State ex rel. Utilities Commission v. Mead Corp.

• Decision Date: 04 November 1953
• Docket Number: No. 24,24
• Court: North Carolina Supreme Court
• Parties: STATE ex rel. UTILITIES COMMISSION v. MEAD CORP.

Page 290

78 S.E.2d 290

238 N.C. 451

STATE ex rel. UTILITIES COMMISSION v. MEAD CORP.

No. 24.

Supreme Court of North Carolina.

Nov. 4, 1953.

Jones & Jones, Franklin, and Joyner & Howison, Raleigh, for Nantahala Power & Light Co., appellant.

John R. Jordan, Jr., Blanchard & Jordan, Raleigh, David M. Hall, Sylva, Boyd Compton, Smith, Schnacke & Compton, Dayton, Ohio, for Mead Corp., appellee.

DEVIN, Chief Justice.

This proceeding was instituted by the application of the Nantahala Power & Light Company to the Utilities Commission for authority to increase its rates for electric power distributed to customers for industrial purposes. Consequent upon an order by the Commission authorizing the increase and later denying the petition of Mead Corporation to rehear, the matter came on to be heard, on appeal, by the Judge of the Superior Court. From an adverse judgment in the Superior Court the appellant, the Nantahala Power & Light Company brings the case here for review.

The statute governing procedure before the Utilities Commission prescribes the rules and extent of review on appeal from an order of the Commission. G.S. § 62-26.10. This statute provides that on such appeal to the Superior Court the review shall be on the record certified by the Commission, and the cause heard by the judge without a jury who may reverse or modify the decision of the Commission if substantial rights have been prejudiced because of findings and conclusions which are 'unsupported by competent, material and substantial evidence' in view of the entire record submitted. State ex rel. Utilities Comm. v. Atlantic Coast Line R. Co., 235 N.C. 273, 69 S.E.2d 502, 503; State ex rel. Utilities Comm. v. Fox, 236 N.C. 553, 73 S.E.2d 464. The statute further provides that upon appeal to the Superior Court the finding, determination or order of the Commission shall be 'prima facie just and reasonable.' G.S. § 62-26.10. Appeals from the Utilities Commission are confined to questions of law, and on appeal the appellant may not rely upon grounds for relief which were not set forth in his petition for rehearing by the Commission. State ex rel. Utilities Comm. v. Queen City Coach Co., 233 N.C. 119, 63 S.E.2d 113. There is no provision for additional findings of fact by the judge for the purpose of determining the validity of the order of the Commission brought in question. State ex rel. Utilities Comm. v. Fox, supra.

At the outset in the statement of findings and conclusions by the Utilities Commission it was stated that the principal question presented was 'whether the arrangement between Alcoa and its subsidiary, Nantahala Power Company, amounts to a preference and an unlawful discrimination in favor of the parent company and to the prejudice of the other customers of the applicant.'

The statute G.S. § 62-70 prohibits discrimination by a public service corporation in the following language: 'No public utility shall, as to rates or services, make or grant any unreasonable preference or advantage to any corporation or person or subject any corporation or person to any unreasonable prejudice or disadvantage. No public utility shall establish or maintain any unreasonable difference as to rates or services either as between localities or as between classes of service. The Commission may determine any questions of fact arising under this section.'

The obligation of a public service corporation to serve impartially and without unjust discrimination is fundamental. Hilton Lumber Co. v. Atlantic Coast Line R. Co., 136 N.C. 479, 48 S.E. 813; Garrison v. Southern R. Co., 150 N.C. 575, 64 .S.E. 578; North Carolina Public Service Co. v. Southern Power Co., 179 N.C. 18, 101 S.E. 593, 12 A.L.R. 304; Salisbury & S. R. Co. v. Southern Power Co., 180 N.C. 422, 105 S.E. 28. It is not essential that consumers who are charged different rates for service should be competitors in order to invoke this principle. Texas Power & Light Co. v. Doering Hotel Co., Tex.Civ.App., 147 S.W.2d 897. There must be substantial differences in service or conditions to justify difference in rates. There must be no unreasonable discrimination between those receiving the same kind and degree of service. Horner v. Oxford Water & Electric Co., 153 N.C. 535, 69 S.E. 607; Postal Telegraph-Cable Co. v. Associated Press, 228 N.Y. 370, 127 N.E. 256.

The protestant, the Mead Corporation, does not directly attack the action of the Commission in authorizing the rate increase applied for as being in itself arbitrary, unreasonable or unjust, but it does contend that the whole question of rates is bound up in the basic and determinative question of the admitted substantial difference in the rates proposed to be charged the Mead Corporation, an industrial customer, and those for which Alcoa, also an industrial customer, is now and will continue to be charged, and that the order of the Commission would result in unreasonable discrimination and subject the Mead Corporation to an unreasonable disadvantage.

The position of the Nantahala Company is that the proposed increase in rates would still leave Mead in the position of paying a less rate than that charged by other power companies in other sections; that the difference in rates does not under the facts of this case constitute an unreasonable preference or discrimination, and that the Mead Corporation is not subjected to any unreasonable prejudice or disadvantage. It is contended that the difference in rates is reasonably based upon the distinction between primary and secondary power, the protestant having primary or dependable power, and Alcoa taking only what is left over or 'dumped' upon it; and that there is a difference in the service afforded users of primary power and that received by users of secondary power; that line losses are borne by Alcoa and not by Mead; that Nantahala is entitled to a reasonable return on its investment of some seventeen million dollars, and that with the increase in rates it would still be unable to earn a profit; that Nantahala and Alcoa were not competitors, and that the rates proposed apply to different classes of service.

Judge Gwyn studied the evidence and the findings of the Commission, and set out his conclusions thereon and the reasons therefor at length. He concluded that 'the record contained no evidence legally sufficient to support the interpretation given it by the Utilities Commission'; that the record was susceptible to no other interpretation but that the order of the Commission would allow discrimination. He held that the record evidence did not support the finding that the difference in rates to two industrial users of electric power could be attributable to an arbitrary designation of one as primary and the other as secondary.

The facts are not in dispute. Upon them the Utilities Commission decided that 'in any view of the facts of this case we are unable to find and unlawful discrimination against the North Carolina customers of the applicant (Nantahala), or any just reason for denying the application for the proposed increase in rates.'

The judge held, however, that the record contained no evidence legally sufficient to support this interpretation, and upon that ground reversed the order of the Commission. Whether the findings and conclusions of the Utilities Commission were 'unsupported by competent, material and substantial evidence in view of the entire record' presented a question of law for the decision of the Court. 42 A.J. 635. In that view Judge Gwyn held as a matter of law that the record was susceptible of no other interpretation but that the order of the Commission would allow an unreasonable discrimination, and that the rate increase based upon and concomitant with such discrimination was improvidently authorized. From an examination of the record we are inclined to the view that the ruling of the court below in principle should be upheld.

Here, according to the record, Alcoa owns all the capital stock of Nantahala which represents an investment of seventeen million dollars in hydroelectric plants in Western North Carolina. Presumably Alcoa furnished the capital for this enterprise. Alcoa uses electric power in enormous volume for the production of aluminum. It takes 81.65% of Nantahala's total generation of electric power for which it pays less than the cost of producing and distributing it. It derives no dividend or income from its ownership of Nantahala stock. Nantahala has other customers, including Mead, who are charged a higher rate and from whom it derives the major portion of its income. Nantahala has continued to expand its production through the years by adding to the number of its hydroelectric plants, but the percentage of resultant electric energy devoted to Alcoa has remained fairly constant. The more Nantahala expands the greater the volume of electric current Alcoa obtains at 2.3 mills per kilowatt hour. And Nantahala continues to derive the greater part of its revenue from customers other than Alcoa who consume only 18.35% of its power and are charged approximately twice as much per kilowatt hour as Alcoa pays.

The increase in rates applied for by Nantahala applies only to the industrial customers other than Alcoa. No increase in Alcoa's rate is contemplated. Among the reasons for presently asking authority to increase rates is that it will provide more revenue and enable Nantahala to put to use additional hydroelectric plants. The burden of rate increase is placed upon one particular group of customers.

Since Alcoa owns the entire stock of Nantahala ordinarily their dealings between themselves would be a matter of bookkeeping. But Nantahala is a separate legal entity, a corporation created under the laws of North Carolina and endowed with the powers, duties and obligations set forth in its charter, and as a corporation engaged in the production and distribution to the public of an essential utility it must be amenable to and required to observe...