Utility refunds for overcharges in jeopardy

Real Estate Weekly, Sept 22, 1993 by Martin C. Seham

There is a movement afoot to limit the authority of the Public Service Commission in making adjustments that would correct faulty calculations of past charges. This new proposal would be limited to those aspects of the utilities pricing which are normally calculated "automatically". A good example of this type of adjustment would be the fuel adjustment clause in the typical electric company billing. With the commission needing more and more total reliance on automatic adjustments, the suggestion that a specific time limitation or "statute of limitations" should cause increasing concern among major utility customers.

In the relatively little decisional law on the issue, the commission has used a "rule of reason" in determining how far back it will go in pursuit of utility refunds due to adjustment errors. Some commentators have suggested a six-year statute of limitations - a figure which would have limited the actual scope of the commission's investigation in at least one major instance. Over the dissent of a few of its members, the majority of the prestigious City Bar Committee on Energy have proposed the imposition of some specified number of years as compared to the commission's current rule of reason.

The obvious purpose of this proposed limitation on the commission's authority is to save money for the utilities. The corresponding fact is that it will cost more money to the consumers and, particularly, to major customers to whom utility service is a significant part of their operating costs.

It has not been shown that the commission's rule of reason has inflicted any hardship on the utilities. On the other hand, a specific statute of limitations would "wash out" legitimate claims forever. The fact is that six years may just not be enough leeway to discover, investigate, and authenticate the overcharges. The passage of time is certainly no burden to the utility which may continue to enjoy the benefit of the erroneous determination until the Commission rules otherwise.

Another reason why the arbitrary cutoff is inappropriate arises out of the concerns of major investors/consumers for the actual operating costs of their often massive properties. It certainly wouldn't be good management or conducive to the economic health of New York City for building management to calculate future costs on the basis of perceptively wrong past costs.

The adoption of a rule setting a specific time for the expiration of these claims could be a substantial windfall to the utility at the expense of the customer. It is another one of those complex details which could cost million of dollars and require the unwavering vigilance of OCER.