58 N.C. App. 480 | N.C. Ct. App. | 1982
We first note that the statute out of which the proceedings before the Commission, and from which the Commission’s order emanated, G.S. § 62434(e), has since been repealed by 1981 N.C. Sess. Laws Ch. 1197, § 2 (enacted 17 June 1982). The Chapter containing such repeal nowhere states the effect of the repeal on already pending G.S. § 62434(e) proceedings, but does state, “all rates and changes under G.S. § 62434(e) shall terminate not later than December 1, 1982.” 1981 N.C. Sess. Laws Ch. 1197, § 3 (enacted 17 June 1982). Since the rate increase challenged in the present case pertained to a period well before December 1, 1982, and since “[a] statute will not be construed to have retroactive effect unless that intent is clearly expressed or arises by necessary implication,” In re Will of Mitchell, 285 N.C. 77, 79-80, 203 S.E. 2d 48, 50 (1974), we will treat G.S. § 62434(e) as the controlling statute notwithstanding its repeal as to certain fuel adjustment proceedings which are held later than the proceedings at issue in the present case.
The first assignments of error brought forward in the intervenor’s briefs relate to the Commission’s denial of a motion to have the instant fuel adjustment proceedings, which were being conducted pursuant to G.S. § 62434(e), consolidated with a CP&L general rate case already in progress and being conducted pursuant to G.S. § 62-133. Interveners argue that the Commission’s Order allowing an upward adjustment, based on increased costs
G.S. § 62434(e) states in pertinent part:
Notwithstanding the provisions of this Article, upon application by any public utility for permission and authority to increase its rates and charges based solely upon the increased cost of fuel used in the generation or production of electric power, the Commission shall suspend such proposed increase for a period not to exceed 90 days beyond the date of filing such application to increase rates. . . . The Commission shall promptly investigate applications filed pursuant to provisions of this subsection and shall hold a public hearing within 30 days of the date of the filing of the application to consider such application, and shall base its order upon the record adduced at the hearing, such record to include all pertinent information available to the Commission at the time of hearing. The order responsive to an application shall be issued promptly by the Commission. ... A proceeding under this subsection shall not be considered a general rate case.
By the clear and express language of G.S. § 62434(e), “the legislature has provided a procedure by which a public utility may apply to the Utilities Commission for authority to increase its rates and charges based solely upon the increased cost of fuel used in the generation of electric power. . . .” State ex rel. Utilities Commission v. Virginia Electric and Power Co. [hereinafter referred to as “Vepco”], 48 N.C. App. 453, 460, 269 S.E. 2d 657, 661, disc. rev. denied, 301 N.C. 531, 273 S.E. 2d 462
On the other hand, review by the Utilities Commission of the reasonableness of “management decisions . . . in a general rate case is not only entirely appropriate but even necessaryf;]. . . the Utilities Commission . . . [must] take into account the efficiency of the company’s operations in fixing its rates in a general rate case as provided in G.S. 62-133.” Id. at 461-62, 269 S.E. 2d at 662 [emphasis in original]. This requirement, for general rate cases, of an inquiry into the reasonableness of incurred costs extends to fuel costs incurred by the utility. See Id. and G.S. § 62433(b)(3), requiring the Commission, in a general rate case, to ascertain the “utility’s reasonable operating expenses.” [Emphasis added.]
Hence, a fuel adjustment proceeding under G.S. § 62434(e) and a general rate case under G.S. § 62433 are entirely different in their functions and basic procedures. This fundamental difference between the two justifies the action of the Commission in hearing CP&L’s application for a rate adjustment based solely on the increased cost of fuel in a G.S. § 62434(e) proceeding rather than in the then-pending general rate case, since such adjustments for increased fuel costs are to be made in expedited G.S. § 62434(e) proceedings.
Intervenors, however, are concerned that if adjustments for fuel cost increases are always rendered in expedited G.S. § 62434(e) proceedings, in which the reasonableness of the increases are irrelevant, then public utilities will always be able to achieve virtually automatic rate increases based on their increased costs of fuel, even if the utilities were manifestly
In the present case, the Commission properly considered the application for a fuel cost-based adjustment in a separate G.S. § 62434(e) proceeding, rather than consolidating that application with the then-pending general rate case. The application for a fuel cost-based adjustment was entitled to the expedited consideration of a G.S. § 62434(e) proceeding, and even if the adjusted rate ordered in the G.S. § 62434(e) proceeding were eventually superseded by the reasonable rate established in the then-pending general rate hearing, it would be of valid force until so superseded. Further, the intervenor appellants have shown us nothing in the record to prove that the Commission did not follow the proper procedures, as discussed supra, for a G.S. § 62434(e) adjustment.
In addition, the Commission has considered the matter of the appropriate fuel base to be used in the final rates approved in this case. Docket No. E-2, Sub 402, was consolidated with this docket in order to allow full consideration of this matter. The fuel cost and resulting fuel factor found to be appropriate in that docket is just and reasonable, and the Commission affirms its decision in Docket E-2, Sub 402. The rates approved in this docket should reflect the fuel charges approved in Docket No. E-2, Sub 402.
Intervenors argue that this language shows that the Commission, in the general rate hearing numbered E-2, Sub 391, used expedited G.S. § 62434(e) methodology in setting the fuel cost portion of CP&L’s general rate, rather than the full-blown G.S. § 62-133 procedures required of a general rate case. This argument, however, is not grounds for reversal of the Commission’s Order challenged in the present case, which was a fuel adjustment proceeding. However erroneous the Commission’s procedures may have been in Docket No. E-2, Sub 391, such alleged errors have no bearing on the appeal from the order challenged in the present case, which was entered in Docket No. E-2, Sub 402. These assignments of error are overruled.
Intervenor North Carolina Textile Manufacturers Association (NCTMA) next assigns error to the Commission’s consideration of CP&L’s systemwide fuel cost per kilowatt-hour for the relevant historical test period in determining the appropriate adjustment in future rates based solely on the increased cost of fuel. The argument here presented is that the Commission was required to consider the total fuel cost per unit for only that electricity consumed by North Carolina retail customers. It is not clear to us that there is any difference between CP&L’s systemwide fuel cost per unit of electricity, and its fuel cost per unit of electricity consumed by North Carolina retail customers, and assuming arguendo that the North Carolina figure may be segregated from the
Intervenor NCTMA next assigns error to the Commission’s inclusion, in the rate adjustment permitted CP&L, of an amount for the increased gross receipts taxes CP&L would incur on the additional revenues it receives pursuant to the upward adjustment based on increased fuel costs. NCTMA argues that such an allowance is for something other than the increased cost of fuel, that it duplicates allowances made in the subsequent general rate case, and that the allowance is improper since the amount of additional revenues, and of the gross receipts taxes thereon, have not yet even been incurred.
G.S. § 105-116 imposes a tax of six percent on the gross receipts of electric utility companies. As will be demonstrated below, an allowance in a G.S. § 62434(e) proceeding for this gross receipts tax factor is a permissible method of effecting the purpose, as described in Vepco, supra, of G.S. § 62434(e), which is to enable utilities to receive an expedited adjustment of their rates based on the volatile and uncontrollable costs of fuel. If the Commission, in a fuel adjustment proceeding, determines that fuel costs in the relevant historical test period require an upward adjustment of some amount a for the billing period in question, then the utility’s revenues per kilowatt-hour will be increased by a but then decreased by .06a, the gross receipts tax factor. Hence, without an adjustment for the gross receipts tax factor, the utility would not receive an adjustment, a, sufficient to keep up with its increased fuel costs, but would receive a net amount less than a, to wit a minus .06a. We will not construe G.S. § 62434(e) as requiring such a result, since to do so would frustrate the purposes of the statute. See State ex rel Utilities Commission v. Edmisten, 294 N.C. 598, 242 S.E. 2d 862 (1978). Rather, the gross receipts tax factor may be taken into account in an adjustment granted pursuant to G.S. § 62434(e). Further, the allowance of adjustments which take such factors into account in a fuel adjustment proceeding and in a subsequent general rate hearing does not result in a double recovery by the utility, since, as previously discussed, the rate established in the subsequent general rate
In their next assignment of error, the North Carolina Textile Manufacturers Association argues that the rate increase allowed by the Commission was tainted by reversible error in that it was based on costs incurred in a previous test period, without any compensating adjustment for abnormalities in that previous test period. The NCTMA here contends that without adjustment for such cost-increasing abnormalities in the previous test period, the experience of such test period cannot be used as a basis for an increase under G.S. § 62434(e) for the relevant future billing period. NCTMA also contends that the Commission improperly allowed a rate increase to recover past operating expenses which were incurred but not recovered in the previous test period.
“The procedure provided [by G.S. § 62434(e)] is an expedited one ‘and shall not be considered a general rate case,’ ” Vepco, supra, at 460, 269 S.E. 2d at 661; it is a limited proceeding, Id., and is designed to avoid “the regulatory lag . . . incident to repeated general rate cases.” State ex rel. Utilities Commission v. Edmisten, 291 N.C. 451, 472, 232 S.E. 2d 184, 196 (1977). Just as Vepco, supra, holds that a G.S. § 62434(e) proceeding should not be burdened with questions about the reasonableness of fuel costs incurred in the historical test period, so too should such proceeding be free of concerns about how representative the historical test period is with respect to the billing period for which adjustment is sought. The Commission may, in an expedited G.S. § 62434(e) proceeding, use the data from the historical test period as a basis for an increase in the future billing period without having to undergo the delay and burden of
The final assignment of error employed by intervenors in their attempt to demonstrate the excessiveness of the rate adjustment allowed by the Commission is that the rate adjustment improperly includes an adjustment for increased costs incurred by CP&L in its purchase of power from other utilities. For instance, the intervenor Public Staff argues that adjustments pursuant to an expedited G.S. § 62-134(e) proceeding may be made only for changes in costs incurred by CP&L “for fuel used by CP&L in its own generating plants,” and not for changes in costs it incurs in its purchases of power from other utilities. The intervenors further argue that the Commission must first conduct an inquiry into the reasonableness of any past purchase by CP&L of power from another utility before the Commission may allow CP&L to adjust its future rates to correspond to any changing cost it incurred in such purchase, and that such inquiries into reasonableness may be made only in a G.S. § 62-133 general rate hearing, and may not be made in a G.S. § 62434(e) expedited proceeding.
We again note that G.S. § 62434(e) provides an expedited procedure by which a utility may be granted an increase in rates based solely on the increased cost of fuel used in the generation of electric power. Vepco, supra. The intervenors’ assignments of error here under consideration raise the question of what upward adjustment, if any, may be made in a utility’s rates in an expedited G.S. § 62434(e) proceeding when the basis for adjustment is an increase in costs incurred by the utility in its purchase of power from other utilities.
A different question, however, is presented when a utility’s increase in expenditures for purchased power is attributable to the increase, between the two periods, of the cost to the selling utility of fuel used in producing the power sold. In such an instance, the fuel cost incurred by the selling utility in producing the power it sold to the buying utility during the relevant test period is higher than the selling utility’s fuel cost for any power sold the buying utility in the previous base period, and the selling utility has recovered its increased fuel costs by increasing that portion of the buying utility’s bill which is attributable to the selling utility’s fuel costs. In paying such a bill, the buying utility has incurred, albeit indirectly, an increased cost of fuel. Such an increase in a buying utility’s fuel component expenditure for purchased power could therefore justify an increase in the buying utility’s rates, pursuant to G.S. § 62434(e). Vepco, supra, states that G.S. § 62434(e) increases may be “based solely upon the increased cost of fuel used in the generation of electric power,” Id. at 460, 269 S.E. 2d at 661, and such a basis for an increase includes the increased cost of fuel used by a selling utility in the
To the allowance of a G.S. § 62434(e) adjustment for an increase in the fuel component of purchased power, the intervenors object on the grounds that such an allowance would exempt the applicant utility’s purchases of power from an examination into the reasonableness of such purchases, and that the increased costs incurred therefrom could be taken into account in an expedited G.S. § 62434(e) proceeding, which proceedings make no inquiry into the overall prudence of the utility’s management practices. This argument is only partially true: the only increased component of purchased power costs which may be the basis of a G.S. § 62434(e) adjustment is the fuel cost component, and nothing else. Intervenors are correct, however, insofar as they argue that under our ruling today, adjustments may be made for increases in the fuel cost component of purchased power even if the utility was manifestly unreasonable and imprudent in incurring such increases. “[P]lant efficiency as it bears upon fuel cost is not a factor to be considered in the limited and expedited proceeding provided for by G.S. § 62434(e). Vepco, supra, at 462, 269 S.E. 2d at 662. Hence, even if it could be demonstrated that a reasonably managed utility could have served its customers’ needs without expending additional funds on purchased power and could have thereby avoided the increased fuel component of purchased power costs, the power-purchasing utility could still use G.S. § 62434(e) to obtain an upward adjustment for the increased fuel component.
That this result obtains, however, is no refutation of our holding allowing expedited G.S. § 62434(e) adjustments for the fuel component of purchased power costs. It is the language of the statute which requires an expedited adjustment for increases based on fuel costs, and this language implicitly extends to the fuel component of purchased power costs. Each item of the power production costs incurred by a utility may be either reasonable or unreasonable; with respect to most such costs, e.g. labor costs, an
In the present case, the record is ambiguous as to exactly what costs of the relevant historical test period were considered by the Commission in allowing CP&L to adjust its rates upward. An exhibit introduced by CP&L and entitled “Nevil Exhibit B” stated that “Total Cost Fuel” for the relevant May 1980 through August 1980 test period was $191,757,875. That figure was relied upon in the computation of the adjustment, and the figure also appears on another exhibit introduced by CP&L and entitled “Nevil Exhibit C.” “Nevil Exhibit C” indicates that the figure is the sum of various component amounts expended by CP&L to achieve its total cost of fuel during the relevant test period, and the exhibit shows what those component amounts are. Amounts are listed for “coal” costs, “oil” costs, and “natural gas” costs. Significantly, however, “Nevil Exhibit C” does not contain the category “Fuel Cost Component of Purchased Power.” Instead, the exhibit contains a category for “Purchased Power,” and lists $45,452,648 as the total cost thereof. This entry suggests that the Commission allowed a G.S. § 62434(e) adjustment based on an increase in all costs paid by CP&L for purchased power, rather than just its fuel component costs; as discussed above, G.S. § 62434(e) may not be used to effect adjustments based on increases in production costs of purchased power other than the fuel costs. That amount of the
Because of the uncertainty in the record as to whether the rate adjustment allowed by the Commission was based in part on increases incurred by CP&L in purchased power costs other than fuel component costs, there is a possibility that the allowed adjustment was too high.
The reviewing court has power without determining and disposing of the cause to remand it to the lower court for further proceedings, where the record is not in condition for the appellate court properly to decide the questions presented with justice to all parties concerned, and it should exercise such power wherever justice calls for a remand to effect a proper decision.
5B C.J.S. Appeal & Error § 1836, 233 (1958) [footnote omitted]; see also Ellison v. Hunsinger, 237 N.C. 619, 75 S.E. 2d 884 (1953); Trustees of Guilford College v. Guilford County, 219 N.C. 347, 13 S.E. 2d 622 (1941); Smith v. Board of County Commissioners of Bladen County, 191 N.C. 775, 133 S.E. 1 (1926); Bradley v. Jones, 76 N.C. 204 (1877); 5 Am. Jur. 2d Appeal & Error § 962 (1962). Hence, the order appealed from is vacated and the cause is
Vacated and remanded.