Columbia Gas of New York, Inc. v. New York State Elec. & Gas Corp.

• Decision Date: 17 February 1971
• Citation: 320 N.Y.S.2d 57,28 N.Y.2d 117
• Court: New York Court of Appeals Court of Appeals
• Parties: , 268 N.E.2d 790, 1971 Trade Cases P 73,558, 89 P.U.R.3d 223 COLUMBIA GAS OF NEW YORK, INC., Respondent, v. NEW YORK STATE ELECTRIC & GAS CORPORATION, Appellant.

Page 57

320 N.Y.S.2d 57

28 N.Y.2d 117, 268 N.E.2d 790, 1971

Trade Cases P 73,558,

89 P.U.R.3d 223

COLUMBIA GAS OF NEW YORK, INC., Respondent, v. NEW YORK STATE ELECTRIC & GAS CORPORATION, Appellant.

Court of Appeals of New York.

Feb. 17, 1971.

Frederic H. Lawrence, New York City, and Paul C. Gouldin, Binghamton, for appellant.

Robert M. Diggs, Oleon, for respondent.

FULD, Chief Judge.

This is an action in which the plaintiff Columbia Gas, seeks a declaration that certain contracts which defendant New York State Electric and Gas--one of the plaintiff's competitors York--has made or wishes to make with various municipalities are violative of section 65 of the Public Service Law, Consol. Laws, c. 48, and Section 340 of the General Business Law, the so-called Donnelly Act, Consol.Laws, c. 20.

In the areas in which the plaintiff and defendant compete, Columbia Gas is the sole distributor of natural gas, New York State Electric and Gas the sole distributor of electricity. Although the plaintiff and defendant are competitors with regard to gas and electric Space heating, the defendant alone enjoys a monopoly in supplying energy for Lighting. During 1967, the latter was furnishing electricity to its commercial and municipal customers as a general service pursuant to its particular rate schedule (P.S.C. No. 113, Service Classification No. 2), filed with the Public Service Commission. In addition to the rate for general service, there was a special provision for space hearing service available upon written application to 'Any customer using general service under this service classification and also using electricity as the sole source of space heating in a premises or segregated portion of a premises'. Such a customer was permitted to 'have the energy used for such space heating * * * separately metered' at a rate substantially less than that charged on the general service meter.

The defendant interpreted this special provision to mean that, since lighting is a source of heat, the electricity used for lighting could also be furnished through the space heating meter at the lower heating rate. In 1967, the defendant, therefore, offered the lower heating rate for lighting energy if the customer used electric heating and if the energy from lighting contributed at least 25% Of the heat required for the particular building. By the end of 1967, the defendant was furnishing electricity for lighting at this special heating rate to approximately 55 customers in the Binghamton area. Objecting to this, the plaintiff commenced an action in the Supreme Court in November, 1967, challenging the defendant's interpretation of its filed rate schedule. (Columbia Gas of New York, Inc. v. New York State Elec. & Gas Corp., 56 Misc.2d 367, 289 N.Y.S.2d 339.) The defendant moved to dismiss the complaint; the court denied the motion, holding that the complaint stated a cause of action under section 65 (subd. 5) of the Public Service Law, since the rate, as fixed by New York Electric and Gas, had not been filed with, and approved by, the commission (56 Misc.2d, at pp. 370, 372, 289 N.Y.S.2d at pp. 342--343, 344--345). The defendant thereafter filed amendments to its rate schedule in an attempt to formalize its practice. The commission, however, disapproved the rate and, following a hearing, directed the defendant, in November, 1968, to discontinue furnishing electricity for lighting at the space heating rate except with respect to existing customers served on that basis.

Unable to gain commission approval, the defendant sought to accomplish somewhat the same end by offering to enter into Contracts with municipalities to provide such service to them on the basis set forth in the rejected amendment. The plaintiff, after learning of the defendant's plan, commenced this action in February, 1969, seeking a declaration that the contemplated agreements had the effect of (1) 'granting an undue and unreasonable preference and advantage to (the defendant's) contract customers,' in violation of subdivisions 2 and 3 of section 65 of the Public Service Law, and were (2) 'contrary to public policy, illegal and * * * violative' of section 340 of the General Business Law. The defendant moved to dismiss the complaint, and the Appellate Division, modifying the order entered at Special Term, sustained both causes of action. (Columbia Gas of N.Y. v. New York State Elec. & Gas Corp., 33 A.D.2d 1057, 307 N.Y.S.2d 313.) The case comes to this court by permission of the Appellate Division on certified questions.

The threshold challenge to the plaintiff's standing to maintain the first cause of action is quickly answered. The contracts between the defendant and local municipalities, according to the plaintiff, have the effect of sufficiently reducing lighting charges so as to overcome the economic advantage of heating with gas instead of electricity--in consequence of which, the plaintiff asserts, municipalities will be induced to use electricity (supplied by the defendant) instead of gas for space heating in the construction or remodeling of municipal buildings. This claim of economic injury, caused by the business practices of a competitor in violation of the Public Service Law ( § 65, subd. 3), is sufficient to confer standing. (See, e.g., Association of Data Processing Serv. Organizations, Inc. v. Camp, 397 U.S. 150, 152 90 S.Ct. 827, 25 L.Ed.2d 184; Swan Lake Water Corp. v. Suffolk County Water Auth., 20 N.Y.2d 81, 88--89, 281 N.Y.S.2d 775, 780--781, 228 N.E.2d 773, 777--778; De Matteis v. McGoldrick Realty Co., 259 N.Y. 452, 182 N.E. 80; Brooklyn City R.R. Co. v. Whalen, 191 App.Div. 737, 182 N.Y.S. 283, affd. 229 N.Y. 570, 128 N.E. 215.) There is no merit to the defendant's contention that, while the statute may allow a consumer to sue, it does not confer standing upon a competing public utility. It may not be gainsaid, to quote from a recent decision of the Supreme Court, that the 'interest sought to be protected by the complainant is arguably within the zone of interests to be protected or regulated by the statute'. (Association of Data Processing Serv. Organizations, Inc. v. Camp, 397 U.S. 150, 153, 90 S.Ct. 827, 830, Supra.)

We turn, therefore, to the merits of the appeal. The substance of the first cause of action is that the defendant, by offering to sell electric lighting energy to municipalities at a special contract rate, violates the proscriptions of section 65 of the Public Service Law. ¹ The effect of these contracts is to furnish certain municipal customers with electricity for lighting at a lower rate than that charged other customers, thereby resulting in an 'undue or unreasonable preference or advantage' to those contracting municipalities (Public Service Law, § 65, subd. 3). The defendant urges, however, that section 65 is controlled by subdivision 12 of section 66 and that, consequently, its contracts are Exempt both from the prohibitions of section 65 and from the jurisdiction of the Public Service Commission.

The defendant has misconstrued the statute. Section 65 deals, as its caption indicates, with 'Safe and adequate service; just and reasonable charges; unjust discrimination; unreasonable preference.' Moreover, the prohibitions against discrimination and preferences set forth in the several subdivisions of section 65 are as broad as language can devise. Thus, subdivision 3 declares that 'No gas corporation, electric corporation or municipality shall make or grant any undue or unreasonable preference or advantage to any person, corporation or locality'. Subdivision 2 is just as broad and clear in prohibiting, 'directly or indirectly, by any special rate * * * Or other device or method,' a gas or electric corporation or a municipality from charging anyone 'a greater or less compensation for gas or electricity' * * * than it charges * * * any other person or corporation for doing 'a like and contemporaneous service'.

Subdivision 12 of section 66 deals with a completely different subject. ² It simply exempts gas and electric corporations from the necessity of filing 'state, municipal or federal contracts' relating to rates or charges. More specifically, the subdivision recites that the commission shall

'Have power to require every gas corporation, electric corporation and municipality * * * to file with the commission and to print and keep open to public inspection schedules showing all rates and charges made * * * or to be charged * * *, all forms of contract or agreement and all rules and regulations Relating to rates, charges or service used or to be used.' (Emphasis supplied.)

Thereafter follows the clause relied upon by the defendant:

'but this subdivision shall not apply to state, municipal or federal contracts.'

To say that subdivision 12, with its limited exception clause, was designed to exempt contracts with government either from the regulatory provisions of section 65 or from the regulatory powers of the commission would constitute a gross misreading and an unwarranted extension of that subdivision. Most assuredly, it may not be read to manifest a total exemption from restrictions contained in the Public Service Law. This is evident from a reading of the statute. No other subdivision of section 66 mentions this exemption for government contracts and, significantly, section 65--though it does contain certain limiting language (subds. 4 and 5)--makes no mention of exempting government contracts from its provisions.

In short, subdivision 12 merely serves the narrow function of exempting government contracts from the filing requirements set forth in section 66 and may not be read to immunize municipal contracts from the prohibitions against an 'undue or unreasonable preference' found in section 65. (See, e.g., City of New York v. Maltbie, 274 N.Y. 90, 99, 8 N.E.2d 289, 293; Matter of City of Buffalo v. New York State Public Serv. Comm., 40 Misc.2d 926, 244 N.Y.S.2d 87.) We agree with the Appellate...