Delaware County Elec. Co-op., Inc. v. Power Authority of State of N.Y.

• Decision Date: 24 February 1983
• Citation: 118 Misc.2d 77,460 N.Y.S.2d 430
• Court: New York Supreme Court
• Parties: DELAWARE COUNTY ELECTRIC COOPERATIVE, INC., Oneida Madison Electric Cooperative, Inc., Otsego Electric Cooperative, Inc., and Steuben Rural Electric Cooperative, Inc., Plaintiffs, v. POWER AUTHORITY OF the STATE OF NEW YORK and New York State Electric & Gas Corporation, Defendants.

Page 430

460 N.Y.S.2d 430

118 Misc.2d 77

DELAWARE COUNTY ELECTRIC COOPERATIVE, INC., Oneida Madison Electric Cooperative, Inc., Otsego Electric Cooperative, Inc., and Steuben Rural Electric Cooperative, Inc., Plaintiffs, v. POWER AUTHORITY OF the STATE OF NEW YORK and New York State Electric & Gas Corporation, Defendants.

Supreme Court, Niagara County.

Feb. 24, 1983.

Hodgson, Russ, Andrews, Woods & Goodyear, Buffalo (Victor T. Fuzak, Buffalo, of counsel), for plaintiffs.

Scott B. Lilly, for Power Authority of the State of N.Y.; Gerald C. Goldstein, and Vincent J. Tobin, and Anne Wagner-Findeisen, New York City, of counsel.

Huber Lawrence & Abell, for New York State Elec. & Gas Corp.; Frederic H. Lawrence, Kenneth M. Jasinski, New York City, of counsel.

MEMORANDUM

JOSEPH J. SEDITA, Justice.

The need for efficient and effective governmental instrumentalities to deal with our increasingly complex and technologically sophisticated society has led to the creation, by our State Legislature, of a number of unique entities known as "public authorities". These "authorities" are public corporations which were created as specialized hybrids which could utilize the flexibility and independence of the corporate structure in achieving their primary goals as instrumentalities for accomplishing a variety of public purposes. (See Vol. 47, New York Jurisprudence "Public Authorities", § 1, "New York Coord. Comm. Staff Report on Public Authorities", NYS Leg.Doc.1956 # 46.) In creating public authorities, the Legislature faced a classic dilemma. How much power would it be necessary to transfer to these new "creatures" of the state to insure their effectiveness, and how much and how long a "leash" would it be necessary for the state to maintain on said authorities in order to insure public accountability?

A part of this case focuses on one such "leash" written into the Public Authorities Law to insure greater public accountability by one such creature of the state known as the Power Authority of the State of New York. (hereinafter known as PASNY) This particular "leash" is § 1009 of the Public Authorities Law and provides that certain types of contracts entered into by PASNY must be subject to public hearings and gubernatorial approval prior to their effectuation. This Court is asked, as part of this case, to determine whether or not a particular agreement entered into between defendant PASNY and New York Electric and Gas Corporation (hereinafter NYSEG) falls within the scope and mandate of § 1009 of the Public Authorities Law. Plaintiffs additionally challenge the agreement for alleged violations of other statutory requirements.

A premature leap into the heart of this controversy, would be inappropriate before first understanding the background of this dispute and navigating the substantial procedural shoals which threaten to sink any judicial expedition into the merits of this case.

Plaintiffs wish to enjoin effectuation of a letter agreement which was executed by the Defendants (PASNY and NYSEG) on February 3, 1982. Defendants seek dismissal of this matter on a variety of grounds. Plaintiffs are electric cooperatives organized to supply electric energy to certain rural areas of the state. Defendant, PASNY, is a public authority created pursuant to the Public Authorities Law for the production and development of hydraulic power for the benefit of the people of the state. (See § 1001 of the Public Authorities Law) Defendant, NYSEG, is a public utility corporation in the business of generating, transmitting, distributing and selling electric power.

The relationship between Plaintiffs and PASNY has been substantial. PASNY entered into contracts with Plaintiffs to provide for the transmission, distribution and sale of electric power to said rural cooperatives. The rural cooperatives agreed to pay PASNY transmission and substation charges and to reimburse PASNY for all increases in the cost of transmission service provided by NYSEG. The Power Authority entered into contracts with NYSEG to provide for the use of NYSEG's transmission facilities for the delivery of power to the Plaintiffs.

In 1982, PASNY entered into a new agreement with NYSEG which substantially increased rates and made other substantial changes in the nature of the transmission arrangement. Plaintiffs view this as a wholly new agreement, whereas Defendants see it as only a "modification" of prior contracts. The new agreement was submitted to the Federal Energy Regulatory Commission (hereinafter FERC) for approval of the new rates. By an order dated June 4, 1982 the FERC accepted the new transmission rates agreement for filing.

The procedural issues which confront this Court include: which statute of limitations applies; do Plaintiffs have proper standing to go forward with their suit; have necessary parties been omitted; is jurisdiction lacking due to exclusive federal jurisdiction; do principles of res judicata or collateral estoppel require dismissal, have Plaintiffs failed to state a cause of action, and finally is any partial summary resolution of this case, or a portion thereof, precluded by the existence of fact issues which would require a hearing or trial.

The statute of limitations issue, we feel, must be resolved in favor of Plaintiffs. Plaintiffs claim that this matter is more appropriately cast as an action for a declaratory judgment which has a six year statute of limitations. Defendants argue that it should be considered an Article 78 proceeding having a four month statute of limitations. They view the action of PASNY in entering into this agreement as essentially administrative in nature. Even assuming the shorter four month Article 78 period applies, the four months would not run until the decision of PASNY was approved by the FERC. Until acceptance by the FERC, the decision of PASNY to approve the new agreement would not and did not have any binding effect on the Plaintiffs or anyone else. (Federal Power Act § 205(c), (d), 16 U.S.C. § 824d(c), (d).) It is well established law that the four month limitation period, pursuant to § 217 of the Civil Practice Law and Rules (hereinafter CPLR) does not start to run until the decision or action has or could have impact on the petitioner. (Vol. 8 Weinstein-Korn-Miller, NY Civil Practice § 7804.02, Vol. 24 Carmody-Wait 2nd, New York Practice § 145:239) Where a decision was to take effect on a latter date, the limitations statute would not commence running until that effective date. (See Garguil v. Bd. of Education of Liverpool Central School Dist., 54 A.D.2d 1085, 389 N.Y.S. 504, Mtr. of Gates v. Walkley, 41 A.D.2d 319, 342 N.Y.S.2d 490, Wininger v. Williamson, 46 A.D.2d 689, 360 N.Y.S.2d 262.)

By its own terms, the new agreement was not to take effect until July 1, 1982, and could not take effect under federal law until after acceptance by the FERC. The FERC accepted the letter agreement for filing on June 4, 1982 but postponed the effective date of the agreement to July 2, 1982. On or about July 21, 1982, the Plaintiffs commenced this action. Said date is well within four months of the effective date of this agreement.

We note in passing that Allstate Insurance Company v. Stewart, 36 A.D.2d 811, 320 N.Y.S.2d 193, aff'd 29 N.Y.2d 925, 329 N.Y.S.2d 102, 279 N.E.2d 858, motion for reargument denied, 30 N.Y.2d 694, 332 N.Y.S.2d 1025, 283 N.E.2d 432 is not in point because in that case the contingency (preparation of certain forms) was only "incidental" to the decision of the Superintendent of Insurance. In our case, approval by the FERC was essential to the effectuation of the decision to approve the new agreement. We also note that the Court of Appeals appears, as a matter of policy, to favor the shorter statute of limitations in determining if a body's action is "administrative" or "legislative" in nature. (See Press v. County of Monroe et al., 1980, 50 N.Y.2d 695, 431 N.Y.S.2d 394, 409 N.E.2d 695, Solnick v. Whalen, 1980, 49 N.Y.2d 224, 425 N.Y.S.2d 68, 401 N.E.2d 190.) We have not deemed it necessary to delve into this thorny issue since we are of the opinion that the action is not time barred even if the shorter statute is applied.

A second procedural issue raised, is whether the Plaintiffs have standing to sue in this matter. We feel that they clearly are third party beneficiaries of these contracts and as such have a clear interest in them, and right to commence suit to protect their interests. The original contracts specifically refer to rural electric cooperatives implying a directly beneficial relationship. (See New York Jurisprudence, "Contracts" § 271-281.) We additionally note that not only are rural electric cooperatives implicitly parties to be benefitted in the original contracts, but they are expressly named as parties to be benefitted in the statute. (See Public Authorities Law § 1001.)

A third procedural issue is whether or not Plaintiffs have failed to join necessary parties. Defendants have argued that the FERC and/or municipal customers should be necessary parties. The FERC specifically excluded determination of state issues when it issued its initial ruling on June 4, 1982. Said ruling specifically stated that:

"Insofar as NYSRECA raises issues of state law, however, its appropriate avenue of relief is a court of competent jurisdiction."

The FERC has specifically excluded itself from determination of state issues and as such is not a necessary party. Municipal electric utility customers may well be affected by the ruling of this case, but, they cannot be said to be "necessary" or essential for the determination of the issues herein. Said customers may be permissible intervenors pursuant to CPLR 1013, but apparently have not moved for intervention. The Court of Appeals has been extremely reluctant to dismiss a matter on grounds of the indispensability of a potential party who was not joined. (See Castaways Motel v. Schuyler, 24 N.Y.2d 120, 299 N.Y.S.2d 148, 247...