Utilities barred from passing on cost of donations

October 30, 1990|By Lyle Dennistonand Kim Clark

Customers of public utilities in Delaware, Virginia and 20 other states may be able to cut their monthly bills a little by asking courts to declare a portion of their rates unconstitutional in the wake of Supreme Court action yesterday.

A brief order by the nation's highest court implied that ratepayers in some states -- excluding Maryland -- could file suits charging that utility stockholders, not customers, should pay for a utility's donations to charities.

Maryland's Public Service Commission ruled in 1962 that utility companies could not pass through their charitable donations to ratepayers, said PSC spokesman Frank Fulton.

As a result, donations such as Chesapeake & Potomac Telephone Co. of Maryland's annual contributions to scholarship funds, cultural institutions and other groups are charged to stockholders, company spokesman Al Burman said yesterday.

But ratepayers in states that have been allowing such charges, including Delaware and Virginia, could be affected by the Supreme Court's order leaving intact a victory for New York telephone company customers.

The court, without explanation, turned aside a major test case in which New York state courts had ruled that it is unconstitutional for a utility to use money collected from its customers to make donations to charities, because some of the utility's customers might not want to support those causes.

The New York customers were able to cut $1.2 million off the rate base of New York Telephone Co. by blocking charitable gifts of that amount.

Consumers in the mid-Atlantic region may not win any rate relief from the order, because some companies said they don't charge their donations to customers anyway. Delmarva Power & Light Co., which serves Delaware and the Virginia and Maryland sections of the Eastern Shore, doesn't charge its charitable contributions to ratepayers, said spokeswoman Peggy Brinkley.

The case was New York Telephone vs. Cahill (No. 90-255).

State policies

Most states allow utilities to charge for contributions to trade or .. professional organizations, which are not considered charities. No state allows utilities to charge customers for political donations.

Chart shows how regulators in the mid-Atlantic region handle different types of utility charity donations. "Yes" means the Public Service Commission in the jurisdiction allows the company to charge its charitable donations to ratepayers. "No" means stockholders pay for the donations.

District of Columbia. None officially allowed, though the commission decides case by case.

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