Rochester Gas and Elec. Corp. v. Public Service Com'n

• Decision Date: 23 October 1986
• Citation: 507 N.Y.S.2d 305,119 A.D.2d 353
• Parties: ROCHESTER GAS AND ELECTRIC CORPORATION, Appellant, v. PUBLIC SERVICE COMMISSION of the State of New York, Respondent.
• Court: New York Supreme Court — Appellate Division

Page 305

507 N.Y.S.2d 305

119 A.D.2d 353

ROCHESTER GAS AND ELECTRIC CORPORATION, Appellant, v. PUBLIC SERVICE COMMISSION of the State of New York, Respondent.

Supreme Court, Appellate Division,

Third Department.

Oct. 23, 1986.

Nixon, Hargrave, Devans & Doyle (Richard N. George, Robert L. Daileader, Jr., and Jeffrey C. Parnell, Rochester, of counsel), for appellant.

David E. Blabey (Lawrence G. Malone, Albany, of counsel), Public Service Com'n, for respondent.

Before MAHONEY, P.J., and WEISS, MIKALL, YESAWICH and HARVEY, JJ.

MAHONEY, Presiding Judge.

Plaintiff, Rochester Gas and Electric Corporation, is a regulated gas distribution utility that sells natural gas in a seven-county area in and around the City of Rochester. Plaintiff transports the gas which it purchases from pipeline companies to end-users at retail rates developed by State regulatory agencies.

By notice of proposed rulemaking issued October 31, 1983, defendant, the Public Service Commission, solicited comments from interested parties on a proposal that gas distribution corporations be required to transport customer-owned gas to end-users, in addition to their own natural gas, to the extent of their excess transportation capacity. On April 24, 1984, defendant, after reviewing submitted comments, issued its opinion in which it set forth guidelines requiring gas corporations, including plaintiff, to transport customer-owned gas and directed gas distribution corporations to file tariff leave amendments in accordance with the guidelines.

While plaintiff's application to defendant for a rehearing was pending, Laws of 1984 (ch. 519) was enacted by the Legislature which included Public Service Law § 66-d(2). That provision provides that:

The commission * * * after notice and hearing shall * * * have the authority to order any gas corporation to transport * * * gas under contract for sale by such producer or owned by such consumer provided that, the commission finds that the gas corporation has available capacit that no undue burden shall be placed upon the gas corporation or its ratepayers and that the ability of the gas corporation to render adequate service to its customers is not impaired.

After a public hearing where interested parties were afforded an opportunity to show cause why gas distribution companies should not be required to provide transportation services for customer owned gas, the Administrative Law Judge recommended that such companies be required to file tariffs for the proposed natural gas transportation service. Defendant adopted this recommendation.

Plaintiff commenced the instant action seeking a declaratory judgment that Public Service Law § 66-d(2) violated its right to due process by converting it into a common carrier, by interfering with its facilities and by establishing transportation rates that were not just and reasonable. Defendant moved to convert the action to a CPLR article 78 proceeding and to dismiss the action. Plaintiff cross-moved for summary judgment and moved for a preliminary injunction. Plaintiff's motions were denied. Special Term granted defendant's motion for summary judgment dismissing the complaint (128 Misc.2d 801, 490 N.Y.S.2d 956). This appeal by plaintiff ensued.

Plaintiff's contention that Public Service Law § 66-d(2) involuntarily converted it from a contract carrier into a common carrier in violation of its due process rights under both the Federal and State Constitutions is without merit. Since the purpose for enacting Public Service Law § 66-d was to encourage the purchase and use of larger quantities of competitively priced New York State-produced natural gas and provide necessary incentives for the continued growth of the natural gas industry in this State, we hold that Public Service Law § 66-d(2) does in fact, despite defendant's argument to the contrary, convert plaintiff to a common carrier of customer-owned natural gas. Since defendant has required plaintiff to file tariffs for the transportation and delivery of customer-owned gas, it has also required plaintiff to hold itself out to serve all shippers of this kind within its territory who wished to be served. Plaintiff cannot pick and choose. It has to serve all who require its services provided it has the facilities to provide the service. Such a relationship between a shipper and a carrier is the definition of a common carrier (see, Matter of Motor Haulage Co. v. Maltbie, 293 N.Y. 338, 354, 57 N.E.2d 41). The clear intent of Public Service Law § 66-d(2) is that when gas corporations have excess transportation capacity, they must undertake to deliver customer-owned natural gas to all those who seek their services within their franchise territory to the extent of their capabilities. That is the very nature of a common carrier (id., at 351-356, 57 N.E.2d 41).

However, requiring plaintiff to undertake the aforedescribed common carrier responsibilities does not violate its due process rights. As a regulated gas corporation, plaintiff's franchise agreements require it to distribute gas throughout its service territory. No distinction is made concerning gas that plaintiff owns for resale to its retail customers and customer-owned gas (see, Public Service Law § 2[10], [11]; § 65). Therefore, defendant's order requiring plaintiff to file tariffs for the transportation of customer-owned gas amounts to nothing more than extending plaintiff's service to an area that it is already committed to serve. Plaintiff is not being ordered to undertake a new service.

Next, we also hold that plaintiff failed to sustain the heavy burden of proving that Public Service Law § 66-d(2)...