KIAWAH PROPERTY v. Public Service, No. 25827.

• Court: United States State Supreme Court of South Carolina
• Writing for the Court: Acting Chief Justice MOORE
• Citation: 597 S.E.2d 145,359 S.C. 105
• Parties: KIAWAH PROPERTY OWNERS GROUP, Appellant, v. The PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA; and Kiawah Island Utility Company, Inc., Respondents.
• Decision Date: 24 May 2004
• Docket Number: No. 25827.

359 S.C. 105
597 S.E.2d 145

KIAWAH PROPERTY OWNERS GROUP, Appellant,
v.
The PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA; and Kiawah Island Utility Company, Inc., Respondents

No. 25827.

Supreme Court of South Carolina.

Heard January 21, 2004.

Decided May 24, 2004.

359 S.C. 107

Stephen L. Brown, Michael A. Molony and Lea Kerrison, all of Young, Clement, Rivers, and Tisdale, of Charleston, for Appellant

Fred David Butler, of Columbia, for Respondent South Carolina Public Service Commission.

G. Trenholm Walker and Amanda R. Maybank, both of Pratt Thomas, Epting and Walker, of Charleston, for Respondent Kiawah Island Utility Company.

359 S.C. 108

Acting Chief Justice MOORE

This matter arises from a utilities rate dispute between the Kiawah Island Utility Corporation (Utility) and the Kiawah Property Owners Group (KPOG). On appellate review, the circuit court judge found that the Public Service Commission's (PSC) approval of an increase of the Utility's rates and charges that would allow for an operating margin of 6.5% was supported by substantial evidence. We affirm.

FACTS

In 1996, the Utility, which is wholly owned by Kiawah Resort Associates (Developer), applied to the PSC for a rate increase that would increase its operating margin to 5.43%. The PSC approved a rate increase that allowed for only a 3.55% operating margin. On appeal, the circuit court judge upheld the rate increase, and this Court reversed and remanded, finding that the PSC order permitting the rate increase was unsupported by the evidence. Kiawah Prop. Owners Group v. Pub. Serv. Comm'n, 338 S.C. 92, 525 S.E.2d 863 (1999) (KPOG I). Upon remand, a subsequent PSC order, and an appeal to the circuit court, the matter was again appealed to this Court, resulting in the opinion finding that the subsequent PSC order was supported by the evidence. Kiawah Prop. Owners Group v. Pub. Serv. Comm'n, 357 S.C. 232, 593 S.E.2d 148 (2004), (KPOG II).

Upon this backdrop, another rate dispute began in 1999, when the Utility set out to raise its rates and charges to permit an operating margin of 9.5%. The PSC submitted an order, which was affirmed on appeal by the circuit court, authorizing a rate increase that would generate a 6.5% operating margin. KPOG has appealed the circuit court decision, raising the following issues for review:

I. Did the trial court err in finding that the PSC's decision to allow the Utility to set its operating margin at 6.5% was supported by the record?

II. Did the circuit court err in affirming the PSC's treatment of several of the Utility's fee assessments and other affiliated transactions?

III. Did the circuit court judge err in affirming the PSC's refusal to require the Developer and Utility to modify

359 S.C. 109

their cross-collateralized loan agreement with the bank?

IV. Did the circuit court err in refusing to require the PSC to stay this proceeding until this Court issued its opinion in KPOG II?

STANDARD OF REVIEW

The PSC is a government agency of limited power and jurisdiction, which is conferred either expressly or impliedly by the General Assembly. City of Camden v. South Carolina Pub. Serv. Comm'n, 283 S.C. 380, 382, 323 S.E.2d 519, 521 (1984). South Carolina Code Ann. § 58-5-210 (Supp.2003) grants the PSC the "power and jurisdiction to supervise and regulate the rates and services of every public utility in this State...."

The PSC should establish rates that will produce revenues for the utility "reasonably sufficient to assure the confidence in the financial soundness of the utility ... and should be adequate, under efficient and economical management, to maintain and support its credit and enable it to raise the money necessary for the proper discharge of its public duties." Bluefield Water Works and Improvement Co. v. Pub. Serv. Comm'n of West Virginia, 262 U.S. 679, 693, 43 S.Ct. 675, 679, 67 L.Ed. 1176 (1923).

The PSC is considered "the `expert' designated by the legislature to make policy determinations regarding utility rates; thus, the role of a court reviewing such decisions is very limited." Hamm v. South Carolina Public Service Comm'n, 289 S.C. 22, 344 S.E.2d 600 (1986); Patton v. South Carolina Pub. Serv. Comm'n, 280 S.C. 288, 312 S.E.2d 257 (1984). Therefore, the party challenging a PSC order must establish that (1) the PSC decision is not supported by substantial evidence and (2) the decision is clearly erroneous in light of the substantial evidence in the record. Patton, 280 S.C. at 291, 312 S.E.2d at 259; Greyhound Lines, Inc. v. South Carolina Pub. Serv. Comm'n, 274 S.C. 161, 262 S.E.2d 18 (1980).

359 S.C. 110

ISSUE I

Did the trial court err in finding that the PSC's decision to allow the Utility to set its operating margin at 6.5% was supported by the record?

The Utility applied for a rate increase in 1999, requesting that the PSC allow it to charge rates sufficient to sustain a 9.5% operating margin. The PSC determined that a 6.5% operating margin was appropriate. KPOG asserts that the PSC's decision to set the Utility's operating margin at 6.5% is unsupported in the record. We disagree.

At the PSC hearing, the Utility's treasurer, Townsend Clarkson (Clarkson), testified that the application for a rate increase was prompted by (1) a 20.2% increase in the cost of water since the Utility's prior rate application; (2) the capital cost incurred to improve and maintain 45 miles of transmission lines; and (3) the fact that the Utility had operated at a net loss since 1995. In addition, PSC staff member Thomas Ellison (Ellison) testified that the Utility had an operating margin of negative 1.02% and recommended that PSC permit the Utility to raise rates to sustain an operating margin of 8.03%.

Based on this testimony, the PSC concluded that the Utility could raise its rates and charges to generate a 6.5% operating margin, up from the 3.55% margin that the PSC had approved in the Utility's prior rate application.

We hold that the PSC's decision to set the Utility's operating margin at 6.5% — a number much less...