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BHI Ltd. Asks Utilities Commission To Throw Out Village’s Complaint

By Johanna F. Still, posted Mar 31, 2022
Bald Head Island Ltd. is asking the N.C. Utilities Commission to ignore the Village of Bald Head Island's request that the commission regulate Bald Head Island Ltd.'s parking and barge operations. (Photo courtesy of the Village of Bald Head Island)

Bald Head Island Ltd., the parent company of the island’s ferry transportation enterprise, is asking state regulators to disregard the Village of Bald Head Island’s request for additional oversight on the company's other transportation-related services. 

Last month, the village formally asked the N.C. Utilities Commission to regulate Bald Head Island Ltd.'s (BHIL) currently unregulated parking and barge services, which the municipality asserted are intertwined with the business. The regulation is necessary, the village argued, since a sale of the entire transportation system to a private third party might be imminent. Since the 2013 death of the company's founder, George Mitchell, BHIL has divested its assets over the past decade to settle his estate.

The N.C. Utilities Commission does regulate BHIL's ferry and tram services. A decade-old rate case caps the business’s rate of return at 8.3%, a ceiling BHIL has never reached, its CEO has previously stated. All four transportation silos – the ferry, barge, parking and tram operations – operate as monopolies, given the island’s remote location, under BHIL's umbrella. ​Any sale of the system would require approval from the commission with regard to its regulated ferry and tram services. 

The commission granted BHIL an extension to respond to the complaint, and on Wednesday, the last day it had to file an answer, the company submitted its response and motion to dismiss the village’s complaint. “The Complaint is part of a multi-pronged approach by the Village to acquire [BHIL's] regulated and unregulated assets for itself,” the response states. 

Pre-dating the utilities complaint, BHIL and the village have had a strained relationship. The village contested BHIL's proposed sale of its ferry assets to the multi-jurisdictional Bald Head Island Transportation Authority (BHITA), a state-created entity the village initially endorsed. In early 2021, BHITA was poised to purchase the system using $52 million in revenue bonds and submitted an application to the N.C. Local Government Commission (LGC) for permission to do so. 

Though the village has the most representation on the authority’s composition, it contends it warrants more and has aired concerns about nonisland residents getting a say in how the system is operated. 

The village eventually submitted its own LGC application seeking to take out general obligation bonds to finance its acquisition of BHIL’s assets with lower overall debt service. LGC members have scrutinized many aspects of the proposed BHIL-BHITA deal, namely, the system’s valuation. The commission has yet to formally vote on either application. 

Importantly, BHIL is not interested in selling to the village. Regardless, village voters passed a referendum in November authorizing the potential bond issuance for the proposed purchase. 

With the proposed sale to BHITA unlikely given the LGC’s latest sentiments, BHIL has since sought out private buyers to purchase the system, either in whole or in parts. The village cited BHIL’s discussions with private buyers to sell the system – potentially piecemeal to fetch a greater overall sale price – as an urgent matter that necessitates the commission’s oversight in its complaint. 

In its response to the utilities commission, BHIL accuses the village of attempting to steer the commission to favor its position as a potential buyer. “The Village’s Complaint is asking the Commission to interject itself into [BHIL's] potential, third-party market sale of regulated and unregulated assets,” the response states. “There is no statutory authority or precedent to support such an extraordinary intervention into a private company’s control and sale of its own assets.” 

BHIL argues the village’s request for regulating barge and parking services is untimely and without merit. Company officials also assert that the definition of a public utility does not include parking or barge operations, and therefore the matter falls outside of the commission’s jurisdiction. 

The village now has 10 days to respond to BHIL’s response under the commission’s complaint procedure rules. Once that response is received, the commission may take action on its own, or it could schedule a hearing, after which it would issue an order to resolve the matter. ​

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