Court Opinion

ID: 9766385
Source: CourtListenerOpinion
Date Created: 2023-08-29 04:44:36.279761+00
Date Added: 2024-06-11T07:30:21.192158
License: Public Domain

LaVECCHIA, J.,
dissenting.
I would affirm the judgment of the Appellate Division substantially for the reasons expressed in the thorough and thoughtful opinion of Judge Skillman. In re Petition of New Jersey-American Water Co., 333 N.J.Super. 398, 755 A.2d 1192 (2000). The panel correctly analyzed First Amendment jurisprudence and rejected the Ratepayer Advocate’s broad claim that charitable giving by public utilities constitutes an impermissible compelled contribution to expressive activity. Id. at 409, 755 A.2d 1192.
*198In reversing the Appellate Division’s judgment, the majority does not reach the First Amendment issue raised by the Ratepayer Advocate. Instead, the majority reverses exclusively on the basis that the Board of Public Utility’s (BPU) policy that “permits a utility to include half of its charitable contributions as operating expenses for purposes of calculating its service rates,” ante at 184, 777 A.2d at 48, is arbitrary, capricious, and unreasonable. Because the Court fails to accord the BPU’s policy determination due respect under the appropriate standard of review, I respectfully dissent. I add only the following to the Appellate Division’s sound opinion.
I.
The Legislature has broadly delegated ratemaking authority to the BPU, authorizing the agency to approve rates so long as they are “just and reasonable.” N.J.S.A 48:2-21(d). Nearly fifty years ago, this Court in New Jersey Bell Telephone Co. v. Board of Public Utility Commissioners, 12 N.J. 568, 596-97, 97 A.2d 602 (1953), directed the BPU in the exercise of that authority by holding that the BPU must allow a public utility to include some charitable contributions in its operating expenses used to determine rates charged to customers. Since then, the BPU has applied a long-standing policy of allowing public utilities to apportion part of their charitable contributions to operating expenses borne by ratepayers. That agency policy choice, allowing utilities to include some charitable contributions as operating expenses, has remained steadfast. Traditional principles of administrative law counsel that that reasonable policy choice receive deference. In re Pub. Serv. Elec. & Gas Co.’s Rate Unbundling, Stranded Costs & Restructuring Filings, 167 N.J. 377, 384-85, 771 A.2d 1163 (2001); In re Petition of Jersey Cent. Power & Light Co., 85 N.J. 520, 527, 428 A.2d 498 (1982).
The Court is apparently “persuaded by the fact that forty states, either by statute, regulation, or case law, do not permit a utility’s charitable contributions to be treated as an operating *199expense.” Ante at 192, 777 A.2d at 53. By indiscriminately grouping together statutory, regulatory, and judicial disallowances of public utility charitable contributions, the majority overlooks a fundamental distinction relating to the respective institutional roles that were involved in those determinations. As the Appellate Division stated:
Although a majority of other states do not allow public utilities to treat charitable contributions as operating expenses, a minority do allow public utilities to include at least a portion of their charitable contributions in operating expenses. Furthermore, the states that prohibit public utilities from claiming charitable contributions as operating expenses generally consider the issue to be within the discretionary authority of the state’s public utility commission. Thus, the case law relied upon by the Ratepayer Advocate simply shows that other state public utility commissions have made a different policy choice than the BPU concerning this issue.
[In re Petition of New Jersey-American Water Co., supra, 333 N.J.Super. at 404, 755 A.2d 1192 (citations omitted).]
In nine of the ten cases from other jurisdictions that the Court cites, ante at 192-94, 777 A.2d at 52-54, the reviewing courts upheld the regulatory commission’s decision, ruling that the commission reasonably exercised agency discretion in excluding such contributions from a utility’s cost of service. Ala. Power Co. v. Ala. Pub. Serv. Comm’n, 359 So.2d 776, 780 (Ala.1978); Pac. Tel. & Tel. Co. v. Pub. Utils. Comm’n of Cal., 62 Cal.2d 634, 44 Cal.Rptr. 1, 401 P.2d 353, 374 (1965); Wash. Gas Light Co. v. Pub. Serv. Comm’n of D.C., 450 A.2d 1187, 1231 (D.C.1982); Ill. Bell Tel. Co. v. Ill. Commerce Comm’n, 55 Ill.2d 461, 303 N.E.2d 364, 375 (1973); S. Cent. Bell Tel. Co. v. Pub. Serv. Comm’n, 702 S.W.2d 447, 452 (Ky.Ct.App.1985); Cent. Me. Power Co. v. Pub. Utils. Comm’n, 153 Me. 228, 136 A.2d 726, 731 (1957); Chesapeake & Potomac Tel. Co. of Md. v. Pub. Serv. Comm’n of Md., 230 Md. 395, 187 A.2d 475, 485 (1963); Cleveland Elec. Illuminating Co. v. Pub. Utils. Comm’n of Ohio, 69 Ohio St.2d 258, 431 N.E.2d 683, 686 (1982); Carey v. Corp. Comm’n of Okla., 168 Okla. 487, 33 P.2d 788, 794 (1934). Thus, the majority largely relies on cases that respect the policy-making authority of a public-utility commission to support the majority’s determination here to overturn the *200BPU’s policy concerning inclusion of fifty percent of American Water’s charitable contributions in its operating expenses.
The Court simply reaches a different policy choice than the BPU concerning public utility charitable contributions, and then supplants the regulatory commission’s decision on that issue. In my view, the agency determination easily satisfies the arbitrary, capricious, and unreasonable standard that applies in this setting. The BPU’s order makes clear that the agency carefully considered and established the reasonableness of including a portion of a utility’s charitable expenses through a series of rate cases spanning many years. Hardly arbitrary, the BPU’s policy preference was fully articulated in it& order below:
In JCP & L Rates, the Board found that JCP & L’s contributions to charitable organizations resulted in direct and indirect benefits to the Company’s employees, customers, and communities in that such donations supported community service agencies used by JCP & L ratepayers and also universities and colleges located within or near the Company’s service area. While acknowledging ratepayer benefits, the Board also recognized that ratepayers have no say as to whether to contribute, how much to contribute or to what agencies contributions should be made. (Id.) To balance these competing concerns the Board adopted a % sharing of charitable contributions in the JCP & L proceeding. (Id).
This Board continues to believe that charitable contributions by a public utility benefit ratepayers sufficiently to warrant some degree of rate recognition as an expense related to a utility’s business operations. Indeed, a °% sharing recognizes that a utility’s customer benefit, either directly or indirectly, by virtue of contributions made to community funds, educational campaigns, and the like. Charitable contributions also enhance a utility’s standing and good will in a community and therefore benefit shareholders. A 5%o sharing policy properly balances ratepayer and stockholder interests.
Like the Appellate Division, I find the BPU decision to be well within the discretionary authority of the agency. The majority, on the other hand, finds “an insufficient nexus between [American Water’s] contributions and the claimed benefits to ratepayers to justify their inclusion in the utility’s rate petition.” Ante at 196-97, 777 A.2d at 55. A better conception of the necessary nexus between charitable contributions and corporate benefit can be gleaned from this Court’s landmark decision in A.P. Smith Manufacturing Co. v. Barlow, 13 N.J. 145, 98 A.2d 581 (1953), concluding that corporations are empowered legally to make charitable *201contributions. In that decision, the Court re-defined the concept of legitimate corporate benefit in connection with charitable contributions. Kenneth J. Yerkes, Note, Corporate Charitable Contributions: Expanding the Judicial Analysis in a Post-Economic Recovery Act World, 58 Ind. L.J. 161, 175 n. 101 (1982). A.P. Smith did not “remove either the language of, or the need for, some corporate benefit in the contribution, although clearly the term was given a profoundly new meaning.” Id. at 168, 98 A.2d 581.
The Court determined that “more and more [corporations] have come to realize that their salvation rests upon sound economic and social environment[.]” A.P. Smith, supra, 13 N.J. at 154, 98 A.2d 581. Contributions to schools, churches, hospitals, and civic improvement funds, for examples, id. at 151, 98 A.2d 581, may “be readily justified as being for the benefit of the corporation; indeed, if need be the matter may be viewed strictly in terms of actual survival of the corporation in a free enterprise system.” Id. at 154, 98 A.2d 581. Accordingly, farsighted corporations have sought through various types of contributions “to insure and strengthen the society which gives them existence and the means of aiding themselves and their fellows citizens.” Id. at 161, 98 A.2d 581. Corporate charitable contributions manifest “enlightened self-interest” in that
corporate executives now take a long-term view of then- companies’ relationships with the rest of society____[The corporate] benefit need not be immediate, direct, and tangible, and there need not be any explicit quid pro quo involved in corporate gifts. All that is necessary is an identifiable corporate benefit, be it deferred, indirect, and/or intangible.
[Hayden W. Smith, If Not Corporate Philanthropy, Then What?, 41 N.Y. L. Sch. L.Rev. 757, 763 (1997).]
Understanding the nature of corporate enlightened self-interest, the BPU’s judgment appropriately recognized that the benefits of a public utility’s charitable contributions inure to both ratepayer and shareholder. See Peter M. Sikora, Note, Charitable Contributions of Public Utilities: Who Should Bear the Cost?, 30 Case W. Res. L.Rev. 357, 373 (1980) (commenting that shared allocation of charitable contributions to both ratepayers and shareholders is *202necessary for equitable treatment of those expenses because “any approach which places the burden on one group to the exclusion of the other ignores the only persuasive rationale for allocating such burdens — those who benefit should bear the burden”). The allocation of charitable costs to both ratepayers and shareholders reflects an equitable distribution of cost to benefit:
If the ratepayers benefit from the contributions in the form of a better place in which to live and work, so too must the corporation and its shareholders benefit. It is quite probable that a community in which efforts succeed in malting it more stable and attractive is likely to retain current residents and attract new ones — all of whom represent potential new subscribers to the utility’s products and services. A growing customer base is generally a boon to any corporation and helps assure the continued value of the shareholders’ investment. Similarly, other benefits, such as lower finance costs and decreased vandalism, would accrue to ratepayers, shareholders, and the company alike. While ratepayers can expect lower costs, shareholders and the company can expect a more valuable and more easily transferable investment.

[Ibid.]

That corporations, such as American Water here, prefer local charities almost exclusively, confirms the notion that they seek a nexus between the contributions and strategic benefits to the organization. In requiring empirical-like proof of a close nexus between the charitable gift and ratepayer service, the majority misapprehends the nature of corporate giving generally and ignores the strategic benefits inherent in charitable contributions. The BPU policy choice is not only reasonable, but in my view it is preferable.
III.
Accordingly, I would affirm the Appellate Division’s judgment in this matter. The agency’s policy choice did not constitute an abuse of discretion. Moreover, concerning the First Amendment challenge brought by the Ratepayer Advocate, I rely on the decision below with one additional comment.
A misinterpretation by the Ratepayer Advocate should be corrected. The Appellate Division “assume[d] that the BPU also would prohibit a public utility from making contributions to charities with ideological missions that are likely to be offensive to a *203significant segment of the utility’s ratepayers.” 333 N.J.Super. at 412, 755 A.2d 1192. The Ratepayer Advocate mistakenly contends tliat the court “twists the constitutional concept of content neutrality into one of content acceptability and appoints the BPU as the arbiter of acceptability.”
The Appellate Division’s comment must be read in light of the clarity and correctness of the statements throughout its opinion concerning applicable First Amendment law. The court simply was restating the principle recognized earlier in its opinion — that compelled contributions to certain organizations violate First Amendment rights only when the funds are used to subsidize “political or ideological” activities. Id. at 409, 755 A.2d 1192. That standard, established by the United States Supreme Court, requires a content-based test insofar as activities having political or ideological content are distinguished from those activities that do not have such content. The Appellate Division opinion cannot fairly be read as suggesting that the BPU could make a content-based distinction within the category of ideological activities on the basis of “offensiveness.” That the Appellate Division contemplated no differentiation among ideological activities is confirmed by the court’s succeeding statement: “However, the mere specter that the management of some utility could make contributions to inappropriate charitable recipients should not foreclose the BPU from allowing utilities to treat a portion of their contributions to non-ideológical charitable organizations that perform vital public services as operating expenses.” Id. at 412, 755 A.2d 1192.
I would affirm the Appellate Division. ' Therefore, I respectfully dissent from the judgment of the Court.
For reversal — Chief Justice PORITZ and Justices STEIN, COLEMAN, LONG, VERNIERO and ZAZZALI — 6.
For affirmance — Justice LaVECCHIA — 1.