Appeal by Intervenor Carolina Utility Customers Association,
Inc. from order entered 17 August 1999 by the North Carolina
Utilities Commission. Heard in the Court of Appeals 8 January
2001.
Chief Counsel Antoinette R. Wike, by Staff Attorney Vickie L.
Moir, for intervenor-appellee Public Staff.
Attorney General Michael F. Easley, by Assistant Attorney
General Margaret F. Force, for intervenor-appellee Office of
Attorney General.
West Law Offices, P.C., by James P. West, for intervenor-
appellant Carolina Utility Customers Association, Inc.
SMITH, Judge.
Movant Gas Research Institute (GRI) is a non-profit
organization that manages cooperative research and development
programs in the natural gas industry. Prior to 1999, GRI was
funded primarily by surcharges collected by interstate pipelines
from natural gas local distribution companies (LDCs) pursuant to
tariffs approved by the Federal Energy Regulatory Commission
(FERC). The surcharges were, in turn, passed through to retail
customers as part of the LDC's gas costs, pursuant to N.C. Gen.
Stat. § 62-133.4 (1999).
In 1998, the FERC approved an agreement, which gradually
reduced the level of GRI funding collected through surcharges and
called for a complete elimination of funding through surcharges by
31 December 2004. In an effort to maintain its funding at the 1998
level, GRI proposed that LDCs around the country voluntarily
contribute the difference between the 1998 equivalent funding level
and the reduced surcharge level. In return for these voluntary
contributions, the LDCs could designate the types of research they
would support.
On 6 January 1999, GRI filed a motion with the North Carolina
Utilities Commission (the Commission) "request[ing] the entry of an
order authorizing LDCs in the state to make voluntary contributions
to GRI for research and to recover such contributions in their
annual Rate Adjustments pursuant to G.S. 62-133.4." GRI's proposal
was presented to the Commission at its Regular Staff Conference on25 January 1999. At the Conference, the Public Staff indicated
that the proposal raised several important legal and policy issues,
including "whether voluntary contributions to research (as opposed
to mandatory contributions through interstate pipeline tariffs) are
Gas Costs as provided in G.S. 62-133.4 and whether dollar for
dollar rate recovery (as opposed to recovery as an O&M expense in
basic rates) is warranted." Because of these concerns, "[t]he
Public Staff recommended that the Commission issue an order
requesting comments on GRI's proposal from interested parties and
requesting GRI to describe in further detail how other state
commissions have addressed the GRI funding issue." Accordingly, on
27 January 1999, the Commission issued an order requesting comments
from any interested party and requesting GRI to detail how other
states have broached the funding issue.
GRI responded as requested and proposed allowing LDCs to
recover their voluntary contributions in their annual gas cost
adjustment proceeding rather than as an O&M expense. Filing
comments were intervenor-appellant Carolina Utility Customers
Association, Inc. (CUCA); intervenor-LDCs Public Service Company of
North Carolina, Inc. (PSNC), Piedmont Natural Gas Company
(Piedmont), North Carolina Natural Gas Corporation (NCNG), NUI
North Carolina Gas (NUI), and Frontier Energy LLC (Frontier); the
Public Staff of the Commission; and the Office of Attorney General.
In addition to the proposal suggested by GRI, other proposals
submitted to the Commission were:
1 1.
Adopting a surcharge mechanism to enable
the LDCs to recover voluntary GRI
contributions.
2 2.
Denying GRI's motion and making no
provision for LDC recovery of voluntary
GRI contributions.
3 3.
Approving a transitional accounting
mechanism that would allow each LDC to
record its voluntary GRI contributions in
a deferred account until its next general
rate case, at which time the Commission
would examine the prudence and
reasonableness of the contributions and
take these contributions into account
when calculating rates for consumers.
After considering the comments and reply comments of all interested
parties, the Commission, on 17 August 1999, issued an order wherein
it concluded in pertinent part:
GRI is not a supplier of gas, and voluntary
contributions to GRI are not costs "related to
the purchase and transportation of natural gas
to the [LDC's] system." Therefore, such
contributions do not come within the scope of
gas cost adjustment proceedings now, and G.S.
62-133.4(e) cannot be used to expand the
definition of gas costs to cover such
contributions. The Commission concludes that
voluntary contributions made by the LDCs to
GRI cannot be considered gas costs recoverable
under G.S. 62-133.4.
. . . .
The Commission agrees that it has the
authority to change rates in a rulemaking
proceeding in certain limited circumstances.
The question is whether such an approach is
appropriate here. The Commission is not
persuaded that it is appropriate to establish
a surcharge or flow-through mechanism for GRI
contributions in a rulemaking proceeding.
. . . Given that customer mixes are not
uniform and that different LDCs are on record
as wanting to invest their GRI research
dollars in different ways, the Commission
cannot conclude that a generic solution is
appropriate herein. Moreover, . . . all cost
and revenue changes should be considered
together in the context of a general rate case
. . . . The Commission concludes that it must
exercise its authority to change rates in arulemaking proceeding only in limited
circumstances and that such an approach is not
appropriate here.
CUCA, the Attorney General and the Public
Staff all state that any voluntary GRI
contributions should properly be classified as
O&M expenses and recovered through general
rate case proceedings. However, given the
unique circumstances of the situation, the
Public Staff proposes that the Commission
approve a special accounting treatment as a
transitional recovery mechanism to bridge the
change from FERC-approved gas costs to normal
O&M expenses. The Public Staff proposes to
allow each LDC to record voluntary
contributions made to GRI through December 31,
2004 or the next rate case, whichever is
earlier, in a deferred charges account. At
the time of each LDC's next rate case, GRI
costs would be recoverable to the extent they
are found to be reasonable and prudently
incurred. The balance in the deferred charges
account would be amortized. As a condition of
recovery, each LDC should be required to
maintain adequate documentation that supports
the prudence of its overall contributions.
The documentation should include specifics
regarding benefits received as the result of
participating in GRI research. The Public
Staff contends that, with deferred accounting
treatment, the LDCs would be allowed "a
reasonable opportunity to collect amounts paid
to GRI."
. . . .
The Commission's interpretation of the
Public Staff's proposal is as follows: As
FERC-approved surcharges decrease, we assume
that each LDC will make some level of
voluntary contributions to GRI. The LDC will
be allowed to record the voluntary
contributions made until December 31, 2004 or
until the time of the LDC's next rate case in
a deferred charges account; such deferrals
will end on December 31, 2004 or at the time
of the LDC's next rate case, whichever is
earlier. In the LDC's next rate case,
whenever it occurs, a reasonable ongoing level
of GRI funding -- whether through FERC-
approved surcharges being recovered as gas
costs or voluntary contributions of the LDC -_
will be treated as O&M expenses in the ratecase and reflected in rates. The deferred
charges account balance, if found reasonable
and prudent, will be amortized in this rate
case. The Commission recognizes that if these
procedures require that FERC-approved
surcharges collected under the interstate
pipelines' tariffs be reclassified as O&M
expenses in the rate case, an appropriate
adjustment would have to be made in the LDC's
gas cost accounts to prevent the double-
collection of the surcharges in the gas cost
adjustment proceedings. The Commission also
recognizes that it has no authority to rule
that a surcharge approved by the FERC is
unreasonable or imprudently incurred and,
therefore, surcharges collected through FERC-
approved tariffs but reclassified from gas
costs to O&M expenses in the rate case would
not be subject to Commission prudency review.
The Commission believes that these procedures
will allow recovery of an LDC's reasonable and
prudent funding of GRI and will protect the
LDC from a shortfall in recovery during the
transition as FERC-approved surcharges
decrease and voluntary contributions increase.
Furthermore, allowance of carrying charges on
the amount in the deferred charges account
will make the LDC whole for the delay in
recovery. The Commission concludes that the
ratemaking procedures described above should
be followed in each LDC's next general rate
case in order to effect the transition from
FERC-approved funding of GRI to funding by
voluntary contributions of the LDCs.
. . . .
After carefully considering all of the
filings in this docket, the Commission
concludes that the Public Staff's proposal as
described above is reasonable and should be
adopted. The Commission further concludes
that the facts and arguments in this docket do
not warrant either treatment of voluntary
contributions to GRI through gas cost
adjustment proceedings or the establishment of
a surcharge for GRI funding through a
rulemaking proceeding.
(Alteration in original.)
On 15 September 1999, Piedmont filed a motion for
reconsideration and/or clarification, contending that the Augustorder "place[d] significant risks on the LDCs" in that "the
Commission could upon a hindsight review determine that some or all
of GRI's expenditures are imprudent and that the contributions by
the LDCs should not be recovered." Accordingly, Piedmont
request[ed] the Commission to reconsider its
August 17, 1999 Order and to approve a
continuation of GRI contributions at the
current levels pending each LDC's next general
rate case, with all such contribution to be
deferred in the manner set forth in the
Commission's order but without the risk of
disallowance upon an after-the-fact review.
Also on 15 September, CUCA filed a notice of appeal and exceptions
from the August order.
On 6 October 1999, NCNG filed a motion for reconsideration
and/or clarification stating in pertinent part:
NCNG does not object to a procedure in which
the Commission approves a level of GRI
contributions for each LDC in a general rate
case, although NCNG believes that the
preferable way to fund GRI contributions is
through a surcharge. Also, NCNG does not
object to a procedure in which the Commission
reserves the right to require NCNG to
discontinue future contributions to GRI if the
Commission determines that future
contributions would not be prudent. In
neither case, however, should NCNG be subject
to the risk of retroactive disallowance of its
contributions based on hindsight review of the
utilization of the contributions to GRI.
Accordingly, NCNG
request[ed] that the Commission reconsider its
August 17, 1999 Order and approve a
continuation of GRI contributions at the
current levels pending each LDC's next general
rate case, with all such contributions to be
deferred in the manner set forth in the
Commission's Order but without the risk of
subsequent disallowance.
On 7 October 1999, PSNC filed a statement in support ofPiedmont's motion, stating that "PSNC should not be ask
ed to incur
the risk that some portion of its voluntary contributions to GRI
will be disallowed in a subsequent general rate case. If PSNC is
subject to a potential disallowance in a subsequent general rate
case, PSNC probably will not make any voluntary contributions to
GRI."
On 14 October 1999, the Commission issued an Order on Motions
for Reconsideration and on Exceptions. In this subsequent order,
the Commission concluded in pertinent part:
G.S. 62-90(c) provides that when a party files
notice of appeal and exceptions as to a
Commission order, the Commission may set the
exceptions upon which the appeal is based for
further hearing. Further, G.S. 62-80 provides
that the Commission may reconsider any prior
order. While these statutes provide some
basis upon which the Commission could consider
either the motions for reconsideration or the
exceptions filed herein, the Commission
concludes that (except as noted hereinafter)
the Commission will take no action on CUCA's
exceptions and that the Commission will not
reconsider the August 17 Order.
. . . .
As to the exceptions filed by CUCA, one
exception notes that the August 17 Order uses
the phrase "there is much evidence that
. . . " and correctly points out that the
Commission did not hold an evidentiary
hearing. It is clear from the complete
sentence being quoted, in context, that the
phrase was inadvertent and should have instead
read "there were written comments that . . . "
[sic] The Commission will take no action on
CUCA's exceptions and its appeal may proceed.
On 5 November 1999, the Public Staff filed a motion for
reconsideration stating in pertinent part:
Throughout this proceeding, the Public Staff
has sought to support reasonable and prudent
LDC expenditures for gas research in a waythat is consistent with the Commission's
statutory authority and traditional ratemaking
principles. We continue to believe that the
deferral mechanism adopted by the Commission
is theoretically the most appropriate way of
providing support until the LDC's next general
rate cases. We recognize, however, that . . .
LDCs in general are unwilling to put any
material sums at risk for contributions to
GRI. Thus, it appears that the deferral
mechanism may prove unworkable in practice.
[] After studying the matter further, the
Public Staff believes there is merit to the
suggestion of some of the LDCs that the
Commission establish a procedure for prior
approval of their voluntary contributions to
GRI, so that they do not face the possibility
of hindsight review and disallowance of
deferrals in their next general rate cases.
The burden of justifying these expenditures
would remain with the LDCs, but they would
have the benefit of certainty as to the
ultimate ratemaking treatment of approved
amounts. . . .
Therefore, the Public Staff requests the
Commission to reconsider its prior Orders in
this matter and seek further comments on
whether a prior approval procedure would
satisfy the LDCs' concerns about using the
deferral mechanism for voluntary contributions
to GRI and, if so, how such a procedure should
be implemented. If the LDCs are unwilling to
use the deferral mechanism even with the
assurance of prior approval, then the Public
Staff requests the Commission to consider
rescinding its August 17, 1999, Order.
Following responses by CUCA and NCNG to Public Staff's motion, the
Commission again issued an order, on 20 December 1999, stating that
while the Commission "continue[d] to believe that the August 17
Order [was] well-reasoned and fair and should stand as issued[,]"
it would "respond to certain concerns expressed by the LDCs by way
of clarification, not reconsideration." The Commission stated that
"[n]othing in [its] August 17 Order, including the provisions for
documentation of overall GRI contributions, should be interpretedas allowing for hindsight analysis of the prudence of GRI
contributions." Rather, the Commission will use a reasonableness
standard to determine the prudence of GRI contributions. The
Commission stated further, "The Commission-approved procedures are
based on the ratemaking principles established by the General
Statutes. The General Statutes do not provide for 'pre-approval'
of rate case expenses and the LDCs make expenditures every day
without the Commission's 'pre-approval.'" Accordingly, the
Commission refused to reconsider or rescind its prior 17 August
1999 order.
[1]On 3 January 2000, CUCA filed the record on appeal with
this Court and thereafter filed its brief as appellant in this
appeal. We are compelled to note CUCA's apparent attempt to
circumvent the page limitations set forth in our Rules of Appellate
Procedure. See N.C. R. App. P. 28(j) (setting 35-page limitations
on principal briefs and 15-page limitations on reply briefs).
While the text itself extends only to thirty-four pages, CUCA's
abundant use of footnotes, the text of which contains much of the
analysis necessary to sustain its arguments and consists of
extraordinarily small type and single-spaced lines, demonstrates
its noncompliance with our rules. If the text of the footnotes
complied with the mandates of our rules and was added to the length
of the brief, CUCA's appellate brief would have substantially
exceeded the thirty-five page limit. See, e.g., In re MacIntyre,
181 B.R. 420, 421 (B.A.P. 9th Cir. 1995) ("Had [appellant] used the
correct type size for the footnotes . . . , he would have
undoubtedly exceeded the thirty page limit by several pages. It isalso worth noting that [appellant's] use of footnotes is excessive
and attempts to squeeze additional argument into his brief by
utilizing the single spacing found in footnotes."); In re Estate of
Marks, 595 N.E.2d 717, 721 (Ill. App. Ct. 1992) ("[T]he 'footnote'
approach to getting around the page limitations is a violation of
the spirit, and probably of the letter, of the law and is not
favored . . . ."). Similarly, CUCA's reply brief, which spans
better than fourteen pages, is strewn with approximately fifty
lines of reduced-type text, thus adding additional pages to its
brief. This is unacceptable and subjects CUCA's appeal to
dismissal. See Howell v. Morton, 131 N.C. App. 626, 629, 508
S.E.2d 804, 806 (1998). Nevertheless, we elect pursuant to N.C. R.
App. P. 2 to consider this appeal. However, we caution counsel
that footnotes are not to be used as a means to avoid the page
limitations specified in the appellate rules. See N.C. R. App. P.
28(j).
[2]While CUCA raises several issues for our consideration on
appeal, we need not reach those issues because we hold that CUCA is
not a party aggrieved by the order currently before us and, thus,
has no standing to appeal from this order. To appeal from an order
of the Commission, "the party aggrieved by such decision or order
shall file with the Commission notice of appeal and exceptions"
within thirty days after entry. N.C. Gen. Stat. § 62-90 (1999)
(emphasis added).
We find guidance in this Court's decision in State ex rel.
Utilities Comm. v. Carolina Utility Cust. Assn., 104 N.C. App. 216,408 S.E.2d 876 (1991). In that case, the Utilities Commission had
amended a ratemaking formula previously considered and approved by
the Commission in a general rate case. The amendment allowed
Piedmont to reduce its rates provided that it could "remove the
cost reduction if and when its gas costs later increased." Id. at
217, 408 S.E.2d at 876. CUCA contended it was an aggrieved party
"because the order would allow Piedmont to increase its rates in
the future to the extent necessary to offset previous reductions
under this order." Id. at 218, 408 S.E.2d at 877. We disagreed,
stating that "[w]hile under this order Piedmont may file, and in
fact has filed to make subsequent increases, those proposed
increases are not before us." Id. at 218, 408 S.E.2d 877-78.
Similarly, in the case sub judice, the Commission has
authorized no change (increase or decrease) in rates. In fact, it
specifically held that, while it "agree[d] that it ha[d] [the]
authority to change rates in a rulemaking proceeding in certain
limited circumstances[,] . . . [it] [was] not persuaded that it
[was] appropriate to establish a surcharge or flow-through
mechanism for GRI contributions in a rulemaking proceeding." The
Commission specifically accepted the Attorney General's argument
"that all cost and revenue changes should be considered together in
the context of a general rate case" and concluded that the
"exercise [of] its authority to change rates in a rulemaking
proceeding . . . [was] not appropriate."
All the August 1999 order purports to do is establish a
mechanism by which rates may be increased in the future. Thisspeculative recoupment by the LDCs was recognized, as is
unequivocally stated in a post-order statement made by PSNC: "If
PSNC is subject to a potential disallowance in a subsequent general
rate case, PSNC probably will not make any voluntary contributions
to GRI." If an LDC opts not to voluntarily contribute to GRI, this
transitional funding mechanism will be of no consequence and the
issues now presented by CUCA will not arise. Accordingly, because
the Commission's order did not impact rates and because any rate
increases will be effectuated at subsequent rate cases, CUCA is not
an "aggrieved party" and, thus, lacks standing to appeal.
Appeal dismissed.
Chief Judge EAGLES and Judge HUDSON concur.
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