Virginia Electric & Power Co. v. State Corp. Commission
Docket: Record No. 781048
Court: Supreme Court of Virginia; March 2, 1979; Virginia; State Supreme Court
On March 27, 1978, the State Corporation Commission canceled a tariff schedule by Virginia Electric and Power Company (Vepco) that allowed for outdoor lighting service, directing Vepco to propose changes to its ratemaking treatment within 180 days. An order on March 31, 1978, modified this to allow Vepco to continue serving existing facilities at previously prescribed rates until new tariff provisions were approved. The primary legal questions are whether the Commission had the authority to eliminate outdoor lighting service from Vepco’s rate structure and if that authority was properly exercised.
The case originated in 1973 when the Virginia Chapter of the National Electrical Contractors Association (NECA) and Curtis L. Williams sought to stop Vepco from providing outdoor lighting service under its Schedule No. 26. NECA members, who provide electrical contracting services and outdoor lighting installations, must adhere to regulations, including using licensed electricians and complying with the National Electrical Safety Code. While NECA members charge for their services, their installations are not regulated, and customers own the installed lighting facilities and bear maintenance costs.
Vepco installs and maintains outdoor lighting on customers' properties under Schedule No. 26, charging a fixed monthly rate based on the lamp's lumens. The company retains ownership of the facilities, which are installed by its employees or contracted crews. Vepco’s employees do not require electrician licenses, although they receive training. Unlike NECA members, Vepco is not subject to local electrical permits or fees and can capitalize installation costs in its rate base if they are less than four times the expected annual revenue.
In 1974, Vepco's rate of return on outdoor lighting service was 6.88%, while its residential service return was 6.83%. Operating expenses for maintaining and repairing facilities are considered in rate-making. As of December 31, 1973, Vepco served 46,056 outdoor lighting customers in Virginia. The allocated rate base for outdoor lighting service was $9,551,313 in 1970 and $15,217,036 in 1973, with gross revenue of $3,627,917 for that year. NECA argued that its members could meet outdoor lighting service requirements except for the electric energy needed, while Vepco claimed to provide a complete service, resulting in limited competition between the two. The Commission was tasked with determining if Vepco's practices under Schedule No. 26 should be prohibited, but ultimately concluded whether Vepco should receive cost of service entitlement for this outdoor lighting service. The Commission ruled that Vepco should stop providing the service under the current tariff but refrained from deciding on the continuation of outdoor lighting service independent of cost entitlement. The majority opinion stated that only utility property essential for public service obligations should be included in the rate base and that competitive business costs should not qualify for rate of return. Commissioner Shannon dissented, citing a broad definition of service under Virginia law and historical precedence for Vepco's service offerings. He expressed concern over the decision's potential negative impact on Virginians unable to afford installation costs and argued that outdoor lighting service is a lawful utility service in the public interest. Vepco contended that the Commission failed to fulfill its regulatory duties, as outdoor lighting services have been provided under its oversight since 1939, and the Commission's authority to regulate electric company rates was established by legislation in 1914, not the 1902 Constitution.
Provisions from a 1914 Act were incorporated into the Code of 1919 and later Codes, establishing the regulatory framework for public utilities. Under Article IX, § 2 of the 1971 Constitution and relevant Codes, the Commission must regulate public utilities, defined in Code § 56-232 as companies providing 'light' to the public. However, the Utility Facilities Act of 1950 uniquely defines public utility as entities generating, transmitting, or distributing electric energy for sale, excluding 'light' companies from its definition. This discrepancy raises questions regarding the distinction between 'light' and 'electric' companies. Vepco claims to be authorized to provide outdoor lighting services under Code § 56-232. Although Vepco has historically only offered outdoor lighting services, it argues that the General Assembly intended to regulate such services. Vepco's service schedules, initiated in 1939, included various street lighting options, evolving over the years to include more advanced lighting technology. Starting in 1961, these schedules were designated for 'outdoor lighting service,' with specific exceptions based on jurisdictional authority. Opposing counsel contends that 'light' and 'power' are generic terms that do not necessitate Commission regulation of outdoor lighting services. The historical record lacks clarity regarding the sale of street lighting by electric companies in 1914 and legislative intent concerning the regulation of such services. There is also no evidence indicating an intention to expand regulatory definitions to encompass outdoor lighting facilities on private property.
The Commission determined it was unnecessary to address certain questions regarding Vepco's outdoor lighting service under Schedule No. 26. It concluded that Vepco could not be compelled to provide this service, which was not deemed to serve the public's interests. The Commission's authority to make this determination stems from Code § 56-35, which grants it regulatory powers over utilities' public duties. If a service is found to be for public use, Code § 56-233 would encompass all related facilities within the definition of 'service'; conversely, if not, that expansive definition would not apply.
The Commission rejected Vepco's assertion that its order signified a neglect of regulatory responsibility, interpreting it instead as a ruling that Vepco's outdoor lighting operations did not qualify as public service, thereby disqualifying them from earning a return on that portion of its business. Vepco's integration of its nonpublic outdoor lighting services with its public electric energy sales was seen as diminishing competition. The ruling affirmed that only those parts of Vepco's operations that necessitate public interest protections would be included in its jurisdictional rate base, while competitive aspects would be excluded from return entitlement.
The Commission's actions, although not part of a formal rate-setting process, still impacted Vepco's jurisdictional rate base, as costs associated with outdoor lighting services were excluded from consideration. The decision to cancel the filed schedule was viewed as a legislative function by the Commission, presuming its decision to be reasonable and correct.
The Commission's decision from March 27, 1978, is upheld as reasonable under the law. Virginia Code § 13.1-50 permits public service corporations to engage in nonpublic service business, provided it is related or incidental to their primary public service functions. The term "service" encompasses a wide range of offerings, including accommodations for consumers and any products or utilities provided by public utilities. Public utilities are mandated to provide adequate services at fair rates to all eligible entities. The definition of "public utility" includes any corporation, excluding municipalities, that manages or operates facilities for public utilities such as heat, light, water, or power. The Commission is empowered to regulate rates, charges, and services of electric companies and all public service companies, ensuring compliance with legal standards and correcting any abuses in service provision. Electric light companies fall under the category of public service companies, and the Commission's authority extends to the supervision and regulation of their operations.
