Niagara Mohawk Power Corp. v. Public Service Commission

• Decision Date: 10 November 1976
• Citation: 54 A.D.2d 255,388 N.Y.S.2d 157
• Parties: , 16 P.U.R.4th 538 In the Matter of NIAGARA MOHAWK POWER CORPORATION, Respondent, v. PUBLIC SERVICE COMMISSION of the State of New York, Appellant.
• Court: New York Supreme Court — Appellate Division

Page 157

388 N.Y.S.2d 157

54 A.D.2d 255, 16 P.U.R.4th 538

In the Matter of NIAGARA MOHAWK POWER CORPORATION, Respondent, v. PUBLIC SERVICE COMMISSION of the State of New York, Appellant.

Supreme Court, Appellate Division, Third Department.

Nov. 10, 1976.

Peter H. Schiff, Albany, for appellant.

LeBoeuf, Lamb, Leiby & MacRae, New York City (Halcyon G. Skinner, New York City, of counsel), for respondent.

Before SWEENEY, J.P., and KANE, MAHONEY, LARKIN and HERLIHY, JJ.

OPINION FOR AFFIRMANCE

SWEENEY, Justice Presiding.

The facts are not in dispute. Petitioner is a privately owned utility corporation serving customers with gas and electricity or electricity alone. In April, 1974 it instituted rate proceedings before the Commission which resulted in an order issued February 26, 1975 granting an increase it its rates by $92,250,000 annually in revenues. The opinion noted that there was a possibility of tax refunds resulting from the company's retroactive adoption of minimum guideline lives in computing depreciation for tax purposes during the period 1966--1969. Accordingly, Niagara Mohawk was ordered to notify the Commission when the refunds were received. By letter dated March 21, 1975 Niagara Mohawk notified the Commission that it was entitled to receive $22.4 million in tax refunds while being found liable for a deficiency of $6 million. The Commission determined that in fairness Niagara Mohawk be reimbursed for the deficiency.

By order issued September 25, 1975 the Commission directed that 90% Of the refunds be flowed through to the ratepayers with the rest to be retained by the company. After reconsideration the Commission reconfirmed its prior decision. The instant article 78 proceeding was commenced and Special Term determined that the Commission was without authority to direct the flow-through of Federal income tax refunds to Niagara Mohawk ratepayers. This appeal ensued.

A resolution of this controversy requires us to determine whether the Public Service Commission has the authority under the Public Service Law to order a utility to flow-through to its ratepayers Federal income tax refunds received subsequent to the tax years to which the refunds related. We find no New York case treating this precise issue.

Initially, we must determine whether the flow-through ordered by the Public Service Commission is, in fact, retroactive rate making. We agree with Special Term that it is. The Commission refers to it as 'entitlement of present receipt of monies'. Despite this semantical distinction, what the Commission is attempting is a return of this subsequently acquired money by Niagara Mohawk to its customers. This sum represents the overpayment of Federal taxes where the larger amount was utilized in determining the previous rates. The return of the money to the customers would in effect reduce the cost of utilities to them. In other words, it would lower the rates paid. Consequently, what is accomplished is a reduction of past rates. Admittedly, the rates for those years were in all respects proper at the time they were made.

Although we sympathize with appellant's objective, we may not approve it unless it is authorized by existing law. It is well settled that the Commission may exercise only such powers as are conferred upon it by the Legislature (Matter of Village of Boonville v. Maltbie, 272 N.Y. 40, 47, 4 N.E.2d 209, 211), or which are incidental to such power (Kovarsky v. Brooklyn Union Gas Co., 279 N.Y. 304, 18 N.E.2d 287), or...