Domestic Electric Service, Inc. v. City of Rocky Mount

203 S.E.2d 838 (1974) 285 N.C. 135

DOMESTIC ELECTRIC SERVICE, INCORPORATED
v.
The CITY OF ROCKY MOUNT and Cokey Apartments, Ltd.

No. 52.

Supreme Court of North Carolina.

April 10, 1974.

Spruill, Trotter & Lane by D. C. McCotter III and Robert K. Smith, Rocky Mount, and Tally & Tally by J. O. Tally, Jr., and James D. Garrison, Fayetteville, for The City of Rocky Mount.

Battle, Winslow, Scott & Wiley, P. A., Rocky Mount, for Domestic Electric Service, Inc.

LAKE, Justice.

Prior to the enactment of Ch. 287 of the Session Laws of 1965, investor-owned electric power companies and electric membership corporations, unless restricted by contract, were free to compete, in areas outside the corporate limits of municipalities, for the patronage of users and potential users of electric power. Utilities Commission v. Lumbee River Electric Membership Corp., 275 N.C. 250, 166 S.E.2d 663; Pitt & Greene Electric Membership Corp. v. Light Co., 255 N.C. 258, 120 S.E.2d 749; Light Co. v. Johnston County Electric Membership Corp., 211 N.C. 717, 192 S.E. 105. In absence of such contract, an electric membership corporation was also free to continue to serve its members notwithstanding their having become residents of a municipality, by virtue of the annexation by the municipality of the territory in which such members were located, and notwithstanding the fact that it had no franchise from the municipality. Pee Dee Electric Membership Corp. v. Light Co., 253 N.C. 610, 117 S.E.2d 764; Power Co. v. Blue Ridge Electric Membership Corp., 253 N.C. 596, 117 S.E.2d 812. In addition, a municipality, operating its own electric distribution system for the service of its inhabitants, had the right, under Ch. 285 of the Public Laws of 1929, codified as G.S. § 160-255 (now G.S. § 160A-312), to extend its lines beyond its corporate limits "within reasonable limitations" and thus to compete in rural areas with investor-owned power companies and with electric membership corporations. Grimesland v. Washington, 234 N.C. 117, 66 S.E.2d 794.

"In the absence of a valid grant of such right by statute, or by an administrative order issued pursuant to statutory authority, and in the absence of a valid contract with its competitor or with the person to be served, a supplier of electric power, or other public utility service, has no territorial monopoly, or other right to prevent its competitor from serving anyone who desires the competitor to do so." Utilities Commission v. Lumbee River Electric Membership Corp., supra, 275 N.C. at p. 256, 166 S.E.2d at p. 668. Such three-way competition resulted in substantial duplication of power lines and facilities, the lines of one supplier frequently paralleling or crossing those of its competitor. As we said in Utilities Commission v. Lumbee River Electric Membership Corp., supra, at p. 257, 166 S.E.2d at p. 668:

"It is for the Legislature, not for this Court or the Utilities Commission, to determine whether the policy of free competition between suppliers of electric power or the policy of territorial monopoly or an intermediate policy is in the public interest. If the Legislature has enacted a statute declaring the right of a supplier of electricity to serve, notwithstanding the availability of the service of another supplier closer to the customer, neither this Court nor the Utilities Commission may forbid service by such supplier merely because it will necessitate an uneconomic or unsightly duplication of transmission or distribution lines. In such event, it is immaterial whether the Legislature has imposed upon such supplier a correlative duty to serve."

Frequent litigation between investorowned power companies and electric membership corporations grew out of contracts between them defining and limiting territories to be served by each. To avoid or reduce such litigation and uneconomic duplication of transmission and distribution systems, the investor-owned electric utilities and the electric membership corporations, throughout the State, collaborated in recommending to the Legislature the enactment of Ch. 287 of the Session Laws of 1965. The language of the Act was the result of their collaboration and agreement and was carefully chosen for the accomplishment of this purpose. See, Utilities Commission v. Lumbee River Electric Membership Corp., supra, at p. 258. The Act contained two parts. The first, relating to electric service within the corporate limits of municipalities, is codified as G.S. § 160A-331 to G.S. § 160A-338, including subsequent amendments not pertinent to this appeal. The second, relating to electric service outside the corporate limits of municipalities, is codified as G.S. § 62-110.2.

The first part of the Act of 1965 sets forth, in great detail, the rights of a "primary supplier" and the rights of a "secondary supplier" to serve within the corporate limits of a municipality. A "primary supplier" is a city which owns and maintains its own electric system, or a person, firm or corporation furnishing electric service within a city pursuant to a franchise granted by, or a contract with, the city or continuing to do so after the expiration of a previously held franchise or contract. A "secondary supplier" is a person, firm or corporation, other than a primary supplier, who furnishes electricity at retail to one or more customers, other than itself, within the limits of a city. This part of the Act of 1965 has no direct bearing upon the question presented by the present appeal.

The second part of the Act of 1965, relating to electric service outside the corporate limits of municipalities, defines, also in great detail, the rights of, and restrictions upon, "electric suppliers" in such areas. G.S. § 62-110.2(a)(3) defines "electric supplier" to mean "any public utility furnishing electric service or any electric membership corporation." (Emphasis added.)

G.S. § 62-110.2, specifying the rights of, and restrictions upon, an "electric supplier," is, of course, a part of Ch. 62 of the General Statutes. G.S. § 62-3, defining terms "as used in this chapter, unless the context otherwise requires," states in Clause (23)(d), "The term ``public utility', except as otherwise expressly provided in this chapter, shall not include a municipality * * *." (Emphasis added.) Thus, a municipality is not an "electric supplier" as that term is used in G.S. § 62-110.2.

G.S. § 62-110.2(c)(1) provides:

"In order to avoid unecessary duplication of electric facilities, the [Utilities] Commission is authorized and directed to assign, as soon as practicable after January 1, 1966, to electric suppliers all areas, by adequately defined boundaries, that are outside the corporate limits of municipalities and that are more than 300 feet from the lines of all electric suppliers as such lines exist on the dates of the assignments * * *. The Commission shall make assignments of areas in accordance with public convenience and necessity, considering, among other things, the location of existing lines and facilities of electric suppliers and the adequacy and dependability of the service of electric suppliers, but not considering rate differentials among electric suppliers." (Emphasis added.)

G.S. § 62-110.2(b)(8) provides:

"Every electric supplier shall have the right to serve all premises located wholly within the service area assigned to it pursuant to subsection (c) hereof." (Emphasis added.)

G.S. § 62-110.2(b)(10) provides:

"No electric supplier shall furnish electric service to any premises in this State outside the limits of any incorporated city or town except as permitted by this section * * *." (Emphasis added.)

The Act of 1965, including G.S. 62-110.2, did not, without more, alter the competitive rights of municipalities, investor-owned utilities and electric membership corporations to compete for patronage in areas outside the corporate limits of municipalities. Utilities Commission v. Woodstock Electric Membership Corp., 276 N.C. 108, 117, 171 S.E.2d 406. Any premises in any such area could, prior to an assignment of such area by the Utilities Commission, have been served by any of the three competitors chosen by the user (assuming no contract restricting competition and assuming an extension to serve such user would fall within the "reasonable limitation," applicable to service by the municipality.)

Here, we have more. The Utilities Commission has assigned the territory in question to Domestic. Thus, Domestic has the "right to serve all premises" (emphasis added) located wholly within the territory in question, including the Cokey Apartments. G.S. § 62-110.2(b)(8). It is also true that no other "public utility" and no electric membership corporation may serve any premises, including the Cokey Apartments, lying wholly within this territory. G.S. § 62-110.2(b)(10). However, the City of Rocky Mount is neither a "public utility" nor an electric membership corporation. Therefore, the city is not an "electric supplier," as that term is used in G.S. § 62-110.2. Consequently, the city is not prohibited from serving Cokey Apartments by the provision of G.S. § 62-110.2(b)(10).

While, by reason of G.S. § 62-110.2(b)(8), Domestic has the right to serve all premises in the area, including Cokey Apartments, the mere grant of a right to serve is not the grant of an exclusive right to do so. If G.S. § 62-110.2(b)(8) granted to the assignee of the territory an exclusive right to serve therein, G.S. § 62-110.2(b)(10) would be surplusage. The presumption is that no part of a statute is mere surplusage, but each provision adds something which would not otherwise be included in its terms. State v. Harvey, 281 N.C. 1, 19, 187 S.E.2d 706; In re Watson, 273 N.C. 629, 634, 161 S.E.2d 1. Furthermore, "the right of a potential user of electric power to choose between vendors of such power seeking his patronage is not lightly to be denied." Blue Ridge Electric Membership Corp. v. Power Co., 258 N.C. 278, 128 S.E.2d 405; Utilities Commission v. Woodstock Electric Membership Corp., supra, 276 N.C. at p. 118, 171 S.E.2d at p. 413.

An assignment of territory by the Utilities Commission can, of course, have no greater effect than that which is given to it by the statute, the Commission having no authority except that conferred upon it by the statute. Utilities Commission v. Woodstock Electric Membership Corp., supra, at p. 119, 171 S.E.2d 406.

Thus, we hold that the assignment to Domestic by the Utilities Commission of the area which includes the Cokey Apartments did not automatically preclude the City of Rocky Mount from extending its service lines into the area.

Since G.S. § 62-110.2(c)(1) directs the Utilities Commission to assign to electric suppliers all areas outside the corporate limits of municipalities and the Commission has now completed, or virtually completed, this task, a contrary construction of G.S. § 62-110.2(b)(8) would make it unlawful for a city to construct a new line across the city limits to serve a residence or a business establishment, however close it may be to the city limits and however remote it may be from the existing line of the "electric supplier" to whom the area has been assigned. This would nullify G.S. § 160A-312, which, as amended by Ch. 426 of the Session Laws of 1973, provides:

"(A) city may acquire, construct, establish, enlarge, improve, maintain, own, and operate any public enterprise outside its corporate limits, within reasonable limitations * * *." (Emphasis added.)

The predecessor of this statute, G.S. § 160-255, authorizing a municipality to render light, water, sewer and gas services outside its corporate limits, was in effect until replaced by G.S. § 160A-312, as set forth in Ch. 698, Session Laws of 1971. Nothing in the legislative history of this statute indicates a legislative intent completely to deprive municipal corporations of the authority to serve new users outside the corporate limits.

On the other hand, "It is equally clear that without legislative authority the [city] would not be permitted to extend its lines beyond the corporate limits for the purpose of selling electricity to nonresidents of the city." Williamson v. High Point, 213 N.C. 96, 195 S.E. 90. Its power to extend its lines and distribute electric current beyond its corporate boundaries is expressly restricted to "reasonable limitations."

The primary function of a municipal corporation is to provide local government within its limits and authorized services to its inhabitants, not to engage in business enterprises for profit outside its corporate limits. See, Williamson v. High Point, supra. "The term, ``within reasonable limitations' does not refer solely to the territorial extent of the venture but embraces all facts and circumstances which affect the reasonableness of the venture." Service Co. v. Shelby, 252 N.C. 816, 115 S. E.2d 12. An extension of a city's electric system, reasonable at the time of and under the circumstances prevailing in Grimesland v. Washington, supra, would not necessarily be reasonable in the present day under the circumstances disclosed in the record before us.

In the present instance, the investor-owned utility, to which the territory has been assigned by the Utilities Commission "in accordance with public convenience and necessity," had its service lines in the immediate vicinity of the Cokey Apartments and was ready, able and willing to serve Cokey. There is nothing to indicate that its service will not be adequate. Both its service and its rates are subject to regulation by the Utilities Commission. Neither the service nor the rates of the city are subject to regulation by any agency other than the city itself. G.S. § 62-3(23)(d); G.S. § 160A-312; Dale v. Morganton, 270 N.C. 567, 155 S.E.2d 136. Under these conditions, we conclude and hold that the extension by the city of its electric system across its city limits to serve Cokey exceeds "reasonable limitations" and, therefore, is beyond the authority of the city.

While the Court of Appeals based its decision upon a construction of G.S. § 62-110.2, which we deem erroneous, its decision to reverse the judgment of the Superior Court was correct for the reason herein stated and will not be disturbed.

Affirmed.