Does the NC Department of Correction have to pay the Utilities Commission's quarterly regulatory fee for its inmate pay-phone system?
Plain-English summary
The NC Department of Correction had been operating inmate pay phones inside its confinement facilities. In 1989, the Utilities Commission required DOC to obtain a Special Certificate to provide that service under N.C.G.S. § 62-110(c), which covers all entities under Commission jurisdiction that offer pay-phone service to the public. DOC complied and got Special Certificate No. SC-418. The trouble started when the Commission began sending DOC quarterly bills for the regulatory fee in § 62-302, which funds the Commission's regulatory work by assessing every public utility under its jurisdiction.
DOC General Counsel LaVee Hamer asked the AG: do we actually owe these fees? Assistant AG J. Mark Payne, signing for AG Michael F. Easley, said no.
The reasoning was a clean statutory-construction problem. The fee in § 62-302 applies to "every public utility subject to the jurisdiction of the Commission." Public utility is defined in § 62-3(23) as a "person" providing certain services, including "[c]onveying or transmitting messages or communications by telephone … to the public for compensation." The definition of "person" in § 62-3(21) lists corporations, individuals, partnerships, companies, associations, trustees, receivers, assignees, lessees, and personal representatives. The State and its agencies appear nowhere in the list.
Then comes the canon. NC has consistently held that general statutes do not apply to the State or its agencies unless the State is expressly included. Yancey v. State Highway Commission, 222 N.C. 106 (1942) is the foundational case; Davidson County v. City of High Point, 85 N.C. App. 26 (1987) reaffirmed it. Because § 62-3 does not name the State, DOC is not within the statutory definition of public utility and is not subject to the § 62-302 fee.
The conclusion fit neatly with prior authority. In State ex rel. Utilities Commission v. Chapel Hill Telephone Company, 12 N.C. App. 543 (1971), the Court of Appeals had held the University of North Carolina at Chapel Hill was not a public utility under the same Chapter 62 framework. The General Assembly later amended the statute to specifically include the UNC system, which is exactly the legislative correction the Yancey canon contemplates. A separate 1993 AG opinion had reached the same conclusion for the NC State Ports Authority.
The opinion left the Commission with two options if it wanted to collect: persuade DOC to pay voluntarily (unlikely, given the opinion), or persuade the General Assembly to amend § 62-3 to include State agencies operating telecommunications services. Neither option appears to have moved quickly. DOC could keep operating under the Special Certificate without paying the fee.
Currency note
This opinion was issued in 1994. 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. Inmate telecommunications law has been substantially reshaped by federal FCC rate-cap proceedings and by NC's contracting practices for inmate-phone services through third-party providers; current regulatory status of state-agency-operated phone systems should be confirmed separately.
Background and statutory framework
Chapter 62 and the Utilities Commission. Chapter 62 of the General Statutes governs public utilities in NC. The Commission regulates rates, services, and entry for entities meeting the public-utility definition.
The Special Certificate path. § 62-110(c) requires any entity under Commission jurisdiction that offers pay-phone service to the public to obtain a Special Certificate. The Commission used this provision to bring DOC's inmate phones into the regulatory fold in 1989. The opinion did not directly question whether DOC needed a Special Certificate; it was specifically about whether DOC owed the regulatory fee.
The Yancey canon. Yancey v. State Highway Commission (1942) is the NC Supreme Court's clearest statement of the canon that general statutes do not bind the sovereign without express inclusion. The canon has been applied to many similar disputes over the years.
The Chapel Hill Telephone precedent. The Chapel Hill Telephone case (1971) held the UNC system was outside the public-utility definition. After that decision, the General Assembly amended Chapter 62 to add UNC. The amendment confirms the Yancey approach: if the legislature wants the State included, it must say so.
The 1993 State Ports Authority opinion. A formal AG opinion from June 8, 1993 had reached the same conclusion for the State Ports Authority. The DOC opinion treats it as on-point precedent.
The Special Certificate vs. the fee. The opinion is careful not to invalidate the Special Certificate. The Certificate may have been issued by mutual understanding for operational reasons. The fee, however, depends on § 62-302's application, which fails on the public-utility definition.
Common questions
Q: Does this mean DOC's phones can charge any rate without oversight?
A: Not necessarily. DOC's authority over its phone system runs through its general statutory powers and federal constitutional limits (Eighth Amendment, Equal Protection). Federal FCC oversight of inmate calling services has been a significant later development. The opinion was specifically about the state regulatory fee.
Q: Why did DOC get a Special Certificate if it is not a public utility?
A: The opinion does not unwind the Special Certificate. The Commission and DOC apparently agreed in 1989 that DOC would operate under one. The opinion only addresses the fee question.
Q: What about university or community college pay phones?
A: The Chapel Hill Telephone case originally exempted UNC. The General Assembly then specifically included the UNC system. Community colleges' status would turn on whether they fit the public-utility definition or have been expressly included by amendment.
Q: Does this apply to State agency cell-phone contracts?
A: The opinion concerned DOC operating a phone service, not procuring service from a private provider. State agencies that are customers of public utilities are not themselves utilities.
Q: How does this interact with federal regulation of inmate phones?
A: Federal FCC rules on inmate calling service rates and fees apply regardless of state-utility classification. State and federal regimes operate in parallel.
Q: Could the General Assembly amend Chapter 62 to bring DOC in?
A: Yes. That is the standard legislative fix when the Yancey canon excludes a state agency.
Citations from the opinion
- N.C. Gen. Stat. §§ 62-2; 62-3; 62-3(21); 62-3(23); 62-110(c); 62-302
- Yancey v. State Highway Commission, 222 N.C. 106, 22 S.E.2d 256 (1942)
- Davidson County v. City of High Point, 85 N.C. App. 26, 354 S.E.2d 250 (1987)
- State ex rel. Utilities Commission v. Chapel Hill Telephone Company, 12 N.C. App. 543, 183 S.E.2d 802, cert. denied, 279 N.C. 729, 184 S.E.2d 887 (1971)
- AG Formal Opinion of June 8, 1993 (NC State Ports Authority)
Source
- Landing page: https://ncdoj.gov/opinions/department-of-correction-pay-telephone-system-public-utility-status/
Original opinion text
FORMAL OPINION
DATE: October 17, 1994
Subject: Department of Correction Pay Telephone System; Public Utility Status Formal Opinion
Requested by: LaVee Hamer, General Counsel, N. C. Department of Correction
Question: Is the North Carolina Department of Correction subject to the regulatory fee requirement provided in N.C. Gen. Stat. §62-302?
Conclusion: No, the Department of Correction, as a State agency, is not a public utility as defined by N.C. Gen. Stat. §62-3(23) and, therefore, is not subject to requirements of N. C. Gen. Stat. §62-302.
The North Carolina Department of Correction offers telephone service to inmates by the means of pay telephone instruments in its confinement facilities. N.C. Gen. Stat. §62-110(c) requires that all persons under the jurisdiction of the North Carolina Utilities Commission (the "Commission") offering telephone service to the public by means of private coin, coinless, and key-operated pay telephone instrument obtain a Special Certificate from the Commission. The North Carolina Department of Correction filed an application for such a special certificate and received a Special Certificate on February 22, 1989 (NCUC Docket No. SC-418).
Subsequent to the issuance of the Special Certificate, the Commission began sending quarterly requests for payment of the regulatory fee set out in N.C. Gen. Stat. §62-302. The Department of Correction is seeking an opinion from the Attorney General as to whether it is subject to the regulatory fee requirements set out in the statute.
The North Carolina Utilities Commission is authorized to assess a regulatory fee from every public utility under the jurisdiction of the Commission. This authority is set out in N.C. Gen. Stat. §62-302, which reads in pertinent part:
(a) Fee Imposed — It is the policy of the State of North Carolina to provide fair regulation of public utilities in the interest of the public, as provided in G.S. 62-2. The cost of regulating public utilities is a burden incident to the privilege of operating as a public utility. Therefore, for the purpose of defraying the cost of regulating public utilities, every public utility subject to the jurisdiction of the Commission shall pay a quarterly regulatory fee, in addition to all other fees and taxes, as provided in this section. The fees collected shall be used only to pay the expenses of the Commission and the Public Staff in regulating public utilities in the interest of the public." (Emphasis added.)
"Public utility" is defined by N. C. Gen. Stat. §62-3(23) as follows:
(a) … a person, whether organized under the laws of this State or under the laws of any other state or country, now or hereafter owning or operating, in this State equipment or facilities for: . . .
- Conveying or transmitting messages or communications by telephone or telegraph or any other means of transmission, where such service is offered to the public for compensation.
The threshold question, then, is whether the Department of Corrections is a "public utility" within the meaning of the statute.
The statutory definition of "public utility" includes any "person…[c]onveying or transmitting messages or communications by telephone … to the public for compensation." N.C. Gen. Stat. §62-3(21) defines "person" to include any:
"[c]orporation, individual, copartnership, company, and association, or any combination of individuals or organizations doing business as a unit, and includes any trustee, receiver, assignee, lessee, or personal representation thereof."
The State, or any agency of the State, is not expressly identified within the definition of "person" or "public utility"; neither is there any specific reference to the State in N.C. Gen. Stat. §62-302. North Carolina law has consistently found that a general statute is not applicable to the State, or agency thereof, unless the State is expressly included in the statute. Yancey v. Highway Commission, 222 N.C. 106, 22 S.E.2d 256 (1942). See also Davidson County v. City of High Point, 85 N.C. App. 26, 37, 354 S.E.2d 250 (1987).
When these rules are applied to the language in the relevant statutes, it is clear that the statutory definition of public utility does not include the Department of Corrections and the Department is thus not subject to the payment of the regulatory fee set out in N. C. Gen. Stat. §62-302. This conclusion is consistent with prior case law and formal opinions of the Attorney General.
In State ex. rel. Utilities Commission v. Chapel Hill Telephone Company, 12 N.C. App. 543, 183 S.E.2d 802, cert. denied, 279 N.C. 729, 184 S.E.2d 887 (1971), the court applied this standard in determining that the University of North Carolina at Chapel Hill, an agency of the State, was not included in the definition of "public utility" as then defined in Chapter 62 and was, therefore, not subject to the authority of the Commission. The statute was later amended to specifically include the University of North Carolina system.
In a formal opinion issued on June 8, 1993, the Attorney General, citing Yancey v. State Highway Commission, supra., determined that the North Carolina State Ports Authority is not a public utility as defined by N.C. Gen. Stat. §62-3(23) and that its services, rates, and charges are not subject to regulation of the North Carolina Utilities Commission.
In conclusion, the Department of Correction, as a State agency, is not a public utility within the meaning of N.C. Gen. Stat. §62-3(23) and, therefore, is not subject to the regulatory fee requirements of N.C. Gen. Stat. §62-302.
MICHAEL F. EASLEY, Attorney General
J. Mark Payne, Assistant Attorney General