Could a South Carolina nonprofit water company give residential customers a free month without giving businesses the same benefit?

Plain-English summary

A representative asked whether a nonprofit water company could give residential customers one free month of water while excluding business customers. The Attorney General did not approve or reject the plan outright. It said South Carolina courts had tested water rates for reasonableness, so the answer depended on whether a court considered the particular rate arrangement reasonable.

The opinion noted that the state utility regulators lacked authority over the rates of the nonprofit company described in the request. That did not settle the reasonableness question. The AG left the factual assessment to a court and said its response was only a prediction of how a court might apply the law.

Currency note

This opinion was issued in 2013. 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.

Common questions

Q: Did the AG say a residential-only free month was automatically legal? A: No. It said the plan's validity would likely depend on whether the resulting rates were reasonable.

Q: Did the state Public Service Commission regulate this nonprofit company's rates? A: The opinion reported that, under the statute and agency correspondence it reviewed, the Commission and Office of Regulatory Staff did not regulate those rates.

Q: Who would decide whether the rates were reasonable?
A: The AG left the fact-specific decision to a court.

Background and statutory framework

The letter cited § 33-36-280 for the exemption of nonprofit water or sewer corporation rates from state agency supervision. It then looked to the reasonableness standard in South Carolina water-rate cases and declined to decide how that standard applied to the proposed free month.

Citations and references

The opinion discusses § 33-36-280 and the reasonableness standard for water rates.

Official title

Regarding the ability of a nonprofit water company to provide a month of free water to residential customers but not business customers.

Requester

The Honorable Dennis Moss, Member, South Carolina House of Representatives

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/august-29-2013/
• Original PDF: https://www.scag.gov/wp-content/uploads/2013/09/moss-d-c-os-9643-8-29-13-nonprofit-water-company-provide-month-of-free-water.pdf

Original opinion text

ALAN WILSON
A TIORNEY GENERAL

August 29, 2013

The Honorable Dennis Moss
Member, South Carolina.House of Representatives
306 Silver Circle
Gaffney, South Carolina 29340
Dear Representative Moss: ·
Attorney General Alan Wilson has referred your letter of February 11, 2013 to the Opinions section for a response. The following is our understanding of your question presented and the opinion of this Office concerning the issue based on that understanding. Issue: May a nonprofit water company provide a month of free water to its residential customers but not to its business customers? Short Auswer: The test used by South Carolina courts in the past concerning water rates has been the reasonableness test. Therefore, the answer to your question will likely depend on whether a court interprets the water rate as reasonable or not. Law/Analysis: As this Office has mentioned before, if an administrative agency's interpretation of a statutory provision is reasonable, this Office generally defers to an agency's construction. Op. S.C. Attv. Gen., 2006 WL 269609 (January 20, 2006). However, it is this Office's understanding that according to your correspondence with the Office of Regulatory Staff, there is no administrative agency concerning nonprofit water companies such as the one you are dealing with. Included in your correspondence was a letter from the Office of Regulatory Staff that stated the Public Service Commission and the Office of Regulatory Staff do not have the authority to regulate the rates of a nonprofit water company. One statute cited in your correspondence was South Carolina Code § 33-36-280 (1976 Code, as amended), which says: The rates charged for services furnished by a nonprofit corporation created for the purpose of providing water supply or sewage disposal, or a combination of those services, are not subject to supervision or regulation by a state board, commission, or agency or department or division of it.

REMBERT C. DENNIS BUILDING

•

POST OFFICE Box 11549

•

COLUMBIA SC ?9211 1549
'
'
-

•

TELEPHONE 803-734-3970

• FACSIMILE 803-2i1-o?R1

The Honorable Dennis Moss
Page2
August 29, 2013

Therefore, since the water company is a nonprofit corporation, if there is no state board, commission or agency to supervise the rates, the rates would, at minimum, be regulated by the contract with the customers and would also be regulated, at minimum, by the courts. While this Office has written numerous opinions concerning rates, those were written for special purpose districts, municipalities and commissions concerning their statutes and limitations, not for a nonprofit corporation furnishing water pursuant to South Carolina Code § 33-36-280. See. e.g. Ops. S.C. Attv. Gen., 2006 WL 1207272 (April 21, 2006); 2002 WL 31341808 (September 26, 2002); 1963 WL 11115 (March 12, 1963). Nevertheless, as this Office has stated before, "[a] nonresident purchaser of water from a municipality has only those rights set forth or necessarily implied from the contract to sell and furnish water and the nonresident has no rights beyond the contract." Ops. S.C. Atty. Gen., 2006 WL 1877124 (June 30, 2006) (citing Childs v. Citv of Columbi!!, 87 S.C. 566, 70 S.E. 296 (1911)). Thus, reasonableness would be the standard for the water rates. Water meter rates in ordinances are presumed to be reasonable. Poole v. Paris Mountain Water Co., 81 S.C. 438, 62 S.E. 874 (1908). Moreover, our South Carolina Supreme Court said: As we have heretofore pointed out, the Constitution, while investing municipalities with the right to operate waterworks systems, has limited their power to charge, by directing that "reasonable" rates must be maintained. But even in the absence of this constitutional restriction, the court would hold that the rates charged must be reasonable. A waterworks is a public utility, and it makes no difference whether such utility be operated by a municipality or by a private corporation. Both are bound by the rnle of reasonableness. . .. "Water rates are imposed and collected merely as compensation or equivalent to be paid, by those who choose to receive and use the water." 27 R.C.L. 1436. A municipality may charge a rate that will yield a fair profit, just the same as a private corporation. The fact that it makes a profit does not show that the rate is unreasonable. The service received is the test. 67 C.J. 1243. Simons v. City Council of Charleston, 181 S.C. 353, 187 S.E. 545 (1936). As you are likely aware, this Office does not make factual determinations. This Office only issues legal opinions. Op. S.C. Atty. Gen., 1996 WL 599391 (September 6, 1996) (citing Op. S.C. Atty. Gen., 1983 WL 182076 (December 12, 1983)). Therefore, this Office will leave it up to the courts to determine whether the rates are reasonable. However, please note Tennessee's Attorney General's Office issued an opinion in 2012 opining that utility providers could give discounted water and sewer rates to senior citizens. Op. Tenn. Atty. Gen., 2012 WL 719468 (February 29, 2012). That same opinion also notes that discounted water rates are not authorized for charitable institutions pursuant to a Tennessee statute that requires "reasonable rates" and based on their common law principle that rates may not be "unjustly discriminatory." Id. (citing 99-026; 97-129 and referencing City of Parsons v. Perryville Utility District, 594.S.W.2d 401, 406-407 (Tenn. Ct. App. 1979)). Conclnsion: The test used by South Carolina courts in the past concerning water rates has been the reasonableness test. Therefore, the answer to your question will likely depend on whether a court interprets the water rate as reasonable or not. However, this Office is only issuing a legal opinion. Until a court or the legislature specifically addresses the issues presented in your letter, this is only an opinion

The Honorable Dennis Moss
Page 3
August 29, 2013

on how this Office believes a comi would interpret the law in the matter. If it is later determined otherwise or if you have any additional questions or issues, please let us know. Sincerely,

~. ~
Anita Smith Fair
Assistant Attorney General
REVIEWED AND APPROVED BY:

f6zzol ~
Robert D. Cook
Solicitor General