State ex rel. Utilities Commission v. Cube Yadkin Generation LLC

• Decision Date: 07 September 2021
• Docket Number: No. COA20-46,COA20-46
• Citation: 865 S.E.2d 323
• Parties: STATE of North Carolina EX REL. UTILITIES COMMISSION, Duke Energy Carolinas LLC, and Duke Energy Progress, LLC, Appellees, v. CUBE YADKIN GENERATION LLC, Appellant.
• Court: North Carolina Court of Appeals

865 S.E.2d 323

STATE of North Carolina EX REL. UTILITIES COMMISSION, Duke Energy Carolinas LLC, and Duke Energy Progress, LLC, Appellees,

v.CUBE YADKIN GENERATION LLC, Appellant.

No. COA20-46

Court of Appeals of North Carolina.

Filed September 7, 2021

The Allen Law Offices, Raleigh, by Dwight W. Allen, Britton H. Allen, and Brady W. Allen, and Lawrence B. Somers, Deputy General Counsel of Duke Energy Corporation, for the Appellees.

Brooks, Pierce, McLendon, Humphrey and Leonard, LLP, by Jim W. Phillips, Greensboro, Marcus W. Trathen, Raleigh, and Gisele Rankin, for the Appellant.

Burns, Day & Presnell, P.A., Raleigh, by Daniel C. Higgins, for amici curiae North Carolina Eastern Municipal Power Agency, North Carolina Municipal Power Agency Number 1 and ElectriCities of North Carolina, Inc.

Nelson Mullins Riley & Scarborough LLP, Raleigh, by Joseph W. Eason, and Michael D. Youth, for amicus curiae North Carolina Electric Membership Corporation.

McGuireWoods LLP, Raleigh, by Brett Breitschwerdt and Tracy S. DeMarco, for amicus curiae Virginia Electric and Power Company, d/b/a Dominion Energy North Carolina.

GRIFFIN, Judge.

¶ 1 Appellant Cube Yadkin Generation, LLC ("Cube"), appeals from an order of the North Carolina Utilities Commission (the "Commission") declaring that Cube's proposed business plan would cause it to be a public utility subject to regulation. Cube contends the Commission erred because its proposed plan falls within the landlord/tenant exemption to public utility regulation. After careful review, we hold that Cube has failed to present a justiciable controversy and vacate the Commission's order.

I. Factual and Procedural Background

¶ 2 Cube is the owner and operator of four hydroelectric generation facilities located along the Yadkin River near Badin, North Carolina.¹ The Record shows that Cube currently operates as an exempt wholesale generator of electrical energy under a license issued by the Federal Energy Regulatory Commission. Exempt wholesale generators are not considered public-utility companies under federal law. See 15 U.S.C. § 79b (2021) ; 16 U.S.C. § 824 (2021) ; 18 C.F.R. § 366.1 (2021). Cube uses its hydroelectric generation facilities primarily to generate energy needed for its own internal operations and sells its entire surplus of electrical energy on the wholesale market.

¶ 3 In 2019, as part of an effort to explore additional or alternative uses for the electricity generated by its facilities,² Cube devised a plan to redevelop an area of land in Badin known as the Badin Business Park. The Badin Business Park is a commercial area. It served as the location for a large aluminum production plant for almost 100 years prior to the plant's closure in 2007. Cube's hydroelectric generation facilities were previously used to power the aluminum production facility. Two of Cube's four facilities are located within the Badin Business Park. Cube intends to (1) purchase the Badin Business Park; (2) lease the land to prospective technology-based commercial tenants; and (3) supply electricity to those tenants by generating electricity from its own hydroelectric generation facilities located in or nearby Badin Business Park and/or by purchasing additional electricity as needed from the wholesale market (collectively, the "Proposed Plan").

¶ 4 On 8 March 2019, Cube filed a Petition for Declaratory Ruling (the "Petition") with the Commission requesting a declaration that Cube's Proposed Plan qualified for exclusion from public utility regulation under the landlord/tenant exemption in N.C. Gen. Stat. § 62-3(23)(d). Prior to filing the Petition with the Commission, Cube also presented its Proposed Plan to the Public Staff of the Commission, who expressed their support. Appellees Duke Energy Carolinas, LLC, and Duke Energy Progress, LLC (collectively, "Duke"), requested and were allowed to intervene in the Petition proceedings. The Commission also granted a number of other local electric utility monopoly providers the right to participate in the proceedings as amici. On 2 May 2019, Duke and the amici filed motions and comments in opposition to Cube's Petition. Cube filed a reply comment on 9 May 2019.

¶ 5 On 4 September 2019, the Commission entered an Order Issuing Declaratory Ruling (the "Order") concluding "that Cube's proposed landlord/tenant arrangement ... would cause Cube to be a public utility" and would not qualify for the landlord/tenant exemption. The Commission denied Cube's Petition with prejudice. Cube timely appealed.

II. Analysis

¶ 6 Cube contends that the Commission "erred in concluding that Cube does not qualify for the landlord-tenant exemption to ‘public-utility’ status" due to its misapplication of the governing law and incorrect interpretation of multiples terms or phrases used in N.C. Gen. Stat. § 62-3(23)(d). In response, Duke and its amici contend, inter alia , that the Commission's decision is void ab initio because the Commission and our Court lack jurisdiction to issue an advisory opinion where Cube has not presented an actual, justiciable controversy.

¶ 7 Cube requested that the Commission issue a declaratory judgment that its Proposed Plan fulfilled the statutory requirements to qualify for exemption from regulation as a public utility. Chapter 62 of the North Carolina General Statutes defines and prescribes the way public utilities are regulated within the state. See N.C. Gen. Stat. § 62-2 (2019) (explaining that the availability of electric power is a matter of public policy and vesting the Commission with authority to regulate such availability as a public utility); N.C. Gen. Stat. § 62-3(23) (2019) (defining "public utility"). Section 62-3(23)(d) exempts from the definition of a "public utility" an entity acting in a landlord/tenant relationship:

Any person not otherwise a public utility who furnishes such service or commodity only to himself, his employees or tenants when such service or commodity is not resold to or used by others.

N.C. Gen. Stat. § 62-3(23)(d)(4) (2019).

¶ 8 "A declaratory judgment may be used to determine the construction and validity of a statute." Town of Emerald Isle v. State , 320 N.C. 640, 646, 360 S.E.2d 756, 760 (1987) (citation omitted). "[A] declaratory judgment should issue ‘(1) when [it] will serve a useful purpose in clarifying and settling the legal relations at issue, and (2) when it will terminate and afford relief from the uncertainty, insecurity and controversy giving rise to the proceeding.’ " Augur v. Augur , 356 N.C. 582, 588, 573 S.E.2d 125, 130 (2002).

¶ 9 Nonetheless, "neither the Utilities Commission nor the appellate courts of this State have the jurisdiction to review a matter which does not involve an actual controversy." State ex rel. Utilities Comm'n v. Carolina Water Serv., Inc. of N.C. , 149 N.C. App. 656, 657–58, 562 S.E.2d 60, 62 (2002). "To satisfy the jurisdictional requirement of an actual controversy, it must be shown in the [petition] that litigation appears unavoidable." Wendell v. Long , 107 N.C. App. 80, 82–83, 418 S.E.2d 825, 826 (1992) (citations omitted). "Mere apprehension or the mere threat of an action or suit is not enough." Id. at 83, 418 S.E.2d at 826. A declaratory judgment is not a vehicle in which litigants may "come into court and ask for either academic enlightenment or practical guidance concerning their legal affairs." Lide v. Mears , 231 N.C. 111, 117, 56 S.E.2d 404, 409 (1949) (citation omitted). Essentially, a party may only request a judgment declaring a particular interpretation of a statute if they are "directly and adversely affected" by application of the statute to their actual circumstances. See Byron v. Synco Properties, Inc. , 258 N.C. App. 372, 373, 377, 813 S.E.2d 455, 457, 460 (2018) ("Landowners whose property is not directly and adversely affected by a ... statute do not have standing to bring a declaratory judgment action to challenge the ... interpretation of the statute.").

¶ 10 "A universal principle as old as the law is that the proceedings of a court without jurisdiction of the subject matter are a nullity." Burgess v. Gibbs , 262 N.C. 462, 465, 137 S.E.2d 806, 808 (1964) (citation omitted). The existence of an actual controversy is a jurisdictional prerequisite to any judicial action based thereon. See Sharpe v. Park Newspapers of Lumberton, Inc. , 317 N.C. 579, 583, 347 S.E.2d 25, 29 (1986). This Court reviews challenges to its jurisdiction de novo and may do so for the first time at any stage of the proceedings. McKoy v. McKoy , 202 N.C. App. 509, 511, 689 S.E.2d 590, 592 (2010).

¶ 11 Cube submitted to the Commission its Proposed Plan which purports to satisfy each of the requirements of section 62-3(23)(d). According to Cube's Petition, Cube has made "[p]reliminary contact" and entered into "active negotiations" with "a number of potential tenants[,]" with whom Cube believes "binding lease agreements could be reached" if it can receive a favorable declaratory ruling with respect to its Proposed Plan. (Emphasis added). However, Cube concedes that it has not yet entered into any leasing contracts creating a landlord/tenant relationship, does not currently have any ownership interest in real property in the Badin Business Park, and is not under contract to acquire any real property in Badin Business Park. It appears from the Record that Cube intends to make formal efforts to acquire the very land it intends to develop and lease only after the Commission approves of its Proposed Plan.

¶ 12 Cube has no present interest in the resolution of its question. It is not in a realized adversarial position to Duke. Cube owns and operates four hydroelectric facilities which could be used to provide electric energy in ways that would provoke an adversarial relationship with Duke. Those facilities are not currently used in those ways. Cube has no legal duties that demand it conduct acts in compliance which would unavoidably lead to litigation with Duke. Rather, Cube effectively asks this...