States Await Court Test on PUC Ruling : At Issue: Ownership of ‘Extra Space’ in Utility Bill Envelopes

It may have come as a surprise to California utility customers to learn that, collectively, they own the “extra space” inside the envelopes that bring their monthly gas and electric bills.

Obscure as it was, that finding by the California Public Utilities Commission laid the foundation for a subsequent, precedent-setting ruling by the PUC that now is before the Supreme Court--providing a key test of the newly developed right of corporate free speech against the longstanding authority of the states to regulate utilities.

The case stems from a PUC order in December, 1983, that gave a consumer watchdog group, Toward Utility Rate Normalization (TURN), the right to insert consumer information in monthly Pacific Gas & Electric bills. Because of PG&E;’s immediate appeal, TURN never got a chance to use the “extra space.” The PUC defined “extra space” as the space left over, after the bill was inserted, that could hold additional material without raising postage.

Wide Effect

In their current term, the justices will decide whether the PUC exceeded its powers by giving TURN access to billing envelopes for fund appeals. The outcome could have a wide effect. Four other states recently have imposed similar requirements on state-regulated, privately owned utilities, and proposed requirements are pending in at least 12 others.

PG&E;, arguing that it cannot be forced to share its envelopes with its critics, is being supported in “friend of the court” briefs by a host of utility companies and business organizations around the nation. The PUC, warning that its ability to serve ratepayers is at stake, is being backed by a similar array of consumer groups and state and local governmental authorities.

In oral arguments before the justices last week, Robert L. Harris, the attorney for the utility, contended that the Constitution protects a corporation, like an individual, against forced associations--and that state agencies should not be giving selected groups special access to channels of communication.

“We should not be compelled to be the courier of someone else’s message,” Harris said. “And the government should not be involved in picking and choosing speakers.”

‘Variety of Viewpoints’

But PUC attorney Mark Fogelman argued that corporations--especially state-regulated utilities--enjoy no such broad constitutional protection and that any minimal incursion on PG&E;’s rights is justified. “The commission is doing this to provide ratepayers with a variety of viewpoints,” Fogelman said. “It wants to improve consumer participation in its own proceedings.”

The case (PG&E; vs. PUC, 84-1044) traces back to a complaint to the PUC in 1981 by TURN, an arch foe that has consistently opposed San Francisco-based PG&E;’s proposed rate hikes. TURN contended that PG&E; improperly included political messages in the monthly newsletter that it includes in billing envelopes. The commission, agreeing that such material sometimes had been included in the newsletters, responded with a novel compromise: It would allow TURN access to PG&E;’s billing envelopes.

The PUC concluded that the extra space in billing envelopes was of “economic value” as a vehicle for advertising--and was “the property of ratepayers” because they pay indirectly for the postage and the envelopes.

The commission ruled that TURN--whose anti-rate hike positions it said often might be shared by “substantially all” residential customers--would be allowed to include messages soliciting donations to support consumers in PUC proceedings involving PG&E.; As part of the ruling, TURN would pay for the material it inserts and identify it clearly as its own; PG&E; and its shareholders would continue to pay the costs of inserting the utility’s newsletter.

But before TURN submitted its request to use the space, another consumer group was given permission to insert its fund-raising material in monthly billing envelopes of San Diego Gas & Electric. SDG&E; agreed under protest. During the program, which ended last spring, San Diego utility customers have opened their bills to find consumer group materials with such headlines as: “Do You Think This Bill Is Too High?”

In December, 1983, TURN was given permission to make inserts to PG&E;’s bills four times a year for two years. But before its program began, PG&E; took the ruling to court. The state Supreme Court upheld the PUC ruling in October, 1984.

In the meantime, the PUC last fall rejected a request for similar access to utility company envelopes from a political group that wanted to insert material on Proposition 36, an unsuccessful tax-limitation measure on the November ballot.

PG&E; and its allies are relying on previous Supreme Court decisions that upheld the right not to be forced to carry the communication of another party. The court, citing freedom of the press, ruled in 1974 that a Miami newspaper could not be forced to grant reply space to a political candidate it criticized in an editorial. And it held in 1977 that a New Hampshire man could not be compelled to carry the state slogan “Live Free or Die” on his car license plate.

In 1978, the justices struck down a Massachusetts law that barred corporate expenditures on ballot campaigns, holding that corporations were entitled to at least some free speech rights granted to individuals under the First Amendment. And, in 1980, they held that New York state authorities could not prevent a utility from including political material in its billing envelopes.

Four of California’s largest public utilities--Pacific Bell, Southern California Gas, General Telephone and Southern California Edison--are urging the court to back PG&E;, saying that, if the PUC is allowed to turn utility envelopes into a kind of “public forum,” the commission may soon be faced with a clamor of interest groups, political candidates and others seeking the access that it gave TURN.

The PUC, backed by 14 states and such organizations as the National League of Cities, says that none of the court precedents that the utility cites should foreclose the commission from imposing such authority on a state-regulated, legally mandated monopoly. Utilities already can be required to include legal notices or other informational material in its billing envelopes, the commission and its allies note.

The commission contends that there is no real impingement of PG&E;’s right to speak--it can still enclose its newsletter in the envelope--and that by labeling TURN’s material as the group’s own, the utility will be clearly dissociated from the consumer message.