New York Law Review

Tag: Public Service Law

  • New York Telephone Co. v. Public Service Commission, 72 N.Y.2d 419 (1988): Defining ‘Management Contract’ Under Public Service Law

    72 N.Y.2d 419 (1988)

    A contract granting an affiliate total control over a utility’s directory business, including staff and systems, constitutes a ‘management contract’ under Public Service Law § 110(3), allowing the Public Service Commission (PSC) to disapprove it if not in the public interest.

    Summary

    New York Telephone Company (NYT) contracted with its affiliate, NYNEX IRC, to manage its directory business. The Public Service Commission (PSC) investigated and disapproved the contract (DPA), finding it not in the public interest under Public Service Law § 110(3). NYT challenged the PSC’s authority. The Court of Appeals held that the PSC had jurisdiction because the DPA was a ‘management contract,’ and that the PSC’s determination that the DPA was not in the public interest had a rational basis.

    Facts

    Prior to the Bell System restructuring, NYT managed its own directory operations, including White Page listings and Yellow Page advertising. After the restructuring, NYNEX created NYNEX IRC and transferred NYT’s directory staff to this new subsidiary. NYT and NYNEX IRC then entered into the Directory Publishing Agreement (DPA), giving NYNEX IRC control over NYT’s directory business for five years, with automatic renewals. NYNEX IRC paid NYT an annual fee based on 1983 advertising profits, adjusted for growth and inflation, retaining profits exceeding this amount.

    Procedural History

    The PSC initiated proceedings to investigate the DPA, concluding it had authority under Public Service Law § 110(3) and disapproving the DPA. NYT’s request for a rehearing was denied. NYT commenced a CPLR article 78 proceeding, which Supreme Court transferred to the Appellate Division. The Appellate Division reversed, holding the PSC lacked jurisdiction. The Court of Appeals granted the PSC’s motion for leave to appeal.

    Issue(s)

    Whether the Directory Publishing Agreement (DPA) between New York Telephone and NYNEX IRC constitutes a “management contract” under Public Service Law § 110(3), thereby granting the Public Service Commission (PSC) the authority to disapprove it if not in the public interest.

    Holding

    Yes, because the DPA grants NYNEX IRC total control over and responsibility for the management of New York Telephone Company’s directory business, and the PSC’s determination that the DPA is not in the public interest has a rational basis.

    Court’s Reasoning

    The Court rejected NYT’s narrow interpretation of ‘management contract,’ stating that it isn’t limited to contracts delegating total control over an entire business. The Court emphasized the legislative intent behind § 110(3): preventing utilities from insulating themselves from regulatory control through contractual devices to divert profits at the expense of ratepayers. The Court found that the DPA gave NYNEX IRC total control over NYT’s directory business, including staff, systems, and customer lists. NYNEX IRC assumed responsibility for providing directory services consistent with NYT’s policies. The payment structure, where NYT relinquished profits over a stipulated sum, was considered a payment for NYNEX IRC’s management services. The Court distinguished Matter of General Tel. Co. v. Lundy, clarifying that it didn’t preclude directory service contracts from being ‘management contracts’ under § 110(3); the key factor is the degree and nature of control delegated. The Court deferred to the PSC’s expertise in determining whether the DPA was in the public interest, finding substantial evidence to support the PSC’s findings that the base level earnings figure was understated, the growth and inflation factors were inaccurate, and the impact of competition was not properly considered. The Court stated, “Like the setting of utility rates, the question of whether a given contract is contrary to the public interest is a matter presenting ‘technical problems which have been left by the Legislature to the expertise of the PSC’.” Because the PSC’s determination had a rational basis and reasonable support in the record, it was upheld.

  • Consolidated Edison Co. v. Town of Red Hook, 60 N.Y.2d 99 (1983): Local Laws Inconsistent with State Regulation are Preempted

    Consolidated Edison Co. v. Town of Red Hook, 60 N.Y.2d 99 (1983)

    A local law is invalid if the state legislature has preempted the field of regulation, or if the local law is inconsistent with a general state law.

    Summary

    Consolidated Edison (Con Ed) sought to build a power plant and began site studies. The Town of Red Hook then enacted a local law requiring a license from the town to conduct such studies, effectively allowing the town to block the studies based on local concerns. Con Ed challenged the law, arguing that it was preempted by state law (Article VIII of the Public Service Law), which established a comprehensive state-level review process for power plant siting. The New York Court of Appeals held that the local law was invalid because the state legislature had preempted the field and because it was inconsistent with the state law.

    Facts

    In March 1978, Consolidated Edison announced proposed sites for a new power plant, including one partly in the Town of Red Hook.
    In response, in May 1978, the Town of Red Hook enacted Local Law No. 2, requiring a license from the town board to begin a site study for a power plant.
    Applicants for the license had to pay a fee and submit detailed data. The town could reject the application if the activities were detrimental to town property, residents, wildlife, or ecology, or inconsistent with the town’s land use plan and zoning regulations.

    Procedural History

    Con Ed sued the Town of Red Hook seeking a judgment declaring Local Law No. 2 invalid as it applied to major steam electric generating facilities, arguing it conflicted with the Public Service Law.
    Special Term found the local law a valid exercise of the town’s authority.
    The Appellate Division affirmed, reasoning that the state law only precluded a municipality from imposing conditions on the construction or operation of a major steam facility with respect to which an application for a certificate had been filed.

    Issue(s)

    Whether Local Law No. 2 is invalid because the State Legislature, by Article VIII of the Public Service Law, has preempted the field of regulation concerning the siting of major steam power plants.
    Whether the local law is inconsistent with the state statute.

    Holding

    Yes, Local Law No. 2 is invalid because the Legislature has preempted such local regulation in the field of siting of major steam electric generating plants.
    Yes, Local Law No. 2 is invalid because it is inconsistent with Article VIII of the Public Service Law, a general law.

    Court’s Reasoning

    The Court of Appeals found that the state legislature had demonstrated its intent to preempt local regulation in the field of siting major steam electric generating plants. This intent was implied from the Legislature’s declaration of state policy and the enactment of a comprehensive regulatory scheme in Article VIII of the Public Service Law.
    The Legislature stated that the purpose of Article VIII was to have the Siting Board balance all interests, including local interests, on a state-wide basis in a single proceeding. The Court cited the legislative history, noting the desire to replace the “uncoordinated welter of approvals” with a unified certification procedure.
    The Court also found the local law inconsistent with the state law. “Inconsistency is not limited to cases of express conflict between State and local laws.” Local Law No. 2 added further restrictions to an applicant’s ability to conduct site studies required by Article VIII and allowed the town to prohibit such studies altogether.
    The Court stated, “Defendants have, in effect, arrogated to themselves the power to determine, solely on the basis of local concerns, whether the site studies required for facilities within article VIII of the Public Service Law can be conducted.” The Court emphasized that the local law would allow communities to prevent applications from ever being filed, which was contrary to the state’s plan. The court emphasized that the purpose of the Public Service Law was “to provide for the expeditious resolution of all matters concerning the location of major steam electric generating facilities…in a single proceeding”. This goal would be undermined if each locality could impose its own requirements, potentially halting the project before it could be considered on a statewide basis.

  • Matter of Niagara Mohawk Power Corp. v. Public Serv. Comm’n, 37 N.Y.2d 156 (1975): Adequacy of Environmental Impact Statements for Utility Projects

    Matter of Niagara Mohawk Power Corp. v. Public Serv. Comm’n, 37 N.Y.2d 156 (1975)

    An environmental impact statement for a proposed utility transmission facility need not include detailed studies of every conceivable alternative route, provided the Public Service Commission develops a comprehensive record of the environmental impact of the chosen route.

    Summary

    Niagara Mohawk applied for a certificate to construct high-voltage transmission lines. After its initial route through a reservation failed, the Public Service Commission (PSC) approved an alternative route proposed by the Syracuse-Onondaga County Planning Agency (SOCPA), despite Niagara Mohawk not filing a full environmental impact statement for that specific route. Challengers argued that the lack of an impact statement for the chosen route violated the Public Service Law. The New York Court of Appeals held that a full impact statement for every alternative is not required, as long as the PSC develops a comprehensive record on the environmental impact of the certified route. The Court emphasized the balance between environmental concerns and the need for energy infrastructure.

    Facts

    Niagara Mohawk sought to build high-voltage transmission lines across several counties. Its primary proposed route through the Onondaga Indian Reservation was abandoned. The utility then presented other alternative routes, but without detailed environmental impact statements for each. SOCPA proposed an alternative route. The Hewlett Hills community objected to the SOCPA route. Niagara Mohawk provided descriptions of alternatives and explained why the primary proposal was deemed best. The PSC ultimately certified the SOCPA route.

    Procedural History

    The Public Service Commission approved the SOCPA route. The appellant, representing the Hewlett Hills community, challenged the PSC’s decision. The Appellate Division affirmed the PSC’s decision. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether the Public Service Law requires an applicant for a certificate to construct a utility transmission facility to prepare and submit a full environmental impact study for every alternative route proposed for the facility.

    Holding

    No, because the Public Service Law requires only a comprehensive record on the environmental impact of the route ultimately certified, not detailed impact studies for every conceivable alternative.

    Court’s Reasoning

    The Court reasoned that the Public Service Law strikes a balance between environmental protection and the need for new utility facilities. While an applicant must provide information on alternative routes, the law does not mandate detailed and expensive studies for every conceivable alternative. The applicant must provide descriptions of reasonable alternatives and explain why the primary proposal was deemed best. The Court emphasized that the PSC has a duty to develop a comprehensive record on the environmental impact of the line to be certified, citing Public Service Law § 128, subd 1. The Court stated, “As long as the commission developed a comprehensive record, as we believe it had, on the environmental impact of the line to be certified, the statutory purpose has been fulfilled.” The Court declined to impose a stricter requirement than that intended by the legislature. The decision reflects a pragmatic approach, recognizing the burden of requiring full impact statements for all alternatives and highlighting the importance of the PSC’s role in developing a comprehensive record. There were no dissenting or concurring opinions noted.