State Ex Rel. Util. Com'n v. Farmers Chemical Association, Inc.

Annotate this Case

235 S.E.2d 398 (1977)

STATE of North Carolina ex rel. UTILITIES COMMISSION, North Carolina Natural Gas Corporation, Applicant, and Aluminum Company of America, Intervenor, v. FARMERS CHEMICAL ASSOCIATION, INC., Petitioner.

No. 7610UC825.

Court of Appeals of North Carolina.

June 15, 1977.

Certiorari Denied August 23, 1977.

*401 Sanford, Cannon, Adams & McCullough by William H. McCullough, H. Hugh Stevens, Jr., and Charles C. Meeker, Raleigh, for petitioner-appellant.

North Carolina Utilities Commission by Commission Atty. Edward B. Hipp and Deputy Commission Atty. Maurice W. Horne, Raleigh, for applicant-appellee.

Joyner & Howison by Henry S. Manning, Jr., Raleigh, for intervenor-appellee.

Certiorari Denied by Supreme Court August 23, 1977.

MARTIN, Judge.

Farmers Chemical assigns as error the action of the Commission in finding and concluding that Farmers Chemical was served by or benefited from NCNG's purchase of emergency gas. It contends there is no competent, material and substantial evidence in view of the entire record as submitted to support such findings and conclusions.

Upon appeal, the authority of the reviewing court to reverse or modify the order of the Commission, or to remand the matter to the Commission for further proceedings, is limited to that specified in G.S. 62-94, which includes the authority to reverse or modify such order on the ground that it is unsupported by competent, material and substantial evidence or is arbitrary or capricious. When the Commission's findings are supported by competent, material and substantial evidence, they are binding upon the appellate court. Utilities Comm. v. Telephone Co., 281 N.C. 318, 189 S.E.2d 705 (1972). See Comr. of Insurance v. Automobile Rate Office, 30 N.C.App. 427, 227 S.E.2d 603 (1976), modified and remanded 292 N.C. 1, 231 S.E.2d 867 (1977).

The Commission found

". . . NCNG made the only emergency purchase for the winter season 1975-76 to serve high priority industrial and commercial customers, and there are the customers of NCNG which benefited from the temporary emergency purchase.. . . All industrial and commercial *402 customers of NCNG benefited from the emergency purchase by NCNG from Michigan Consolidated for the winter season 1975-76." Among the conclusions reached by the Commission, the following appears: "It is equally clear that Farmers Chemical and all other industrial and commercial customers did benefit from the emergency purchase."

Calvin B. Wells, Vice President with NCNG, recognized the restrictive requirement of Farmers Chemical when he testified:

". . . they cannot operate when the gas supply is significantly below their total requirement, and so we had to develop a procedure which would let them operate for a certain number of days and given that amount of gas for the whole winter and be down for the other days and yet not let them operate so long that it would build up a deficit and become an undue risk for the other customers in case of a cutback later on by Transco and this is why we established the first date of cutoff as being January 3. . . . At the November 6 meeting, it was agreed that the first operating period for Farmers Chemical would be from November 16 to January 3, 1976. That meeting was predicated upon then known entitlements from Transco."

John A. Lawrence, Vice President and General Manager of Farmers Chemical, testified:

"At the time of the November 6 meeting, NCNG's winter entitlement was 10,337,000 Mcf. This figure did not include emergency volumes. This entitlement represented NCNG's winter entitlement as per the Transco Interim Settlement Agreement. Based upon such entitlement, NCNG said the Tunis plant for the 1975-76 winter season in 0.1 priority could be served 2,003,876 Mcf, or 45% of our requirements. On the basis of 29,200 Mcf per day, NCNG in terms of days of the 1975-76 winter period could serve FCA for 68.6 days of the 152-day winter period. The agreement as to how the FCA plant at Tunis would run from the beginning of the winter period, November 16, 1975, was that the Tunis plant would be allowed to take an average of 29,200 Mcf per day from November 16, 1975, through January 3, 1976. If gas consumption at the Tunis plant averaged less than 29,000 Mcf per day, the unused portion of the gas could be used to extend the operating period for up to three days or through January 6, 1976. Assuming no additions to Transco's supply and no extra additions to Transco's supply and no extra gas was available as a result of a warm winter, the Tunis plant would be shut down at the end of the first winter period, i. e., between January 3 and January 6, and would remain down for three weeks. The plant would then reopen and run until February 12 or the balance of the winter, depending upon availability of gas. It was further understood that if Transco made restorations to its gas supply prior to January 3, and NCNG had not experienced an abnormally cold winter, the first winter period would be extended depending upon NCNG's flexibility."

Thus, the evidence is abundantly clear that Farmers Chemical was operating between 16 November and 6 January on an allotment of gas by NCNG from its (NCNG) known entitlement from Transco as of 6 November. Emergency gas or increased entitlement from Transco was unnecessary to enable NCNG to supply Farmers Chemical the 2,003,876 Mcf or 45% of its winter requirement to be used between 16 November and 3 January. It is true that Farmers Chemical operated at 100% capacity during this period but it operated on its winter share of the known entitlement of NCNG as of 6 November.

The order of the Commission was content to state that Farmers Chemical operated on 100% capacity without making sufficient findings that would explain its operating procedure.

Furthermore, we do not find that during the winter season, NCNG was without sufficient *403 flowing gas to supply Farmers Chemical with 100% service. The Commission found that:

"Transco made restoration of flowing gas volumes to NCNG on November 13, 1975, for the 1975-76 winter period in the amount of 1,019,000 mcf. This increased somewhat NCNG's ability to serve Farmers Chemical from 45% for winter service to 65% for winter service. On December 10, 1975, Transco made another restoration to NCNG for the 1975-76 winter season of 608,000 mcf. On January 15, 1976, Transco made a further restoration to NCNG for the 1975-76 winter season of 1,494,000 mcf."

What the Commission overlooked is the fact that the allotment to Farmers of its 45% (2,003,876 Mcf) share of the known entitlement of NCNG was sufficient to serve Farmers Chemical at 100% capacity until 3 or 6 January. The 13 November, 10 December, and 15 January restorations provided NCNG with sufficient flowing gas to serve Farmers Chemical its remaining requirement for the period commencing 6 January until the end of the winter season. (29,200 Mcf per day times 152 day winter season equals 4,438,400 Mcf which is 100% allotment.)

As we interpret Nery's exhibit 3, the percentages therein stated affecting Farmers Chemical relate to the percentages available for the winter season, November 16, 1975, to April 15, 1976. For instance, the 45% relates to the amount Farmers Chemical is entitled for the 152 day winter season to be used in a 68.8 day period commencing 6 November. The other percentages simply show an extension of the days allowed with the restoration and with both the restoration and the emergency gas for the period 16 November 1975 to 15 April 1976.

In its brief the Commission stated, in discussing Nery's exhibit 3, as follows:

"This exhibit clearly demonstrates that under the supplies as they actually became available, Farmers Chemical would have been curtailed 45% on October 3, 1975; 65% on November 13, 1975; greater than 93% on December 10, 1975 and those undisputed circumstances used hindsight. Even with restoration of flowing gas, Farmers Chemical and other industrial customers were curtailed for those percentages. Yet the record clearly shows, and the appellant does not dispute the fact, that Farmers Chemical continued to take 100% of its natural gas requirements throughout the winter season."

Under column October 3, 1975, of Nery's exhibit 3, appears the figure of 2,003,876 (45%). Mr. Wells, testified: ". . . they [Farmers Chemical] cannot operate when the gas supply is significantly below their total requirement, and so we had to develop a procedure which would let them operate for a certain number of days and given that amount of gas for the whole winter and be down for the other days. . . . At the November 6 meeting, it was agreed that the first operating period for Farmers Chemical would be from November 16 to January 3, 1976. That meeting was predicated upon then known entitlements from Transco. . . . that used up most of the 69 days supply that Farmers Chemical had coming based on that supply and short period of time, based on that supply on January 24th and then run for a few days and shut down for the rest of the winter."

Thus, the 2,003,876 or 45% entitlement of Farmers Chemical was the winter allotment as of October 3, 1975, and by agreement on 6 November was to be used between 16 November and 3 January, shut down for three weeks and resume for a few days and then shut down for the winter.

We understand the amounts and percentages reflected in Nery's exhibit 3 under the columns November 13, 1975, December 10, 1975, and January 15, 1976, were not curtailments but merely showed the amounts of increase of entitlement to Farmers Chemical by restoration of flowing gas and emergency gas and the percentages of entitlement as of those dates for the entire winter season. They project the percentages *404 of availability as of those dates for use during the entire winter season.

Mr. Wells further stated: "There were restorations by Transco on November 13 and December 10. It is correct that that would have extended the operating period." Thus, neither restoration of flowing gas nor emergency gas was necessary for Farmers Chemical between 16 November and 3 January. The restorations of flowing gas simply extended the operating period of Farmers Chemical from 3 January to the end of the winter season and was sufficient without the emergency gas for the needs of Farmers Chemical.

We are unable to agree with the statement of the Commission in its brief that:

"If the emergency purchase had been excluded it is obvious that the curtailment for Farmers Chemical and other industrial customers would have been substantially deeper at December 10, 1975."

Whatever effect this had on "other industrial customers" is not before us. However, we repeat, as of December 10, 1975, Farmers Chemical was operating on its winter entitlement as of 6 November agreement and was not dependent at that time upon either restoration of flowing gas or emergency gas. It was simply using 100% of its 45% winter allotment.

The fact that Farmers Chemical was operating on an entitlement which would enable them to operate at 100% capacity for 68.8 days by agreement with NCNG is further demonstrated by a telegram sent to Farmers by Arthur P. Gnam, Jr., Vice President Operations of NCNG dated 1 December. In the telegram Farmers Chemical was notified that by reason of the purchase of emergency gas the new entitlement of the Tunis plant "is 3,676,173 mcf or 124 days service at 29,200 mcf per day. . ."

The record reveals that Farmers Chemical never agreed to purchase emergency gas and were willing to shut down when its 45% allotment was exhausted. Had it not been for the restoration of the flowing gas they would have had to shut down or purchase emergency gas. It was the good fortune of Farmers Chemical that restoration of flowing gas came in time to enable them to continue operations after 3 January. It must have been apparent to the Commission that there was no competent evidence that Farmers Chemical used emergency gas but they say that Farmers Chemical benefited from its purchase. The Commission failed to find facts that support such conclusion. However, the Commission makes the novel assertion that:

"The questions before the Commission in this case must turn on the decision of NCNG management at the time the contract with Michigan Consolidated was entered into sometime in late November or early December, 1975."

The Commission found that:

"[A]t the time Mr. Wells, Vice President of NCNG, indicated that the emergency purchase was made for NCNG's high priority industrial and commercial customers and that the time framework for this decision was `definitely crucial.'"

The action of Mr. Wells was a business venture that did not obligate an unwilling customer to use the gas. Farmers Chemical's unwillingness to purchase the emergency gas was made clear prior to its purchase by NCNG.

While we recognize the obligation of a utility adequately to serve its customers, we are not aware of a requirement that obligates the action taken by NCNG. The Commission correctly found as a fact that "NCNG has a legal obligation to serve all of its customers under the priorities approved by the Commission and under available supplies from Transco." Of course NCNG holds a certificate to serve subject area and along with that obligation comes the necessity to purchase a sufficient supply of gas to serve them. NCNG's legal obligation must be a function of availabilities and priorities. Farmers Chemical was under a long term contract with NCNG for service. It was entitled to its share of flowing gas according to its priority. It asked for nothing more. Emergency gas should not have been purchased for Farmers Chemical against its consent. Especially is this so *405 when Farmers Chemical is bearing part of the cost of supplying gas to lower priority customers and is helping to subsidize the increased cost to residential customers. The Commission has failed to find facts that demonstrate a benefit to Farmers Chemical.

In our discussion of the evidence we have not undertaken to say what weight the Commission should give to the testimony of the various witnesses. We have referred to evidence that, if believed by the Commission, would support essential findings that were not made. The credibility of the evidence and the weight to be given it was for the determination of the Commission. Utilities Comm. v. Telephone Co., 285 N.C. 671, 208 S.E.2d 681 (1974); Utilities Comm. v. Power Co., 285 N.C. 398, 206 S.E.2d 283 (1974).

In addition to those already discussed, the Commission made no findings and conclusions on the following important issues in the case:

1. Whether on November 6, 1975 Farmers Chemical and NCNG agreed that appellant would accept its fifty-five percent (55%) winter curtailment by operating at full capacity until January 3, 1976, and then closing down completely for various periods thereafter; 2. Whether the three Transco restorations permitted Farmers Chemical to operate at one hundred percent (100%) capacity throughout the 1975-76 winter without resorting to the use of any emergency gas; 3. Whether Transco Interim Settlement established prices for emergency gas volumes incrementally and treated such gas as being injected last into the pipeline system for the period covered by such settlement; 4. Whether Farmers Chemical put NCNG on notice in November and December, 1975 that it did not want any emergency gas; and 5. Whether residential customers should be excluded from paying their share of the emergency surcharge.

"A failure to find facts essential to a determination of the rights of the parties necessitates a remand to the . . . agency charged with that responsibility." Utilities Commission v. Membership Corporation, 260 N.C. 59, 69, 131 S.E.2d 865, 871 (1963).

Such findings and conclusions are necessary to enable this Court to determine whether the Commission had performed the duty imposed by statute. The matter is remanded to the Commission to make necessary findings and conclusions on which it may base its order.

Reversed and remanded.

MORRIS and VAUGHN, JJ., concur.