Monday, April 5, 2010

South Carolina Supreme Court Rules Municipality Possessed the Sole Right to Provide Electric Service Following Annexation

In City of Newberry v. Newberry Electric Cooperative, Inc., the South Carolina Supreme Court reversed the South Carolina Court of Appeals’ decision holding that the Newberry Electric Cooperative (Cooperative) could provide electric service to an area owned by Wal-Mart and annexed by the City of Newberry (City).

When Wal-Mart begin negotiations to construct a store on the site, the area was assigned to the Cooperative by the South Carolina Public Service Commission pursuant to the South Carolina Electric Cooperative Act, S.C. Code Ann. §§ 33-49-10, et. seq. (2006 and Supp. 2008) (Electric Cooperative Act).

On June 21, 1999, the Cooperative and Wal-Mart entered into agreements for the Cooperative to provide electric service to the property. On June 27, 1999, the City annexed the property.

Generally speaking, a municipality enjoys an absolute right to provide electric service to property it annexes. In the event that an electric cooperative is providing electric service to property prior to its annexation by a municipality, however, the Electric Cooperative Act allows the Cooperative to “continue serving all premises then being served” at the time of annexation. S.C. Code Ann. § 33-49-250(1). This is known as the “annexation exception.”

The Supreme Court ruled 1) the annexation exception did not apply to allow the Cooperative to provide electric service to the property, because the Cooperative was not providing services to the property prior to annexation; and 2) no applicable statute of limitations prevented the City from asserting its exclusive right to serve the property. The Cooperative’s agreements with Wal-Mart did not meet the annexation exception’s requirement that the Cooperative actually serve the property prior to annexation, and any statute of limitations began to run not when the property was annexed, but when the Cooperative began to provide service to the property.

Justice Kittredge dissented, based on the proposition that the applicable statute of limitations (found in S.C. Code Ann. § 15-5-530(2)) began to run on the date of annexation. According to Justice Kittredge, the City’s exclusive right to serve the Wal-Mart property was established on the date of annexation.

The preceding does not constitute legal advice. Consult counsel in your jurisdiction for advice regarding this subject matter.