Jones v. Kansas Gas & Elec. Co.

• Decision Date: 11 June 1977
• Docket Number: No. 48248,48248
• Citation: 222 Kan. 390,565 P.2d 597
• Parties: Lola B. JONES and Marie R. Wilson, Appellants, v. KANSAS GAS AND ELECTRIC COMPANY and the Gas Service Company, State Corporation Commission, Appellees.
• Court: Kansas Supreme Court

Page 597

565 P.2d 597

222 Kan. 390

Lola B. JONES and Marie R. Wilson, Appellants, v. KANSAS GAS AND ELECTRIC COMPANY and the Gas Service Company State Corporation Commission, Appellees.

No. 48248.

Supreme Court of Kansas.

June 11, 1977.

Syllabus by the Court

1. In an appeal from the judgment of a district court reviewing an order of the State Corporation Commission, review is limited to the question of whether the order is lawful and reasonable. (K.S.A. 66-118d.)

2. If an order of the State Corporation Commission is based upon substantial competent evidence, the order will generally be considered reasonable.

3. Substantial competent evidence is evidence which possesses something of substance and relevant consequence, and which furnishes a substantial basis of fact from which the issues tendered can reasonably be resolved.

4. Interest is defined as compensation allowed by law or by agreement of the parties for the use or forbearance of money.

5. A late payment charge on a public utility bill is not interest. It is a charge against a customer to encourage prompt payment, to cover extension of credit, and to defray the expense involved in securing payment of the bill.

6. Public utilities are specifically excluded from application of the UCCC (K.S.A. 16a-1-202(3)).

7. Public utilities are specifically excluded from application of Truth In Lending laws. (K.S.A. 16-804, now repealed; 15 U.S.C., Sec. 1603; 12 C.F.R., Sec. 226.3(d).)

8. Public utilities are excluded from application of the state usury laws.

9. Regulation of late charges by a public utility rests solely with the State Corporation Commission, subject to judicial review of the reasonableness of the rate.

10. The touchstone of public utility law is the rule that one class of consumers shall not be burdened with costs created by another class.

11. In an appeal from the judgment of a district court reviewing an order of the State Corporation Commission, it is held : (1) The district court was correct in its holding that the collection of a 5% late penalty by a public utility (a) does not constitute usurious interest, (b) does not discriminate against low income persons, (c) does not violate public policy, and (d) does encourage prompt payment of utility bills; and (2) the district court erred in its holding that a uniform penalty assessed against all delinquent consumers is reasonable.

Brian J. Moline and William J. Rich, of the Legal Aid Society, Wichita, Inc., argued the cause and were on the brief for appellants.

Ralph Foster, Wichita, argued the cause and was on the brief for appellee, Kansas Gas and Elec. Co.

Richard C. Byrd, Ottawa, argued the cause, and Donal D. Guffey, Kansas City, Mo., was with him on the brief for appellee, The Gas Service Co.

Carl M. Anderson, Asst. General Counsel, argued the cause, and W. Robert Alderson, General Counsel, was with him on the brief for appellee, State Corporation Commission.

Curt T. Schneider, Atty. Gen., and Lance A. Pool, Asst. Atty. Gen., were on brief of the Attorney General of the State of Kansas, as amicus curiae.

OWSLEY, Justice.

This is an appeal from a district court order affirming the decision of the State Corporation Commission of the State of Kansas (Commission) dismissing a complaint filed by Lola B. Jones and Marie R. Wilson (complainants) attacking the validity of the late payment charges imposed by the Kansas Gas and Electric Company (KG&E) and the Gas Service Company (Gas Service).

The complaint, filed August 3, 1972, alleged that Jones was a subscriber to the services of KG&E and on May 10, 1972, she received a bill for services in the amount of $11.64. The bill stated that if she did not pay the amount due by May 24, 1972, she would have to pay a late payment charge of fifty-nine cents. Wilson was a subscriber to the services of Gas Service and on June 16, 1972, she received a bill for services in the amount of $16.46, $9.60 of which was past due from previous billing periods. Her bill stated that if she did not pay the amount due by June 30, 1972, she would have to pay a late payment charge of thirty-four cents. The complainants further stated that both were public assistance recipients; therefore, they encountered great difficulty in paying their utility bills within the allotted payment period and were forced to pay late penalties. In addition, complainants alleged the utility companies did not allow customers to choose a convenient date for billing purposes. According to complainants, the late charges were usurious interest in violation of K.S.A. 16-201, et seq.; violated the Kansas Truth In Lending Act (K.S.A. 16-801, et seq., now repealed) and the Federal Truth In Lending Act (15 U.S.C., Sec. 1601, et seq.); and were "unjust, unreasonable, arbitrary, capricious, unjustly discriminatory, and unduly preferential, all in violation of K.S.A. 66-107."

Complainants asked the Commission to convene and conduct an investigation and (1) compel the utilities to permit a 45-day period to expire from billing before assessing any late penalty; (2) allow utility subscribers to choose their own regular billing date; (3) limit late charges to no more than one-half of 1% of the principal of their bills; (4) require the utility companies to conform their billing practices with K.S.A. 16-820 and 15 U.S.C., Sec. 1637; and (5) apply all previously paid late charges, together with 6% annual interest, to the accounts of their respective subscribers.

KG&E answered the complaint admitting jurisdiction and identity of the parties. As a defense it stated the late payment charges were provided within its approved rates as follows:

"GROSS MONTHLY BILL

"The net monthly bill; computed in accordance with the Net Monthly Rate, plus 5% on the first $200 and 2% on the balance thereof.

"PAYMENT

"The net monthly bill is due and payable when rendered; when not paid within 15 days from date, the Gross Monthly Bill applies."

Gas Service answered in a similar fashion, setting forth Rule IV(a) of its rules and regulations on file and approved by the Commission, which stated:

"Bills for service shall become delinquent fifteen (15) days after date of the bill or meter reading in case of self billing. If bill becomes delinquent, a 5% penalty charge will be added on the first $200 and 2% on the balance thereafter. * * *."

Both respondents asserted the late charge was necessary to encourage prompt payment, to offset the cost of handling, processing and collecting delinquent accounts, and was reasonable; that the charge was neither interest nor a charge for forbearance of collection and therefore neither usurious nor in violation of K.S.A. 16-201, et seq.; and that the provisions of K.S.A. 16-801, et seq., and 15 U.S.C., Sec. 1601, et seq., specifically excluded application to public utilities.

Hearings commenced on January 16, 1973, and continued intermittently until their conclusion on February 23, 1973. The matter was taken under advisement, and on April 3, 1974, the Commission rejected in toto the complainants' allegations and requested relief. Petition for rehearing was denied. Jones and Wilson then filed a petition in district court for judicial review, pursuant to K.S.A. 66-118c. Following submission of the transcript and briefs, the district court issued an order sustaining the Commission's order of dismissal. This appeal ensued.

Before proceeding further, the billing practices of the respective utilities should be disclosed. Gas Service and KG&E, as well as most other utility companies in this state, practice "cycle billing." Under this system the utility divides its service area into geographic districts for meter reading and billing purposes. The districts are read and billed so all are processed in a continuous cycle. Gas Service bills on a 30-day cycle. Since there are normally 21 working days in each billing period, the service area is divided into 21 districts. If a customer lives in a district where bills are prepared on the first day of the month, his meter is usually read on the 25th or 26th day of the preceding month. After the meter is read, the meter reading card is sent to the Gas Service central office where the computer prepares the bill. It is then shipped to the local office and on to the customer, who receives it on the 4th. The customer has until the 15th to pay his bill without incurring the 5% late payment charge; however, Gas Service takes no action to collect late bills until the 22nd. At that time all bills in the district are reconciled to determine which customers are tardy, and second notices are prepared and mailed to those customers. The second notice informs the customer that his service may be shut off if payment is not made within 10 days. Gas Service generally waits a week after the shut-off date listed on the customer's second notice, then sends a collector to the customer's address to either collect the bill or shut off service. The time elapsing from preparation of the first bill until potential termination is about 41 days.

KG&E uses a similar billing system, except its second is not mailed until 10 days after the late payment charge is assessed, or 25 days after the bill is initially prepared. Like Gas Service, this is KG&E's first effort to collect a delinquent account after initial billing.

As indicated, both complainants were subscribers to services of the utilities and had been assessed late payment fees. KG&E had threatened to terminate Jones' service eleven times for nonpayment of bills. Wilson had paid her bill to Gas Service without incurring a penalty only eight times in the two years preceding the complaint. Both alleged their tardiness was attributable to the fact they received their public assistance checks on the first of the month and by the time they paid other bills they did not have enough to pay their utilities. As a result a late charge was imposed before they received their next checks and paid their bills. Since they received...