Regulated utilities sit on the seams between public and private, Federal and State and often, on the seams between the branches of government. In a recent Massachusetts case, Maryland Casualty v NSTAR Electric 471 Mass 416 (2015) the Judiciary reinforced its role as subordinate to the Legislative branch. The issue in the case – was the utility liable to a business for an outage?

FACTS
The Utility NSTAR, repairing its equipment, caused such smoke damage in a commercial building in Cambridge that the tenants had to relocate for six weeks. Insurance covering tenants paid out for damages and business interruption losses.  In the name of the tenants, the insurers sued the utility to recoup their payouts.

The Utility moved to have the case dismissed saying their liability exposure was limited by the State Department of Public Utilities “tariff” under whose authority the Utility operates. “The company shall not be liable” for commercial losses.
The tenant’s insurers said utilities cannot enjoy protection against damages caused by “gross negligence or willful and wonton misconduct” which they alleged in the complaint.

ISSUE
Should a legal case be dismissed where utility interruption caused business losses and the claim included allegations of gross negligence but where the utility tariff gave immunity from claims generally?

RULING
Case dismissed. The issue was not one for the Court system. The Legislature delegated the responsibility for regulating electric company practices to the DPU.

REASONS
Utilities’ liabilities are limited by tariffs. The tariff-based model has been dominant to regulate rates, regulations and practices- giving the State Department of Public Utilities the ultimate and almost exclusive control. The Legislature delegates to the DPU, the duty to make Utility rates – taking the whole process out of the realm contract law. The DPU fixes rates with limitations of liability in mind.

The claimants relied on an 1800’s case about damages from a missent telegraph. The Court accused the claimants of eliding the significant historical transformation of the regulation of public utilities since 1866.

COBB COMMENTS
As environmental and cost concerns pressure utilities to modernize, it is instructive to see the actors and roles of on the energy transformation stage. Tariff exculpates utilities, blocks recovery of business losses. Courts defer to Legislature’s DPU.