Exemption of Utilities Commisison for Certain Contracts

Re: Advisory Opinion N.C.G.S. § 62-37(b); Exemption of
Utilities Commission from Articles 3 and 3C
Chapter 143 for Certain Contracts

Dear Mr. Bennink:

We have received your letter of September 11, 2001, and offer the following response.

You have requested the assistance of this office in resolving an issue concerning the Commission’s contracting with a firm to conduct an audit pursuant to N.C.G.S. § 62-37(b). Your specific question was whether or not the Commission may contract with the auditing firm without following the procedures outlined in either Articles 3 or 3C of Chapter 143. If the Commission is not required to follow these procedures, you ask whether any other procedures or approvals must be obtained prior to contracting with an auditing firm.

Pursuant to G.S. § 62-37(b), the Commission has one of two options when conducting audits of public utilities. The first option allows the Commission to request the Governor and Council of State to pay for the audit out of the State’s Contingency and Emergency fund. If this option is chosen by the Commission, the purchasing provisions of Chapter 143 of the General Statutes would apply as there would be an expenditure of State funds. The second option allows the Commission to issue an order requiring an auditor to be hired at the public utility’s expense. It is our understanding that the Commission intends to use this second option in this instance and that the public utility will make the payments directly to the auditing firm after the invoices are reviewed by the Commission. Neither Article 3 (Purchases and Contracts) of Chapter 143 nor the rule promulgated thereunder, 1 N.C.A.C. 5B.0301, applies in this case because there is no expenditure of State funds to purchase contractual services. See G.S. § 143-52 (requires competitive bids only for “contracts for the purchase of supplies” etc.) We have also reviewed Article 3C (Consultant Services) of Chapter 143 for its application in this instance. As noted above the Commission, as a quasi-judicial body, intends to order an audit to be undertaken by an Mr. Robert H. Bennink, Jr. October 11, 2001 page 2

auditing firm at the expense of the public utility. Since the Commission is acting in its quasijudicial capacity, through the issuance of an order, and not through its contracting powers, the Commission need not comply with Article 3C. That Article applies to a “contract to obtain services of a consultant,” G.S. § 143-64.20(b), not to orders issued by quasi-judicial bodies.

G.S. § 62-15(h) referenced in your inquiry, which reads in part, “… the executive director is authorized to employ, subject to approval by the State Budget Officer, expert witnesses … to assist the public staff …”, does not appear to apply in this circumstance. It does not apply because the auditor to be hired will be assisting the Commission rather than the public staff. We are aware of no other approvals which might apply in this instance. We would suggest that you contact the purchaser for the Department of Commerce for any internal procedures which might exist. In addition, we are certain that the contractual services team within the Division of Purchase and Contract would be glad to provide the Commission assistance in this process.

We hope that this advisory opinion will be useful to you. Please let us know if you have additional questions concerning this matter.

Very truly yours,

Reginald L. Watkins Senior Deputy Attorney General

Teresa L. White Assistant Attorney General

TLW:lbb

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