State ex rel. Utilities Commission v. Edmisten

• Decision Date: 31 January 1977
• Docket Number: No. 145,145
• Citation: 291 N.C. 451,232 S.E.2d 184
• Court: North Carolina Supreme Court
• Parties: STATE of North Carolina ex rel. UTILITIES COMMISIONS and Duke Power Company, Applicant v. Rufus L. EDMISTEN, Attorney General.

Page 184

232 S.E.2d 184

291 N.C. 451

STATE of North Carolina ex rel. UTILITIES COMMISIONS and Duke Power Company, Applicant v. Rufus L. EDMISTEN, Attorney General.

No. 145.

Supreme Court of North Carolina.

Jan. 31, 1977.

Rufus L. Edmisten, Atty. Gen., by Robert P. Gruber, Sp. Deputy Atty. Gen., Raleigh, for the State.

Edward B. Hipp, Com'n Atty., by Wilson B. Partin, Jr., Asst. Com'n Atty., Raleigh, for N.C. Utilities Com'n.

Steve C. Griffith, Jr., Gen. Counsel, George W. Ferguson, Jr., Deputy Gen. Counsel, Kennedy, Covington, Lobdell & Hickman by John M. Murchison, Jr., Charlotte, for Duke Power Co.

LAKE, Justice.

This case is a companion to State ex rel. Utilities Commission and Virginia Electric & Power Company v. Edmisten, Attorney General, N.C., 232 S.E.2d 199 and State ex rel. Utilities Commission and Carolina Power & Light Co. v. Edmisten, Attorney General, N.C., 232 S.E.2d 200. The three cases were argued together and, as the Court of Appeals observed in affirming the orders of the Utilities Commission, while in the three cases there are variations in dates, and the amounts involved and other inconsequential matters, the legal questions are the same. The briefs of the parties in the several cases so show. They have been considered together and all arguments made and authorities cited in the several briefs have been taken into consideration in this decision.

In State ex rel. Utilities Commission and Carolina Power & Light Co. v. Edmisten, N.C., 230 S.E.2d 651, decided 21 December 1976, this Court sustained the validity of the fuel adjustment clauses which the Commission authorized Duke, CP and Vepco to put into effect in late 1973 and early 1974. The present cases are an aftermath of those clauses which were terminated, as of 1 September 1975, by the enactment of G.S. 62--134(e) in the spring of 1975.

G.S. 62--134(e) provides: 'All monthly fuel adjustment rate increases based solely upon the increased cost of fuel, as to each public utility, as presently approved by the Commission shall Fully terminate effective September 1, 1975 * * *.' (Emphasis added.)

G.S. 62--134(e) also provides that, upon application by a public utility, the Commission, solely on the basis of the increased cost of fuel used in the generation of electric power, may authorize such utility to increase its rates.

Pursuant to this statute, the three electric utility companies applied to the Commission for authority to increase their basic rates for electric power and, in addition, to put into effect a temporary surcharge. The Commission, in the case of each company, did two things: (1) It authorized the utility to increase its basic rates, chargeable for electric power billed on and after 1 September 1975 (i.e., generated and sold on and after 1 August 1975), to reflect (i.e., to pass on to the users of power) the full cost of fossil fuel used in generating such power, such cost being computed on the basis of the then most recent available data; (2) it ordered the utility to put into effect a further charge to its customers, to be spread over a period of 10 months, sufficient in the aggregate to yield to the company the full expense (over and above the previously established base price of fuel) incurred by it for fossil fuel burned in July and August 1975 in the generation of electric power. Only this surcharge is involved in the present appeal.

Had there been no surcharge whatever, the increase in the utility's basic rates so allowed by the Commission would have produced for the utility in September 1975 (that is, from October bills for September service) the same, or substantially the same, revenue which that company would have derived under the old Fossil Fuel Adjustment Clause had it not been terminated by the Legislature. This is shown by the testimony of Mr. Behrends, Vice President of Carolina Power & Light Company, and the testimony of Mr. Stimart, Treasurer of Duke Power Company, who testified as witnesses for their respective companies before the Commission in the hearings in the present cases.

Mr. Behrends testified:

'Now, insofar as the customer is concerned * * * there will be no practical difference to him as of September 1, whether or not there is a fuel adjustment clause. He will have a charge that includes the fuel cost, he will certainly have a bill that includes the fuel costs as precisely as administration and nature of this proceeding will permit it to be. * * * At the present time we have filed to do what the statute requires, to obtain a base rate which best reflects our current level of fossil fuel expense.'

Mr. Stimart testified:

'This application seeks to incorporate into the company's basic rates the level of fossil fuel cost the company has been recovering through the fossil fuel clause * * * which terminates under the provisions of the new statute. * * * In September we will collect whatever the Commission says is acceptable level of fuel.'

Thus, the surcharge here in question enables the utility, in addition to collecting from its customers in September 1975, and subsequent months, the entire amount which it would have collected had the fuel clause remained in force, to collect also an aggregate for the three companies of approximately $36,000,000 on account of coal burned in July and August 1975.

Some time after the original Fuel Adjustment Clause was put into effect, each company put into effect accounting practices with reference to its expenses for fuel and revenues collectible under that clause. These varied from company to company. Apparently, Duke's procedure was to enter upon its books, in the month in which the fuel was burned, what it designated thereon as 'unbilled revenues,' these being the amounts it estimated would be received by it pursuant to the Fuel Adjustment Clause. CP 's practice appears to have been to defer the entry of coal expense to the month in which it billed its customers for the electricity generated by the fuel so burned. These accounting practices were subsequently approved by the Commission. Thus, they were proper accounting practices for purposes such as determining net income for tax purposes and making reports of net income to stockholders and investment services. Although these were proper accounting practices, they could not create a liability upon the company's customers or establish the company's right to recover from its customers the amounts so entered. Duke concedes this in its brief, stating: 'Duke in no way asserts that its entitlement to recover its unbilled revenues involved in this appeal arises because of the accounting practices approved by the Commission.'

The companies say in their briefs that, by reason of the termination of the Fuel Adjustment Clause rate increases by G.S. 62--134(e), they could not 'recover' such 'unbilled revenues' or 'deferred expenses' shown on their books as of September 1, 1975, unless the Commission took action authorizing them to do so. That is, the companies concede that G.S. 62--134(e), standing alone, would deprive the companies of any right to collect from users of power that which the surcharge here in question permits them to charge and collect. The companies do not challenge the constitutionality of this termination by the Legislature of the Fuel Adjustment Clause. This they could not have done successfully without a showing that the rates left in effect by the Legislature deprived them of a fair return upon their properties used and useful in rendering service to the public. No such showing was made or undertaken by the companies in these cases. They rely entirely upon the order of the Commission allowing the surcharge.

The Commission is a creation of the Legislature and, in fixing rates to be charged by public utilities, exercises the legislative function. It has no authority except the given to it by statute. Utilities Commission v. Merchandising Co., 288 N.C. 715, 722, 220 S.E.2d 304 (1975); Electric Service v. City of Rocky Mount, 285 N.C. 135, 203 S.E.2d 838 (1974); Utilities Commission v. Telephone Co., 281 N.C. 318, 189 S.E.2d 705 (1972); Utilities Commission v. R.R., 268 N.C. 242, 245, 150 S.E.2d 386 (1966); Utilities Commission v. Motor Lines, 240 N.C. 166, 81 S.E.2d 404 (1954). A fortiori, the Commission has no authority to permit that which is forbidden by statute or to extend a previously granted rate increase which the statute has declared terminated. In its brief in this Court the Utilities Commission states:

'The termination of the old fuel clause on September 1, 1975, pursuant to G.S. 62--134(e), prevented the recovery of Duke's July and August fuel expenses through the normal operation of the fuel clause. The Commission's Order of August 27, 1975, permitted Duke to recover through the surcharge these two months costs actually incurred. In so deciding the Commission was squarely faced with the interpretation of G.S. 62--134(e). Clearly the statute terminated the old fuel clause effective September 1, 1975. The question remained as to whether Duke could recover the fuel expenses which were incurred in July and August, 1975 and which were recoverable under the old fuel clause. The Commission decided that the Legislature did not intend to penalize Duke by denying it recovery of its July and August, 1975, fuel expenses actually incurred.' (Emphasis added.)

When the language of a statute is clear and unambiguous, it must be given effect and its clear meaning may not be evaded by an administrative body or a court under the guise of construction. Peele v. Finch, 284 N.C. 375, 200 S.E.2d 635 (1973); Utilities Commission v. Membership Corp., 275 N.C. 250, 166 S.E.2d 663 (1969); Colonial Pipeline v. Clayton, 275 N.C. 215, 166 S.E.2d 671 (1969); Valentine v. Gill, 223 N.C. 396, 27 S.E.2d 3 (1943); In re Poindexter's Estate, 221 N.C. 246, 20 S.E.2d 49, 140 A.L.R. 1138 (1942); Morris v. Chevrolet Co., 217 N.C. 428, 8 S.E.2d 484, 128 A.L.R. 132 (1940); Williamson v. High Point, 213 N.C....