State ex rel. Utilities Commission v. CF Industries, Inc.

HEDRICK, Judge. By its one assignment of error, CF Industries contends the “Commission erred in its conclusion that the increase in NCNG’s gas storage capacity was an increase in the wholesale cost of gas pursuant to G.S. § 62-133(f).” G.S. § 62433(f) empowers the Utilities Commission to permit North Carolina utilities to increase their retail rates for natural gas commensurate with increases in the “wholesale cost” of natural gas without going through the procedures required for a general rate case. This permits utilities to “pass through” periodic wholesale price increases imposed by interstate pipeline companies. G.S. § 62433(f) provides in pertinent part: [479] Unless otherwise ordered by the Commission subsections (b), (c), and (d) [of GS 62-133] shall not apply to rate changes of utilities engaged in the distribution of natural gas bought at wholesale by the utility for distribution to consumers to the extent such rate changes are occasioned by changes in the wholesale rate of such natural gas. The Commission may permit such rate changes to become effective simultaneously with the effective date of the change in the wholesale cost of such natural gas, or at such other time as the Commission may direct. The sole question thus presented for our review is whether charges incurred for increased storage capacity and paid to the natural gas wholesaler are part of the “wholesale cost” of natural gas within the meaning of G.S. § 62433(f), so that the increased cost can be reflected in the retail rates automatically without the necessity for fixing the retail rates pursuant to the procedures for a general rate case. We believe such storage service charges are not properly includable in the “wholesale cost” of natural gas supplies. The purpose of G.S. § 62433(f) is to allow the retailer to automatically pass on to the consumer changes in the wholesale cost of the natural gas, over which neither the retailer nor the Utilities Commission has control, whenever the natural gas suppliers’ price is revised upward or downward, thus avoiding costly and protracted rate proceedings. NCNG argues that the storage service charge is a “wholesale cost” that it “must incur in order to obtain supplies of gas that are adequate to fill the needs of its customers.” While we express no opinion as to the necessity of the added storage, it is clear that the decision to increase storage capacity represents a discretionary determination on the part of NCNG and is not a change in the wholesale cost of the gas supplies beyond the retailer’s control. Any increase in the retail rates attributable to charges by a wholesaler of natural gas for storage capacity must be apportioned in a general rate case pursuant to G.S. § 62433(a) through (e). We hold that the Utilities Commission acted in excess of its statutory authority when it permitted NCNG to pass on additional costs resulting solely from an increase in storage capacity without complying with the statutory procedures required for a general rate case. [480] Vacated and remanded. Judges Vaughn and Arnold concur.