In 1925, when SCE&G predecessor Broad River Power Co. acquired Columbia Railway, Gas, and Electric Co., the utility inherited the obligation to provide public passenger transit service for a reasonable fare inside the City of Columbia, be it either light rail or bus or both. In 1927, the utility balked, shut down the transit system, and later lost to the City in the U.S. Supreme Court. In 1931, the utility resumed its transit operations in direct response to the U.S. Supreme Court decision.
Also in 1925, on March 24, the governor of S.C. signed an agreement with the utility that said all State properties inside the City of Columbia would not pay franchise fees while the State still paid the going rate for its electricity.
Now the city appears to be the party breaking the 1925 franchise fee agreement, this time to serve its own purposes at the expense of the State of South Carolina. But first, a history of the transit deal needs review to illustrate the extraordinary measures taken by the city.
The utility agreed to run the public transit system for the life of the community and for the life of the company in exchange for the monopoly market inside the city to sell electric power and natural gas, and the U.S. Supreme Court said that was the deal.
The Columbia bus system became one of the country’s worst because Columbia’s elected officials allowed Scana to run one of the country’s worst. Columbia has about half the national average number of buses on the street per capita at peak demand time, 8 am, otherwise known as rush hour.
After Scana ran its bus system into the ground, after Scana ran off half the ridership between 1982 and 1992, the City of Columbia accepted the beleaguered bus service in 2002 as part of a give- away agreement to renew Scana’s monopoly status for another 30 years. Having scored to its shareholders’ satisfaction, Scana continues to move out of downtown to its own property in Lexington County.
The State of South Carolina, in a letter by the assistant general counsel, protests the payments the City of Columbia is attempting to collect as franchise fees from the State of South Carolina, which are part of state government’s electric power purchases inside the City of Columbia. According to the letter such franchise fees are in direct violation of the 1925 agreement.
Since the city worked out a deal to let Scana out of its transit obligations, and since the city extended a 30- year monopoly franchise with Scana while Scana left town, the City is now breaking the State of South Carolina’s agreement with the utility, valid since 1925.
Editor’s Note: Below is a copy of the letter made public by the City from the State of South Carolina Budget and Control Board to the City of Columbia protesting the franchise fees imposed by Scana and the City of Columbia
March 10, 2008
Patricia Banks Morrison,
Esquire
SCANA Corporation
Columbia, SC 29218
Dear Ms. Morrison:
Your letter of February 29, 2008 has been forwarded to me to reply to you on behalf of the Division of General Services. The Division disagrees with your contention that SCE&G is entitled to charge the State for its cost of doing business in the City of Columbia. The State has never agreed to pay franchise fees to SCE&G (or the City of Columbia) for service provided by lines and equipment some of which were previously owned by the State.
The analysis in your letter reaches the wrong conclusion for several reasons, including the fact that it fails to take into account prior contractual agreements between the State of South Carolina and SCE&G’s predecessor with respect to the Stateline Accounts. In 1925, the State of South Carolina entered into an agreement with Columbia Railway, Gas and Electric Company, and its successors and assigns, with respect to the Columbia Canal and provision of electricity to the State. SCE&G, as the successor to the Columbia Railway, Gas and Electric Company, is bound by the terms of the 1925 Agreement.
The 1925 Agreement set forth the initial terms pursuant to which the State has been charged for electric service. The predecessor of SCE&G promised to furnish, in perpetuity, certain electric power at no cost and the remainder of its needs at the then “legally established rate of the Company” for like customers. The term “rate” was not specifically defined, but for more than seventy- five years has not included surcharges, fees or other additions.
Significantly, at the time of the 1925 Agreement, the State owned most, if not all, of the streets and public ways of the City of Columbia and had installed and maintained its own lines and equipment as it was entitled to do as both the owner of the property and sovereign. The agreement then required your company to “maintain and keep in good and efficient condition” the “lines, poles, wires, transformers and all appurtenances” then owned by the State up to the entrances to its buildings. Your company also agreed “to deliver the power to be used by the State to the point of entrance to the buildings or other place of use … within a radius often (10) miles from the State Capital in Columbia.”
The 1925 Agreement was supplemented in the mid- fifties (the 1955 Agreement) when your company and the State arrived at a more practical and feasible manner for the delivery of, and billing for, the said power contracted for delivery under the 1925 Agreement.” The 1955 Agreement then specified exactly how the State would be charged for its electrical power. See, 3 of the 1955 Agreement. In addition, your company also agreed to provide certain maintenance services of lines and systems ceded to the State on a cost basis. The 1955 Agreement contains no consent or agreement to pay your company any fees, costs or other charges except for the specific rate allowed. Needless to say, there was no attempt to charge the State a municipal franchise fee or to allocate to the State any of your company’s cost of doing business in the City of Columbia.
When the decision was made by your company to cease providing a public transit system in the City of Columbia, the 1925 Agreement was again affirmed by the State in its 2002 amendment to the S.C.Cocte Ann. § 58-27-120 (Supp. 2007). The statute specifically reaffirmed the duties and obligations of your company as set forth by the Supreme Court in the case
of State ex rel.Daniel,Attorney
General v.Broad River Power
Company,et al, 157 S.C. 1,153 S.E. 537 (1929). In that case it was noted by the Court as follows:
There being a contract between the state and the company, this contract must be carried out by the company, the company must perform all of the services contemplated by the contract,and,further,the contract must be treated as an entirety.This principle must not be overlooked.153 S.E.at 548.
The Court also noted that the lines of your company “were constructed and acquired directly under the company’s primary franchise from the state for the operation of the electric street railway, light, and power business.” Id.
Your company (or its predecessor) was granted the right to operate by the State and, in exchange for property belonging to the citizens of the State, agreed to furnish electric power at a specific rate in perpetuity. The Agreement has now been in effect for over three quarters of a century.
SCE&G’s agreement in 2002 to pay the City of Columbia an additional fee to continue to do business in the City does not amend SCE&G’s Agreement with the State or create an obligation on the State. The State was not invited to assent to your agreement with the City nor did it do so. SCE&G has assumed an additional cost of doing business by agreeing to pay a franchise fee on the Stateline Accounts. The City and SCE&G have determined that the Stateline Accounts are not exempt from the franchise fee and SCE&G may well owe franchise fees to the City with respect to the Stateline Accounts. But this franchise fee may not be passed through to the State because of, among other reasons, SCE&G’s prior contractual obligations to the State.
As a result, the State cannot agree with your assertion that the General Services Division owes a franchise fee to SCE&G with respect to the Stateline Accounts. While the General Services Division also values its relationship with SCE&G, the Division has not paid, and will not pay, the additional charges on the Stateline Accounts referenced in your letter because no such fee may be allocated to the State by SCE&G under the terms and conditions of the company’s 1925 Agreement with the State, as amended.
Very truly yours, Frank S. Potts Assistant General Counsel
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