Summary
In Norman, 406 N.E.2d at 494, the municipal utility (Cincinnati Gas & Electric, i.e., "CG&E") had "backbilled" several customers for periods of one to six years, in amounts from $65 to $1,741 each, and those customers (i.e., Norman plaintiffs) filed a complaint with the Public Utilities Commission of Ohio (PUCO) and appealed to the Ohio Supreme Court, arguing that CG&E's regulations limited its backbilling to a two-month period.
Summary of this case from Nibco Inc. v. City of LebanonOpinion
Nos. 79-475 and 79-486
Decided June 18, 1980.
Public Utilities Commission — Complaints as to service — Utility may backbill customers — One-year limitation unreasonable — Service regulations — Interpreted, how — Utility's nondiscovery of improper metering — Not permissible factor in determining reasonableness of backbilling, when.
1. It is neither unlawful nor unreasonable for the Public Utilities Commission to interpret a utility's service regulations in light of the statutory scheme for regulating that utility.
2. In the absence of statutory authority, the Public Utilities Commission cannot limit a utility's practice of backbilling to one year based on a determination that the utility should have discovered within that period that the service was not being properly metered.
APPEALS from the Public Utilities Commission.
Cincinnati Gas Electric Company (CG E) provides gas and electric services to approximately 296,000 and 496,000 customers, respectively. Every year, due to malfunctions, damage, or intentional tampering, some customers are not billed for all the service they receive. Between July 1, 1976, and August 1, 1977, 1,114 of these customers were billed (backbilled) for unmetered consumption. Fifty percent of metering problems are detected and corrected within six months and 90 percent are detected and corrected within 12 months. The total amount billed for the 13-month period was $140,000.
Although CG E could take certain steps to discover malfunctioning meters more quickly, there is no certainty that such action would aid in discovering errors earlier and there is a chance that the additional workload would impede such efforts. In addition, there are several legitimate factors which impede early detection of defective meters.
The utility has been backbilling since the 1940's, but in 1975 it formed a committee to study the problem, and, in July 1976, a plan was implemented standardizing procedures and policies to be followed in backbilling.
On June 17, 1977, Consumers' Counsel filed a complaint with the Public Utilities Commission, on behalf of Richard Ihlendorf and six others, alleging that within the preceding ten months each had been backbilled by CG E for unmetered consumption. The commission, by entry dated July 13, 1977, determined that the matter should be treated as a complaint filed pursuant to R.C. 4905.26, and ordered the utility to satisfy the complaint or file an answer within 15 days. After an unsuccessful motion to dismiss, based on Consumers' Counsel's alleged lack of statutory authority to bring such action, the utility answered and a hearing date was set.
Prior to the hearing, the commission allowed 14 parties, including the city of Cincinnati, acting on its own behalf as a consumer of CG E's services, to intervene because it appeared that their claims might involve questions of law and fact common to those of the original claim. Complainants alleged that they had been backbilled as a part of the plan implemented in 1976 to police and bill for unmetered consumption.
At the hearing it was established that the 20 complainants (the city having no actual complaint of backbilling) had been backbilled for various reasons.
Four people — Joanne Gullett, Carol Ihlendorf, Hazel Malott, and Geneva Stuckey — were billed for electrical service which had not been previously billed due to internal malfunctions in the meters. Four others — Kathy Shearer, William Phillips, Ruth Gallagher, and Orlean Randolph — were billed for electrical service which had not been metered due to what was asserted to be externally caused problems (although no fault was placed on these persons).
Eight people — Catherine Hummeldorf, Herbert Norman, Leda Corn, George Singer, James Winters, Edward Midgett, Ethel Royston, and Jannith Ash — were backbilled for gas service which had not been measured due to malfunctioning gas meters.
Two complainants — Paine Learning Aids Center and Joseph Grasso — were backbilled for electrical service which had not been billed because the meters had been strapped (intentionally by-passed). No charges have been brought against either complainant, nor has wrongdoing been alleged on their part.
Wayne Bollman was backbilled due to undercharges which occurred because his meter was not large enough to measure the increased usage of electricity caused by the addition of an electric furnace to his residence. Bollman claimed that he had notified CG E of the change, but the utility denied having any record of such notice. Virginia Bradley was backbilled for service which had not been charged because CG E had neglected to read one of two gas meters for her residence.
Paine Learning Aids, Grasso and Winters were billed for commercial use. The others were billed for residential use.
The billings were for periods of from one to six years, and the amounts backbilled ranged from $65.17 to $1,741.21. Except in the cases of Bollman and Bradley, where actual unbilled usage could be determined, the bills were for estimated usage based on actual consumption over a period of time before or after the period of unmetered service.
Ronald L. Campbell, director of CG E's revenue recovery program, testified that a 30 to 60 day period was normally used as it had proven to be accurate. Adjustments were then made in the estimates for seasonal changes and for temperature variations between the unmetered period and the estimate period.
After usage was estimated, the relevant charges for the unmetered period and any relevant fuel adjustment amounts were used to compute the total amount of the bill. CG E's gas department director, residential division, testified that, in addition, the total amount was reduced based on the customer's oral representation of changed circumstances.
At one time, CG E charged the residential customers it backbilled, who used less than 1,000 kwh, the average rate for residential service instead of the specific applicable rate. The average rate is lower than the applicable rate for such users. According to CG E's counsel this practice has been discontinued due to the utility's statutory duty to bill customers equally.
The backbilled amount could be paid in installments for a period equal to that for which service went unmetered and apparently, if need arose, for an even longer period of time. The utility made many of the backbilled customers sign an agreement to repay which waived notice of default and authorized termination of service for non-payment of an installment. This agreement has been modified to require the utility to give notice of a termination of service.
The commission found that bills were not uniformly estimated and ordered that a uniform procedure be established and included in CG E's tariff, along with provisions regarding its backbilling procedure. The commission also ordered "[t]hat CG E file, for commission approval, a policy statement to be circulated to company employees responsible for contacting customers about overdue bills." The purpose of this statement is to protect the customers from coercive conduct. Neither of these orders has been appealed by the parties.
The ruling by the commission, which is for the 1976 plan only, stated that the utility could backbill, placing a limitation of one year on such backbilling for residential customers, but not for those complainants who had benefitted from intentionally tampered-with meters. In its second entry on rehearing, the commission ruled that as to complainant Winters, the only commercial user who had not benefited from intentional tampering, there should be no limitation on backbilling because his claim of ignorance of the fact his bills were abnormally low was not persuasive.
In Am. Sub. H.B. No. 1111, the General Assembly enacted R.C. 4933.28, effective January 12, 1979. That statute places a one-year limitation on backbilling. Although not directly applicable to the complaints before the commission which arose out of backbilling during 1976 and 1977, the commission cited this statute in support of its determination to limit CG E's backbilling practices to one year for residential customers.
In case No. 79-475, Norman, Stuckey, Randolph, Singer, Winters, Midgett, Royston, Ash, Paine Learning Aids, Grasso, Gallagher, Malott and Bradley have appealed that part of the order of the commission which allowed backbilling in any form for gas use and beyond two months for electrical use.
In case No. 79-486, Cincinnati Gas Electric has appealed that part of the order of the commission limiting backbilling to one year in the case of innocent residential and commercial customers.
The causes are now before this court as matters of right.
Messrs. Frost Jacobs and Mr. W. Joseph Dehner, Jr., for Norman et al., appellants in case No. 79-475 and intervening appellees in case No. 79-486.
Mr. R. Gregory Park, for appellant Gallagher in case No. 79-475 and intervening appellee in case No. 79-486.
Mr. John D. Woliver, for appellant Malott in case No. 79-475 and intervening appellee in case No. 79-486.
Messrs. Squire, Sanders Dempsey, Mr. Alan P. Buchmann, Mr. William J. Moran, Mr. James J. Mayer and Ms. Kathleen M. Brinkman, for Cincinnati Gas Electric Co., appellant in case No. 79-486 and intervening appellee in case No. 79-475.
Mr. William A. Spratley, consumers' counsel, Mr. Richard L. Goodman, Mr. Michael D. Cotleur and Ms. Gretchen J. Hummel, for intervenor-appellee Consumers' Counsel in case No. 79-486.
Mr. William J. Brown, attorney general, Mr. Marvin Resnik and Mr. Thomas L. Mumaw, for appellee Public Utilities Commission in both cases.
Although the opinion and order of the Public Utilities Commission herein is written in terms of the specific parties before the commission, we determine that it must constitute statements of rate and charge policy. The commission is not a collection agency, but rather an overseer of the rates and charges of a utility as they apply to the utility's customers in general. We interpret the commission's order to hold that in cases of residential customers and in those cases where a commercial customer can show excusable ignorance of the fact his bills are abnormally low, there shall be a one-year limitation on backbilling. In cases involving other commercial customers and where intentional tampering is evident, no such limitation is imposed.
The commission has the authority to rule on backbilling pursuant to R.C. 4905.26 and 4905.37. Under R.C. 4905.26, upon written complaint against a public utility "that any rate, fare charge, toll, rental, schedule, classification, or service, or any joint rate, fare, charge, toll, rental, schedule, classification, or service rendered, charged, demanded, exacted, or proposed to be rendered, charged, demanded, or exacted, is in any respect unjust, unreasonable, unjustly discriminatory, unjustly preferential, or in violation of law***if it appears that reasonable grounds for complaint are stated, the commission shall fix a time for hearing and shall notify complainants and the public utility thereof, and shall publish notice thereof in a newspaper of general circulation in each county in which complaint had arisen."
R.C. 4905.37 authorizes the commission to make necessary changes and prescribe them by order if it finds, after a hearing held upon a complaint under R.C. 4905.26, that the practices of the public utility are unjust or unreasonable. Pursuant to this provision, the commission imposed a one-year limitation on backbilling, thus allowing limited backbilling.
Under R.C. 4903.13 this court may reverse, vacate or modify commission orders. As this court stated in Arcadia Tel. Co. v. Pub. Util. Comm. (1979), 58 Ohio St.2d 180, at page 183:
"The scope of review required on an appeal from the Public Utilities Commission, mandated by R.C. 4903.13, dictates that an order of the commission will be overturned where, upon a consideration of the record, that particular order is either unreasonable or unlawful."
It is within these parameters that we must determine the questions before us.
Case No. 79-475
Appellants argue that CG E can only backbill when the procedure is specifically enumerated in its service regulations. The only specific mention of backbilling in CG E's applicable gas and electric tariffs is in its electric service regulations, and that provision limits backbilling to a period of two months. As a consequence, appellants contend that CG E can only backbill for electrical usage, such backbilling being limited to a two-month period.
This specific mention of backbilling states as follows:
"Company, for the mutual protection of Customer and Company, will make periodic tests of the meter or meters used in measuring the electricity furnished to Customer, and will test a meter or meters upon the written request of a customer. The meter or meters shall be tested and if found inaccurate, shall be restored to an accurate condition or a new meter or meters shall be substituted. Any meter tested and found to be registering not more than two percent (2%) either above or below normal shall be considered to be correct and accurate.
"If as a result of any test any meter is found to register in excess of two percent (2%) either above or below normal, then the registration of any electricity for the period of the preceding regular billing month and the part of the month from the last regular meter reading to the date of the test shall be corrected according to the percentage of inaccuracy so found, unless a test was made during this period, then in such case the correction shall be made to the registration of electricity for the period between these tests. Company will refund any overcharges if the meter is found to be fast and customer will pay the undercharges if the meter is found to be slow."
Contrary to appellants' contention, this provision, which limits backbilling to two months, does not apply to the case where the company discovers meter malfunctioning because of abnormally low charges, but, rather, applies only to meters found to be malfunctioning when a periodic random test is performed. Such a limitation makes sense when a malfunction is discovered through random testing, because the utility is not able to determine when the meter began to malfunction.
On the other hand, when the meter malfunction is discovered due to abnormally low bills, the utility is able to determine that the malfunction occurred for at least the length of time during which the differential between normal and abnormal bills was apparent. Any period of slight variation which is not accounted for is held in the consumer's favor. As a consequence, where abnormally low bills are involved, a two-month limitation is not in order.
In both CG E's electric and gas tariffs there is no specific provision regarding backbilling made necessary because of metering problems discovered by means other than random, periodic checks. The commission properly ruled such backbilling permissible.
R.C. 4909.17 states, in part, that:
"No rate, joint rate, toll, classification, charge, or rental, no change in any rate, joint rate, toll, classification, charge, or rental, and no regulation or practice affecting any rate, joint rate, toll, classification, charge, or rental of a public utility shall become effective until the public utilities commission, by order, determines it to be just and reasonable, except as provided in this section and sections 4909.18 and 4909.19 of the Revised Code. * * *"
In each of CG E's applicable service regulations, which were approved by the commission, there is a provision which states that "[s]ervice is supplied under a given Rate Schedule." (Paragraph 6 of the 1976, 1974 and 1954 Electric Service Regulations; Paragraph 6 of the 1976, 1973 and 1955 Gas Service Regulations.) Each regulation also states that "upon the registration of said meter or meters all bills will be calculated." (Paragraph 19 of the 1976 and 1974 Electric Service Regulations and Paragraph 21 of the 1954 Electric Service Regulations; Paragraph 19 of the 1976 Gas Service Regulations and Paragraph 20 of the 1973 and 1955 Gas Regulations.)
There is an ambiguity present in these regulations. If billing is based on a malfunctioning meter, service is not supplied under a given rate structure.
It is neither unlawful nor unreasonable for the commission to interpret a utility's service regulations in light of the statutory scheme for regulating that utility.
R.C. 4905.32 states in relevant part:
"No public utility shall charge, demand, exact, receive, or collect a different rate, rental, toll, or charge for any service rendered, or to be rendered, than that applicable to such service as specified in its schedule filed with the public utilities commission which is in effect at the time."
R.C. 4905.33 provides:
"No public utility shall directly or indirectly, or by any special rate, rebate, drawback, or other device or method, charge, demand, collect, or receive from any person, firm, or corporation a greater or lesser compensation for any services rendered, or to be rendered, except as provided in Chapters 4901, 4903, 4905, 4907, 4909, 4921, 4923, and 4925 of the Revised Code, than it charges, demands, collects or receives from any other person, firm, or corporation for doing a like and contemporaneous service under substantially the same circumstances and conditions.* * *"
These two sections require the service regulations, as approved by the commission, to be interpreted to allow backbilling. The provision regarding billing, based on registration of the meter, must be read to presume the presence of an accurate meter.
That part of the order of the commission permitting CG E to backbill customers is not unlawful or unreasonable and it is hereby affirmed.
Case No. 79-486
Under R.C. 4905.37, "[w]henever the public utilities commission is of the opinion, after hearing had upon complaint * * * served as provided in section 4905.26 of the Revised Code, that the rules, regulations, measurements, or practices of any public utility with respect to its public service are unjust or unreasonable * * * the commission shall determine the regulations, practices, and service to be installed, observed, used, and rendered, and shall fix and prescribe them by order to be served on the public utility."
Based on the finding that backbilling innocent parties beyond a one-year period would be unjust and unreasonable, the commission ordered a one-year limitation on backbilling for residential customers. The commission could, pursuant to R.C. 4905.37, order this limitation on backbilling after it had found that CG E's service regulations permitted the practice of backbilling; however, the limitation must be reasonable under the facts before the commission.
The factors cited by the commission for this determination are the potential inaccuracy of estimates based on a 30 to 60 day period which, when used for more than a year of backbilling, become unjust for an innocent party, and the hardship involved in billing for service for over a year.
The fact that R.C. 4933.28 was enacted and has since imposed a one-year limitation on backbilling is irrelevant to the determination of whether the commission's order is unreasonable or unlawful. The General Assembly was not bound by the dictates of the statutory scheme in enacting a new statute. The legislature can alter the statutory scheme, the commission may not.
R.C. 4905.32 through 4905.35 make it clear that normally all charges for service rendered must be under the applicable rate structure. However, considerations of unfairness and unreasonableness appear to be imposed upon these sections. These considerations, though, relate to the public served by the utility, and not just to the customers being backbilled.
The commission was clearly most concerned with fault in the case at bar. It found that beneficiaries of meter strapping and commercial users had contributed to the underbilling and, as a consequence, it imposed no limitation on the backbilling of such customers. It imposed the one-year limitation on the billing of Bollman and Bradley even though their bills were not estimated, but were based on actual usage. The commission did so apparently because it determined that the utility should have discovered the underbilling within a one-year period.
In the absence of statutory authority, the Public Utilities Commission cannot limit a utility's practice of backbilling to one year based on a determination that the utility should have discovered within that period that the service was not being properly metered.
Public utilities are not like private corporations. To apportion loss as the utility commission proposed to do merely spreads the cost of the unbilled service to all the utility's customers, rather than to the customers who actually used the service the utility provided. The parties at fault do not pay, the public does. As a consequence, it was unreasonable for the commission to consider the utility's practice in determining the fairness and reasonableness of backbilling.
Because the fault of the utility can not be considered, the innocence of the customer is only relevant in the consideration of hardship. The commission viewed payment for unbilled service beyond a year as being unfairly harsh to the customer who could not be expected to know, or who justifiably did not know, of the undercharge. While consideration of unfair hardship might be a valid factor in determining fairness of the backbilling practice, the facts before the commission can not justify imposition of the one-year limitation.
The customers who were backbilled were allowed to make their payments in installments over a time period equal to that for which the service went unmetered. They received both the unbilled service and the use of their money which they would have had to pay CG E had their bills reflected their total actual usage. Unfair hardship would exist only if the estimates were inaccurate.
There has been no showing that the estimation process is inherently inaccurate. On the contrary, CG E accounted for seasonal changes and variations in temperature. It reduced bills based on oral representations of changed circumstances.
As a consequence, we find unreasonable the determination of the commission that hardship and inaccuracy justify the imposition of a one-year limitation on CG E's backbilling practices for some customers.
There being no other basis for the commission's order imposing a one-year limitation on CG E's backbilling practices, we must reverse that part of the commission's order.
Order affirmed in part and reversed in part.
HERBERT, W. BROWN, SWEENEY and HOLMES, JJ., concur.
LOCHER, J., concurs in part and dissents in part.
VICTOR, J., of the Ninth Appellate District, sitting for P. BROWN, J., after oral argument recused himself.
R.C. 4909.17 provides, in pertinent part: "No rate, joint rate, toll, classification, charge, or rental, no change in any rate, joint rate, toll, classification, charge, or rental, and no regulation or practice affecting any rate, joint rate, toll, classification, charge, or rental of a public utility shall become effective until the public utilities commission, by order, determines it to be just and reasonable* * *." Backbilling is clearly a practice affecting a charge and, as such, requires prior commission approval before the implementation of that practice by a utility company.
The majority opinion quotes paragraph 20 of Cincinnati Gas Electric's (CG E) service regulations, which regulation limits backbilling for electric service to a period of two months. Unfortunately, the majority finds that regulation inapplicable to this cause. Although the service regulation may be ambiguous, it should apply in this case. We have held that where the meaning of a tariff is ambiguous, it is to be construed in favor of the consumer. Saalfield Publishing Co. v. Pub. Util. Comm. (1948), 149 Ohio St. 113. Today's decision construes the tariff in favor of the very entity that drafted and caused any ambiguity, rather than the consumer who suffers from this construction.
With regard to gas service, a CG E tariff provides:
"Gas will be measured by a meter or meters to be installed by Company upon Customer's premises at a point most convenient for Company's service, and upon the registration of said meter or meters all bills will be calculated." (Emphasis added.)
The tariff allows for billing only for gas service actually registered on a meter. Where no service registers on the meter, there can be no billing under the clear and unambiguous language of the company drafted tariff. Although this may seem to be a harsh view, in actuality it appropriately places the burden on the utility company to make certain that its meters are kept in working order. If they fail in this task, the utility company, not the consumer, should bear the brunt of the financial loss.
I am in complete accord with the majority decision which denies to the commission the power to limit backbilling to one year. My disagreement with the majority is in their failure to apply the company drafted tariff to the practice of backbilling. My solace is that this factual setting presents one of limited application due to the enlightened action of the General Assembly in the enactment of R.C. 4933.28.
For the foregoing reasons, I respectfully dissent in part.