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National Fuel blocked by judge in ‘excess’ earnings case

A State Supreme Court justice has shot down – at least for the time being – National Fuel Gas Co.’s legal efforts to prevent state regulators from potentially refunding “excess” earnings by the company in the last few years to its customers.

National Fuel had sued the New York State Public Service Commission, arguing that its continuing effort to potentially seek refunds from “excess” revenues the company received under its current rate plan violated its rights under both the State and U.S. constitutions.

Justice Tracey A. Bannister ruled against National Fuel late last week, deciding that the Amherst-based energy company had “failed to establish that they suffered an injury” because of the PSC’s efforts.

But Bannister also ruled that National Fuel could resume its legal fight if state regulators rule in the coming months that the utility had received “excess” revenues that must be refunded to customers. If that happened, National Fuel could refile its lawsuit, which contends that the PSC’s action would violate its rights under the Due Process and Equal Protection clauses of the U.S. Constitution.

“Judge Bannister’s decision intentionally did not address the central issue in this action – that a confiscatory law is unconstitutional – and instead merely put that analysis and decision off for another day,” said Karen L. Merkel, a National Fuel spokeswoman.

The PSC, in June, imposed a series of temporary rates for the utility that froze its delivery charges while the state agency conducts a broader review of its rates that could take until next spring to complete.

As part of that ruling, the PSC noted that National Fuel’s earnings from its New York utility business have been significantly higher than the targets set by the commission in its rate plan that took effect at the beginning of 2008. That prompted the PSC to take the unusual step of making the company liable for refunding a portion of those delivery charges if the review finds that its rates going forward were too high.

National Fuel has argued that the company is being penalized for doing a good job running its New York utility business, cutting costs and improving the efficiency of its operations while freezing the rates that it has charged its customers since the beginning of 2008. The company has reduced its operating and maintenance costs by about 6 percent, or $10 million, since 2008.

The PSC, however, has argued that National Fuel overcharged its 516,000 customers in Western New York by upward of $10 million a year because the utility has been much more profitable than the level of earnings that was targeted under the 2008 rate plan.