Investigation Finds Cape Fear Public Utility Authority Raised Rates in Violation of State Law

The Cape Fear Public Utility Authority's rates continue to spiral upward. The entity has plans to potentially raise rates every year for the next decade. The CFPUA has increased rates twice in 2010; a 25% increase in the fixed water and sewer rates in January and another 14% increase to the tiered rate in May. Both of these rate increases appear to have been in violation of state law.

The CFPUA was created under NC General Statute 162A. NC General Statute 162A-9(a) reads as follows: 162A‑9. Rates and charges; electronic notice; contracts for water or services; deposits; delinquent charges.
         "(a) An authority may establish and revise a schedule of rates, fees, and other charges for the use of and for the services furnished or to be furnished by any water system or sewer system or parts thereof owned or operated by the authority. The rates, fees, and charges established under this subsection are not subject to supervision or regulation by any bureau, board, commission, or other agency of the State or of any political subdivision.
        Before an authority sets or revises rates, fees, or other charges for stormwater management programs and structural or natural stormwater and drainage system service, the authority shall hold a public hearing on the matter. At least seven days before the hearing, the authority shall publish notice of the public hearing in a newspaper having general circulation in the area.”

In November of 2009, minutes show the CFPUA Board discussed and approved the 25% increase in the fixed rate portion of the water and sewer rates. That increase went into effect January 1, 2010 with no public notice or public hearing.

In March of 2010 the board approved a second rate increase of 14% in the tiered rate portion of the water rate which went into effect as of May 1, 2010. Meeting minutes again show the rate increases were discussed and approved with no public notice or hearing.

The CFPUA provided affidavits of publication from the Star News for the all Authority’s public hearings since October 1, 2009. Those records confirm that there was no notice of public hearing published for either the November 2009 or March 2010 meeting. Likewise, Authority minutes show there was no public hearing regarding rate increases.

Records from a board meeting in March 12, 2008 indicate the authority was aware of the requirement for public notice and hearing regarding rate increases. In compliance with NCGS 162A-9(a) then interim attorney Bill Lynch advised the Board that it should publish the proposed rates for hearing and approval at the next Authority meeting

Linda Miles currently serves as consulting attorney for the CFPUA Board. Records indicate she was in attendance at both the November 2009 meeting and March 2010 meeting where rates increase were discussed and approved. Minutes do not show that the requirements of 162A-9(a) were mentioned during either meeting.

Since rate hikes were imposed without due process, and in violation of North Carolina general statutes, customers have actually been overcharged for the last 12 months. Technically those overcharges should be refunded and the process completed in accordance with state law. However, that’s not likely to occur.

Refunding overcharges could cost the CFPUA millions of dollars. If the organization was forced to credit customers the overcharges, it would immediately have to turn around and send customers a bill to recoup the refund.

With the Cape Fear Public Utility Authority, citizens find themselves being governed by what is essentially a government corporation. An appointed board with the unlimited ability to spend money and raise rates, rates many would call taxes since they are levied by a government body. A scenario most likely not envisioned by our forefathers. What recourse do citizens have when these government corporations fail to comply with state laws and violate the public’s trust? Little, if any, according to the North Carolina Department of Justice(NCDJ).

Utilities Attorneys with the North Carolina Department of Justice’s Consumer Protection Division said it is the responsibility of local elected bodies, such as the City Council and County Commissioner, to keep entities like the CFPUA in check. In reality, the City Council and County Commission have little control over the CFPUA, other than the ability to appoint members to the board.

Attorneys with the North Carolina Department of Justice admitted there is no regular process for overseeing these government corporations. The only way for citizens to seek relief and force organizations like the CFPUA into compliance with NC General Statutes is by filing a civil action: an expensive proposition average citizens can not afford to undertake.

The Cape Fear Public Utility Authority’s failure to follow statute 162A-9(a) is not only a direct violation of state law, but a serious violation of the public’s trust. It is taking away the rights of the citizens to due process as required by state law. Local elected officials have called for a shake-up at the CFPUA. That shake-up may need to start in Raleigh with changes to the very statutes that allowed for the creation of entities like CFPUA.

Reference documents and links:
North Carolina Department of Justice
NC General Statute 162A
NC General Statute 162A-9(a)
CFPUA Affidavit of Publication October 2009 thru November 2010
CFPUA Board Meeting Minutes March 2008
CFPUA Board Meeting Minutes November 2009
CFPUA Board Meeting Minutes March 2010