Petition of New Jersey Natural Gas Co.

• Decision Date: 26 March 1970
• Citation: 109 N.J.Super. 324,263 A.2d 174
• Parties: , 83 P.U.R.3d 232 Petition of NEW JERSEY NATURAL GAS COMPANY to have Rele, Inc. and/or Redi-Flo Corporation of New Jersey, adjudged a Public Utility.
• Court: New Jersey Superior Court — Appellate Division

Page 324

109 N.J.Super. 324

263 A.2d 174, 83 P.U.R.3d 232

Petition of NEW JERSEY NATURAL GAS COMPANY to have Rele,

Inc. and/or Redi-Flo Corporation of New Jersey,

adjudged a Public Utility.

Superior Court of New Jersey,

Appellate Division.

Argued Nov. 10, 1969.

Decided March 26, 1970.

Robert N. Wilentz, Perth Amboy, for Rele, Inc. and Redi-Flo Corp. of New Jersey (Wilentz, Goldman & Spitzer, Perth Amboy, attorneys).

Sidney M. Schreiber, Newark, for New Jersey Natural Gas Co. (Schreiber & Lancaster, Newark, attorneys).

William Gural, Deputy Atty. Gen., appeared but did not argue for Bd. of Public Utility Com'rs (Arthur J. Sills, Atty. Gen., attorney).

Before Judges GOLDMANN, LEWIS and MATTHEWS.

The opinion of the court was delivered by

GOLDMANN, P.J.A.D.

Rele, Inc. and Redi-Flo Corporation of New Jersey appeal from a determination of the Board of Public Utility Commissioners (Board) that they are subject to the jurisdiction of the Board in that they fall within the definition of a public utility and the requirements for jurisdiction set out in N.J.S.A. 48:2--13.

New Jersey Natural Gas Company filed a petition with the Board praying that Rele be declared a public utility by virtue of its distribution of oil from a central tank through a pipeline distribution system in a housing development known as Holiday City, located in Dover Township, and that it be made to comply with such provisions of Title 48, 'Public Utilities,' and Board rules and regulations as might be applicable. An answer was filed by Redi-Flo admitting that it was a New Jersey corporation 'engaged in the business of distributing oil from a central tank through a pipeline distribution system to the owners of private homes in (Holiday City) and that its pipeline distribution system is located in part under land which is now or may become public streets.' The answer denied that Redi-Flo was a public utility.

At the hearing before the Board the petition was amended to include Redi-Flo as a respondent, the same allegations being made against it as had been asserted against Rele. The amended petition sought an adjudication that either company or both be adjudged a public utility. The answer was then amended so that it was equally applicable to both companies.

The evidence adduced before the Board consisted primarily of stipulated facts, documentary evidence and the testimony of the president of Hovsons, Inc., the developer of Holiday City.

Rele and Redi-Flo are related New Jersey corporations, engaged in the retail distribution of fuel oil to homes through a central pipeline system. They operate a single system of this type in the Holiday City subdivision in Dover Township. The installation consists of two 20,000-gallon storage tanks, a pumping station and a network of distribution mains in the streets, connecting with service lines running to the individual homes. Fuel consumption in each home is monitored and recorded by a meter located on the service connection for each house. Rele owned the entire distribution system until February 1968. After that date all the facilities were owned by Redi-Flo, with Rele continuing to manage and operate the system itself.

Holiday City is a planned retirement community consisting of one-family, duplex and quad units. The first two phases of the development contemplated some 1,530 residences. In addition, there are two adjoining tracts consisting of 24 acres which Hovsons, Inc. may develop in the future. The development was promoted in the usual manner by constructing model homes and by advertising in the New York metropolitan area. Hovsons would submit to prospective purchasers an estimate of living costs, including the cost of fuel oil. As of July 15, 1968, the date of the Board hearing, Hovsons had sold some 1,300 homes, and 950 families were already living in Holiday City. Every purchaser had entered into a form agreement, described hereinafter, to purchase oil from Rele.

In March 1965, while the Holiday City project was in the preliminary stages of development, Rele (the predecessor of Redi-Flo) entered into an agreement with Hovsons whereby it was given the 'sole and exclusive right and privilege to install, maintain and operate a pipe line fuel oil distribution system (including meters, storage tanks, oil transmission lines, valves, and all other components and auxiliary equipment)' in Holiday City. Hovsons agreed to sell Rele a lot in the development for the installation, maintenance and operation of its fuel oil storage tanks, buildings, mains, feeder lines and other equipment. Hovsons further agreed to grant Rele such easements and rights of way throughout the tract as might be necessary for the installation, maintenance and operation of the system, including the streets intended to be dedicated to public use. In addition, Hovsons agreed that easements from the streets to the several residences would be reserved in favor of Rele at the time of sale of the houses.

The agreement also provided that the developer would use its best efforts to induce prospective homeowners to connect to the system. For this promotional effort Rele initially agreed to pay Hovsons $130 for each customer. (A supplemental contract covering the second phase of the Holiday City development provided that Hovsons would receive 2cents a gallon for all oil sold to customers over a 25-year period, instead of the $130 payment which related to the first phase of the development.) If Hovsons obtained less than 99% Of the homeowners for Rele, it agreed to pay Rele $75 for each home that did not tie into the system. Rele was to furnish all advertising literature to promote the system. Hovsons agreeing to have its salesmen learn about the system's benefits. Rele paid Hovsons $9,000 for brochures naming the system to be installed in Holiday City.

A significant provision of the Hovsons-Rele agreement was Hovsons' convenant that 'no other system for distribution of fuel oil, heat, or other form of energy or fuel used to heat buildings shall be introduced or permitted within the Tract for promotional or advertising purposes.'

After Hovsons had conveyed a lot in the development to Rele, Rele proceeded to obtain a building permit for the erection of its oil storage tanks and pumping station. Distribution mains were installed in the streets which would later be dedicated to the public. The meters installed in the Holiday City houses were inspected by the New Jersey Bureau of Weights and Measures. The system went into operation in September 1965.

Rele entered into a separate agreement on a year-to-year basis with each consumer in the development by which it agreed to install its system to furnish fuel oil to the heating plant of each dwelling and to supply the meter. The contract guaranteed that the price charged for fuel oil would not exceed the year's average retail price charged in the local market by major suppliers. Rele was to notify the consumer on June 1 of each year as to the price which would prevail for the year following. The homeowner could either pay each month, by reading his meter and computing the bill, or budget the estimated annual bill over a 12-month period and pay equal monthly installments. Meters would be read as of May 31 each year and the adjustment, if any, made between the parties as of that date.

Rele reserved the right to terminate the consumer's contract, in which case, if the consumer was without fault, it agreed to install at its own expense a 275-gallon fuel oil tank, together with the facilities necessary to give the consumer a fully operative independent fuel oil system. The homeowner had the right to terminate upon 60 days' notice, in which event he would be responsible for installing his own tank.

Of the 950 families that had moved into Holiday City as of the date of the Board hearing, all but 9, who subsequently desired to use electricity for heating or hot water, had connected to the Rele-Redi-Flo system. Thus, the system serviced 99% Of the homes.

We note that Rele is a New Jersey corporation whose purposes, as stated in its certificate of incorporation issued in 1953, are quite general. Redi-Flo's charter, issued in 1965, authorizes it, among other things, to 'own, manage, maintain and operate, plants, buildings, structures, works, mains, pipes, pipelines and pipeline systems,' and to 'market, distribute, transport and handle petroleum products, at retail and wholesale.'

Sometime after New Jersey Natural Gas Company filed its petition with the Board, Public Service Electric and Gas Company sought to intervene in the proceedings. While no formal order allowing intervention was issued, the company was represented in and notified of all subsequent proceedings. Following a brief hearing at which, as noted, most of the facts were stipulated and the testimony of Hovsons' president taken, and the subsequent filing of briefs, the Board determined that Rele and Redi-Flo were public utilities subject to its jurisdiction. They were ordered to comply with all the public utility statutes, Title 48, including those requiring the filing of a tariff. This appeal ensued, and pending its determination we ordered (all parties consenting) that the decision and order of the Board be stayed.

N.J.S.A. 48:2--13 provides, in pertinent part:

The board shall have general supervision and regulation of and jurisdiction and control over all public utilities as hereinafter in this section defined and their property, property rights, equipment, facilities and franchises so far as may be necessary for the purpose of carrying out the provisions of this Title.

The term 'public utility' shall include every corporation * * * that now or hereafter may own, operate, manage or control within this State any railroad, street railway, traction railway, autobus, canal, express subway, Pipeline, gas, electric light, heat, power, water, Oil, sewer, telephone or telegraph system, plant or...