{ "id": 4325643, "name": "STATE OF NORTH CAROLINA ex rel. UTILITIES COMMISSION; DUKE ENERGY CAROLINAS, LLC, Applicant; PUBLIC STAFF-NORTH CAROLINA UTILITIES COMMISSION, Intervenor v. ATTORNEY GENERAL ROY COOPER, N.C. WASTE AWARENESS AND REDUCTION NETWORK, N.C. JUSTICE CENTER, and N.C. HOUSING COALITION, Intervenors", "name_abbreviation": "State ex rel. Utilities Commission v. Cooper", "decision_date": "2014-12-19", "docket_number": "No. 268A12-2", "first_page": "644", "last_page": "652", "citations": [ { "type": "official", "cite": "367 N.C. 644" } ], "court": { "name_abbreviation": "N.C.", "id": 9292, "name": "Supreme Court of North Carolina" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "500 S.E.2d 693", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 9, "year": 1998, "pin_cites": [ { "page": "700" }, { "page": "699", "parenthetical": "citation omitted" }, { "page": "700", "parenthetical": "alteration in original" }, { "parenthetical": "citation omitted" }, { "page": "700-01" }, { "page": "703" }, { "page": "703" } ], "opinion_index": 0 }, { "cite": "761 S.E.2d 640", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2014, "pin_cites": [ { "page": "644", "parenthetical": "citations omitted" } ], "opinion_index": 0 }, { "cite": "367 N.C. 444", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4315981 ], "year": 2014, "pin_cites": [ { "page": "450", "parenthetical": "citations omitted" } ], "opinion_index": 0, "case_paths": [ "/nc/367/0444-01" ] }, { "cite": "348 N.C. 452", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 1659837 ], "weight": 5, "year": 1998, "pin_cites": [ { "page": "461" }, { "page": "460" }, { "page": "460" }, { "page": "461-62" }, { "page": "466" } ], "opinion_index": 0, "case_paths": [ "/nc/348/0452-01" ] }, { "cite": "739 S.E.2d 541", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 12, "year": 2013, "pin_cites": [ { "page": "542-43" }, { "page": "544" }, { "page": "547" }, { "page": "547" }, { "page": "548" }, { "page": "547" }, { "page": "543" }, { "page": "548" } ], "opinion_index": 0 }, { "cite": "366 N.C. 484", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4354335 ], "weight": 6, "year": 2013, "pin_cites": [ { "page": "488" }, { "page": "494" }, { "page": "493" }, { "page": "486-87" }, { "page": "495" } ], "opinion_index": 0, "case_paths": [ "/nc/366/0484-01" ] }, { "cite": "758 S.E.2d 635", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 2014, "pin_cites": [ { "page": "636", "parenthetical": "citations omitted" }, { "parenthetical": "citation omitted" } ], "opinion_index": 0 }, { "cite": "367 N.C. 430", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4316610 ], "year": 2014, "pin_cites": [ { "page": "432", "parenthetical": "citations omitted" } ], "opinion_index": 0, "case_paths": [ "/nc/367/0430-01" ] } ], "analysis": { "cardinality": 797, "char_count": 19180, "ocr_confidence": 0.735, "pagerank": { "raw": 4.03580807328026e-08, "percentile": 0.1461540807977608 }, "sha256": "72e79150a4b52a6f5089ec2933b5ad7c27b2849ff6184084e5afdc46dfcbf8dc", "simhash": "1:80adaa720dc4ac4e", "word_count": 2969 }, "last_updated": "2023-07-14T22:06:46.212757+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "STATE OF NORTH CAROLINA ex rel. UTILITIES COMMISSION; DUKE ENERGY CAROLINAS, LLC, Applicant; PUBLIC STAFF\u2014NORTH CAROLINA UTILITIES COMMISSION, Intervenor v. ATTORNEY GENERAL ROY COOPER, N.C. WASTE AWARENESS AND REDUCTION NETWORK, N.C. JUSTICE CENTER, and N.C. HOUSING COALITION, Intervenors" ], "opinions": [ { "text": "JACKSON, Justice.\nIn this case we consider whether the order of the North Carolina Utilities Commission (\u201cthe Commission\u201d) authorizing a 10.5% return on equity (\u201cROE\u201d) for Duke Energy Carolinas (\u201cDuke\u201d) contained sufficient findings of fact to demonstrate that the order was supported by competent, material, and substantial evidence in view of the entire record. See N.C.G.S. \u00a7 62-94 (2013). Because we conclude that the Commission made sufficient findings of fact regarding the impact of changing economic conditions upon customers, we affirm. See id. \u00a7 62-94(b).\nOn 1 July 2011, Duke filed an application with the Commission requesting authority to increase its North Carolina retail electric service rates to produce an additional $646,057,000, yielding a net increase of 15.2% in overall base revenues. The application requested that rates be established using an ROE of 11.5%. The ROE represents the return that a utility is allowed to earn on the equity-financed portion of its capital investment by charging rates to its customers. As a result, the ROE approved by the Commission affects profits for shareholders and costs to consumers. State ex rel. Utils. Comm\u2019n v. Cooper (\u201cCooper II\"), 367 N.C. 430, 432, 758 S.E.2d 635, 636 (2014) (citations omitted). \u201cThe ROE is one of the components used in determining a company\u2019s overall rate of return.\u201d Id. (citation omitted).\nThe proceedings before the Commission are set forth in- our opinion in State ex rel. Utilities Commission v. Cooper (\u201cCooper 7\u201d), 366 N.C. 484, 739 S.E.2d 541 (2013). In pertinent part, we explained that\n[t]he Commission entered an order on 28 July 2011, declaring this matter to be a general rate case and suspending the proposed rate increase pending further investigation. . . . The Attorney General of North Carolina and the Public Staff-North Carolina Utilities Commission intervened in this matter as allowed by law.\nOn 28 November 2011, the Public Staff and Duke filed an Agreement and Stipulation of Settlement with the Commission that \u201cprovide[d] for a net increase of $309,033,000\u201d for annual revenues and an allowed \u201cROE of 10.5%.\u201d The Settlement addressed all issues between Duke and the Public Staff, but was contested by some of the other parties, including the Attorney General.\nId. at 486, 739 S.E.2d at 542-43. Subsequently, the Commission conducted six hearings to receive testimony from public witnesses and an evidentiary hearing for receiving expert testimony. Id. On 27 January 2012, the Commission entered an order (the \u201cRate Order\u201d) approving the revenue increase and ROE contained in the Stipulation. 366 N.C. at 488, 739 S.E.2d at 544. The Attorney General appealed.\nUpon review, we concluded that the Rate Order was not supported by sufficient findings of fact demonstrating that the Commission exercised independent judgment in approving the Stipulation\u2019s provisions. Id. at 493, 739 S.E.2d at 547. We explained that\nit does not appear that the Commission weighed any of the testimony presented at the evidentiary hearing. Instead, it appears that the Commission merely recited the witnesses\u2019 testimony before reaching an ROE conclusion in its order. Notably absent from the Commission\u2019s order is any discussion of why one witness\u2019s testimony was more credible than another\u2019s or which methodology was afforded the greatest weight.\nId. We further noted that the Rate Order did not include sufficient findings of fact regarding the impact of changing economic conditions upon customers. 366 N.C. at 494, 739 S.E.2d at 547. As a result, we reversed the Rate Order and remanded the case \u201cwith instructions to make an independent [ROE] determination ... based upon... findings of fact that weigh all the available evidence.\u201d Id. at 496, 739 S.E.2d at 548.\nOn 23 October 2013, the Commission entered an order (the \u201cRemand Order\u201d) making supplemental findings of fact, summarizing public witness testimony, reviewing expert testimony, explaining the weight given to the evidence, and \u201creaffirm[ing]\u201d the Rate Order. The Commission concluded that the ROE authorized in the Rate Order was \u201cjustified and supported\u201d by the evidence and was reasonable in light of the Stipulation as a whole. The Attorney General appealed the Remand Order to this Court as of right pursuant to N.C.G.S. \u00a7\u00a7 7A-29(b) and 62-90.\nSubsection 62-79(a) of the North Carolina General Statutes \u201csets forth the standard for Commission orders against which they will be analyzed upon appeal.\u201d State ex rel. Utils. Comm\u2019n v. Carolina Util. Customers Ass\u2019n (\u201cCUCA I\u201d), 348 N.C. 452, 461, 500 S.E.2d 693, 700 (1998). Subsection 62-79(a) provides:\n(\u0430) All final orders and decisions of the Commission shall be sufficient in detail to enable the court on appeal to determine the controverted questions presented in the proceedings and shall include:\n(1) Findings and conclusions and the reasons or bases therefor upon all the material issues of fact, law, or discretion presented in the record, and\n(2) The appropriate rule, order, sanction, relief or statement of denial thereof.\nN.C.G.S. \u00a7 62-79(a) (2013). When reviewing an order of the Commission, this Court may, inter alia,\nreverse or modify the decision if the substantial rights of the appellants have been prejudiced because the Commission\u2019s findings, inferences, conclusions or decisions are:\n(1) In violation of constitutional provisions, or\n(2) In excess of statutory authority or jurisdiction of the Commission, or\n(3) Made upon unlawful proceedings, or\n(4) Affected by other errors of law, or\n(5) Unsupported by competent, material and substantial evidence in view of the entire record as submitted, or\n(\u0431) Arbitrary or capricious.\nId. \u00a7 62-94(b) (2013). Pursuant to subsection 62-94(b) this Court must determine whether the Commission\u2019s findings of fact are supported by competent, material, and substantial evidence in light of the entire record. Id.; CUCA I, 348 N.C. at 460, 500 S.E.2d at 699 (citation omitted). \u201cSubstantial evidence [is] defined as more than a scintilla or a permissible inference. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.\u201d CUCA I, 348 N.C. at 460, 500 S.E.2d at 700 (alteration in original) (citations and quotation marks omitted). The Commission must include all necessary findings of fact, and failure to do so constitutes an error of law. Id. (citation omitted).\nIn his appeal, the Attorney General argues that the Commission did not reach its own independent conclusions because the Remand Order \u201conce again analyzes and critiques the expert testimony ... in just such a way. so as to reach \u2014 to the exact tenth of a percent \u2014 the precise compromise ROE contained in the Stipulation.\u201d The Attorney General asserts that the Commission supported the Remand Order by \u201ccherry picking\u201d through the available evidence, evidence from other cases, and orders entered in other jurisdictions. We disagree.\nIn CUCA I we explained that the Commission is required to reach an independent conclusion on a fair ROE. 348 N.C. at 461-62, 500 S.E.2d at 700-01. The Commission must consider all the evidence before it along with any stipulation entered into by some of the parties and any other relevant facts. Id. at 466, 500 S.E.2d at 703. But the requirement that the Commission reach an independent conclusion does not preclude the Commission from adopting an ROE recommended by a particular party or witness. As we explained in CUCA I,\n[t]he Commission may even adopt the recommendations or provisions of the nonunanimous stipulation as long as the Commission sets forth its reasoning and makes \u201cits own independent conclusion\u201d supported by substantial evidence on the record that the proposal is just and reasonable to all parties in light of all the evidence presented.\nId.\nIn Cooper I we reversed the Rate Order because we were unable to conclude from the record that the Commission had considered all the evidence in addition to the Stipulation. See 366 N.C. at 493, 739 S.E.2d at 547. Specifically, we noted that the Rate Order did not weigh the evidence, but \u201cmerely recited the witnesses\u2019 testimony before reaching an ROE conclusion.\u201d Id. But in the Remand Order, the Commission revisited the evidence related to ROE and explained the weight given to each' witness\u2019s testimony.\nThe Commission first reviewed the discounted cash flow (\u201cDCF\u201d) analysis presented by Duke witness Robert Hevert. See 366 N.C. at 486-87, 739 S.E.2d at 543. The Commission explained that Hevert performed this analysis using several proxy groups and arrived at estimated ROE ranges of: (1) 10.42% to 10.84% for a proxy group he had selected; (2). 10.24% to 10.74% for a proxy group selected by Public Staff witness Johnson; (3) 10.31% to 10.57% for one proxy group selected by CUCA witness O\u2019Donnell; and (4) 10.27% to 10.58% for a second proxy group selected by O\u2019Donnell. The Commission observed that the average midpoint of these ranges was exactly the stipulated 10.5%. Ultimately, the Commission \u201ccreditfed]\u201d Hevert\u2019s DCF analysis and found \u201cthat the resulting value provides substantial support for its determination that 10.5% is the appropriate [ROE].\u201d\nThe Commission noted that Public Staff witness Ben Johnson had examined ROE through a comparable earnings method and a market approach. The Commission gave \u201csubstantial weight\u201d to Johnson\u2019s comparable earnings method, which resulted in an ROE range of 9.75% to 10.75%, and determined that Johnson\u2019s analysis provided \u201cample support\u201d for the Commission\u2019s conclusion that 10.5% was an appropriate ROE. Nevertheless, the Commission explained that Johnson had acknowledged that his market approach \u201cdoes not focus on short-term securities markets at all; so the recent drop in interest rates and the drop in the opportunity to reach capital that is being signaled by security markets is simply not a part of that analysis.\u201d The Commission further explained that Hevert testified that Johnson\u2019s market analysis resulted in an \u201cunreasonably low\u201d ROE. The Commission determined that Johnson\u2019s market analysis was unpersuasive.\nThe Commission gave \u201cminimal weight\u201d to CUCA witness Kevin O\u2019Donnell\u2019s testimony recommending an ROE of 9.5%. The Commission concluded that O\u2019Donnell inappropriately relied upon the assumed rate of return for Duke\u2019s pension expense, \u201cignoring] the crucial distinction between expected returns, which underlie pension expense, and required returns, which underlie the appropriate rate of return on equity.\u201d\nIn conducting its analysis, the Commission was required to consider the Stipulation together with all the other evidence and was permitted to adopt the ROE contained therein. CUCA I, 348 N.C. at 466, 500 S.E.2d at 703. We hold that the Remand Order contains sufficient findings of fact explaining the weight given to the evidence and demonstrating that the Commission reached its own independent conclusion on ROE.\nNext, the Attorney General argues that the Commission determined that it \u201cneed not follow\u201d this Court\u2019s decision in Cooper I. Specifically, the Attorney General contends that the Commission did not make sufficient findings of fact regarding the impact of changing economic conditions upon customers. We disagree.\nPursuant to subdivision 62-133(b)(4) of the North Carolina General Statutes, the Commission must fix a rate of return that\nwill enable the public utility by sound management to produce a fair return for its shareholders, considering changing economic conditions and other factors, ... to maintain its facilities and services in accordance with the reasonable requirements of its customers in the territory covered by its franchise, and to compete in the market for capital funds on terms that are reasonable and that are fair to its customers and to its existing investors.\nN.C.G.S. \u00a7 62-133(b)(4) (2013). In Cooper I we observed that this provision, along with Chapter 62 as a whole, requires the Commission to treat consumer interests fairly, not indirectly or as \u201cmere afterthoughts.\u201d 366 N.C. at 495, 739 S.E.2d at 548. But although the Commission must make findings of fact regarding the impact of changing economic conditions upon consumers, \u201cwe did not state in Cooper I that the Commission must \u2018quantify\u2019 the influence of this factor upon the final ROE determination.\u201d State ex rel. Utils. Comm\u2019n v. Cooper (\u201cCooper III\u201d), 367 N.C. 444, 450, 761 S.E.2d 640, 644 (2014) (citations omitted).\nHere the Commission\u2019s order contains several findings of fact that address this factor:\n53. Economic conditions in North Carolina during the last several years have caused high levels of unemployment and other economic stress on [Duke\u2019s] customers.\n54. The rate increase approved in this case, which includes, among the many authorized adjustments, the approved return on equity and capital structure, will be difficult for some of [Duke\u2019s] customers to pay, in particular [Duke\u2019s] low-income customers. ...\n55. Continuous safe, adequate, and reliable electric service by [Duke] is essential to the well-being of the people, businesses, institutions, and economy of North Carolina.\n56. The return on equity approved by the Commission appropriately balances the benefits received by all of [Duke\u2019s] customers from [Duke\u2019s] provision of safe, adequate, and reliable electric service in support of the well-being of the people, businesses, institutions, and economy of North Carolina with the difficulties that a portion of [Duke\u2019s] customers experience in paying their bills in the current economic environment.\nFurthermore, the Commission found that the Stipulation was \u201cdesigned to mitigate the impact of the rate increase in several ways.\u201d First, the Commission explained that pursuant to the Stipulation, Duke\u2019s rates would increase by 7.21% across-the-board for all customer classes, which amounted to less than half the revenue increase that Duke originally sought. The Commission determined that an across-the-board increase, as provided in the Stipulation, resulted in a smaller increase for residential customers than an alternative rate design considered by the Commission. The Commission concluded that this approach was responsive to the concerns of public witnesses regarding the ability of residential customers to pay for a rate increase.\nSecond, the Commission noted that the Stipulation required Duke to defer recovery of costs associated with construction work in progress at Duke\u2019s Cliffside Unit 6. The Commission found that this requirement \u201cprovid[es] $51 million of relief in present rates to respond to the present economic straits.\u201d (Emphasis omitted.)\nFinally, the Commission explained that the Stipulation required Duke to pay $11 million for energy assistance for low-income customers. As stated in the Stipulation, this contribution would come from Duke\u2019s shareholders and would be used exclusively to provide energy assistance to Duke\u2019s North Carolina retail customers.\nThese findings of fact not only demonstrate that the Commission considered the impact of changing economic conditions upon customers, but also specify how this factor influenced the Commission\u2019s decision to authorize a 10.5% ROE as agreed to in the Stipulation. These findings are supported by the evidence before the Commission,. including public witness testimony, expert testimony, and the Stipulation itself. Therefore, we hold that the Commission made sufficient findings regarding the impact of changing economic conditions upon customers and that these findings are supported by competent, material, and substantial evidence in view of the entire record.\nAccordingly, the order of the Commission is affirmed.\nAFFIRMED.\n. We note that NC WARN, the North Carolina Justice Center, and the North Carolina Housing Coalition did not file a notice of appeal with the Commission, although they filed a brief with this Court. Pursuant to section 62-90 of the North Carolina General Statutes, a party may appeal a final order of the Commission \u201cif the party . . . shall file with the Commission notice of appeal and exceptions which shall set forth specifically the ground or grounds on which the aggrieved party considers said decisions or order to be unlawful, unjust, unreasonable or unwarranted.\u201d N.C.G.S. \u00a7 62-90(a) (2013). Because NC WARN, the North Carolina Justice Center, and the North Carolina Housing Coalition did not file a notice of appeal with the Commission, we are without jurisdiction to consider their arguments.", "type": "majority", "author": "JACKSON, Justice." } ], "attorneys": [ "K&L Gates LLP, by Kiran H. Mehta; Heather Shirley Smith, Deputy General Counsel, and Charles A. Castle, Associate General Counsel, Duke Energy Carolinas, LLC; and Williams Mullen, by Christopher G. Browning, Jr., for applicant-appellee Duke Energy Carolinas, LLC.", "Antoinette R. Wike, Chief Counsel, and William E. Grantmyre and David T. Drooz, Staff Attorneys, for intervenor-appellee Public Staff \u2014 North Carolina Utilities Commission.", "Kevin Anderson, Senior Deputy Attorney General; Phillip K. Woods, Special Deputy Attorney General; Michael T. Henry, Assistant Attorney General; and John F. Maddrey, Solicitor General; for intervenor-appellant Roy Cooper, Attorney General.", "Law Offices ofF. Bryan Brice, Jr., by Matthew D. Quinn, for NC WARN; and John D. Runkle for NC WARN, N. C. Justice Center, and N.C. Housing Coalition, intervenor-appellants." ], "corrections": "", "head_matter": "STATE OF NORTH CAROLINA ex rel. UTILITIES COMMISSION; DUKE ENERGY CAROLINAS, LLC, Applicant; PUBLIC STAFF\u2014NORTH CAROLINA UTILITIES COMMISSION, Intervenor v. ATTORNEY GENERAL ROY COOPER, N.C. WASTE AWARENESS AND REDUCTION NETWORK, N.C. JUSTICE CENTER, and N.C. HOUSING COALITION, Intervenors\nNo. 268A12-2\n(Filed 19 December 2014)\n1. Utilities \u2014 North Carolina Utilities Commission \u2014 electric service rate \u2014 return on equity \u2014 sufficiency of findings of fact\nIn a utilities rate case, the Utilities Commission\u2019s order authorizing a return on equity of 10.5% for Duke Energy Carolinas contained sufficient findings of fact. The findings reviewed the testimony of the witnesses, described the weight given to the evidence, and demonstrated that the Commission reached an independent conclusion in adopting the return on equity in the stipulation.\n2. Utilities \u2014 North Carolina Utilities Commission \u2014 electric service rate \u2014 return on equity \u2014 impact on consumers\u2014 sufficiency of findings of fact\nIn a utilities rate case, the Utilities Commission\u2019s order authorizing a return on equity of 10.5% for Duke Energy Carolinas contained sufficient findings of fact regarding the impact of changing economic conditions on utilities customers. The order considered the need for safe, adequate, and reliable electric service and the difficult economic climate for consumers, concluding that a 10.5% return on equity struck the appropriate balance. The order also found that the stipulation for the return on equity would mitigate the impact of the rate increase in several ways, including provision of assistance programs for low-income consumers.\nOn direct appeal as of right pursuant to N.C.G.S. \u00a7\u00a7 7A-29(b) and 62-90(d) from a final order of the North Carolina Utilities Commission on remand from this Court entered on 23 October 2013 in Docket No. E-7, Sub 989. Heard in the Supreme Court on 8 September 2014.\nK&L Gates LLP, by Kiran H. Mehta; Heather Shirley Smith, Deputy General Counsel, and Charles A. Castle, Associate General Counsel, Duke Energy Carolinas, LLC; and Williams Mullen, by Christopher G. Browning, Jr., for applicant-appellee Duke Energy Carolinas, LLC.\nAntoinette R. Wike, Chief Counsel, and William E. Grantmyre and David T. Drooz, Staff Attorneys, for intervenor-appellee Public Staff \u2014 North Carolina Utilities Commission.\nKevin Anderson, Senior Deputy Attorney General; Phillip K. Woods, Special Deputy Attorney General; Michael T. Henry, Assistant Attorney General; and John F. Maddrey, Solicitor General; for intervenor-appellant Roy Cooper, Attorney General.\nLaw Offices ofF. Bryan Brice, Jr., by Matthew D. Quinn, for NC WARN; and John D. Runkle for NC WARN, N. C. Justice Center, and N.C. Housing Coalition, intervenor-appellants." }, "file_name": "0644-01", "first_page_order": 684, "last_page_order": 692 }