Request By:
Van F. Phillips, Esq.
Public Square
P.O. Box 391
Monticello, Kentucky 42633
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Thomas R. Emerson, Assistant Attorney General
This is in reply to your letter asking whether the Electric Plant Board of Monticello may legally exempt the city of Monticello from paying penalties on delinquent electric payments due the Board by considering the city as a special class of consumer.
The city of Monticello, the Electric Plant Board of Monticello and the Tennessee Valley Authority are presently operating under a "Power Contract." The Electric Plant Board of the city of Monticello was organized and is functioning pursuant to the terms and provisions of KRS 96.550 to 96.900, Kentucky's "T.V.A. Act." The electric plant was financed through the sale of revenue bonds by the city of Monticello (KRS 96.650 et seq.).
Your letter also mentions KRS 96.830, which provides as follows:
"The board shall charge the municipality and all departments and works thereof for any electric service furnished to them at the rates applicable to other customers. Revenues derived from such service shall be treated as all other revenue."
In 64 Am.Jur.2d, Public Utilities, § 56, it is stated: "As a general rule a public service company may exact a penalty or added amount for delay in payment of service charges provided that such penalty or added amount is reasonable and not exhorbitant." See also
City of Covington v. Sanitation District No. 1, Ky., 301 S.W.2d 885 (1957).
That section of the "Power Contract" setting forth the "Schedule of Rates and Charges" contains a provision dealing with the "General Power Rate" which applies in part to the firm power requirements for electric service to commercial, industrial and governmental customers. Included therein is a statement relating to "Payment" stating in part that any amount of a bill unpaid after the due date specified may be subject to additional charges under the Distributor's standard policy. The Schedule of Rates and Charges also contains a provision dealing with the "Outdoor Lighting Rate" applicable to street and park lighting systems, traffic signal systems and athletic field lighting systems. The "Payment" provision there also states that any amount of a bill unpaid after the due date specified on the bill may be subject to additional charges under the Distributor's standard policy.
The "Power Contract," under section 5 dealing with "Resale Rates" states in part as follows:
"(a) Board agrees that the power purchased hereunder shall be sold and distributed to the ultimate consumer without discrimination among consumers of the same class, and that no discriminatory rate, rebate, or other special concession will be made or given to any consumer, directly or indirectly.
(b) Board agrees to serve consumers, including all municipal and governmental customers and departments, at and in accordance with the rates, charges, and provisions set forth for the several classes thereof in Schedules RS-12, GS-12, and LS of said Schedule of Rates and Charges, and not to depart therefrom except as the parties hereto may agree upon surcharges, special minimum bills, or additional resale schedules for special classes of consumers or special uses of electrical energy, and except as provided in subsection (c) next following.
For the purpose of uniform application, within the classes of consumers, of the provisions of the paragraph entitled 'Payment' of said resale schedule, Board shall designate in its standard policy a period of not less than 10 days nor more than 20 days after date of the bill during which period the bill is payable as computed by application of the charges for service under the appropriate resale schedule and shall further designate in said policy the percentage or percentages, if any, not to exceed 10 percent of the bill, computed as above provided, which will be added to the bill as additional charges for payment after the period so designated. "
A public utility is, of course, under a legal obligation to serve the members of the public to whom its operations extend impartially and without unjust discrimination. "A public utility must serve alike all who are similarly circumstanced with reference to its system, and favor cannot be extended to one which is not offered to another, nor can a privilege given one be refused to another." See 64 Am.Jur.2d, Public Utilities, § 38. Discrimination is not unjust if it rests on a classification based on substantial differences and as long as like service is rendered to consumers conducting like operations under like circumstances. See 73 C.J.S., Public Utilities, § 6, and McQuillin Mun. Corp. (3rd Ed.) Vol. 12, §§ 35.35(f) and 35.37(b).
The answer to your specific question, however, would appear to be governed by the terms and conditions of the "Power Contract." The contract authorizes the imposition of additional sums if bills are not paid within the designated time and assuming that the Board has designated in its "standard policy" the percentage of the additional charges for late payments, that amount is to be applied to all of its delinquent customers. There is no exception from the late payment provisions for municipal customers in the general contract provisions as the Board is prohibited from utilizing any discriminatory rate, rebate or other special concession. The contract further provides that there can be no departure from the Schedule of Rates and Charges except as the parties hereto may agree, which would imply that the Tennessee Valley Authority, as one of those parties, would have to agree to the waiver of the late charges even if the Board could adopt a reasonable classification for those customers, including municipal corporations, who would be exempt from the delinquent payment provisions.
Thus, under the "Power Contract" executed by the city of Monticello, the Electric Plant Board of Monticello and the Tennessee Valley Authority, the Electric Plant Board cannot exempt the city from paying penalties on delinquent electric service payments.