J.J. Cassone Bakery, Inc. v. Consolidated Edison Co. of New York, Inc.

• Decision Date: 01 February 1996
• Citation: 168 Misc.2d 272,638 N.Y.S.2d 898
• Parties: , Util. L. Rep. P 26,524 J.J. CASSONE BAKERY, INC., Plaintiff, v. CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., Defendant.
• Court: New York Supreme Court

Page 898

638 N.Y.S.2d 898

168 Misc.2d 272, Util. L. Rep. P 26,524

J.J. CASSONE BAKERY, INC., Plaintiff, v. CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., Defendant.

Supreme Court, Westchester County.

Feb. 1, 1996.

Monroe Yale Mann, Port Chester, for plaintiff.

John D. McMahon, New York City (John F. Gallagher, III, of counsel), for defendant.

JOAN B. LEFKOWITZ, Justice.

In 1990, defendant Consolidated Edison Company (hereafter referred to as "Con Ed"), offered its large commercial customers, of which there are about 4,550 such consumers, a cost savings program called, "Curtailable Electric Service--Summer Savings Program" (hereafter referred to as "CES"). If a customer agreed to reduce electric usage during peak periods during summer months, it would receive a credit (or reduced price) towards the monthly electric bill. The CES program, established in 1989 with a tariff approved by the Public Service Commission (hereafter the "PSC"), was set at $15 per kilowatt where the customer would comply on a thirty minute notification.

A brochure describing the CES credit gives an example of the dollar savings on a monthly and four-month basis (p. 1). On page 2 of the brochure it states, inter alia:

"Program Duration:

Guaranteed for five years (1990 through 1994)

Credit Amount:

$15/kw for reduced demand with 30-minute notification ...

* * * * * *

Guaranteed five-year program life (for a total of $344/kw including tax savings)".

A more detailed pamphlet provided to potential users of the program (Exhibit 6-c) provided in paragraph 9:

"... Customers receiving service under this Special Provision E will be eligible for service hereunder for a minimum of five years.... All terms and conditions of this Special Provision E, including the levels of credit and penalty and number and duration of curtailments are subject to change and may differ during the period in which this Special Provision is in effect."

The application for the CES program states at the very top thereof, in pertinent part:

"This application and the furnishing of Curtailable Electric Service hereunder are subject in all respects to the provisions of the Company's electric rate schedule and any amendments thereof, and to the rates, charges, rules, regulations and conditions therein set forth, applicable to the particular service to be supplied hereunder as the same may be in effect from time to time, all of which are hereby referred to and made part hereof."

At the bottom of the application, it states in part: "Con Edison will supply CES service only under PSC-approved tariffs."

Plaintiff signed on for the CES program by execution of the application on May 1, 1991 and received the appropriate credit until 1993. In May 1991, after seven years without a rate increase, Con Ed filed a rate increase with the PSC. During hearings thereon, the PSC recommended that Con Ed reduce the CES credits. Con Ed initially opposed the recommendation. A principal witness for Con Ed testified at the hearing as follows:

"Q. Are there other reasons for not reducing the monthly CES credit?

A. Yes, issues of customer equity and fairness and assuring the success of our entire DSM ¹ program require that the credit not be reduced at this time.

Q. Please explain.

A. The customers whom the Company solicited for participation in the CES program, some of whom made significant equipment investments in order to participate, relied on the level and stability of the current monthly credit amount in doing their own cost benefit analyses and making their investment decisions. In fact, the Company's tariff provides for the availability of the CES tariff for 5 years to prospective participants to induce them to make whatever changes in equipment or operation are necessary to participate. To now reduce the monthly credit or customer incentive payment for such customers' participation would not only undermine a program which has achieved significant peak demand reductions since its inception in 1989, but may make our customers reluctant to participate in our other DSM programs and make it more difficult for us to achieve the aggressive goals of our entire DSM and Enlightened Energy program.

* * * * * *

Q. What is your proposal with respect to the amount of the monthly CES credit?

A. I recommend that it should remain at least at the current level for the duration of the CES program.

Q. If a change in the monthly credit amount is ordered in spite of your objections, do you have an alternate proposal?

A. Yes, I propose that, at a minimum, the current level of the CES credit be maintained for the remainder of the minimum 5-year term of the Company's commitment to the customers who are already on the program and that any reduced monthly credit be applied only prospectively to such new customers as might still apply for the program under the new rates."

At the close of the hearings, Con Ed and the PSC entered into a settlement agreement in January 1992. It was publicized in accordance with PSC rules and was approved by the PSC in April 1992. Part of the agreement required Con Ed to reduce the CES credit in 1993 to $12 per kilowatt and thereafter to $9 per kilowatt.

Notice of the change was published. This change affected 143 participants in the program, including plaintiff. The settlement was challenged by a consumer group, which challenge was rejected by the Court. Owners Comm. on Rates v. PSC, 194 A.D.2d 77, 604 N.Y.S.2d 316 (3rd Dep't 1993). As required by the PSC, Con Ed filed a tariff approved by the PSC which changed the CES rates as of March 1993.

Plaintiff sues for damages in fraud and for breach of contract. Plaintiff claims damages of $39,208.50 as the per kilowatt differential credit denied it and $250,000 for the purchase and installation of generators in reliance upon the savings it believed it would receive under the original CES program. Plaintiff also requests punitive damages.

Defendant moves to dismiss the complaint on the grounds of lack of subject matter jurisdiction as the fixing of rates is within the primary jurisdiction of the PSC; the Court should not proceed in the absence of a necessary party, the PSC; the action is barred by the four-month statute of limitations (CPLR 217); and that the complaint fails to state a cause of action because the agreement did not guarantee a fixed CES credit rate nor may Con Ed provide plaintiff with a rate not provided for in its approved tariffs.

Defendant's arguments concerning subject matter jurisdiction, PSC presence, primary jurisdiction and statute of limitations are without merit. The PSC is a creature of statute with limited powers as set forth in the Public Service Law. 88 N.Y.Jur.2d, Public Utilities, § 29. Its primary function is to conduct hearings on rates. Id., § 48, 64. Its expertise is not required in this action for breach of contract and fraud. It has no jurisdiction to adjudicate these claims. Capital v. Pattersonville, 56 N.Y.2d 11, 21, 451 N.Y.S.2d 11, 436 N.E.2d 461 (1982); Matter of Long Island Lighting Company v. Horn, 49 Misc.2d 717, 268 N.Y.S.2d 366 (Supreme Ct. Suffolk 1964), rvd., 23 A.D.2d 583, 256 N.Y.S.2d 690 (2d Dep't 1965), new opn. after remand, nor, aff'd, 24 A.D.2d 840, 263 N.Y.S.2d 696 (2d Dep't 1965), aff'd (on the original opn. at Special Term), 17 N.Y.2d 652, 269 N.Y.S.2d 432, 216 N.E.2d 595 (1966); 2 N.Y.Jur.2d, Administrative Law, §§ 181, 182. Questions of law concerning the doctrine of impossibility and statutes of limitations are beyond the powers granted to the PSC. Kovarsky v. Brooklyn Union Gas Co., 279 N.Y. 304, 18 N.E.2d 287 (1938). The causes of action asserted herein are timely, as the four-month statute of limitations (CPLR 217) to review the PSC determination is inapplicable. CPLR 213(2), (8).

Defendant's last contention that the complaint fails to state a cause of action requires discussion.

It is for the Court to determine whether a written agreement is ambiguous. Van Wagner Adv. Corp. v. S & M Enters., 67 N.Y.2d 186, 191, 501 N.Y.S.2d 628, 492 N.E.2d 756 (1986). Reading the brochure, pamphlet and application together establishes that the terms at issue here are unambiguous. W.W.W. Assocs. v. Giancontieri, 77 N.Y.2d 157, 565 N.Y.S.2d 440, 566 N.E.2d 639 (1990). Even indulging in the presumption of construction against the draftsman of the contract (22 N.Y.Jur.2d, Contracts, § 228), Con Ed, the documents relied on by plaintiff, which form the agreement of the parties, do not guarantee a set rate of credit for the CES program; only that CES credits will be given over a five-year period "subject to change ... during the period" (Exhibit 6-c), "subject ... to the provisions of the Company's electric rate schedule and any amendments thereto ... as the same may be in effect from time to time" (Application); and subject to "PSC-approved tariffs" (id.).

Con Ed may not deviate from rates established by the PSC that would discriminate against other customers without PSC approval. Public Service Law § 65(1), (2), (3), 66(12), (12-b[b]. Con Ed is bound by its tariff as approved by the PSC. Matter of Mt. Kisco Dev. Corp. v. Lundy, 37 A.D.2d 1040, 326 N.Y.S.2d 125 (3rd Dep't 1971); see Willson v. American Railway Express Co., 204 App.Div. 59, 197 N.Y.S. 600 (4th Dep't 1922), aff'd, 239 N.Y. 562, 147 N.E. 196 (1924). The case of Wackenhut v. Empire Gas & Elect. Co., 166 N.Y.S. 29, nor (Supreme Ct. Cayuga 1917) relied on by plaintiff is inappropriate as the Court there noted that it would give effect to a contractual utility rate until it was changed and superseded by the PSC. That is what occurred here, albeit as a result of a settled rate increase application.

Resolution of the rate increase by Con Ed by compromise with the PSC, which has a legislative function to set rates (88 N.Y.Jur.2d, Public Utilities, § 64), was appropriate from a consumer, procedural and substantive point of view. Administrative Procedure Act, § 301(5); Owners Comm. on Rates v. PSC, supra, 194...