Request By:
Philip D. McKenzie, Esq.
P.O. Box 635
Grayson, Kentucky 41143
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Thomas R. Emerson, Assistant Attorney General
This is in reply to your letter raising questions concerning municipal utilities and services, overdue accounts and the termination of utility and public services by the city. Apparently the city is incurring delinquencies in connection with its garbage collection system payments. You state you have been advised that the Public Service Commission exercises no control over municipal utilities. You further state that you have found no prohibition against having the garbage collection charges set forth on customers' utility bills along with their water, sewer and gas charges. In addition, you have found nothing to preclude a municipality from terminating a service as a partial remedy for failure to pay for that service.
Your specific questions to this office concern whether there is any prohibition against the City of Grayson adding its garbage collection fee to its utility bills and whether the city may terminate all utility services to customers who do not pay all or some part of their utility bills. You further ask whether the city may terminate utility services, regardless of whether the customer is current in his payments, if that customer is delinquent in paying his city taxes.
At the outset we direct your attention to KRS 278.040, effective April 1, 1979, providing that the energy regulatory commission shall regulate energy utilities as defined in KRS 278.010(4) and the utility regulatory commission shall regulate non-energy utilities so defined in KRS 278.010(5). KRS 278.010 (4) provides that "energy utility" means any person except a city who owns, controls, operates or manages any facility used or to be used for or in connectioin used or to be used for or in connection with the purposes set forth in subsections (a), (b) and (c) thereof, including the distribution, sale or furnishing of natural gas to the public for compensation. KRS 278.010(5) states that "nonenergy utility" means any person except a city who owns, controls, operates or manages any facility used or to be used for or in connection with the purposes set forth in subsections (a), (b) and (c) thereof, including the distributing or furnishing of water for the public and the treatment of sewage for the public. Thus, municipal utilities are exempt from the jurisdiction of both the energy regulatory commission and the utility regulatory commission.
In connection with the city adding its garbage collection fee to its utility bills, along with the water, sewer and gas charges, it would be our opinion that the city could do so provided that each charge, including the garbage collection fee, is separately designated so that the utility customers will be informed as to the exact charge for each service and the purpose of that charge. See OAG 66-642, copy enclosed, at page two.
Cities of the second through the sixth class are authorized pursuant to KRS 94.281 et seq. to acquire and operate garbage disposal systems. The city legislative body may by ordinance provide for the collection of fees for services to be rendered through the garbage disposal system and may provide the terms and conditions under which the service is to be operated. The city is also authorized to fix the charges for services, the schedule of rates and the rules and regulations governing the users of the service. Since the city is authorized to designate the method of collection, it can place the garbage collection charge on the utility bill provided the garbage collection fee is separately designated on the bill.
Your next questions concern the termination by the city of its utility services and garbage collection service because of the failure of the users of those services to pay for some or all of those services and whether such services may be terminated, even if payments for those services are current, when the customer is delinquent in paying his city taxes.
In Cassidy v. City of Bowling Green, Ky., 368 S.W.2d 318 (1963), the Court considered the question of whether a city could enforce the collection of its garbage disposal charges by discontinuance of its water services. The Court said water service, sewerage service and garbage disposal service are all inter-related and it is reasonable to discontinue one public service for failure to pay for a related public service. Furthermore, in 60 ALR 3d 714, the general rule is stated to be that a public utility corporation cannot refuse to render the service which it is authorized to furnish, because of some collateral matter or independent transaction. See also 64 AM.Jur.2d Public Utilities § 18, where the following appears:
"Most courts hold that a public utility cannot refuse to render the service which it is authorized by its charter to furnish, because of some collateral matter not related to that service."
As a general rule, of course, a service may be discontinued for the nonpayment of charges but that rule is subject to exception or qualification if there is a bona fide dispute over the correctness of the bill rendered. Where a public service company discontinues its service for nonpayment of a disputed bill, it does so at its peril; and, if the public entity is wrong, it is liable for at least compensatory damages and, where the circumstances justify it, for punitive damages also. See 64 Am.Jur.2d Public Utilities §§ 63-64.
Thus, the city may discontinue a public service because of the user's failure to pay for that particular service. The city may discontinue a public service or services for failure to pay for a related public service. A city cannot refuse to furnish a service it is authorized to perform because of some collateral matter or independent transaction not related to the public service involved. In your specific situation the city could terminate garbage service to those persons who did not pay for that service and it could terminate garbage service and other "related public services" for failure to pay the garbage fee. It could not terminate, for failure to pay the garbage fee, other public services not related to garbage service and it could not terminate public services, where payments have been properly and timely made, for failure of the person to pay his city taxes, a collateral or independent matter from that pertaining to the furnishing of public services.