Government officials should apply their regulations consistently. The rule of law demands such consistency.
That doesn’t mean every outcome needs to be identical. But officials ought to be able to explain why cases that appear to have the same set of facts end up producing different government decisions.
That basic concept helps explain why North Carolina’s three Republican N.C. Supreme Court justices dissented from a recent ruling handed down by their Democratic colleagues.
The case dealt with electricity rates. Specifically, Virginia-based Dominion Energy questioned why the N.C. Utilities Commission appeared to have changed rules regarding coal ash cleanup costs. When seeking a rate increase in 2019, Dominion expected the Utilities Commission to follow the same standards set both for Dominion in 2016 and Duke Energy in 2017.
The commission instead set a different standard, both for the period of time Dominion could write off its coal ash costs and its ability to earn a return on costs not yet written off.
In a 4-3 decision, the state Supreme Court’s Democratic majority found no fault with the Utilities Commission’s work.
“Although Dominion’s dissatisfaction with the Commission’s order is understandable, it has failed to show that the Commission’s decision lacks adequate record support, misapplies the applicable ratemaking statutes, or fails to embody a reasoned decision,” wrote Democratic Justice Sam “Jimmy” Ervin IV. “Instead, at the end of the day, Dominion’s challenge to the Commission’s order amounts to little more than a belief that the Commission should have weighed the evidence differently and reached a different result and that we should intervene to require that a different outcome be reached.”
Republican justices reached a different conclusion.
“The issue I address today is whether the Utilities Commission needed to explain why it departed from its reasoning in two cases that were decided less than two years prior, had materially similar facts, and were brought to the Commission’s attention,” wrote Justice Tamara Barringer in dissent.
“Under general tenets of administrative law, an agency’s failure to explain a departure from recent, applicable past decisions when they were brought to its attention is arbitrary and capricious,” Barringer added. “North Carolina administrative law should be no different. Otherwise, an agency can treat two similarly situated entities differently without having to directly explain why. Such arbitrary and capricious decision-making will only serve to undermine trust in our government.”
Barringer noted that her dissent relied upon a general principle.
“I cannot find a case where this Court has addressed whether or not the Commission must explicitly explain why it departed from a recently decided case with materially similar facts that was brought to its attention, “ she wrote. “However, this Court has previously recognized that “[w]hile the Commission is not covered by our Administrative Procedure Act[,] … the Commission is still an administrative agency of the state government, and general tenets of administrative law are applicable to its operation except where modified by statute.”
“Looking to the general tenets of administrative law, ‘[i]t is textbook administrative law that an agency must provide a reasoned explanation for departing from precedent or treating similar situations differently.’”
The dissent concedes that regulators were not bound by the legal doctrine “stare decisis.” In other words, the Utilities Commission faced no obligation to follow a precedent in deciding Dominion’s rate case.
“Since ratemaking is a legislative function and traditional principles of stare decisis do not apply, it was permissible for the Commission to allow a different recovery method in this case than in the Duke cases,” Barringer wrote. “However, when departing from the Duke cases, under general tenets of administrative law, the Commission needed to provide some explanation directly addressing why it departed when the Duke cases were similar, recently decided, and brought to the Commission’s attention. The Commission’s failure to provide that explanation rendered its order arbitrary and capricious.”
Barringer emphasized the importance of an explanation.
“Ultimately, the lack of an explanation by the Commission is the fatal flaw in this case,” she wrote. “While nonarbitrary explanations for why the Commission treated one utility differently than another utility certainly could exist, so could arbitrary ones.”
“For instance, the Commission might arbitrarily treat out-of-state-based utilities differently than locally based ones due to a bias towards local businesses,” Barringer added. “Unless the Commission had to directly explain why it treated two similarly situated utilities differently, it could hide biased, arbitrary decision-making through the release of reasonable but unrelated explanations in each case.”
“The risk that some businesses will be treated differently than others, without a guarantee that they will receive an explanation as to why they are treated differently, will only undermine trust in our government,” she concluded.
Barringer and her Republican colleagues didn’t call for Dominion to get the same outcome as Duke. They called on government regulators to explain why the two cases should produce different results.
That type of transparency would help bolster respect for the rule of law.
Mitch Kokai is senior political analyst for the John Locke Foundation.