Matter of New Rochelle Water Co. v. Public Serv. Comm., 29 N.Y.2d 400 (1972)
The Public Service Commission has discretionary power, but is not required, to grant reparations to public utility companies when a temporary rate increase allowed during a rate suspension period is less than the final approved rate increase.
Summary
New Rochelle Water Company (NRW) and Long Island Water Corporation (LIW) sought retroactive application of permanent rate increases to recoup revenues lost during periods when temporary, lower rates were in effect due to Commission suspensions of proposed rate hikes. The New York Court of Appeals held that while the Public Service Commission (PSC) has the discretionary authority under Public Service Law § 113 to order reparations to utilities when temporary rates are inadequate, it is not mandatory. The Court found that the PSC’s denial of reparations was not arbitrary or capricious, and that the utilities were not entitled to recoupment under § 114, which applies only to temporary rate decreases, not increases.
Facts
NRW filed proposed rate increases with the Public Service Commission (PSC). The PSC suspended the increases for 10 months. NRW requested, and was granted, temporary rate increases during the suspension, designed to produce a 5.5% rate of return. The PSC ultimately approved permanent increased rates generating additional revenue and yielding a 7.6% rate of return. LIW presented a similar situation, seeking reparations for the difference between temporary and final rates during a suspension period.
Procedural History
NRW and LIW filed Article 78 proceedings challenging the PSC’s denial of retroactive rate increases (reparations). The Appellate Division affirmed the PSC’s determination in both cases, holding that the PSC had discretionary power to order reparations, but was not obligated to do so. The utilities appealed to the New York Court of Appeals.
Issue(s)
Whether Public Service Law § 113 requires the Public Service Commission to grant reparations to public utility companies when a temporary rate increase, granted during a suspension period, is less than the final rate increase ultimately approved.
Holding
No, because the 1970 amendment to Public Service Law § 113 grants the Public Service Commission the discretionary power to order reparations when proposed rate increases are suspended and temporary rate increases are inadequate, but does not mandate it.
Court’s Reasoning
The Court of Appeals analyzed the legislative history of Public Service Law §§ 113 and 114. It determined that § 113, as amended in 1970, gives the PSC discretionary authority to order reparations. The use of “may” in the statute indicates a permissive, not mandatory, power. The Court distinguished § 114, which mandates recoupment for temporary rate decreases imposed by the PSC, finding that it was enacted to address constitutional concerns related to confiscatory rate reductions, citing Prendergast v. New York Tel. Co., 262 U.S. 43. The Court emphasized that suspending a proposed rate increase merely preserves the status quo. Quoting Hope Natural Gas Co. v. Federal Power Comm., 196 F.2d 803, the Court stated that a utility’s loss during rate investigation is a “necessary incident of rate regulation so long as the period of suspension does not ‘overpass the bounds of reason.’” The Court rejected the utilities’ claims of a denial of equal protection, finding a reasonable classification based on due process requirements. The Court concluded that the Commission acted within its statutory authority and that its refusal to authorize reparations was not arbitrary or capricious.