Supreme Court rejects 'grandfather' rights claim in the Territorial Act renovation dispute

Georgia Power had served electricity to the premises, which is in Georgia Power’s assigned service territory, since the building’s construction in 1991 as a textile manufacturing and warehouse facility. Except for the leasing of some warehouse space, the facility was vacant for about a decade until it was acquired by Nestlé in 2017. Nestlé then overhauled the facility so that it could be used to make pet food. Nestlé also decided to switch its electric service provider from Georgia Power to Walton EMC.

Georgia Power filed a petition with the Georgia Public Service Commission (PSC) claiming that it had the right to continue serving the facility under the “grandfather” clause of the Territorial Act. The PSC determined that, as a result of Nestlé’s overhaul and renovation of the facility, the premises was “destroyed or dismantled” and not “reconstructed in substantial kind.” Accordingly, the PSC decided that Georgia Power’s grandfather rights were extinguished by the renovation, and Nestlé was permitted to select Walton EMC as its new electric supplier. Georgia Power appealed the PSC’s decision to the Superior Court of Fulton County, which reversed the PSC and ruled that Georgia Power’s grandfather rights survived the renovation. The Georgia Court of Appeals then affirmed the Superior Court, ruling again in Georgia Power’s favor. See prior legal alerts about these decisions. Court of Appeals; Superior Court; Public Service Commission.

On January 28, 2025, the Georgia Supreme Court decided that Georgia Power’s grandfather rights did not survive Nestlé’s renovation of the premises, affirming the decision of the PSC. The Court’s ruling provides some clarity to an issue that has been litigated repeatedly over the last several years:

Accordingly, taken together, we construe the phrase “destroyed or dismantled and which are reconstructed . . . in substantial kind” in OCGA § 46-3-8 (b) as extending an electric supplier’s exclusive right to continue serving premises if, among other things: (a) the premises are completely ruined or torn or broken down, or (b) short of entire destruction, the premises are substantially taken apart or the premises’ structural components, furniture, equipment, or other significant contents are substantially stripped away; and (c) the premises are constructed again largely, but not wholly, of the same fundamental nature or quality as they were previously.

Applying this rule, the Supreme Court held:

[W]e have no difficulty determining that the Commission did not abuse its discretion in concluding that Nestle’s premises were “destroyed or dismantled” given the factual findings about the substantial modifications to the premises and construction of new buildings.

The Supreme Court summarized these factual findings as follows:

Those findings included that Nestlé spent $300 million dollars (nearly 43 times the purchase price) changing the structure and design of the previous facility, adding exterior walls, removing interior walls, removing roofing, demolishing infrastructure and systems, removing some buildings in part or in whole, constructing new buildings, replacing its wastewater treatment and drainage systems to be specific to Nestlé’s operations, replacing the electrical systems and infrastructure, replacing the air-handling systems with specialized systems for Nestlé’s operations, removing and replacing flooring and foundation, making various other additions specific for operating a wet-food processing center and creating a food-safe environment, installing all new equipment, and sealing off and filling in horizontal branch and vertical ducting systems with rebar and concrete.

Accordingly, the Supreme Court reversed the rulings of the Court of Appeals and the Superior Court and agreed with the PSC’s determination that Georgia Power’s grandfather rights did not survive the kind of major renovation that Nestlé performed at the premises.

Our energy litigation team has published legal alerts on other recent PSC cases involving grandfather rights and renovations. See here (Ga. Power v. Carroll EMC), here (Ga. Power v. Jackson EMC), and here (GreyStone Power v. Ga. Power).

__________

If you have any questions about this legal briefing, please feel free to contact any of the attorneys listed under 'Related People/Contributors' or the Eversheds Sutherland attorney with whom you regularly work.