Court Opinion

ID: 5825083
Source: CourtListenerOpinion
Date Created: 2022-01-12 21:20:48.591852+00
Date Added: 2024-06-11T08:43:05.227032
License: Public Domain

OPINION OF THE COURT
Greenblott, J.
We are here concerned with two separate appeals but because of the similarity of issues we are considering them together.
The first appeal concerns an order of the Public Service Commission (PSC) issued on February 25, 1977 which provided, in pertinent part, that ”[a]ll utilities subject to the jurisdiction of this Commission shall discontinue the practice of utilizing material inserted in bills rendered to customers as a mechanism for the dissemination of the utility’s position on controversial matters of public policy”. Petitioner, Consolidated Edison Company of New York, Inc. (Con Edison), challenged the validity of that portion of the order and Special Term annulled the order to the extent that it prohibited Con Edison from utilizing bill inserts as a means of disseminating its views or controversial matters of public policy. Special Term concluded that there was no basis in the statutory powers accorded the PSC which would authorize the total ban of such inserts. We disagree.
The PSC has general powers of supervision and regulation over activities of gas and electric utilities. (See, e.g., Public Service Law, § 66.) The issue before us is whether, given these powers, the PSC may prevent management from expressing its political positions in a manner that is inevitably subsidized by the consumer, particularly when the PSC places no restrictions on advertisement by any other means. We hold that it may.
Con Edison does not dispute that the PSC has a duty to allocate costs for political advertising to accounts chargeable to shareholders (16 NYCRR ch 3, subch F, account 426.4). An obvious corollary of this duty is the requirement that consumers not be charged with the costs of these political activities. The PSC necessarily has the duty to protect consumers from such charges.
The PSC protests that, given the manner of airing its views chosen by Con Edison, it cannot fulfill that duty. We agree *368that it would be impossible to separate out the costs attributable to mailing the bills (a customer expense) from the costs attributable to mailing out management statements (a shareholder expense). Unless the PSC allocates all the costs of mailing as well as costs of stuffing the envelopes to the utility, management will benefit from a savings in postage and labor, a subsidy the PSC is empowered to prevent. That the mailings would not cost the consumers anything is irrelevant since the issue is whether management’s costs will be reduced through customer subsidy. In the battle of ideas, the utilities are not entitled to require the consumers to help defray their expenses.
We also reject the argument that the order is a violation of the utilities’ free speech rights. Since the PSC’s authority to issue the order and the necessity for doing so have been established, it is only a serious infringement of petitioner’s constitutional rights that would warrant our annulment of the order. Here, there is no order barring Con Edison from expressing its opinions, nor is there an order barring the company from using the usual forms of advertisement. There is merely an order prohibiting the use of bill inserts to put forth management positions. This insignificant impingement on petitioner’s rights is far outweighed by the PSC’s duty to prevent customer subsidy of management’s pamphleteering.
Nor do we view the order as being fatally vague. The order restricts only the utility’s use of the bill insert to express its "position on controversial matters of public policy”. The boundaries of the order need not be defined with utmost exactitude. We have little doubt that the PSC and the utilities are capable of distinguishing useful information for consumers (e.g., ways to conserve energy) from management’s statement on the political issues of the day (e.g., benefits of nuclear energy). Further the order clearly contemplates expenditures that would qualify under account 426.4 of the PSC’s accounting guidelines (16 NYCRR ch 3, subch F) as expenditures to influence public opinion. This is as detailed a statement of the contours of the order as the Constitution requires. Thus, the judgment entered March 6, 1978 must be reversed.
In the second appeal petitioner Central Hudson Gas & Electric Corp. (Central Hudson) cross-appeals from a judgment of Special Term insofar as the court dismissed its application to vacate that part of the order of the PSC issued on February *36925, 1977 which classified expenses for advertising designed to sway public opinion as nonoperational and, therefore, chargeable to shareholders and which prohibited promotional advertising by electric utilities. For the reasons hereinbefore mentioned so much of the judgment as annulled that portion of the PSC order banning the use of bill inserts as a means of disseminating the utility’s position on controversial matters of public policy should be reversed.
Concerning the prohibition of promotional advertising Central Hudson initially argues that no statutory authority empowers the PSC to order such a prohibition. The PSC relies on its statutory obligation to assure that rates charged are just and reasonable (Public Service Law, § 66) and upon subdivision 2 of section 5 of the Public Service Law which required the PSC to encourage corporations subject to its jurisdiction "to formulate and carry out long-range programs, individually or cooperatively, for the performance of their public service responsibilities with economy, efficiency, and care for the public safety, the preservation of the environmental values and the conservation of natural resources.” In justification, the PSC concluded that promotional advertising will increase the use of electricity causing spiraling price increases due to the fact that present rates do not cover the marginal cost of new capacity; that such advertising provides misleading signals that energy conservation is unnecessary; and that additional usage will increase the level of dependence on foreign sources of fuel oil. Considering the impact of promotional advertisement, the PSC is, in our view, statutorily empowered to prohibit such advertisement (Public Service Law, §§ 66, 5, subd 2).
Central Hudson also argues that the prohibition violates its right to free speech as guaranteed by the First Amendment to the United States Constitution. The Supreme Court has held that commercial speech falls within the protection of the First Amendment (Virginia Pharmacy B. v Virginia Consumer Council, 425 US 748). More recently, in a case where a prohibition was directed at speech itself, the Supreme Court held that the prohibition must be supported by a showing of a subordinating interest which is compelling and the burden is on the government to show such an interest (First Nat. Bank of Boston v Bellotti, 435 US 765). Upon our review of the record, it is the opinion of this court that the PSC has sufficiently demonstrated such an interest and, therefore, the *370prohibition of promotional advertising is not violative of Central Hudson’s First Amendment right to freedom of speech.
Expenditures for political and related advertising activities have normally been excluded from operational expenses in the rate-making process and consequently have been chargeable to shareholders rather than ratepayers (16 NYCRR ch 3, subch F, account 426.4). Central Hudson, however, argues against the expansion by the PSC of the definition of political and related advertising activities to include "all advertising which seeks to sway opinion—legislative, environmental, governmental, consumer or any other kind—to the industry’s position on public policy disputes”. Specifically included in this category by the PSC were expenses incurred in advertisements designed to influence public opinion concerning the development of nuclear energy. We agree with Special Term that the PSC may properly classify such expenditures pursuant to its rate regulating activities and that the expanded definition propounded by the PSC is not overly broad, arbitrary or capricious (see Southwestern Elec. Power Co. v Federal Power Comm., 304 F2d 29, cert den sub nom. Alabama Power Co. v Federal Power Comm., 371 US 924). We also find no constitutional infirmity in such categorization.
The judgment entered March 6, 1978 should be reversed, on the law, without costs, and the order declared constitutional.
The judgment entered March 14, 1978 should be modified, on the law, by deleting so much thereof as annulled the PSC’s directive; determination confirmed, and, as so modified, affirmed, without costs.