State ex rel. Utilities Com'n v. Conservation Council of North Carolina, 126A84

• Court: North Carolina Supreme Court
• Writing for the Court: COPELAND
• Citation: State ex rel. Utilities Com'n v. Conservation Council of North Carolina, 320 S.E.2d 679, 312 N.C. 59 (N.C. 1984)
• Decision Date: 02 October 1984
• Docket Number: No. 126A84,126A84
• Parties: STATE of North Carolina, ex rel. UTILITIES COMMISSION; Duke Power Company (Applicant); North Carolina Public Interest Research Group; North Carolina Textile Manufacturers Association; Peoples Alliance; and Public Staff, North Carolina Utilities Commission v. CONSERVATION COUNCIL OF NORTH CAROLINA; Great Lakes Carbon Corporation; and Kudzu Alliance.

Page 679

320 S.E.2d 679

312 N.C. 59

STATE of North Carolina, ex rel. UTILITIES COMMISSION; Duke Power Company (Applicant); North Carolina Public Interest Research Group; North Carolina Textile Manufacturers Association; Peoples Alliance; and Public Staff, North Carolina Utilities Commission v. CONSERVATION COUNCIL OF NORTH CAROLINA; Great Lakes Carbon Corporation; and Kudzu Alliance.

No. 126A84.

Supreme Court of North Carolina.

Oct. 2, 1984.

Duke Power Company by Steve C. Griffith, Jr. and George W. Ferguson, Jr., Kennedy, Covington, Lobdell & Hickman by Clarence W. Walker, Stephen K. Rhyne, and Myles E. Standish, Charlotte, for applicant-appellee Duke Power Company.

Byrd, Byrd, Ervin, Blanton, Whisnant & McMahon, P.A. by Robert B. Byrd and Sam J. Ervin IV, Morganton, for intervenor-appellant Great Lakes Carbon Corporation.

Edelstein, Payne & Jordan by M. Travis Payne, Raleigh, for intervenor-appellant Kudzu Alliance.

COPELAND, Justice.

I.

Appellants argue that the Commission erred in including the sum of $144,841,000 in Duke's retail rate base for construction work in progress (hereinafter CWIP) because its findings on this matter were inadequate as a matter of law. Appellants base their argument on both G.S. § 62-79(a) and G.S. § 62-133(b)(1) (1977) (amended 1981). Each statute will be considered separately.

G.S. § 62-79(a) provides that:

All final orders and decisions of the Commission shall be sufficient in detail to enable the court on appeal to determine the controverted questions presented in the proceedings and shall include:

(1) Findings and conclusions and the reasons or bases therefor upon all the material issues of fact, law, or discretion presented in the record, and

(2) The appropriate rule, order, sanction, relief or statement of denial thereof.

The appellants contend that the final order of the Commission falls short of this standard because its Finding of Fact Number 7 is simply a recitation of the factors in G.S. § 62-133(b)(1). ¹ We disagree.

The purpose of the findings required by G.S. § 62-79(a) is to provide the reviewing court with sufficient information to allow it to determine the controverted questions presented in the proceedings. In the section of its order entitled "Evidence and Conclusions for Finding of Fact No. 7" the Commission summarized and rejected the statutory interpretation arguments made by the appellants. The Commission then concluded that all of Duke's CWIP expenditures, in particular those for the Cherokee plant and allowance for funds used during construction accrued after 1 July 1979, were reasonable and prudent expenditures under G.S. § 62-133(b)(1). The Commission further concluded that the expenditures were needed to insure adequate service to Duke's customers in the future. The Court of Appeals properly noted that such scant findings and conclusions barely pass muster. Utilities Comm'n v. Conservation Council, 64 N.C.App. at 273, 307 S.E.2d at 379. We do not approve the practice of using such sparse evidence and conclusions to support the Commission's findings of fact, but we hold that they were adequate to meet the requirements of G.S. § 62-79(a). The Commission's summary of the appellant's argument and its rejection of the same is sufficient to enable the reviewing court to ascertain the controverted questions presented in the proceeding. That is all that G.S. § 62-79(a) requires.

A somewhat more difficult issue is posed by appellants' contention that G.S. § 62-133(b)(1) first requires the Commission to make findings on the reasonableness and prudence of including CWIP expenses in the rate base before it considers the reasonableness of the CWIP costs incurred. G.S. § 62-133(b)(1) as it read at the relevant time provides that the Commission shall:

Ascertain the reasonable original cost of the public utility's property used and useful, or to be used and useful within a reasonable time after the test period, in providing the service rendered to the public within this State .... In ascertaining the cost of the public utility's property, construction work in progress as of the effective date of this subsection shall be excluded until such plant comes into service but reasonable and prudent expenditures for construction work in progress after the effective date of this subsection shall be included subject to the provisions of subparagraph (b)(5) ² of this section.

Appellants argue that before the Commission may include CWIP expenses in the rate base it must first find that the plant under construction is necessary and will be completed in a reasonable time.

We hold that G.S. § 62-133(b)(1) does not require the Commission to make new findings on the need for the construction. Before any public utility begins the construction of a facility for generating electricity for use by the public it must first obtain from the Commission a certificate stating that "public convenience and necessity requires, or will require such construction." G.S. § 62-110.1(a). Before such a certificate can be granted the applicant must file an estimate of construction costs and the Commission must hold public hearings. G.S. § 62-110.1(e). This procedure satisfies appellant's argument that the construction must be necessary.

The wording used by the legislature makes it clear that the Commission must include all reasonable CWIP expenditures in the rate base. The only matter left to the discretion of the Commission is whether such expenditures are reasonable and prudent. Evidence of whether the plant under construction will be completed within a reasonable time is pertinent to deciding if expenditures for such construction are reasonable and prudent. While it is the better practice for the Commission to specifically find that the construction will be completed within a reasonable time, the statute does not require it so long as there is evidence in the record that the plant would be completed within a reasonable time. There was sufficient evidence in the record to allow the Commission to conclude that the Cherokee units would be completed within a reasonable time. We are not persuaded by the Appellants' argument that the Commission must make findings as to the cost of each project and when it will be needed. Nowhere in G.S. § 62-133(b)(1) is there such a requirement. To require such extensive evidence would put an undue burden on Duke and cause the ratemaking process to be more time consuming and difficult of administration.

Costs are presumed to be reasonable unless challenged. State ex rel. Utilities Commission v. Intervenor Residents, 305 N.C. 62, 76-77, 286 S.E.2d 770, 779 (1982), and there was no challenge to the reasonableness of the prices paid by Duke. Further, the Commission found that Duke's construction expenditures were reasonably incurred and were needed to provide adequate electric service to its customers. The Commission's findings on this point are supported by competent, material, and substantial evidence and are conclusive on appeal. Utilities Comm'n v. Intervenor Residents, 305 N.C. at 77, 286 S.E.2d at 779.

II.

We next turn to the portion of CWIP expenditures ($103,880,000) related to the Cherokee Nuclear Station. G.S. § 62-133(b)(1) requires that expenses added to the rate base to represent the costs of construction must come from construction work that is in progress. Appellants argue that work had ceased on Cherokee by the time the hearings were held because Duke had indefinitely delayed construction and had no target date for completion. Work on unit two had been terminated and work on unit one was reduced to a bare minimum. Also, Duke's witness acknowledged that the company had not yet decided whether the Cherokee plant would be completed. However, Duke did offer evidence tending to show that the delay was due to the uncertain economic conditions in 1981, including Duke's financial circumstances, and that the Cherokee units were needed to provide Duke's customers with an adequate reserve margin. Approximately 166 people were still working on Cherokee unit one, no contracts had been cancelled, and Duke's vice president assured the Commission that Duke intended to complete Cherokee. The Commission considered this evidence and included the costs of Cherokee as a CWIP expenditure.

We note that before this appeal reached the Court of Appeals Duke had abandoned the Cherokee Nuclear Station. G.S. § 62-93 provides that a reviewing court may, in its discretion, remand a case for further consideration by the Commission if evidence has been discovered since the hearing before the Commission "that could not have been obtained for use at that hearing by the exercise of reasonable diligence, and will materially affect the merits of the case, ..." The question before the Commission to which this evidence applies is whether the construction done at Cherokee Nuclear Station was in progress during the test year ending 31 December 1980. After considering the evidence we hold that the subsequent cancellation of Cherokee does not materially affect the Commission's determination that the Cherokee Nuclear Station was construction work in progress during the test year. Therefore, we decline to remand the case for further consideration of this issue.

The validity of the Commission's findings and conclusions must be determined in light of the evidence that was presented to it. There was evidence before the Commission from which it could reasonably conclude that the delay in the construction of Cherokee was due to economic conditions and that Duke intended to complete Cherokee once its financial circumstances enabled it to do so. The Commission was also made aware of the possibility that the uncertain economic conditions prevailing at the time might force Duke to cancel Cherokee. Further, the Court of Appeals correctly pointed out that Duke's failure to specify a definite completion date is irrelevant because the statute does not require it. Based on a review of...