Boston Edison Co. v. City of Boston

• Decision Date: 18 January 1984
• Citation: 390 Mass. 772,459 N.E.2d 1231
• Parties: BOSTON EDISON COMPANY v. CITY OF BOSTON.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1231

459 N.E.2d 1231

390 Mass. 772

BOSTON EDISON COMPANY v. CITY OF BOSTON.

Supreme Judicial Court of Massachusetts Suffolk.

Argued Oct. 6, 1983.

Decided Jan. 18, 1984.

Arlene S. LaPenta, Asst. Corp. Counsel, Boston (Jo-Ann M. Marzullo, law student, with her) for defendant.

William G. Meserve, Boston (John A. Walsh, Jr., Boston, with him), for plaintiff.

Before HENNESSEY, C.J., and LIACOS, ABRAMS and LYNCH, JJ.

LYNCH, Justice.

This case raises the issue whether the city of Boston, a municipal consumer of electric power, may be charged interest when it fails to pay its bills on time. A judge in the Superior Court found that the city was liable for interest, but only on bills that came due after June 27, 1977, the effective date of St.1977, c. 328, amending G.L. c. 164, § 94D. He therefore allowed partial summary judgment in favor of Boston Edison Company (Edison). Both parties have appealed from this judgment. The city claims that it cannot be charged interest, the provision of § 94D notwithstanding, while Edison argues that the city is liable for interest as of February 19, 1975, ¹ when the Department of Public Utilities (department) approved a general interest charge for nonresidential customers. Edison's appeal is before this court on direct appellate review; the city's appeal was transferred to this court on our own motion. The partial judgment in favor of Edison is affirmed and the case is remanded to the Superior Court for the entry of a further judgment in Edison's favor consistent with this opinion.

The facts are straightforward. The city purchases electricity from Edison for numerous buildings and facilities. There is no written contract between the parties, but the city pays for whatever electricity it uses according to the rates and charges filed with and approved by the department pursuant to G.L. c. 164, § 94. In February, 1975, the department's order became effective which approved the collection of a late payment charge of 1 1/2% a month by Edison and other utilities for accounts that were overdue by twenty-five days or more. DPU 18248. On June 27, 1977, St.1977, c. 328 became effective, which provided that late charges could not be collected from the Commonwealth or any municipal customer until the bill had been overdue fifty-five days. ² During the relevant period (1975 to the present), the city has incurred late charges for overdue accounts but has refused to pay Edison any amount claimed to be due as interest.

1. Statutory history. The provision of electricity in Massachusetts is thoroughly regulated. The process of utility rate making by a public regulatory body is the exercise of a legislative function, Boston Real Estate Bd. v. Department of Pub. Utils., 334 Mass. 477, 482, 136 N.E.2d 243 (1956), which has been delegated to the department through the enactment of G.L. c. 164. Specifically, G.L. c. 164, § 94, authorizes the department to prescribe the "rates, prices and charges" which utilities may charge. General Laws c. 164, § 94D, concerns penalties and late charges for overdue accounts. As originally enacted in 1936, § 94D prohibited the collection of penalties from residential consumers. St.1936, c. 243. ³ There is no indication that Edison included late charges in its rate schedule until 1975 when it, along with four other utilities, petitioned the department to approve an interest charge of 1 1/2% a month for accounts overdue more than twenty-five days. The department approved this change, citing the increase in the numbers of accounts receivable outstanding for more than thirty days, "especially from industrial and commercial customers." DPU 18248.

In 1977, a second paragraph was added to § 94D. St.1977, c. 328. ⁴ The legislative history makes it clear that the General Court was concerned about the imposition of late charges on State and municipal agencies and wished to extend the grace period from twenty-five to fifty-five days. There were proposals that State and municipal consumers be exempted from interest charges. 1977 House Doc. No. 3120 at 1-2. 1977 House Doc. No. 5581 at 1.

This review of the statutory history and the order of the department identifies the three distinct time periods at issue in this case. It is agreed that prior to the approval of general late charges as part of the rate schedule in 1975 (DPU 18248), Edison could not charge the city interest on overdue accounts. Between February 19, 1975, and June 27, 1977, if Edison could collect interest from the city, it would be on the authority of DPU 18248. Interest would start to accrue when the bills were overdue twenty-five days. After June 27, 1977, it would be on the authority of DPU 18248 and St.1977, c. 328, and interest would start to accrue after fifty-five days. Edison argues that it can collect interest according to this scheme. The city argues that neither the order of the department nor the 1977 amendment to G.L. c. 164, § 94D, gives Edison the authority to assess a late charge for its overdue accounts.

2. The period subsequent to June 27, 1977. We address the most recent period first. The city maintains that even the straightforward language of St.1977, c. 328, does not obligate it to Edison for interest payments because the city is governed by a special statute, the City of Boston Code (Code), which requires all contracts for more than $2,000 to be in writing and approved by the mayor. City of Boston Code, Statutes, Title 4, § 8 (1975). Furthermore, Title 4, § 4, prohibits expenditures in excess of appropriations. The city argues that the Code, since it is a special law, overrides the provisions of the general law. Although there is some support for this argument, see Haffner v. Director of Pub. Safety of Lawrence, 329 Mass. 709, 713-714, 110 N.E.2d 369 (1953), we have also recognized that local laws are superseded by statutes that deal comprehensively with a Statewide problem, and that utility regulation is one type of comprehensive legislation that preempts local ordinances. New England Tel. & Tel. Co. v. Lowell, 369 Mass. 831, 834-835, 343 N.E.2d 405 (1976).

Whether the laws regulating utilities take precedence over inconsistent special laws, such as the Code, we conclude that in this case the provisions of the Code do not conflict with G.L. c. 164, § 94D. This is so because, first, the provision of electricity to the city is not a relationship where the special contract requirements are implicated, and second, it is not an expenditure for which budgetary appropriation must be made in the regular way.

a. Contracts must be in writing and approved by the mayor. The city claims that it cannot be required to pay interest on its overdue electric bills because it has no written contract with Edison. ⁵ It cites several cases where the requirements of Title 4, § 8 (or comparable ordinances or by-laws of other municipalities), were strictly and absolutely adhered to, despite an unfair result. See, e.g., Urban Transp., Inc. v. Mayor of Boston, 373 Mass. 693, 696-697, 369 N.E.2d 1135 (1977) (even after providing bus service to the city for three years, plaintiff could not recover because contract had never been approved by mayor); Central Tow Co. v. Boston, 371 Mass. 341, 343-344, 357 N.E.2d 310 (1976) ("No doubt it was most imprudent of the parties not to have entered into an express contract ... [t]hat the parties were neglectful, however, did not repair the absence of the elements, fixed by statutes, which were essential here to the formation of a contract"); Adalian Bros. v. Boston, 323 Mass. 629, 632, 84 N.E.2d 35 (1949) ("It is ... settled that limitations on the contracting power of municipal officers cannot be evaded by first rendering services or furnishing supplies without an express contract and then claiming under an implied contract").

This argument would be convincing if the service provided by Edison were one for which a contract is appropriate. The Appeals Court faced precisely this issue in Boston Gas Co. v. Boston, 13 Mass.App. 408, 433 N.E.2d 483, Id., 386 Mass. 1102 (1982), and we fully agree with the court's analysis in that case. None of the reasons for requiring the safeguards of a written contract approved by the mayor is applicable here. The city must have electricity, and unless it generates its own, Edison is the only possible source. Since Edison has a legislatively sanctioned monopoly, there could never be competitive bidding. The rates themselves are set legislatively and cannot be altered by the parties. New York, N.H., & H.R.R. v. York &amp Whitney Co., 215 Mass. 36, 102 N.E. 366 (1913). When a utility wants to change its rates, it must file a schedule with the department. G.L. c. 164, § 94. A consumer's challenge to a rate must be filed through the department, not the courts. Sullivan v. Boston Consol. Gas Co., 327 Mass. 163, 167, 97 N.E.2d 535 (1951). Thus there can be no negotiation between the parties as to rate. ⁶ The result of regulation this extensive is that it "takes that subject out of the realm of ordinary contract in some respects, and places it upon the rigidity of a quasi statutory enactment." Haverhill Gas Co. v. Findlen, 357 Mass. 417, 420, 258 N.E.2d 294 (1970), quoting from New York, N.H., & H.R.R. v. York & Whitney Co., 215 Mass. at 40-41, 102 N.E. 366.

The purpose of Title 4, § 8, is "to limit the power of public officials in making contracts ... so as to unify the control of the city's commercial transaction ... and guard against waste by departments in the government" (citations omitted). Urban Transp., Inc. v. Mayor of Boston, supra 373 Mass. at 697, 369 N.E.2d 1135. This purpose would not be served by applying the terms of Title 4, § 8, to the obligation of the city to pay interest on overdue electric bills.

b. Expenses in excess of appropriation. Much the same analysis applies to the city's appropriation argument as applied to its contract argument, with much the same conclusion. Title 4, § 4, prohibits the expenditure by...