If the State of North Carolina (through the Wanchese Harbor Commission or a successor) operates water and sewage facilities at the Wanchese Industrial Park and bills tenants and outside hookups, does the State need a certificate from the Utilities Commission to do that?

Plain-English summary

The Chairman of the Wanchese Harbor Commission asked the AG a foundational regulatory question. The N.C. State Ports Authority had formed the Wanchese Harbor Commission to develop the Wanchese Harbor Industrial Park, an industrial park to be owned by the State of North Carolina. Tenants would lease space from the State, and the Commission (or its legislative successor) would provide water and sewage treatment. Two questions: could the Commission operate those facilities for tenants without a Utilities Commission certificate, and could it extend service to outside customers ("tap-on" arrangements)?

The AG said yes to both.

The reasoning is short and grounded in the structure of Chapter 62. The Utilities Commission's regulatory authority is statutory, not inherent. N.C.G.S. § 62-2 vests the Commission with authority "to regulate public utilities." N.C.G.S. § 62-3(23) defines "public utility" as a list of categories. The State of North Carolina and its agencies are not within the categories. Utilities Commission v. Chapel Hill Telephone Co., 12 N.C. App. 543, 183 S.E.2d 802 (1971), cert. denied, 279 N.C. 729, holds that the Commission has no authority over an entity not within the statutory definition.

That answers the first question. The State, through the Wanchese Harbor Commission, can operate the water and sewage facilities for tenants without a certificate.

The second question, about service to outside customers, gets the same answer for the same reason. The State is not transformed into a public utility by extending service to people outside the Park; the State is still a state agency, and § 62-3(23) still excludes state agencies. Utilities Commission v. Carolina Telephone and Telegraph Company, 267 N.C. 257, 148 S.E.2d 100 (1966), supplies the supporting principle: a certificate of public convenience and necessity is needed only for entities engaged in the business of being a public utility as defined in § 62-3(23).

The negative-implication argument from § 62-3(23)(e) is the closer to the analysis. In 1971, the General Assembly added the University of North Carolina to the public-utility definition. The deliberate addition of one state entity suggests the General Assembly understood other state entities to be outside the definition. If state entities were generally within the definition, the UNC addition would have been superfluous.

The opinion ends with a precautionary recommendation: when the General Assembly creates the successor agency to manage the Park (which the Ports Authority resolution anticipated for 1979), it would be helpful to add the successor agency to the § 62-3(23)(d) exclusions list. That would eliminate any residual doubt. But the AG was clear that the recommendation was precautionary, not necessary; the legal analysis already supported the Commission's authority to operate the facilities and serve outside customers without Utilities Commission regulation.

Currency note

This opinion was issued in 1978. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Chapter 62 and the public-utility definition in § 62-3(23) have been amended multiple times since 1978. The list of specific entities included or excluded has changed. The Wanchese Harbor Commission's successor agency has had its own statutory framework developed. State-agency utility operations are now also subject to environmental permit requirements (drinking water, wastewater discharge) under separate statutes administered by the Department of Environmental Quality, which did not exist in 1978 in its current form. The basic principle (state agencies are not public utilities under Chapter 62 unless specifically included) remains a feature of NC utility law but the specific application to current state-agency operations should be checked against current authority.

Historical context: what the AG concluded

The opinion is a clean application of statutory definition to a state-operated facility.

The Wanchese Harbor Industrial Park. The North Carolina State Ports Authority resolved on March 14, 1978, to establish the Wanchese Harbor Commission to study and develop the Industrial Park. The Park was to be a state-owned facility, with industrial tenants leasing space from the State. The Commission (or a successor agency created by the 1979 General Assembly) would operate the Park, including water and sewage treatment facilities for tenants. The question for the Commission was whether the utility services would trigger Utilities Commission regulation.

The Chapter 62 regulatory framework. The Utilities Commission is an administrative agency created by statute, with no inherent regulatory authority. § 62-2 vests the Commission with authority "to regulate public utilities." § 62-3(23) defines "public utility." The Commission's reach extends only as far as that definition reaches.

The state-agency exclusion. The State (and its agencies) are not within the § 62-3(23) definition. The exclusion is not explicit; it is the result of the statute defining "public utility" by reference to a list of categories (corporations, individuals, etc. providing certain services to the public) that does not name state agencies. Utilities Commission v. Chapel Hill Telephone Co. (1971) is the case-law confirmation: the Commission has no authority over an entity not within the statutory definition.

The UNC negative implication. The General Assembly's 1971 addition of the University of North Carolina to § 62-3(23)(e) is doctrinally significant. The addition would have been unnecessary if UNC (as a state agency) were already within the definition. The deliberate addition therefore implies that other state agencies, absent specific inclusion, remain outside.

The service-to-outside-customers question. Extending service beyond the Industrial Park does not transform the State into a public utility. The doctrinal question is who is providing the service, not who is receiving it. § 62-3(23) defines "public utility" by reference to the entity providing the service. The State is the entity providing the service whether the customers are inside the Park or outside. Utilities Commission v. Carolina Telephone (1966) supports the principle: a certificate is needed only for entities engaged in the business of being a public utility as defined.

The precautionary recommendation. Even with the legal analysis supporting Commission operation without a Utilities Commission certificate, the AG recommended that the 1979 General Assembly add the successor agency to the § 62-3(23)(d) exclusions list. The reason: certainty. A specific statutory exclusion would eliminate any litigation risk over the scope of the implicit state-agency exclusion. This was a belt-and-suspenders approach common in legislative drafting.

For the Wanchese Harbor Commission and its prospective tenants in 1978, the operational takeaways were: the water and sewage services would be billed by the Commission (or successor agency) to tenants and outside customers without any Utilities Commission rate regulation, certificate requirement, or service-quality oversight; the Commission would set rates and service terms as a matter of its own administrative discretion (or under whatever standards the successor enabling legislation might impose); tenants and outside customers would not have a Utilities Commission complaint process for billing or service disputes. The State agency framework, rather than the Utilities Commission framework, governed the relationship.

Common questions

What is a public utility under Chapter 62?

A defined category of entities providing certain regulated services (electric, gas, telephone, water, sewer, transportation) to the public. The definition is in N.C.G.S. § 62-3(23) and lists specific categories of providers. Entities outside the definition are not subject to Utilities Commission regulation.

Why isn't the State a public utility?

Because § 62-3(23) does not include the State or state agencies in its definition. The exclusion is implicit (the definition lists categories that do not include state agencies) rather than explicit. Utilities Commission v. Chapel Hill Telephone Co. (1971) confirms that the Commission has no authority over entities outside the definition.

Why was UNC specifically added to the definition?

The opinion does not address UNC's specific circumstances, but the 1971 addition presumably reflects a legislative judgment that UNC's utility operations should be subject to some level of Commission oversight despite the general state-agency exclusion. The deliberate addition supports the implication that other state agencies, absent specific inclusion, remain outside.

Can the State extend service beyond its own facilities?

Yes, without Utilities Commission regulation. The question is who provides the service, not who receives it. The State provides the service whether customers are on-site or off-site. § 62-3(23) does not transform the State into a public utility by virtue of who its customers are.

What protections do tenants and customers have if the State is not regulated?

Limited in the Chapter 62 sense (no Commission rate review, no Commission complaint process). They have whatever protections the successor agency's enabling legislation or the Department of Administration's general policies provide. They also have constitutional and contractual protections (the State cannot impose arbitrary or discriminatory rates).

What was the precautionary recommendation about?

The AG recommended that when the 1979 General Assembly created the successor agency to manage the Park, it add the successor agency to the § 62-3(23)(d) exclusions list. That would eliminate any residual doubt about the regulatory framework. The legal analysis already supported the conclusion, but a specific exclusion would prevent future litigation.

Did the State need any other permits to operate the facilities?

The opinion does not address environmental or other permit requirements. Water and sewage facilities are typically subject to drinking-water and wastewater-discharge permits under environmental statutes. The opinion's scope is limited to Utilities Commission regulation under Chapter 62; other regulatory frameworks would have to be addressed separately.

Is this opinion still good law?

The basic principle (state agencies are not public utilities under Chapter 62 unless specifically included) appears to remain a feature of NC utility law. The specific exclusions list in § 62-3(23) has been amended multiple times. Anyone with a current question about state-agency utility operations should check the current statutes.

Background and statutory framework

Chapter 62 of the General Statutes (NC public utilities law). The comprehensive regulatory framework for public utilities in North Carolina. § 62-2 vests the Utilities Commission with authority to regulate public utilities. § 62-3 contains the definitions, including the public-utility definition in subsection (23).

N.C.G.S. § 62-3(23) (definition of "public utility"). A list of categories of entities providing regulated services to the public. The list does not include the State or state agencies generally. Subsection (23)(d) is the exclusions list; subsection (23)(e) was added in 1971 to specifically include the University of North Carolina.

The N.C. State Ports Authority and Wanchese Harbor Commission. The Ports Authority is a state agency created to develop and operate port facilities in North Carolina. The Wanchese Harbor Commission was created by Ports Authority resolution on March 14, 1978, to study and develop the Wanchese Harbor Industrial Park. The 1979 General Assembly was expected to create a permanent administering agency.

The case law. Utilities Commission v. Chapel Hill Telephone Co., 12 N.C. App. 543, 183 S.E.2d 802 (1971), cert. denied, 279 N.C. 729, holds that the Utilities Commission has no authority over an entity not within the statutory definition of public utility. Utilities Commission v. Carolina Telephone and Telegraph Company, 267 N.C. 257, 148 S.E.2d 100 (1966), confirms that a certificate of public convenience and necessity is needed only for entities engaged in the business of being a public utility as defined.

Citations

• Chapter 62 of the General Statutes (NC public utilities law)
• N.C.G.S. § 62-2 (Utilities Commission authority to regulate public utilities)
• N.C.G.S. § 62-3(23) (definition of "public utility")
• N.C.G.S. § 62-3(23)(d) (exclusions list)
• N.C.G.S. § 62-3(23)(e) (specific inclusion of the University of North Carolina, added 1971)
• Utilities Commission v. Chapel Hill Telephone Co., 12 N.C. App. 543, 183 S.E.2d 802 (1971), cert. denied, 279 N.C. 729 (Commission has no authority over entities not within statutory definition)
• Utilities Commission v. Carolina Telephone and Telegraph Company, 267 N.C. 257, 148 S.E.2d 100 (1966) (certificate needed only for entities engaged in business of public utility as defined)

Source

• Landing page: https://ncdoj.gov/opinions/municipalities-operation-of-water-and-sewage-facilities-by-state-agencies/

Original opinion text

Requested By: D. A. Phillips, Chairman, Wanchese Harbor Commission

Questions:

(1) May the Wanchese Harbor Commission on its own authority operate water and sewage facilities within the Wanchese Industrial Park and bill the tenants therein for services rendered?

(2) May the Commission on its own authority extend such services to persons who are not tenants of the Industrial Park?

Conclusions:

(1) Yes.

(2) Yes.

The inquiry referred to this Office indicates that the N.C. State Ports Authority has formed the Wanchese Harbor Commission for the purpose of studying and developing a facility to be known as the Wanchese Harbor Industrial Park. The Park will be owned by the State of North Carolina and operated by the Wanchese Harbor Commission or a successor agency created by the Legislature. Industrial tenants would lease space in the Park from the State. Among the services to be provided the tenants are water and sewage treatment facilities. The inquiry questions whether the agency operating the Industrial Park would require certificates or licenses from the N.C. Utilities Commission in order to provide these services to tenants of the Industrial Park or to persons outside the Park who should desire to "tap on" to the facilities developed by the State.

It is the opinion of this Office that the operation of the facilities in question by the State of North Carolina, or any agency thereof, is not subject to regulation by the N.C. Utilities Commission.

The N.C. Utilities Commission is ad administrative agency created by statute and has no authority except as conferred upon it by Chapter 62 of the General Statutes. N.C.G.S. 62-2 vests in the Commission the authority "to regulate public utilities. . . ." (Emphasis added). N.C.G.S. 62.3(23) defines the term "public utility," and the State (or any agency thereof) is not included in that definition. The courts have held that since the statute does not include the state in the definition of a public utility, the Commission has no authority over it. Utilities Commission v. Chapel Hill Telephone Co. 12 N.C. App. 543, 183 SE 2d 802 (1971) (cert. denied 279 N.C. 729). Later the Legislature specifically included the University of North Carolina in its definition of a public utility (N.C. G.S. 62-3(23(e), thereby at least by implication excluding all other agencies of the State.

It is clear that "(one) does not need a certificate of public convenience and necessity in order to engage in a business which is not that of a public utility as defined in G.S. 62-3(23)." Utilities Commission v. Carolina Telephone and Telegraph Company, 267 N.C. 257, 148 SE 2d 100 (1966). It follows that the State may construct and operate its proposed facilities at Wanchese Harbor without regulation by the State.

We note that the Resolution of the North Carolina State Ports Authority dated March 14, 1978, which established the Wanchese Harbor Commission, states that "the 1979 General Assembly is expected to create an agency to administer and manage the Park." In order to eliminate absolutely any question as to the authority of the Utilities Commission over the operation of the facilities in question, it may be helpful to have that agency added to those listed in G.S. 62-3(23)d as being specifically excluded from the Commission's authority. This would only be a precautionary measure, however, since we do not feel that the Harbor Commission or its successor agency would be subject to regulation by the Utilities Commission in any event.

Rufus L. Edmisten
Attorney General

Dennis P. Myers
Associate Attorney General

Francis W. Crawley
Associate Attorney General