Abrams v. Consolidated Edison Co. of New York, Inc.

fuel costs, amounting to over $800,000 per day and representing approximately a 10% rate increase for the average utility customer, through to its ratepayers. On November 3, 1980, the Attorney-General of. the State of New York and 25 of Con. Ed.’s ratepayers filed a complaint and petition with the PSC seeking to prevent Con. Ed. from passing the replacement power costs along to its consumers. It was urged that the fuel adjustment clause (FAC), a mechanism included in a utility’s tariff that allows rates to reflect changes in the cost of fuel a utility has purchased with which to generate electricity, should not function automatically here because Con. Ed. was responsible for the outage. Although the PSC denied petitioners’ request, it ordered an investigation into the cause of the October 17, 1980 outage and directed that all fuel adjustment charges billed to consumers, based on replacement fuel costs for Con. Ed.’s Indian Point II generating station after October 16, 1980, were subject to being refunded. After the PSC refused to grant petitioners a rehearing, petitioners initiated the instant proceeding seeking, inter alia, a temporary restraining order and a preliminary injunction enjoining Con. Ed. from collecting the increased charges. Special Term denied the requested injunctive relief and dismissed the petition, giving rise to this appeal. Initially, petitioners maintain that respondents unlawfully invoked the FAC. In their view, proper application of the FAC is limited to reflecting only those increases and decreases in fuel prices over which the utility has no control. Their distinction between increases due to “market forces” and other cost factors, such as changes in the generation mix, however, is unsupported by either precedent or policy concerns. Moreover, if adopted, the principle they espouse . would prohibit a utility from recouping increased expenditures made while one generator was temporarily shut down for even routine repairs or maintenance if a less efficient or more expensive replacement generator was pressed into service. Utilities would have a reduced incentive to maintain or improve existing facilities, an anomalous result. Such a restrictive notion of the FAC redounds to the benefit of neither the consumers nor the utility. And if, as petitioners claim, additional fuel costs have been imprudently incurred, they are not remediless, for both the PSC’s regulations (16 NYCRR 136.58) and subdivision 12 of section 66 of the Public Service Law afford the commission ample authority to deter a utility from burdening its customers with fuel cost increases stemming from imprudent management. In fact, resolution of the question of managerial imprudence is not sought here, for that very issue is currently being pursued by the Attorney-General in a separate proceeding.^[1] Petitioners’ remaining attack is that the magnitude of the increased rates was such that there was a “major change” in rates within the meaning of subdivision 12 of section 66 of the Public Service Law and any such change is lawfully ineffective without a hearing and appropriate notice. Subdivision 12 of section 66 requires 30 days’ notification to the PSC and public notice when a proposed rate increase contemplates a revenue increment exceeding the greater of $100,000 or 2Vfe% of the utility’s gross revenues. However, increases in fuel adjustment charges are not subject to these mandatory notice and hearing provisions. In the case of Trustees of Villages of Saugerties & Ellenville (15 PSC 431, 433), the PSC observed: “Rate schedules consist not merely of lists of rates in dollars and cents but they customarily include provisions that will, in various ways, affect the rates charged at the time of filing or thereafter. A fuel