City of Rochester v. Rochester Gas & Elec. Corp.

• Decision Date: 28 February 1922
• Citation: 233 N.Y. 39,134 N.E. 828
• Parties: CITY OF ROCHESTER v. ROCHESTER GAS & ELECTRIC CORPORATION et al.
• Court: New York Court of Appeals Court of Appeals

233 N.Y. 39

134 N.E. 828

CITY OF ROCHESTER

v.ROCHESTER GAS & ELECTRIC CORPORATION et al.

Court of Appeals of New York.

Feb. 28, 1922.

Controversy between the City of Rochester and the Rochester Gas & Electric Corporation, impleaded with the Public Service Commission of the State of New York, Second District, Submitted upon an agreed statement of facts under Code of Civil Procedure, § 1279. From a judgment of the Appellate Division for the City (199 App. Div. 944,191 N. Y. Supp. 919), the Gas & Electric Corporation appeals.

Reversed.

See, also, 198 App. Div. 973,190 N. Y. Supp. 229.

Pound and Hogan, JJ., dissenting.Appeal from Supreme Court, Appellate Division, Third department.

Daniel M. Beach, of Rochester, for appellant.

Charles L. Pierce, of Rochester, for respondent.

William L. Ransom and Colley E. Williams, both of New York City, for intervener Empire State Gas & Electric Ass'n.

John P. O'Brien, Corporation Counsel, of New York City, and James A. Donnelly, Judson Hyatt, and Harry Hertzoff, all of New York City, for intervener City of New York.

John Holley Clark, Jr., of New York City, for intervener Flushing United Association.

James Taylor Lewis, of New York City, for intervener City of Yonkers.

Charles A. Van Auken, of New Rochelle, for intervener City of New Rochelle.

Clinton T. Taylor, of Mt. Vernon, for intervener City of Mt. Vernon.

William S. Rann and Ralph K. Robertson, both of Buffalo, for intervener City of Buffalo.

CARDOZO, J.

The Rochester Gas & Electric Corporation petitioned the Public Service Commission for permission to increase the price of manufactured gas. The Commission made an order fixing the rate at $1.30 per thousand cubic feet of gas in addition to a ‘service charge’ against each consumer of 40 cents per month. The service charge alone is the subject of this controversy. The city of Rochester, one of the consumers affected by the order, prays an injunction directed to the Commission and the company. The submission restricts the controversy to three questions:

First. Did the Public Service Commission of the State of New York, Second District, have authority and jurisdiction to order or permit the service charge of 40 cents per consumer per month as provided in its orders of July 1, 1920, and October 14, 1920?

Second. Is such service charge unjust and unreasonable or unjustly discriminatory, regardless of the amount thereof?

Third, Does such service charge constitute ‘rent on a gas meter’ within the meaning of section 66 of the Transportation Corporations Law (Consol. Laws, c. 63), and is the charging and collection thereof consequently barred by such section?

If these questions are answered in favor of the plaintiff, the stipulation is that an injunction is to issue. In view of this stipulation, we do not attempt to consider whether the remedy would be held appropriate if objection had been made to it. We pass directly to the merits.

The expenses of a gas company are incurred partly in manufacture and partly in distribution. Its income must be adequate to reimburse it for the one outlay as for the other. Expenses of manufacture may be apportioned among consumers in proportion to the quantity of gas consumed. Expenses of distribution in their division may follow other lines. Some remain constant whether consumers are few or many. Others increase or diminish at a uniform rate with the number of the patrons. A service charge is an attempt to make the incidence of the burden as wide as the incidence of the benefit. From all the items included in the cost of distribution it segregates, and divides per capita, those dependent upon numbers. Such items there always are. Whenever a building is connected with a main, there is expense which continues while the connection is maintained. This expense will be the same though only a trifling quantity of gas, or even none at all, is used by the householder requiring the connection. In the absence of a service charge, or some similar device, there is the benefit of facilities, which would otherwise be needless, without the burden of contributing to the cost of supplying or maintaining them. The householder who closes his dwelling for the summer, and pays nothing in the interval, shifts the cost of maintenance incurred in his behalf to the householder whose dwelling is open throughout the year. The occupany who consumes something, but not enough to pay his share of the expense, is carried by his neighbors when rates are increased to compensate for profitless accounts. Sometimes this result is avoided through the device of a minimum bill, which differs from a service charge in this only, that the charge is absorbed and disappears when the minimum is reached. For the man who does not take anything, or less than the amount prescribed, the two devices are the same. Each is an expedient for maintaining the equilibrium between service and requital.

With this statement of the problem, the first subject of inquiry will be the jurisdiction of the Commission. The argument is made that jurisdiction is limited to prescribing the charge for gas as distinguished from the charge for service. We find no such limitation in the statute:

‘Every gas corporation’ is required to ‘furnish and provide such service, instrumentalities and facilities as shall be safe and adequate and in all respects just and reasonable.’ Public Service Commission Law, § 65, subd. 1; Consol. Laws, c. 48.

‘All charges made or demanded by any such gas corporation, * * * for gas, * * * or any service rendered or to be rendered, shall be just and reasonable and not more than allowed by law or by order of the Commission.’ Section 65, subd. 1.

‘Every unjust or unreasonable charge made or demanded for gas, * * * or any such service, or in connection therewith, or in excess of that allowed by law or by the order of the Commission is prohibited.’ Section 65, subd. 1.

[1] We are told that the plaintiff, being a public service corporation, is bound to serve, and that, since it is bound to serve, it may not charge inactive accounts for maintaining facilities for service. The conclusion does not follow from the premise. The law imposes the duty to establish connections for the householder who demands them, but it does not impose the duty either to install or to maintain gratuitously. No one is under an obligation to permit connections to be made between his building and the mains. If he demands the facilities with the added expense that follows, he thereby invites a service, and must be numbered among those for whom service is maintained. The Legislature has nowhere said that benefit shall be divorced from burden. On the contrary, permission is expressly given to assess upon the householder the entire cost of installing service pipes beyond the street line (Transp. Corp. Law, § 62; Consol. Laws, c. 63; Moore v. Champlain Electric Co., 88 App. Div. 289,85 N. Y. Supp. 37), and to demand a deposit in advance sufficient to pay therefor.

[2] If there is a right to require payment for installation, there must be a right to require payment for repairs. If there is a right to insist upon payment in a lump sum, there must be a right to distribute the payment in accordance with the monthly average of cost. Even if installation were at the cost of the company alone, this would not mean that a return upon the cost would cease to be a factor in the computation of the charge for service. The burden of maintaining the agencies of distribution is to be apportioned among the total body of patrons for whose benefit the agencies exist. No doubt it is to be apportioned fairly and reasonably. But if that requirement is satisfied, it is not a ground for complaint that each has been required to contribute his share of the expense. A service charge is not something in addition to the price that would otherwise be fair and reasonable. It enters into the price of the commodity, not as an element of addition, but as an item of deduction. In the case at hand, the finding is that, if the service charge were dropped, the price of gas, now $1.30 per thousand cubic feet, would become $1.45. The revenues of the company are the same whether rates are computed on the one basis or the other. The variance is solely in the distribution of the burden.

We pass then to the second question, whether the service charge is ‘unjust and unreasonable or unjustly discriminatory, regardless of the amount thereof.’ The statute prohibits a gas corporation from charging, demanding, collecting, or receiving ‘from any person or corporation a greater or less compensation for gas * * * or for any service rendered or to be rendered or in connection therewith * * * than it charges, demands, collects or receives from any other person or corporation for doing a like and contemporaneous service with respect thereto under the same or substantially similar circumstances or conditions.’ Public Service Comm. Law, § 65, subd. 2. Formal equality there indisputably is. The service charge is imposed, not on some only, but on all, and on all at the same rate. Discrimination, if it exists, must inhere in remoter incidents or consequences. We start with the recognition of the truth that perfect equality in operation as well as in form is not to be attained by any scheme of rates. Classification is not forbidden, if founded upon reason, and not upon caprice or favor. There are those who think that a schedule which does not impose a service charge is discriminatory, since it shifts upon some consumers the burden of carrying the others. Occasional hardships there will be with any plan. It is a question largely of degree. The argument against the charge seems to rest upon the assumption that unjust discrimination inheres in every rate that is not a flat or uniform rate for every foot of gas ship supplied. The scale of charges must not be graduated, it is said, so as to adapt the payment to the cost. But that has never been the rule of rate making for public service...