The Fulton County Superior Court has reversed a decision of the Georgia Public Service Commission in a case addressing whether substantial renovations extinguish grandfather rights under the Georgia Territorial Act.
The facility in dispute is a manufacturing/warehouse facility constructed in 1991 that has been expanded and renovated over the years. Nestlé acquired the facility in 2017, made further renovations, and in 2019 decided to switch electric service providers from Georgia Power Company to Walton EMC. Georgia Power claimed that it had the right to continue serving the facility under the “grandfather clause” of the Territorial Act, which grants the incumbent electric supplier the “exclusive right to continue serving any premises” to which it has lawfully extended service.
Walton EMC, however, invoked the “in substantial kind” provision of the grandfather clause, which provides that the right to continue serving a premises applies even if the premises “have been destroyed or dismantled and . . . reconstructed . . . in substantial kind on approximately the same site.” Walton EMC argued that the premises had been destroyed or dismantled and reconstructed in different kind, thus extinguishing Georgia Power’s grandfather rights. Since the connected load of the renovated facility was over 900 kW, Walton EMC asserted that Nestlé’s selection of Walton EMC was valid. Georgia Power filed a challenge with the PSC.
The PSC agreed with Walton EMC. First, the PSC found that the old facility had been “destroyed or dismantled.” In support of this conclusion, the PSC found that Nestlé “dismantled the Premises when it took apart and stripped away the electrical system, HVAC system, crane system, air handling system, wastewater system, storm water system, and removed various parts of the roof.” Also, Nestlé removed and replaced substantial portions of the flooring and foundation and demolished interior walls, structural piers, air washing pits, and a crane system. The PSC then concluded that the facility was not reconstructed in substantial kind. In support of this finding, the PSC found that Nestlé had changed the facility from a textile manufacturing operation to a pet food production facility. In the process, Nestlé
(1) replaced the wastewater treatment facility, (2) changed the overall structure and design of the existing facility, (3) constructed approximately 120,000 square feet of additional buildings, (4) replaced the existing electrical systems, (5) replaced the air handling systems, and (6) created a food safe environment by, among other things, sealing off and otherwise protecting the interior from pests and other contaminants, and (7) added a freezer in one of the new buildings.
Based on these findings, the PSC determined that the old facility had been rebuilt in different kind and thus Georgia Power did not have the right to continue serving it under the grandfather clause.
On appeal, the Fulton County Superior Court reversed. Georgia Power Co. v. Ga. PSC, Case No. 2020-cv-338123. The court cited with approval the definitions of “destroyed” and “dismantled” used by the PSC: “destroy” means “to ruin completely . . . demolish” and “dismantle” means “to disassemble.” But the court disagreed with the PSC’s application of these terms to the Nestlé renovation:
The Court finds as a matter of law that renovating portions of the premises does not constitute “ruining,” “demolishing,” or “disassembling” in any regard. The definitions above convey a tearing down or breaking apart in a holistic and exhaustive manner. Any partial renovation should not be considered by the PSC to constitute destruction or dismantling.
The court stated that “although portions of the pre-existing buildings were stripped, the buildings as a whole were never destroyed or dismantled when ascribing the words their plain and ordinary meaning.” In fact, the facility “could not have suffered complete ruin when the PSC’s findings of fact indicate Georgia Power continuously electrified the building as Nestlé maintained hold-over tenants and itself operated out of the facility during renovations.”
The court also held that even if the renovations could be construed as “dismantling,” they were “certainly reconstructed in substantial kind.” The court found that both before and after the renovations, the premises were used as a warehouse and processing facility. Also, many of the components of the building, although renovated, “now exist in exactly the same space as before.” Finally, the court held that the structural additions and other changes made by Nestlé did not qualify the building as “new” under the large load exception.
Walton EMC, Nestlé, and the PSC have appealed the Superior Court’s decision to the Georgia Court of Appeals. Walton EMC is represented by David Cook of Autry, Hall & Cook, LLP.
This is one of several “renovation” cases decided over the past few years. Others included Carroll EMC, Jackson EMC, and GreyStone Power.
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