The Georgia Public Service Commission recently rendered an initial decision in a dispute between Jackson EMC and Georgia Power under the so-called “grandfather clause” of the Georgia Territorial Act. Under the grandfather clause, an electric supplier has the right to continue serving any premises lawfully served by it, regardless of whether it is sold to a different owner.

The dispute involves a wood manufacturing plant recently purchased by Atlantic Wood Pellets, LLC (AWP). Prior to being purchased by AWP, the plant was owned by Louisiana Pacific. Louisiana Pacific used the plant to manufacture oriented strand board. Louisiana Pacific sold the plant to AWP in July 2014. By then, Jackson EMC had been serving the plant for more than 20 years – since 1988.

After purchasing the plant, AWP made plans to renovate it for use in manufacturing wood pellets. AWP decided to contract with Georgia Power to provide electric service to the plant. Jackson EMC informed Georgia Power and AWP that it had the exclusive right to serve the plant and that it was not a customer choice load. Georgia Power disagreed and filed a petition with the Georgia Public Service Commission asking that Georgia Power be declared the plant’s lawful supplier.

Georgia Power argued that AWP had the right to select Georgia Power as its electric supplier for two reasons. First, Georgia Power argued that the premises in dispute qualified for customer choice as a “new premises” under the large load exception of the Territorial Act. Second, Georgia Power argued that Jackson EMC had lost its grandfather rights because the plant had been destroyed or dismantled by AWP and was subsequently reconstructed in substantially different kind from Louisiana Pacific’s oriented strand board plant.

The hearing officer disagreed and rendered a decision in favor of Jackson EMC. The hearing officer reasoned that Georgia Power had misconstrued the “reconstruction” clause of the grandfather provision. Under Georgia Power’s interpretation of the reconstruction clause, an electric supplier would have the right to continue serving any premises lawfully served by it, except a premises that undergoes a substantial renovation. “But,” the hearing officer said, “the statute does not say that.”

The hearing officer determined that the reconstruction clause – correctly construed – was not at issue because the plant had not been destroyed or dismantled. While AWP had begun removing and selling some of the oriented strand board equipment from within the building, the main process building itself remained fully intact. He also determined that even assuming AWP carried out its plans, at most only about one-fifth of the main manufacturing building would be dismantled, and an electric supplier does not lose grandfather rights when a building or facility it serves is downsized. Nor had any reconstruction occurred at the site.

The hearing officer also concluded that even if AWP’s plans came to fruition, the renovated plant would still be “in substantial kind.” He stated that “not only would the vast majority of the main process building remain, but the use of the Facility would still be for wood manufacturing, along with substantial overlap in the physical layout, infrastructure, equipment, process centers, and operation. Thus, even assuming the premises have been destroyed/dismantled and reconstructed, which they have not, the evidence more than satisfies the ‘in substantial kind’ standard, leaving Jackson EMC as the only lawful supplier to the Facility.”

For all of these reasons, the hearing officer concluded that Jackson EMC had the exclusive right to serve the facility and denied Georgia Power’s petition.

AWP has appealed the hearing officer’s decision to the full Commission.

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Jackson EMC is represented by James A. Orr and Benjamin C. Morgan of Sutherland Asbill & Brennan LLP.