State ex rel. Utilities Commission v. Edmisten

BRITT, Judge. The Attorney General challenges that part of the Commission order allowing Duke to impose a temporary surcharge and states his contentions thiisly: ■ “I. The Commission order approving a temporary surcharge allowing Duke, to recover, só-cálled unbilled revenues of $18,503,555 for fuel costs incurred in July and August, 1975 was illegal in that.it fixed rates retroactively so as to make them collectible for past sérvice.'. " ,.¡ “II. ;The Utilities Commission-lacks the-statutory authority to approve a temporary surcharge for the recovery of' specific cost items experienced by a utility in the rendering of past service.” To understand .the questions presented by this appeal, it is necessary to review briefly the history of the fuel adjustment clauses which the Commission has authorized Duke to impose. The problem sought to be solved dates back to 1973 when a worldwide, energy crisis, brought about tremendous increases in the cost of fossil fuels, particularly coal which is used extensively in this country in the generation of electricity. On 30 November 1973 Duke filed with the Commission an application (Docket E-7, Sub. 161) for authority to adjust its retail electric rates and charges by the addition of a coal adjustment clause to be-rendered on monthly bills bn and after 1 January 1974. At that time Duke had pending an application (Docket E-7, Sub'. 159) for a general rate increase. On 19 December 1973,. an order based on affidavits and other documentary evidence,. the Commission consolidated the two applications, and,-pending . a hearing, authorized the requested coal adjustment clause. The order provided that the clause would not he operative unless and until coal costs increased above the October 1973 level, and included the following: “1. That effective on bills rendéred on and after Jan- ' uary 19, 1974 for service rendered on and after December 19, 1973 with respect to coal burned on and after November 1, 1973, the-Applicant, Duke Power Company, is authorized and permitted to put into effect the coal cost adjustment clause attached to its application as Exhibit B. — 467 — “2. That Duke Power Company will report to the Commission on a monthly básis the amount of thefuelcost adjustment and the factors and 'computations ’used in its derivation.” ' ■ ‘• ■ ’ ' ; On 17 July 1974 this court dismissed an appeal , by the Attorney General from , the 19 December 1973. order on the ground that the, order was interlocutory. See opinion reported in 22 N.C. App. 497, 206 S.E. 2d 507; aff'd, 285 N.C. 759, 209 S.E. 2d 282 (1974). On 10 October 1974, following lengthy hearings, the Commission entered a final order in Docket No. E-7, 'Süb. 161' in which it made pertinent findings 6f fact and conclusions of law and ordered (1) that thé fossil fuel adjustment clause become effective 1 November 1974/ (2) that the coal clause remain in effect until 1 November 1974, and (3) thát Duké file with the Commission each month a complete fossil fuel adjustment clause memorandum. ' The Attorney General and other intervenors appealed from the order, attacking the validity of the fuel adjustment clause. In an opinion filed 6 August 1975, and reported in 26 N.C. App. 662, 217 S.E. 2d 201, this court upheld thé Validity of the fuel clause. A fuller account of the findings and conclusions of thé Commission is set forth in that opinion. > . Scope of Review ; While our decision in this case doés not rest on technical rules of procedure, we feel constrained to call attention to Rule 10 of the new North Carolina Rules of Appellate Procedure, 287 N.C. 671 (1975), which becamé effective with respect to all appeals taken from orders and judgments of trial tribunals, including the Utilities Commission, in which notice of appeal was given on and after 1 July 1975. Since the . orders appealed from in the instant case were entered subsequent to that daté, the new rules apply. Rule 10(a) provides.: . “Function in Limiting Scope of Review. Except as otherwise provided in this Rule 10,.. the scope of review on appeal is confined to a consideration of those exceptions set out and made the basis of assignments of error in the record on appeal in accordance with this Rule 10. No exception not so set out may be made the basis of an assignment of error; and no exception so set out which is not máde the — 468 — basis of an assignment of error may be considered on appeal. Provided, that upon any appeal duly taken from a final judgment any party to the appeal may present for review, by properly raising them in his brief, the questions whether the judgment is supported by the verdict or by the findings of fact and conclusions of law, whether the court had jurisdiction of the subj ect matter, and whether a criminal charge is sufficient in law, notwithstanding the absence of exceptions or assignments of error in the record on appeal. ” With respect to exceptions to findings of fact and conclusions of law, the last sentence of Rule 10(b) (2) provides “A separate exception shall be set out to the making or omission of each finding of fact or conclusion of law which is to be assigned as error.” The drafting committee’s commentary regarding this sentence, Ibid, p. 702, states: “The last sentence carries forward an established rule of decision which has prohibited ‘broadside exceptions’ to multiple findings or conclusions. Logan v. Sprinkle, 256 N.C. 41 (1961).” All of the Attorney General’s exceptions and assignments of error are to the signing and entry of the orders appealed from, with reasons given as to why the orders are invalid. In his assignment No. 5 (Ex. No. 3) as set forth in his grouping of exceptions and assignments, he alludes to “certain Findings and Conclusions” including one which he summarizes, and states that the findings and conclusions (presumably referring to all of them) are unsupported by competent, material and substantial evidence in view of the entire record as submitted, “and said Order is therefore arbitrary and capricious.” Where the orders are set out in the record on appeal, no exception is noted to any finding of fact or conclusion of law. We hold that there is no proper exception to the findings of fact and conclusions of law set forth in the orders, therefore, the findings and conclusions are presumed to be correct. Our review is limited to the questions whether the orders are supported by the findings of fact and conclusions of law. Merits of the Case The main thrust of the Attorney General’s contention is that the part of the 27 August 1975 order allowing Duke to apply a temporary surcharge to collect its increased fuel costs for July and August of 1975 constitutes retroactive rate fix — 469 — ing which is not authorized by our statutes and has been declared illegal by our Supreme Court. Specifically, the Attorney General argues that one of the primary statutes giving the Commission the authority to fix rates is G.S. 62-136, and that subsection (a) of that statute authorizes a fixing of rates “to be thereafter observed and in force” (emphasis ours). He further argues that in Utilities Commission v. City of Durham, 282 N.C. 308, 318, 193 S.E. 2d 95, 102 (1972), the Supreme Court declared that “the Commission may not fix rates retroactively so as to make them collectible for past service.” The Commission argues that there is a difference between rate fixing and approving a fuel clause designed to recover previously incurred costs. We find this argument persuasive. Rate fixing contemplates considerably more than altering one component in the rate structure of a public utility. The catchline of G.S. 62-133 is “How rates fixed.” The statute then provides that in fixing rates for certain public utilities (including power companies), the Commission, among other things, shall ascertain the fair value of the public utility’s property used and useful in providing the service rendered to the public within this State, estimate the utility’s revenue under present and proposed rates, ascertain the utility’s reasonable operating expenses, and fix a rate of return on the fair value of the property as will enable the utility by sound management to produce a fair profit for its stockholders. While the cost of fuel for its generating plants is undoubtedly a major expense item for Duke and other power companies, such cost is only one of many factors that G.S. 62-133 requires the Commission to consider in fixing rates. In City of Norfolk v. Virginia Electric and Power Company, 197 Va. 505, 90 S.E. 2d 140 (1955), the Virginia Supreme Court of Appeals, in approving a fuel clause (referred to by that court as an escalator clause) for a power company under its jurisdiction, recognized a distinction between rate fixing and approving a fuel clause. We quote from the opinion: “[T]he escalator clause is, therefore, highly remedial; it confers no benefit on the stockholders of the company except to help the avoidance of unjustified loss, and ... it — 470 — likewise deprives them of the possibility of keeping an unjustified gain.” * * * “In approving the escalator clause the Commission did not fix rates retroactively, but on the contrary, it authorized and prescribed a fixed mathematical formula to, be inserted in the schedules of the Company which will serve as a ‘guide, direction, or rule or action’ for determining future rates.” 90 S.E. 2d at 146-48. We think G.S. 62-136 (a) refers to rate fixing as envisioned by G.S. 62-133. We also think the declaration by our Supreme Court in Utilities Commission v. City of Durham, supra, quoted above, was made in the context of a general rate fixing case and is not controlling in this case. On 30 November 1973 when Duke applied to the Commission for authority to implement an automatic coal adjustment clause (also referred to herein as a fuel clause), it was operating within a rate structure that had been determined by the Commission pursuant to G.S. 62-133. That structure included an item of .5035 cent per KWH for cost of fossil fuel. The order of the Commission entered 19 December 1973 authorizing Duke to implement a fuel clause, which order is the root of the question presented by this appeal, did not “fix rates” but was only a means to make the .5035 cent per KWH for cost of fuel a workable figure from the standpoint of Duke and its customers. By the enactment of Section 8 of Chapter 243 of the 1975 Session Laws [G.S. 62-134(e) quoted above], the General Assembly indicated an intent that the cost of fuel used in the generating of electricity by a public utility should be treated as a factor separate from all others in the utility’s rate structure. The new statute expressly states that a proceeding under it shall not be considered a general rate case. It streamlines the procedure for considering an application to change the cost of fuel component and requires the Commission to rule on the application within 90 days after it is filed. The record discloses that after October 1973 Duke could not determine the accurate cost of fuel per KWH for a given month until two months later, therefore, bills rendered in January 1974 included increased fuel costs for November 1973; that this caused a two months’ lag in recovering the increased — 471 — fuel costs, thereby necessitating the surcharge in question to collect for July and August 1975. While the 19 December 1973 and 10 October 1974 orders might have been clearer in their provisions that Duke’s recovery of increased fuel costs would relate back to include November and December of 1978, a liberal construction of the orders leads us to conclude that they were sufficient to accomplish that purpose. We hold that the Commission did not exceed its authority in entering the orders appealed from. Affirmed. Judge Hedrick concurs. Judge Martin dissents.