Opinion
No. CV 05 4007101S
August 29, 2006
MEMORANDUM OF DECISION
I. INTRODUCTION
The captioned matter is an appeal (appeal) from a decision (decision) by the department of public utility control (DPUC). The decision concerns mistakes which the plaintiff (CLP), an electric utility, admits it made in what it charged and collected for electricity supplied to a number of Connecticut municipalities for the lighting of streets.
II. FACTS
At argument on this matter, the parties agreed to the facts in the following recitation.
The electricity supplied by CLP to most customers is measured by meters (metered service), and charges to those customers are based on meter readings. However, CLP does not have meters connected to streetlight fixtures. Rather, an inventory is kept by CLP of the number and wattage of bulbs in the streetlight fixtures of each of its municipal customers. By knowing the number and wattage of the bulbs used by a municipality, and by knowing when streetlights go on and off throughout the calendar year, CLP is able to calculate the charge for electricity used (unmetered service). It is less expensive to calculate the charge for unmetered service than for metered service.
The accuracy of CLP's billing for unmetered service depends on the accuracy of CLP's inventory of the bulbs used. CLP has acknowledged that, for a period of time going back, at least, to 1986, its inventory of those bulbs was not accurate in all cases. Thus, CLP's faulty inventory of the bulbs to which it was supplying electricity for streetlighting resulted in inaccurate billings to some municipalities.
A second group of billing errors resulted from a different record-keeping deficiency. Some streetlighting equipment is municipally owned, and some is owned by CLP. As to the latter, CLP charges for its use. Faulty inventories of streetlighting equipment owned by CLP resulted in inaccurate billings to some municipalities for the use of that equipment.
Since 1999, CLP has learned, through physical inventories made on a statewide pole-by-pole basis, what equipment was actually in use at the time those inventories were taken. By comparing the results of those physical inventories with its billing records, CLP was able to identify streetlights for which it had been overbilling or, in some cases, underbilling.
As to some streetlights, CLP was able to determine when its billing records became inaccurate (streetlights with dates). Knowing the amount by which it had been periodically overbilling or underbilling, and the date when it began to do so, CLP was able to calculate any refunds due in respect of streetlights with dates. As to some other streetlights, CLP was not able to determine when its billing records became inaccurate (no-date streetlights).
III. DPUC ORDERS A. Look-back Date
The decision affirms an order of the DPUC, which is contained in a 2004 DPUC decision (which is referred to by the parties, and hereinafter, as the reconsideration decision), that CLP must make refunds, in respect of streetlights with dates, for overbillings that have occurred since March 11, 1986 (hereinafter, sometimes, look-back date). CLP contends that the period for which it can be ordered to make refunds for overbilling municipalities is limited by General Statutes § 52-576(a) (all further section references are to the General Statutes), which is the six-year statute of limitations for actions on account or on simple contracts (statute of limitations). Insofar as the look-back date precedes the earliest date within the reach of the statute of limitations, CLP maintains that the decision provides a greater remedy for CLP's customers than they could obtain in a civil action and therefore violates Connecticut law. To the extent that the DPUC refused to apply the statute of limitations, CLP argues that the decision is arbitrary, capricious, an abuse of discretion and in excess of the DPUC's statutory authority.
The reconsideration decision was issued in one of a series of proceedings conducted by the DPUC in regard to the overbilling which is the subject of this appeal. The reconsideration decision was not appealed. However, the issue whether the reconsideration decision constitutes administrative res adjudicata as to CLP has not been adequately briefed by the parties and is not addressed herein. Connecticut Light Power Co. v. Dept. of Public Utility Control, 266 Conn. 108, 120 830 A.2d 1121 (2003).
B. Irrebutable Presumption
The decision affirms an order contained in the reconsideration decision that CLP must assume that billing errors for no-date streetlights began on the look-back date (irrebutable presumption), and that refunds for those streetlights must be calculated from that date. CLP argues that the irrebutable presumption violates the statute of limitations, is unsupported by the record and is arbitrary, capricious and an abuse of discretion.
C. Releases
Prior to the issuance of the decision, CLP made refunds to some municipalities. Some of those municipalities had been overbilled for more than six years, but CLP made no refunds in respect of overbillings beyond the scope of the statute of limitations, except to Stamford and Middletown. CLP received releases from some of those municipalities in consideration of refunds. Stamford and Middletown, whose accounts had been overbilled commencing, respectively, in 1954 and 1976, received refunds for overbilling from those dates in exchange for mutual releases. As is apparent, the refunds to Stamford and Middletown were larger than they would have been if they had been calculated from the look-back date. The decision affirms an order contained in the reconsideration decision that municipalities which have already received refunds can elect to have their refunds recalculated from the look-back date. That order is expressly applicable to municipalities which delivered releases to CLP. CLP argues that order violates the contracts clause of the United States Constitution and the public policy of Connecticut, which favors the private resolution of disputes. CLP also asserts that, if municipalities which have delivered releases can void those releases and receive larger refunds recalculated from the look-back date, then Stamford and Middletown should be required to disgorge the portions of their refunds which relate to periods prior to the look-back date.
IV. DISCUSSION A. Look-back Date Basis of DPUC's Authority
Section 16-19(a) provides, in relevant part:
No public service company may charge rates in excess of those previously approved by the authority or the Department of Public Utility Control . . .
Section 16-11 provides, in relevant part:
The Department of Public Utility Control shall . . . keep fully informed as to the . . . manner of operation of all public service companies The department may order such reasonable . . . changes in the manner of operation, as may be reasonably necessary in the public interest. The general purposes of this section and sections 16-19, 16-25, 16-43 and 16-47 are to assure the state of Connecticut its full powers to regulate its public service companies, to increase the powers of the Department of Public Utility Control and to promote local control of the public service companies of this state, and said sections shall be so construed as to effectuate these purposes.
Harmonizing § 16-19(a) and § 16-11, it is clear that CLP has the obligation to bill only in accordance with DPUC approved rates, and that the DPUC has the discretion to remedy overbillings. While CLP acknowledges the DPUC's discretion to order refunds for overbillings, it argues that the DPUC's discretion is confined to ordering refunds for periods within the statute of limitations, and if it is determined that the statute of limitations does not apply, CLP argues that the DPUC's action in ordering refunds back to March 11, 1986 is arbitrary, made without substantial evidence and an abuse of its discretion.
Applicability of Statute of Limitations
The statute of limitations provides, in relevant part:
No action for an account, or on any simple or implied contract, or on any contract in writing, shall be brought but within six years after the right of action accrues . . .
Section 52-576(a).
In Commissioner of Health Services v. Kadish, 17 Conn.App. 577, 554 A.2d 1097, appeal denied, 212 Conn. 806 (1989), the court said, ". . . [A]n investigation by the commissioner of health services is not a `civil action' within the meaning of [the statute there under review]." Id. at 581.
Kadish determined that an administrative proceeding by the health department is not a civil action, and support for that proposition is found in California in Little Company of Mary Hospital v. Belshe, 53 Cal.App. 4th 325, 61 Cal. Rptr. 626 (1997). Belshe concerned recoupment by California's medicaid agency of medicaid overpayments made by it to a hospital. The court there said:
Statutes of limitations found in the Code of Civil Procedure, however, do not apply to administrative actions. ( Bernd v. Eu (1979) 100 Cal.App.3d 511, 515 [ 161 Cal.Rptr. 58] [statutes of limitations inapplicable to administrative agency disciplinary proceedings].) Instead, they apply to the commencement of civil actions and civil special proceedings (Code Civ. Proc., §§ 22, 312, 363), which this was not.
CT Page 15774 Id. at 329.
In Robert F. Kennedy Medical Center v. Dept. of Health Services, 61 Cal.App. 4th 1357, 72 Cal. Rptr. 2d 180 (1998), which also concerned recoupment of medicaid overpayments by California, the court said:
We are of the opinion, however, that neither Code of Civil Procedure section 337 nor Code of Civil Procedure section 338 is applicable to the facts of this case for the simple reason that "they apply to the commencement of civil actions and civil special proceedings [citations], which this was not." ( Little Company of Mary Hospital v. Belshe (1997) 53 Cal.App.4th 325, 329 [ 61 Cal. Rptr. 2d 626].
Id. at 1362.
Finally, in Joyell v. Commissioner of Education, 45 Conn.App. 476, appeal denied, 243 Conn. 910 (1997), the Appellate Court said:
The plaintiff's argument would have us ignore the legal principle that statutes of limitations do not generally apply to the state. [A] universal rule in the construction of statutes limiting rights [is] that they are not to be construed to embrace the government or sovereignty unless by express terms or necessary implication such appears to have been the clear intention of the legislature, and the rights of the government are not to be impaired by a statute unless its terms are clear and explicit, and admit of no other construction.
Id. at 485. (Citations and internal quotation marks omitted; emphasis in original.)
Based on Kadish, Joyell and the California cases cited above, it is held that the proceeding in which the decision was issued was not an "action" as that word is used in the statute of limitations. Accordingly, the DPUC's discretion to order refunds is not constrained by the statute of limitations.
DPUC's Exercise of Discretion CLP has acknowledged that it conducted an internal audit of its unmetered service which resulted in an audit report dated March 11, 1986 (audit report). The decision recites findings contained in the audit report, as well as conclusions contained in subsequent CLP reviews of unmetered service, as follows:Unmetered Service Audit — March 11, 1986 — IAD 86-14 R22
The Internal Audit Department of CLP concluded in March of 1986 that the system of controls over the billing of unmetered services (primarily streetlighting and poles) was not adequate to provide reasonable assurance that all unmetered service installations were being properly billed. Significant concerns included billings records not supported by detailed information, no physical inventory being conducted to verify the physical existence of the streetlights being billed, and no control procedure in place to ensure that the Customer Service System (CSS) was being updated. The Audit recommended the development of an action plan for improving control over the unmetered service process. Streetlight Audit — Phase 2, p. 4.
Unmetered Services Audit Follow-Up Audit — January 11, 1989 — IAD 89-02 R22
In 1989 the Internal Audit Department followed up on the previous audit conducted in 1986. Their conclusions were as follows: actions have been taken to improve controls over the updating of billing records by implementing a new systemwide procedure, however, differences between the streetlight services which are actually installed and the streetlight services which the customer is being billed remain unresolved. In response, CLP formed a steering committee to address the inventory/reconciliation requirements. The committee's attention was to focus on the Group Relamping Program as the method of inventorying service installations and reconciling the CSS. Streetlight Audit — Phase 2, p. 5.
Unmetered Services Audit Follow-Up Audit — Undated (estimate late 1990-early 1991)
The Internal Auditing Department completed an additional review of the unmetered services area in 1991. The Report concluded that the Streetlight Reconciliation Program adequately identified that actual service location data, which once reconciled against CSS records, will provide reasonable assurance that customers are billed accurately. In addition, the report highlighted several concerns involving key system interfaces; and reconciliation of all streetlights and other unmetered services. Key system interfaces involved an automated interface of the Distribution Management System (DMS/WRES) and the CSS. Streetlight Audit — Phase 2, p. 5.Control Risk Self Assessment Reports — 2000
The Control Risk Assessment process brings together workgroups directly involved who can identify and validate business objectives and assess the adequacy of plans and controls. Their pertinent conclusions with respect to the ongoing streetlighting issues were as follows:
Need to address system inconsistencies between billings, field and operating records;
Mapping and tracking of locations are inaccurate;
Information validation not always practiced;
Additional procedural controls are needed;
Rectify discrepancies found in the field;
CSS needs to be integrated with DMS/WRES. Streetlight Audit — Phase 2, p. 5.
Phase 2 of the Streetlight Audit concludes by stating that the consultant's review of the above noted reports, covering over a 15-year timespan, reflect continuous concern regarding CLP's streetlighting business and its ability to provide reasonable assurance that all unmetered service installations are properly billed. A number of streetlighting service issues were successfully addressed. However, despite this progress, the various inventory and billing error rates stated throughout the reports still, but to a lesser extent, continue to be issues with CLP streetlight record keeping. Streetlight Audit — Phase 2, p. 6.
The following is an excerpt from the reconsideration decision, which is repeated in the decision, which lays out the DPUC's rationale for establishing March 11, 1986 as the look-back date:
The record in this proceeding justifies establishing a refund period beginning March 11, 1986, the date upon which CLP was made aware through an audit process of the deficiencies in its streetlight billing. The [DPUC's] selection of this date reflects the fact that [CLP] was at all times in control of the information necessary to calculate correct streetlight bills, and controlled the allocation of resources to those business processes in need of attention.
Reconsideration Decision, p. 8.
Because the statute of limitations does not apply to DPUC ordered refunds, the DPUC was free to establish a date more than six years prior to the issuance of the decision from which refunds are to be calculated. As to the date which should have been selected, the above excerpts from the decision demonstrate that there was substantial evidence before the DPUC to support the conclusion that CLP was aware of its unmetered service billing inaccuracies beginning, at the latest, when the audit report was issued on March 11, 1986. Those excerpts also demonstrate that there was substantial evidence before the DPUC that, from and after March 11, 1986, CLP had the ability to avoid the overbillings which occurred after that date. Accordingly, the order that CLP make refunds from that date is based on substantial evidence, is not arbitrary or capricious and is not an abuse of discretion.
B. No-date Streetlights
CLP argues that the irrebutable presumption (to repeat, that refunds made in respect of no-date streetlights shall be calculated as if overbilling to them had begun on the look-back date) violates the statute of limitations, is not supported by the record and is arbitrary, capricious and an abuse of discretion. The statute of limitations issue as to no-date streetlights is identical to the statute of limitations issue concerning streetlights with dates, and the above analysis concerning streetlights with dates is adopted as to no-date streetlights.
In this case, the DPUC was faced with the Hobson's choice of either: (1) declining to order refunds as to no-date streetlights on the ground that the amount of the refund due in respect of any particular streetlight could not be accurately calculated for lack of a date when overbilling commenced; or (2) selecting a date, which is probably not the actual commencement date for overbilling in respect of any particular no-date streetlight, from which refunds are to be calculated for all no-date streetlights. For the reasons discussed above, electing the latter option was not an abuse of the DPUC's discretion.
Having decided that the DPUC has the authority to establish a date from which refunds for no-date streetlights are to be calculated without regard to the statute of limitations, the next issue is whether the date selected was an appropriate one.
The DPUC is not obliged to make perfect decisions. Rather, it must consider the facts of a case, apply to them a logical methodology and reach a reasoned result. In this case the facts clearly show that CLP knew the overbilling problem existed on March 11, 1986, and that it then had available to it the resources necessary to cure the problem, such as conducting a physical, statewide, pole-by-pole inventory, which it did more than a decade later. In fact, had such an inventory been conducted in 1986, there would not be any no-date streetlights today.
The DPUC's decision to establish March 11, 1986 as the look-back date for calculating refunds with respect to no-date streetlights, when no other date would have resulted in accurate refunds for all, or perhaps any, no-date streetlights, is supported by the record and is not arbitrary, capricious or an abuse of discretion.
C. Releases
The decision grants to municipalities which have given releases (releases) to CLP (other than Stamford and Middletown) the right to void those releases unilaterally and to have their refunds recalculated in accordance with the terms of the decision. CLP argues that provision violates the public policy of Connecticut and the contracts clause of the United States Constitution. The contracts clause argument has not been adequately briefed by CLP, and it is not addressed herein.
"We repeatedly have stated that `[w]e are not required to review issues that have been improperly presented to this court through an inadequate brief . . . Analysis, rather than mere abstract assertion, is required in order to avoid abandoning an issue by failure to brief the issue properly . . . Where a claim is asserted . . . but thereafter receives only cursory attention in the brief without substantive discussion or citation of authorities, it is deemed to be abandoned.' (Citations omitted; internal quotation marks omitted.) Merchant v. State Ethics Commission, 53 Conn.App. 808, 818, 733 A.2d 287 (1999). These same principles apply to claims raised in the trial court." Connecticut Light Power Co. v. Dept. of Public Utility Control, 266 Conn. 108, 120, 830 A.2d 1121 (2003).
The releases are contracts. Historically, few things have been more sacred in our system of government, and our law, than the right of competent parties to contract between themselves. Accordingly, interference with an existing contract by a government agency calls for careful scrutiny. As the United States Supreme Court said in Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 98 S.Ct. 2716 (1978).
"Contracts enable individuals to order their personal and business affairs according to their particular needs and interests. Once arranged, those rights and obligations are binding under the law, and the parties are entitled to rely on them."
Id. at 245.
In Holly Hill Holdings v. Lowman, 226 Conn. 748, 628 A.2d 1298 (1993), our Supreme court reiterated Connecticut's historic public policy favoring the freedom of parties to contract on terms for which they bargain:
It is well established beyond the need for citation that parties are free to contract for whatever terms on which they may agree. This freedom includes the right to contract for the assumption of known or unknown hazards and risks that may arise as a consequence of the execution of the contract. Accordingly, in private disputes, a court must enforce the contract as drafted by the parties and may not relieve a contracting party from anticipated or actual difficulties undertaken pursuant to the contract, unless the contract is voidable on grounds such as mistake, fraud or unconscionability.
Id. at 755-56.
The DPUC argues that the releases can be voided by it on two grounds: (1) they were exchanged during ongoing proceedings before the DPUC concerning the overbilling issue and thereby were subject to the DPUC's regulatory authority; and, (2) CLP's billings are part of a comprehensive scheme of regulation and cannot be varied by a regulated company on a customer-by-customer basis.
The public policy of Connecticut favors the private resolution of disputes. In Duni v. United Technology Corporation/Pratt Whitney Aircraft Division, 239 Conn. 19, 682 A.2d 99 (1966), the court said:
As we have long recognized in the context of civil actions, the pretrial settlement of claims is to be encouraged because, in the vast number of cases, an amicable resolution of the dispute is in the best interests of all concerned. The efficient administration of the courts is subserved by the ending of disputes without the delay and expense of a trial, and the philosophy or ideal of justice is served in the amicable solution of controversies . . . At a time when our courts confront an unprecedented volume of litigation, we reaffirm our strong support for the implementation of policies and procedures that encourage fair and amicable pretrial settlements.
Id. at 26-27 (internal citations and quotation marks omitted).
Section 16-19jj states:
The Department of Public Utility Control shall, whenever it deems appropriate, encourage the use of proposed settlements produced by alternative dispute resolution mechanisms to resolve contested cases and proceedings.
Section 16-19jj does not compel the submission of matters before the DPUC to alternative dispute resolution. Rather, it demonstrates that the public policy of Connecticut favoring the private resolution of disputes extends to matters within the DPUC's jurisdiction.
At argument on this matter, the following colloquy took place between the court and counsel for the DPUC:
THE COURT: . . . Let's take, as an example, a town with which a reconciliation has not yet been made; a town which has not yet executed mutual releases with CLP. And the first selectman of that town is sitting here watching this proceeding, getting very nervous about whatever his or her assumptions were about the process of the law. And that first selectman says to CLP, we have a potential claim for $57,000 under the DPUC's decision, but we're not entirely certain that this decision will be upheld. And, based on the hazards of litigation, we would like to negotiate a settlement with you. Do they have the authority to do that now?
MR. HAINES: Yes, they do, Your Honor.
Transcript, 5-15-06, p. 62.
If parties can enter into enforceable settlement agreements while the decision is on appeal, the court can find no rationale for voiding such agreements which were entered into during or preceding the proceeding below. While the DPUC's arguments have some appeal, on balance it is held that the public policy favoring the private resolution of disputes, including those before the DPUC, should prevail.
D. Punitive Damages Argument
CLP has argued that the cumulative effect on it of the orders contained in the decision is punitive. While the cost of compliance with all of those orders may be significant, it is the legality of each underlying order that is at issue, not the ultimate consequence of those orders. In other words, it is the actions of the DPUC, and not what CLP devines is the intent of the DPUC, that are under review. The court's conclusions as to the legality of the challenged actions appear above.
The parties stipulated at argument that any money paid out by CLP in refunds (that is, principal) constitutes an expense which will be borne by CLP's ratepayers and not its shareholders, while the interest paid out on those refunds will be borne by CLP's shareholders. Therefore, if there is any punitive effect from those refunds, it will be felt by ratepayers and not by CLP's shareholders.
CLP's punitive damages argument is rejected.
E. Stamford and Middletown Disgorgement
CLP has argued that if the municipalities which received refunds in exchange for releases can repudiate those releases, CLP should be allowed to repudiate the releases it gave to Stamford and Middletown and seek reimbursements from them of the money paid out in respect of overbillings prior to March 11, 1986.
Because the releases are found to be valid, the issue of disgorgement by Stamford and Middletown of money received in respect of overbillings which occurred before March 11, 1986 is moot.
V. CONCLUSION
The appeal is sustained as to the DPUC's order that refunds to municipalities which gave releases to CLP may be unilaterally voided by those municipalities, and those releases are held to be enforceable. The appeal is dismissed as to all other grounds raised.