The North Carolina Court of Appeals has been asked to intervene in the decision by the North Carolina Utilities Commission (NCUC) to approve the sale of the Bald Head Island ferry system to SharpVue Capital.
“Our argument today is that in approving this transfer, the commission committed a number of different specific legal errors,” argued Sam Ervin, IV who represents the Village of Bald Head Island. “We are not attempting to get the court to revisit regulatory issues of regulatory discretion made by the commission. We are not trying to re-argue the facts. What we are trying to do is point out a number of instances in which the commission, simply failed to follow obvious statutory requirements.”
In May of 2022, Bald Head Island Limited (BHIL) the owner of the ferry system, announced a $56 million sale to SharpVue Capital, a Raleigh investment company. The Village objected to the sale and filed a complaint against BHIL and asked the North Carolina Utilities Commission to step in.
Ervin said during oral arguments that the commission did not follow the law when they approved the sale with what appear to be six years of automatic rate increases tied to inflation.
“If you look at the commission’s order in this case, it simply says that the transferee can give notice and then raise rates up to the amount that’s permitted by the inflation rate, and that’s simply not something that the established law allows the commission to alter,” claimed Ervin.
Judge Allegra Collins asked the council “Are there contracts in which they are authorized to pre-approve [rate increases]?”
“If the applicants came in at some point, for example, and applied for a general rate increase,” Ervin responded. “Then the commission has the authority to do that, but they can only do that after they conduct a detailed analysis.”
The NCUC must approve rate increases for public utilities like electricity, natural gas, and water. The commission ensures rate hikes are justified by reviewing costs, infrastructure needs, and consumer impact.
Attorney Gray Styers, representing Baldhead Island Limited and Baldhead Island Transportation, the current owners and sellers of the ferry system, asserted that the commission was “hedging their bets” due to a related case before the court of appeals regarding the regulation of a barge and parking lot by the NCUC.
“So if this court were to find in that appeal that there’s no statutory jurisdiction over the parking and barge assets, then the commission would have no regulatory authority to limit rate increases of parking and barge, but for this regulatory condition,” argued Styers. “So here they were hedging their bets on what this court might decide. It was saying even if this court were to find we don’t have jurisdiction, we are going to condition this approval on that limiting rate increases to no more than the rate of inflation for a six-year period.”
“The appellate courts have never reversed or overturned an approval by the Utilities Commission of a utility merger or transfer in the history of jurisprudence in the state, claimed Styers noting the unusual nature of the case.
“The commission has the ability and the obligation and affects the necessity to draw reasonable inferences, consider circumstantial evidence, and look at the totality of all of the case,” said Styers. “In this case, the commission conducted a four-day hearing with expert witnesses, fact witnesses. They had reams of documents that were presented. And that’s exactly their role as the tryer of fact, is to look at that evidence, to weigh the credibility of the witnesses.”
Judge Collins asked Styers about SharpVue Capital’s plans on holding the ferry and it’s assets long term.
“So my question is, is there any fact in here or finding a fact that talks about the long-term versus the short-term plans to hold these assets?” she asked.
“Yes, there is. Absolutely directly on point,” emphasized Styers. “We have this evidence by Mr. Lee Roberts who explained, and he goes on to state, about why this would not be a short-term hold, the intention of this being long-term, the fact that this wasn’t a closed-end fund but an open fund for long-term assets.”
There is no timeline for a decision in this case from Collins, Chief Judge Chris Dillon, and Judge Julee Flood.