Legal Definitions - certificate of convenience and necessity

A certificate of convenience and necessity is a special permit issued by a government regulatory body that grants a company, typically a utility or transportation provider, the legal authority to operate in a specific geographic area or offer a particular service. This certificate signifies that the government has determined the proposed service is essential for public welfare (convenience) and that there is a genuine need for it, often justifying limited competition to ensure reliable service.

Here are some examples to illustrate this concept:

• Example 1: New Natural Gas Service

  Imagine a rapidly growing suburban community that currently relies on more expensive heating oil for warmth. A new energy company proposes to build and operate a natural gas pipeline to deliver gas to this community. Before construction can begin and service can be offered, the company would need to obtain a certificate of convenience and necessity from the state's public utility commission.

  How it illustrates the term: The commission would assess if the community genuinely needs access to natural gas (the "necessity" aspect) and if providing it through a new pipeline would be beneficial and practical for residents and businesses (the "convenience" aspect). By granting this certificate, the commission acknowledges the public benefit, often giving the company a regulated monopoly in that area to ensure the significant infrastructure investment is viable and the service remains stable and affordable.

• Example 2: Inter-Island Ferry Service

  Consider two islands that are part of a state, but currently have very limited and infrequent transportation options between them, making daily commutes for residents difficult and hindering tourism. A private company proposes to launch a new ferry service with multiple daily crossings to connect these two islands.

  How it illustrates the term: Before starting operations, the ferry company would likely need a certificate of convenience and necessity from a relevant state or federal transportation agency. This certificate would demonstrate that the new ferry route addresses a clear public need for improved transit between the islands (the "necessity") and offers a valuable, convenient service to commuters, students, and tourists. The agency would evaluate factors like demand, the company's operational plan, safety standards, and financial stability to ensure reliable and safe service for the public.

• Example 3: Rural Broadband Expansion

  A regional internet service provider (ISP) wants to extend its fiber optic network to several remote rural towns that currently have no high-speed internet access, relying instead on slow, unreliable connections. This expansion requires significant investment in infrastructure.

  How it illustrates the term: To undertake this expansion, the ISP might need a certificate of convenience and necessity from a state public service commission or a similar regulatory body. This certificate would acknowledge that high-speed internet is a vital service in modern society (the "necessity") and that bringing it to underserved rural areas would greatly benefit residents, schools, and businesses (the "convenience"). The regulatory body would ensure the ISP has the technical and financial capacity to provide reliable service and that the expansion serves a genuine public interest, potentially granting certain rights or protections to encourage the investment in these difficult-to-serve areas.