In separate orders handed down this week, the N.C. Utilities Commission decided that it should be the judge of itself – at least when it comes to the review of certain of its orders issued during the Duke-Progress Energy merger.
Twice on Monday the commission dismissed appeals of its own orders which prevented the environmental activist group N.C. Waste Awareness and Reduction Network (NC WARN) from challenging the commission’s approval of the merger and its subsequent investigation into Duke’s management shake-up. The appeals had not yet made it on to the Court of Appeals docket.
They came down just as Duke Energy geared up for its annual shareholder’s meeting, happening today, and for anticipated protests by groups accusing the company of failing to live up to pre-merger promises of lower rates and greener energy.
And they left some attorneys just scratching their heads.
“I’ve been practicing for 30 years, and I’ve never seen an administrative agency decide what can be appealed and what can’t be appealed,” said John Runkle, an attorney for NC WARN.
The Duke-Progress merger began in April 2011 when the companies filed applications for approval with the commission. Over the next year or more, amid public hearings and ongoing negotiations involving the companies, the Commission’s Public Staff and the Attorney General’s office, NC WARN – one of several organizations permitted to intervene in the merger proceedings – frequently objected to terms and raised issues concerning the proposed merger’s effect on low-income families and the need to address energy efficiency.
Over NC WARN’s objections, the commission approved the merger in late June, 2012.
Just a day after the companies closed the transaction on July 2, Duke announced that its president and CEO, James Rogers, would take the reins from Progress’ William Johnson, the designated leader-in-waiting in all public announcements and filings leading up to the merger. Because it had not been informed of this change in management at any time before the merger, the commission opened an investigation on July 6.
NC WARN moved to intervene in the investigation, arguing that as a party to the merger proceedings it should also be permitted to appear in the investigation. The commission denied that request.
A few weeks later, the group also asked the commission to reconsider its approval of the merger, arguing that Duke had failed to disclose significant information prior to the approval of the merger and that cost information revealed during the investigation cast into doubt the merits of the merger. The commission likewise denied that request.
In late November 2012, the commission completed the investigation and reached a settlement with Duke, which according to NC WARN included some additional provisions and conditions not contained in the initial approval.
In January 2013, NC WARN filed a notice of appeal of the merger order as well as of the commission’s order denying reconsideration of that merger and its refusal to allow the group to intervene in the investigation.
In March, before a record had been agreed upon and filed in the Court of Appeals, Duke asked the commission to dismiss the reconsideration and intervention appeals.
The commission did just that on Monday, telling NC WARN that it had no right to appeal the challenged orders.
With respect to NC WARN’s request to intervene, the commission essentially found that the group had no standing to appeal. Only parties affected by the investigation could intervene, which the court construed to be only the subject of the investigation, i.e. Duke Energy. Because NC WARN could not intervene, it was not a party to the investigation proceeding, and because only parties can appeal a ruling, NC WARN could not appeal.
While at first blush that analysis might seem logical, the net effect is that proposed intervenors in any case would never have a right to appeal if they are precluded from joining an action — a proposition not supported by case law.
The problem with that analysis, according to Commissioner Bryan Beatty, who dissented in both rulings, is that the commission improperly assumed the role of the appellate court.
“In its role as the investigative agency the Commission may have correctly exercised its discretion to rule that NC WARN was not party affected and thus had no standing to intervene in the investigation,” Beatty wrote. “However, the majority’s decision to dismiss NC WARN’s appeal of that ruling on that same basis gives the appearance that the majority is acting as an appellate court in affirming its own exercise of discretion.”
The dismissal of the reconsideration order was likewise flawed, Beatty said. The commission may have been correct to deny the motion for reconsideration, as that is typically a non-appealable order, he wrote in his dissent there (joined by Commissioner ToNola D. Brown-Bland). However, it has no authority then to assume the role of reviewing court and pass on the merits of its own order.
Both dismissals will hopefully be reconsidered by the Court of Appeals, along with NC WARN’s appeal of the merger, said its attorney John Runkle. But the merger appeal will go forward as of right, he added; the appeal of the dismissals might need the court’s permission to go forward.
As a party to the merger proceedings, NC WARN believes it should have been permitted to appear in the investigation as well. “They opened up a whole new round of evidentiary hearings, and all kinds of new information was coming in,” Runkle said. “And at the end, the chairman of the commission sat down with the chairman of Duke and negotiated a settlement that modified the merger. They called it an investigation, but they used it to substantially change the final merger order.”
Information came out during the investigation that should have certainly been publicly debated, Runkle added.
“There were some secret agreements between Duke and Progress and the big industrial customers, in which the industrials were offered things so that they would not challenge the merger. That included a fairly substantial rebate of their rates that both Duke and Progress would consider in their next rate hikes,” he said. “So your bills and my bills would be going up to pay for their rate refund.”
Jim Cooney, a partner with Womble Carlyle in Raleigh who represents Duke Energy, directed all inquiries to the company.
“We support the Utilities Commission’s decision and look forward to moving ahead with this matter,” said Jeff Brooks, a spokesperson for the company.