City of New York v. Public Service Commission, 38 N.Y.2d 765 (1975)
While the Public Service Law permits preferential treatment of municipalities as a class, it does not allow discrimination between municipalities.
Summary
The City of New York challenged a decision by the Public Service Commission (PSC) to eliminate non-obligatory discounts provided by a utility company to certain cities and villages. The PSC determined that these discounts constituted an undue preference, violating the Public Service Law. The Court of Appeals affirmed the PSC’s decision, holding that while the law allows preferential treatment for municipalities as a whole, it does not permit discriminatory practices among them. The court found substantial evidence supported the PSC’s finding of undue preference and upheld the gradual phasing out of the discounts. The Court also rejected the City’s argument that its municipal contracts exempted it from the PSC’s jurisdiction under the anti-discrimination provisions.
Facts
A utility company provided non-obligatory discounts to some cities and villages. After hearings, the Public Service Commission (PSC) determined these discounts constituted an undue preference under the Public Service Law (§ 91, subds 2, 3; § 92, subd 2). The PSC approved the company’s proposal to eliminate these discounts, except those required by contract, to rectify the inequity. To soften the impact, the PSC ordered a gradual phase-out of the discounts over five years, excluding municipalities that had not previously received the discounts.
Procedural History
The Public Service Commission made an initial determination. The City of New York challenged the PSC’s decision. The Appellate Division upheld the PSC’s decision. The Court of Appeals affirmed the Appellate Division’s ruling, thus upholding the PSC’s decision.
Issue(s)
1. Whether the Public Service Commission exceeded its authority in ordering the elimination of non-obligatory discounts to certain municipalities, arguing that it violated the Public Service Law?
2. Whether subdivision 3 of section 92 of the Public Service Law exempts the utility’s contracts with municipalities from the Commission’s power to prevent undue preference?
Holding
1. No, because there was substantial evidence to support the finding of undue preference, and the gradual phase-out was within the PSC’s power to set just and reasonable rates and rectify discriminatory practices.
2. No, because while this provision allows preferential treatment of municipalities as a class, it does not permit discrimination between municipalities.
Court’s Reasoning
The Court of Appeals affirmed based on the reasoning provided by the Appellate Division. The court emphasized that the PSC’s determination was supported by substantial evidence presented during the hearings. The court found that the PSC acted within its authority under Public Service Law § 97, subd 1, which empowers it to set just and reasonable rates and address unduly preferential practices.
Regarding the jurisdictional challenge, the court addressed the appellant’s reliance on Public Service Law § 92, subd 3, which generally prohibits free or reduced service but exempts “state, municipal or federal contracts.” The court clarified that this exemption permits preferential treatment of municipalities as a class but does not allow for discrimination *between* municipalities. Citing Columbia Gas of N. Y. v New York State Elec. & Gas Corp., 28 NY2d 117, 126 and New York Tel. Co. v Siegel-Cooper Co., 202 NY 502, 513, the court stated, “As in Columbia Gas (supra) the exemption of governmental contracts is operative only within its specific provision and will not limit the commission’s power under the antidiscrimination sections of the Public Service Law.” This means that while municipalities can receive preferential treatment compared to other entities, the utility cannot discriminate among different municipalities. The court thus upheld the PSC’s authority to rectify discriminatory pricing practices even when contracts with municipalities were involved.
Finally, the court determined that the PSC did not abuse its discretion in disallowing further discovery, given the city’s prior opportunity to examine the telephone company’s files and its untimely application for additional discovery.