Opinion ID: 1942444
Heading Depth: 1
Heading Rank: 2

Heading: issues

Text: The gravamen of plaintiff's complaint is that: (1) the late charge is an arbitrary and discriminatory penalty that is imposed unjustly against those customers paying beyond the monthly due date; (2) the late charge penalty constitutes interest exceeding the maximum legal rate and, hence, is usurious; and (3) as usurious interest, the late charge also constitutes a deceptive trade practice proscribed by the Unfair Trade Practices and Consumer Protection Act.
As noted above, because public utilities enjoy monopoly status and are not subject to the competitive forces of the marketplace, public regulation of their affairs must act as a substitute to prevent a utility from dealing unfairly with its customers. Included in this public regulation is the prevention of unreasonable discrimination by the utility among its customers through various business practices (e. g., rebates, preferential charges, and service inequalities.) [4] While public utilities may reasonably distinguish among classes of customers by charging varying rates for varying services, any discrimination among customers as to the rate charged for the same service is uniformly considered impermissible. [5] Unlike many other states, Louisiana has no statute of statewide application that proscribes unreasonable discrimination by a utility in rate-making. However, the courts of this state have jurisprudentially adopted the generally prevailing rule that a utility's rate structure must be nondiscriminatory. [6] The Attorney General characterizes the late payment rate here in question as discriminatory, unjust, and confiscatory, on the ground that it imposes a penalty on the class of late payers in excess of expenses incurred by NOPSI as a result of the delay of that group in paying its bills. He further alleges that this discrimination works a particular hardship on those customers living on fixed incomes that are payable only once a month (e. g., Social Security recipients, retired federal employees and service personnel and welfare recipients). Finally, the ruling of the Louisiana Public Service Commission, which has rate-making jurisdiction over utilities situated and doing business in other parts of the state, imposing a five per cent (5%) delinquency charge (rather than ten per cent, as here) on bills paid later than 25 days from the billing date (rather than ten days, as here) is cited as a persuasive standard of reasonableness to which NOPSI should be required to conform. Thus, the precise question here is whether the late charge billing practice employed by NOPSI comports with the standards of reasonableness required of classifications drawn among utility customers by a rate structure. In reviewing the reasonableness of the classification before us, appropriate deference is owed to the determinations made by the legislative body vested with rate-making authority. As noted above, the Council of the city of New Orleans is vested with the sole legal authority to regulate the rates charged by companies furnishing utility services in the city of New Orleans. Recognition of that authority requires that we limit our review to a determination of whether the late charge is reasonable and refrain from merely substituting our judgment for that of the Council. Cf. O. Pond, A Treatise on the Law of Public Utilities § 940 (1925). [7] Considering the arguments of the Attorney General in light of these principles, we are unable to declare that the late payment charge employed by NOPSI is unreasonable or unlawful. The billing practice used by NOPSI imposes the ten per cent (10%) penalty on a class of customers who have one characteristic in common, viz., they have failed to pay their monthly bill within ten days of the billing date. NOPSI incurs certain additional costs as a result of the failure of this group (or classification) of customers to pay promptly, and the late charge imposed on the late payers is designed to offset these expenses. According to the testimony of Michael Burns, the Manager of the Customer Accounting Division of NOPSI, the additional costs are incurred in the collection of overduce accounts in the field, reconnection of previously disconnected service, [8] uncollectible accounts, and the maintenance of security deposits. Mr. Burns' testimony also indicated that no substantial disparity existed between the expenses thus incurred and the total revenue produced by the late charge. [9] Thus, it cannot be said that NOPSI enjoys a substantial profit as a result of its late billing practice. [10] It is argued that fairness requires that all NOPSI customers bear the expenses described above, rather than the class that includes only late payers. However, those expenses are not incurred by the class of customers that pays its bills promptly; thus, it is hardly unreasonable to free this group from the obligation to defray expenses for which they are not responsible. Moreover, testimony given by John H. Erwin, Treasurer and Assistant Secretary of LP&L, in the district court demonstrates that, contrary to the charges of the Attorney General, a disproportionately small number of overdue accounts are those of customers below the statistical poverty level. In fact, Mr. Erwin determined from his statistical study that low income customers were beneficiaries rather than victims of the late payment charge, since wealthier customers with larger accounts were generating a disproportionately large portion of the revenues from late payments charges. Thus, he concluded that, if the late charge billing practice was terminated and the expenses incurred from late payments evenly distributed among all customers by a general rate increase (as has been suggested by the Attorney General), lower income customers would bear a greater proportion of these costs than they now do. The evidence is also clear that it was the common practice of both NOPSI and LP&L to adjust the monthly due dates of customers on small, fixed incomes who suffered hardships under the due dates previously assigned them. In sum, there is no evidence to substantiate the charge that the ten per cent penalty works a harsh discrimination against lower fixed income customers. Finally, in noting the ruling of the Louisiana Public Service Commission offered by the Attorney General as an alternative to the billing procedures employed here, it suffices to say that the existence of another method of collection does not preclude our determination that the method before us is nonetheless reasonable. The choice of which of two or more reasonable methods should be employed remains the Council's. Our review is limited to a determination of whether the method chosen was reasonable, not whether it was the most desirable of those available. Having made that determination, we need not consider the merits of the alternative proposed.
In characterizing the late charge as usurious interest, the Attorney General relies upon article 1935 of the Louisiana Civil Code, which provides: The damages due for delay in the performance of an obligation to pay money are called interest. The creditor is entitled to these damages without proving any loss, and whatever loss he may have suffered he can recover no more. Based upon this definition, it is argued that the late charge constitutes ... damages due for delay in the performance of an obligation to pay money .... As interest, the late charge may not exceed eight per cent (8%) of the principal debt, La.Civil Code art. 2924 (1870), as amended by Acts 1972, No. 454, § 9; hence, the ten per cent (10%) late charge is said to constitute usurious interest. This argument overlooks the clear language of article 2924 of the Civil Code and the settled jurisprudence of this state, both of which are to the effect that the usury statutes apply to loans but not to consumer credit sales. Id.; e. g., Motes v. Van Wagner, 188 So.2d 704 (La.App. 4th Cir. 1966) and cases cited therein. As a sale of commodities (i. e., electricity and gas), the monthly billing by NOPSI clearly constitutes a consumer credit sale rather than a loan. Consumer credit sales are ordinarily governed by the Consumer Credit Law. La.Acts 1972, No. 454, § 1, enrolled as La.R.S. 9:3510-9:3568 (Supp.1974). However, recognizing that utility rates are fully regulated by other means, the Consumer Credit Law specifically excludes such rates from its operation. [11] Thus, the appropriate basis for regulation of utility rates is neither the usury statute nor the Consumer Credit Law; properly, regulation of public utility rates, including charges for delayed payment, rests solely with that agency or subdivision of the state vested with authority to supervise the operation of the utility, subject to judicial review of the reasonableness of the regulation. Hence, the charge that the late charge billing practice employed by NOPSI constitutes usurious interest is unfounded.
The final complaint offered by the Attorney General is that, as usurious interest, the late charge billing practice also constitutes a deceptive trade practice proscribed by the Unfair Trade Practices and Consumer Protection Law. La.Acts 1972, No. 759, § 1, enrolled as La.R.S. 51:1401-51:1418 (Supp.1974). Since, as noted above, the late charge is not usurious interest, this charge is also unfounded. Moreover, public utilities are exempt from regulation by the Act. Id. 51:1406.