New York Law Review

Tag: Consolidated Edison

  • Consolidated Edison Co. of N.Y. v. City of New York, 98 N.Y.2d 594 (2002): Functional Obsolescence and Property Valuation

    Consolidated Edison Co. of N.Y. v. City of New York, 98 N.Y.2d 594 (2002)

    Functional obsolescence due to excess construction costs can be considered when determining property value using the Reproduction-Cost-New-Less-Depreciation (RCNLD) method, especially for specialty properties, but this is not a mandatory element in every case and depends on the specific facts.

    Summary

    Consolidated Edison (Con Edison) challenged New York City’s tax assessments on its Arthur Kill electric generating station. The dispute centered on whether functional obsolescence (excess construction costs) could be deducted from the reproduction cost under the RCNLD method. Con Edison’s expert included this deduction, lowering the assessed value. The City’s expert excluded it, arguing it was legally improper. The trial court adopted Con Edison’s valuation, and the Appellate Division affirmed. The New York Court of Appeals affirmed, holding that considering functional obsolescence was not an error of law in this case, although it is not required in all cases using the RCNLD method.

    Facts

    The case involved Consolidated Edison’s Arthur Kill electric generating station, a specialty property comprised of steam and gas turbine units. Con Edison initiated a tax certiorari proceeding, challenging the City of New York’s property tax assessments for the years 1994/1995 through 1998/1999. Both parties agreed that the RCNLD method was the appropriate valuation method. Con Edison’s expert included functional obsolescence due to excess construction costs in the depreciation calculation. The City’s expert omitted this factor based on legal advice, despite acknowledging that it is typically considered in reproduction cost valuations.

    Procedural History

    The case began in Supreme Court, which adopted Con Edison’s valuation. The City appealed to the Appellate Division, which affirmed the Supreme Court’s decision. The City then appealed to the New York Court of Appeals based on a two-Justice dissent in the Appellate Division.

    Issue(s)

    1. Whether the trial court erred as a matter of law by accepting Con Edison’s inclusion of functional obsolescence due to excess construction costs when calculating depreciation under the Reproduction-Cost-New-Less-Depreciation (RCNLD) method for a specialty property.

    Holding

    1. No, because the inclusion of functional obsolescence due to excess construction costs in calculating depreciation under the RCNLD method was not an error of law, as the City’s own expert conceded it was a typical consideration, and relevant appraisal literature supports it; however, the Court explicitly stated this does not create a rule requiring it in all such cases.

    Court’s Reasoning

    The Court of Appeals emphasized that property valuation is primarily a question of fact, and affirmed determinations of value made at the lower courts, finding no error of law. The Court acknowledged that while the RCNLD method is appropriate for specialty properties, it hadn’t previously addressed whether functional obsolescence due to excess construction costs could be included. The Court noted the City’s expert conceded that functional obsolescence is a proper element of depreciation, even if it leads to a valuation consistent with replacement cost. Relevant appraisal literature also supports Con Edison’s methodology. The court referenced prior decisions noting RCNLD valuations often underweight functional obsolescence. The court stated allowing for increased consideration of functional obsolescence may further the purpose of valuation proceedings – arriving at a fair and realistic appraisal. The Court explicitly declined to establish a rule requiring functional obsolescence to be considered in every RCNLD valuation, stating valuation remains a question of fact and the courts have discretion to review the evidence. In this specific case, the Court found no legal error in the lower courts’ review. The court emphasized that the goal is a “fair and realistic appraisal of the value of the property at issue.”

  • Consolidated Edison v. Department of Environmental Conservation, 71 N.Y.2d 186 (1988): Upholding Agency Authority Despite Specific Legislation

    71 N.Y.2d 186 (1988)

    An administrative agency’s broad regulatory powers are not revoked by subsequent, more specific legislation in the same field unless the legislature clearly intends to limit the agency’s authority.

    Summary

    Consolidated Edison (Con Ed) challenged the Department of Environmental Conservation’s (DEC) petroleum bulk storage code, arguing that the 1977 and 1983 Acts superseded DEC’s authority to regulate major and pre-existing non-major facilities. The Court of Appeals reversed the lower courts, holding that DEC’s broad regulatory power over petroleum storage was not revoked. The court reasoned that the Legislature did not expressly or impliedly repeal DEC’s authority and that the statutes could operate harmoniously. This case underscores the principle that specific legislation does not automatically limit broader agency powers unless legislative intent to do so is clear.

    Facts

    Con Edison, a utility company, operated major and non-major petroleum bulk storage facilities. New York enacted the Oil Spill Prevention, Control and Compensation Act in 1977, aimed at regulating major petroleum bulk storage facilities. In 1983, the Control of the Bulk Storage of Petroleum Act was passed to address smaller storage facilities and applied to new or substantially modified non-major facilities. In 1984, DEC promulgated a petroleum bulk storage code, but despite exemptions in the 1983 Act, it applied to preexisting non-major facilities and amended regulations to require major facilities to comply with the Code, even though subject to federal SPCC Plans. Con Ed challenged this, arguing DEC exceeded its authority.

    Procedural History

    Con Edison filed an Article 78 proceeding seeking to annul portions of the Code. The Supreme Court granted the petition, concluding the 1977 and 1983 Acts superseded DEC’s authority. The Appellate Division affirmed. The Court of Appeals then reversed the Appellate Division decision.

    Issue(s)

    Whether the 1977 Oil Spill Prevention, Control and Compensation Act and the 1983 Control of the Bulk Storage of Petroleum Act revoked or superseded the Department of Environmental Conservation’s broad power to regulate the bulk storage of petroleum, thereby precluding the DEC from applying its petroleum bulk storage code to major facilities and pre-existing non-major facilities.

    Holding

    No, because the Legislature did not expressly or impliedly repeal or modify DEC’s broad regulatory authority, and the statutes can operate harmoniously.

    Court’s Reasoning

    The Court of Appeals reasoned that administrative agencies possess powers expressly delegated by the Legislature. The Environmental Conservation Law (ECL) grants DEC broad authority to prevent pollution, including regulating the storage of liquids likely to pollute state waters. The court emphasized that specific legislation in a field doesn’t automatically preclude broader agency regulation unless that was the legislature’s intent. There was nothing in the 1977 or 1983 Acts demonstrating an intent to narrow DEC’s authority. The court highlighted that the 1977 Act requires compliance with both state and federal standards for petroleum discharge control, indicating an intent to allow future state regulation. It further stated that the legislature conferred upon the Commissioner the power to adopt such regulations as he deems “necessary to accomplish the purposes” of the Act (Navigation Law § 191). Additionally, implied repeal of legislation is disfavored. The statutes at issue don’t conflict; the 1983 Act governs new non-major facilities, the 1977 Act governs major facilities, and the ECL allows DEC to regulate in areas where other legislation leaves a gap. Since the statutes can operate harmoniously, DEC’s authority wasn’t repealed. As the Court stated, “Absent an express manifestation of intent by the Legislature — either in the statute or the legislative history — the courts should not presume that the Legislature has modified an earlier statutory grant of power to an agency.” Judge Bellacosa concurred in result only, expressing concern about inconsistencies with the holding in Boreali v. Axelrod, 71 N.Y.2d 1 (1988).

  • Consolidated Edison Co. of New York, Inc. v. City of New York, 66 N.Y.2d 363 (1985): Statutory Interpretation and Taxing Authority

    Consolidated Edison Co. of New York, Inc. v. City of New York, 66 N.Y.2d 363 (1985)

    When interpreting statutes, courts will attempt to harmonize apparently conflicting provisions to give effect to all their parts, especially when dealing with long-standing rules and revisions intended to preserve existing powers.

    Summary

    Consolidated Edison (ConEd) challenged New York City’s authority to tax its gross income at a rate of 2.35%, arguing that General City Law § 20-b limited the rate to 1%. The Department of Finance denied ConEd’s refund claims. The Court of Appeals reversed the Appellate Division’s decision, holding that New York City was authorized to impose the 2.35% tax rate. The court reasoned that the city’s taxing authority derived from special enabling acts and that the apparently conflicting statutory provisions could be harmonized to give effect to all parts, particularly considering the legislative intent to preserve existing taxing powers during statutory revisions.

    Facts

    Consolidated Edison, a public utility, paid New York City utility taxes at a rate of 2.35% of its gross income from May 1, 1980, through November 30, 1982. ConEd later sought refunds for amounts paid in excess of 1% for the periods from December 1, 1981, through November 30, 1982, and May 1, 1980, through November 30, 1981. ConEd contended that General City Law § 20-b limited the city’s authority to tax its gross income to only 1%.

    Procedural History

    The New York City Department of Finance denied ConEd’s refund claims. The Appellate Division, First Department, annulled the Department of Finance’s determination and remitted the case for further proceedings. The Court of Appeals granted leave to appeal to the respondents (City of New York) and the Appellate Division granted leave to appeal to petitioners (Con Edison). The Court of Appeals then reversed the Appellate Division’s order, reinstating the Department of Finance’s original determination.

    Issue(s)

    Whether New York City was authorized, through its tax authorization statutes, to impose a utility tax on Consolidated Edison’s gross income at a rate of 2.35%, despite the existence of General City Law § 20-b, which imposed a 1% rate ceiling on other cities.

    Holding

    Yes, because New York City’s taxing authority derived from special enabling acts, specifically Tax Law § 1201, which authorized the 2.35% rate, and the apparently conflicting statutory provisions could be harmonized to give effect to both Tax Law § 1201 and General City Law § 20-b, especially considering the legislative intent to preserve existing taxing powers during statutory revisions.

    Court’s Reasoning

    The Court of Appeals reasoned that while New York City’s tax authorization statute (Tax Law § 1201) referenced General City Law § 20-b, the city’s tax authorization did not derive from section 20-b. Instead, it stemmed from a series of special enabling acts culminating in section 1201. The court noted that in 1959, the Legislature had expressly indicated that New York City was not subject to the 1% rate ceiling imposed on other cities by General City Law § 20-b. Although this language was omitted in a 1965 statutory recodification, the court stated that “a minor, unexplained omission in connection with a general revision of a statute should not be construed as changing a long-standing rule in the absence of a clear manifestation of such intention.”

    The court emphasized that the apparently conflicting statutory provisions could be harmonized. “Tax Law § 1201 may be read as fixing the rate ceiling for New York City at 2.35% and Tax Law § 1221 (and General City Law § 20-b) may be read as restricting the tax base for the city. So read, all of the provisions are given effect. If not so read, section 1221, which states that the rate is 2.35%, would be rendered a nullity, a construction that ‘is not permissible.’” The court also considered the legislative intent behind the 1965 revision, which was to “incorporate and preserve existing taxing powers.” Therefore, the court concluded that the Department of Finance properly fixed ConEd’s tax at the 2.35% rate.

  • Consolidated Edison Co. v. Public Serv. Commn., 63 N.Y.2d 372 (1984): Cost Allocation for Political Speech in Utility Bills

    63 N.Y.2d 372 (1984)

    A public service commission can require utilities to allocate a portion of the fixed costs associated with including political messages in billing statements to their shareholders without violating the utilities’ First Amendment rights.

    Summary

    Consolidated Edison challenged a Public Service Commission (PSC) order requiring utilities to allocate 50% of the fixed costs of including political messages in billing statements to their shareholders. The PSC reasoned that without this allocation, ratepayers would be subsidizing the utility’s political speech. The New York Court of Appeals upheld the PSC’s order, finding it did not violate the utility’s free speech rights. The court distinguished between expenses that benefit the corporation (shareholder responsibility) and those that benefit ratepayers. The court held that the cost allocation represented a reasonable balance of First Amendment interests, preventing ratepayers from being forced to subsidize the utility’s speech.

    Facts

    Following a Supreme Court decision (Consolidated Edison Co. v. Public Serv. Commn., 447 U.S. 530 (1980)) that struck down a PSC ban on political inserts in utility bills, the PSC initiated proceedings to determine how to allocate the costs of such inserts.
    The PSC issued an order stating that if utilities included inserts concerning matters defined in Account 426.4 (expenditures for influencing public opinion on political matters), 50% of fixed costs associated with preparing and mailing billing statements would be allocated to the utilities’ shareholders.
    The PSC determined that using the billing process to disseminate political messages provides a subsidy to utility management, as the costs are typically borne by ratepayers.

    Procedural History

    The Public Service Commission issued an order requiring the cost allocation.
    Consolidated Edison challenged the order.
    The Appellate Division affirmed the PSC’s order.
    Consolidated Edison appealed to the New York Court of Appeals.

    Issue(s)

    Whether the Public Service Commission’s order requiring utilities to allocate a portion of the fixed costs associated with political messages in billing statements to their shareholders violates the utilities’ First Amendment rights.

    Holding

    Yes, because nothing in the Constitution requires that shareholders get a free ride on the backs of the ratepayers; the allocation of costs represented a reasonable balance of First Amendment interests.

    Court’s Reasoning

    The court relied on its prior decision in Rochester Gas & Elec. Corp. v. Public Serv. Commn., 51 N.Y.2d 823 (1980), which held that the PSC could exclude certain informational advertising costs from being charged to ratepayers. The court stated, “nothing in the Constitution requires that the shareholders get a free ride on the backs of the ratepayers.”
    The court rejected the argument that Account 426.4 was impermissibly based on the content of speech. Instead, the court stated that “the thrust of the regulation is to distinguish between expenditures that primarily advance the interests of the corporation (properly chargeable to the shareholders) and expenditures that primarily advance the interests of the ratepayers (properly chargeable to them).”
    The court emphasized that the PSC was implementing its statutory mandate to ensure just and reasonable utility rates.
    The court also noted that the ruling attempted to balance the competing First Amendment interests of shareholders and ratepayers. Without the cost allocation, ratepayers could argue they were being compelled to subsidize the utility’s speech, violating the principles of Abood v. Detroit Bd. of Educ., 431 U.S. 209 (1977), and Wooley v. Maynard, 430 U.S. 705 (1977).
    The court quoted the dissenting justices in Consolidated Edison Co. v. Public Serv. Commn., 447 U.S. 530 (1980), stating, “[e]ven though the free ride may cost the ratepayers nothing additional by way of specific dollars, it still qualifies as forced support of the utility’s speech.”
    The court concluded that the 50-50 cost division was reasonable and within the PSC’s discretion.

  • Consolidated Edison v. State Board of Equalization, 58 N.Y.2d 710 (1982): Admissibility of Supplemental Appraisals

    58 N.Y.2d 710 (1982)

    A court abuses its discretion as a matter of law when it allows the filing of a supplemental appraisal if the original appraisal was deliberately filed without the supplemental data, and the only reason for allowing the supplement was a valuation ruling that was subsequently overturned.

    Summary

    Consolidated Edison (Con Ed) challenged the State Board of Equalization’s assessment of its special franchise properties. Con Ed initially filed an appraisal that didn’t include reproduction cost data. Special Term allowed Con Ed to file a supplemental appraisal with this data, based on its ruling that the properties were “specialties” that should be valued using the reproduction cost method. The Appellate Division reversed Special Term’s valuation ruling. The Court of Appeals then considered whether Special Term abused its discretion by allowing the supplemental appraisal. The Court of Appeals held that Special Term did abuse its discretion because the sole basis for allowing the supplemental appraisal (the valuation ruling) had been overturned. Without that basis, there was no good cause for allowing the filing of the supplemental appraisal.

    Facts

    Consolidated Edison (Con Ed) initiated a proceeding to challenge the valuation of its special franchise properties by the State Board of Equalization and Assessment.
    Con Ed initially filed an appraisal report that did not include data concerning reproduction cost new less depreciation.
    Con Ed later sought to file a supplemental appraisal that included reproduction cost data.
    The decision to omit the reproduction cost data from the initial appraisal was deliberate.

    Procedural History

    Special Term initially allowed the filing of the supplemental appraisal based on its determination that the special franchise properties were “specialties” and thus should be valued using the reproduction cost method.
    The Appellate Division reversed the Special Term’s ruling regarding the method of valuation.
    The case then reached the Court of Appeals, which reviewed the Appellate Division’s decision regarding the admissibility of the supplemental appraisal.

    Issue(s)

    Whether the Appellate Division erred in holding that Special Term abused its discretion as a matter of law in allowing the filing of a supplemental appraisal, when the original appraisal deliberately omitted the data contained in the supplement, and the allowance was based solely on a valuation ruling that was later overturned.

    Holding

    No, because the Special Term’s authorization of the supplemental appraisal was without basis after the valuation ruling was overturned, constituting an abuse of discretion as a matter of law.

    Court’s Reasoning

    The Court of Appeals focused on the fact that the Special Term’s decision to allow the supplemental appraisal was entirely predicated on its valuation ruling, which the Appellate Division subsequently overturned. The court emphasized that Con Ed deliberately chose not to include the reproduction cost data in its original appraisal. Because the basis for allowing the supplemental appraisal (the valuation ruling) was eliminated, there was no remaining justification for allowing the filing of the supplemental appraisal.

    The court reasoned that, “Without Special Term’s valuation ruling, its authorization of a supplemental appraisal was without basis and, therefore, an abuse of discretion as a matter of law.”

    This decision highlights the importance of having a valid legal basis for any court order. If the underlying rationale for a decision is removed, the decision itself becomes invalid. The court’s decision also discourages parties from strategically withholding information in their initial filings and then attempting to introduce it later based on favorable, but ultimately incorrect, rulings.

  • Food Pageant, Inc. v. Consolidated Edison Company, 54 N.Y.2d 167 (1981): Establishing Gross Negligence in Utility Service Interruption

    Food Pageant, Inc. v. Consolidated Edison Company, 54 N.Y.2d 167 (1981)

    A utility company can be held liable for damages resulting from service interruption if its actions or inactions constitute gross negligence, even without explicit expert testimony defining the standard of care when the jury is competent to evaluate the utility’s conduct based on the facts presented.

    Summary

    This case concerns a grocery store chain’s lawsuit against Consolidated Edison (Con Edison) for damages resulting from the 1977 New York City blackout. The plaintiff alleged that Con Edison was grossly negligent in several respects, including failing to maintain adequate power sources, improperly managing the crisis, and staffing critical positions with inexperienced personnel. The New York Court of Appeals held that sufficient evidence existed for a jury to determine that Con Edison was grossly negligent, even without expert testimony, as the jury could evaluate Con Edison’s actions based on the presented facts. The court also clarified that the trial court properly presented the shortcomings in Con Edison’s procedures as evidentiary contentions, not as separate theories of liability.

    Facts

    On July 13, 1977, a blackout affected approximately three million Con Edison customers. The initiating event was two lightning strikes that caused double circuit outages of transmission lines. Plaintiff alleged that several power sources were unjustifiably out of service. These included the Hudson-Farragut tie, the Indian Point 2 power plant, and certain gas turbines. Plaintiff further alleged improper maintenance of relays and circuit breakers and inadequate lightning protection. Additionally, the plaintiff claimed that William Jurith, the person in charge of the Con Edison system on the night of the blackout, reacted improperly to the crisis and lacked adequate experience. Con Edison argued that the power sources were justifiably out of service for repairs or due to the expiration of peak demand hours. They also maintained that their inspection program was adequate and Jurith acted appropriately.

    Procedural History

    The trial court instructed the jury that they could only return a verdict for the plaintiff if they found that the defendant had been grossly negligent. The jury found that Con Edison had been grossly negligent and awarded the plaintiff $40,500. The Appellate Division affirmed the judgment. Con Edison appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether there was sufficient evidence of Con Edison’s gross negligence to present the issue for jury determination.
    2. Whether expert testimony was required to establish the standard of care Con Edison allegedly violated.
    3. Whether the use of a general verdict was improper given the multiple alleged shortcomings in Con Edison’s procedures.

    Holding

    1. Yes, because there was sufficient evidence of Con Edison’s gross negligence for the jury to consider, particularly regarding the actions and inactions of its system operator, William Jurith.
    2. No, because the jury was competent to evaluate Con Edison’s actions based on the factual presentation alone, especially concerning the system operator’s response to the emergency.
    3. No, because the trial court presented the alleged shortcomings in Con Edison’s procedures as evidentiary contentions, not as separate theories of liability.

    Court’s Reasoning

    The Court of Appeals found that there was sufficient evidence for the jury to determine gross negligence without expert testimony. The court reasoned that while some issues require expert testimony due to scientific or technical complexity, this case did not. The jury was capable of evaluating Con Edison’s actions, particularly the behavior of the system operator, William Jurith, during the crisis. The court noted Jurith’s failure to comply with the New York Power Pool’s directions to reduce voltage by shedding load after the lightning strikes. The court stated, “The actions of Con Edison’s employees on the night of the blackout, and Con Edison’s staffing decisions, could properly be judged by the members of the jury unaided by expert testimony to clarify the standard of care.” The court distinguished this case from situations requiring expert testimony, such as medical malpractice, where the lack of skill or success is not obvious. Regarding the general verdict, the court emphasized that the alleged shortcomings were presented as evidentiary contentions, not as separate theories of liability, thus making the general verdict appropriate. The court cited Davis v. Caldwell, distinguishing it by noting that in this case, the jury was presented with a summary of evidentiary contentions, not separate theories of liability for individual determination.

  • Consolidated Edison Co. of New York, Inc. v. Public Service Commission, 47 N.Y.2d 94 (1979): Utility Advertising and First Amendment Rights

    47 N.Y.2d 94 (1979)

    A utility company does not have a First Amendment right to compel ratepayers to fund all of its informational advertising; the Public Service Commission (PSC) can disallow the inclusion of certain advertising expenses in the rate base if the advertising is not necessary for providing utility services.

    Summary

    Consolidated Edison challenged a Public Service Commission (PSC) decision that disallowed the inclusion of certain informational advertising expenses in the rates charged to customers. Con Ed argued that this violated its First Amendment rights. The New York Court of Appeals upheld the PSC’s decision, stating that while Con Ed has a right to express its views, the PSC is not obligated to force ratepayers to subsidize all of the utility’s communications. The court reasoned that the PSC has the authority to determine which costs are appropriately borne by ratepayers versus shareholders, and the PSC’s decision was not arbitrary or unsupported by evidence.

    Facts

    The Public Service Commission (PSC) disallowed Consolidated Edison (Con Ed) from including certain informational advertising expenses in the rates charged to its customers. The disallowed advertising was deemed not necessary for the provision of utility services and primarily served to enhance the utility’s image. Con Ed challenged this decision, arguing that it had a First Amendment right to have ratepayers cover the costs of all its informational advertising.

    Procedural History

    The Public Service Commission made the initial determination disallowing certain advertising expenses. Con Ed appealed this decision. The Appellate Division affirmed the PSC’s decision. Con Ed then appealed to the New York Court of Appeals.

    Issue(s)

    Whether a utility company has a First Amendment right to compel its ratepayers to bear the expense of informational advertising that the Public Service Commission deems unnecessary for providing utility services.

    Holding

    No, because while the Constitution provides a right to engage in certain activities free of governmental restrictions, it does not place a corresponding duty on the government to ensure the availability of all resources necessary to realize that freedom.

    Court’s Reasoning

    The court reasoned that while Con Ed’s advertising is entitled to First Amendment protection, the PSC did not restrain or restrict Con Ed’s ability to communicate. Instead, the PSC simply refused to allow ratepayers to bear the entire cost of the informational advertising, determining that the utility’s shareholders should cover the portion deemed unnecessary for the provision of utility services. The court emphasized that the PSC has a legitimate function in separating costs borne by ratepayers from those charged to shareholders. The court cited the principle that the Constitution does not generally obligate the government to ensure the availability of resources necessary to exercise a constitutional freedom, referencing Harris v. McRae, 448 US 297, and Norwood v. Harrison, 413 US 455, 462. The court found no evidence that the PSC’s ruling was arbitrary, capricious, or unsupported by substantial evidence, citing Matter of New York State Council of Retail Merchants v Public Serv. Comm. of State of N. Y., 45 NY2d 661, 671-672.