Can customers sue power companies for outages after Sandy?

A couple look out at the skyline of New York with most of Lower Manhattan remaining in the dark as they stand in a park along the Hudson River in Weehawken, New Jersey.

(Alison Frankel writes the On the Case blog for Thomson Reuters News & Insight. The views expressed are her own.)

Scott Kreppein of the law firm Hagney, Quatela, Hargraves & Mari lives and works on Long Island, where about 90 percent of the customers of the Long Island Power Authority lost power in last week’s storm. He still doesn’t have electricity or heat at his house in Smithtown, New York. Last week he got by on flashlights and a small gas-powered generator. Over the weekend, he and his wife fled to a hotel in Pennsylvania, and since they came back home, they’ve been living with relatives. Kreppein, in other words, has a personal interest in holding LIPA accountable for any failures in its restoration of power across Long Island.

But Kreppein also knows that the odds are very low of establishing LIPA’s liability through a class action by disgruntled customers of the power company. In 2006, when he was working at the Morelli Ratner law firm, Kreppein represented several businesses in Queens, New York, that sued Consolidated Edison in state court for millions of dollars in damages that resulted from a week-long blackout in Astoria, Woodside and neighboring communities. According to Kreppein, there’s nothing barring customers — whether they’re businesses or individual ratepayers — from bringing such suits against power companies, even though utilities are state-regulated. To win, however, New York ratepayers have to show that their power company was not just slow or inefficient. Instead, Kreppein said, under a 1985 New York Court of Appeals ruling called Strauss v. Belle Realty, electric company customers must establish that the utility was grossly negligent — that its conduct was way outside the bounds of reasonableness.

In the Queens power outage case, that question was not answered in court. Litigation over Con Ed’s alleged negligence proceeded alongside an investigation by the New York Public Service Commission, which regulates power companies and other utilities. With intense pressure from politicians and local activists accelerating the process, Con Ed reached a global settlement in 2008, agreeing to put up $17 million for affected homes and businesses and to waive rate increases intended to pay for $40 million in plant repairs associated with the blackout.

New York Governor Andrew Cuomo has already committed to a PSC investigation of post-Sandy power restoration efforts, and New Jersey will almost certainly conduct a similar investigation; last year New Jersey’s Board of Public Utilities reviewed the responses of the state’s four power companies to Hurricane Irene and the October snowstorm. That doesn’t mean, however, that the regulatory investigations will result in findings that support allegations of gross negligence against the utilities. According to Greg Reinert, a spokesman for New Jersey’s BPU, ratepayers didn’t bring class actions after Irene or the October storm.

Indeed, the trouble that all of the region’s power companies have had in turning their customers’ lights back on could hamper gross negligence claims against any one of them, according to Kreppein. “If all of the companies did the same thing, and if everyone was bad at handling outages after the storm, then that’s just the facts, that’s not negligence,” he said.

The high bar for claims against power companies didn’t deter Manhattan lawyer Richard Hershman, who filed a bare-bones class action against Con Ed on Thursday in New York State Supreme Court in Westchester. Hershman told me he and his neighbors in Tarrytown, New York, have been in the dark since last Monday and feel like they’ve been ignored by their power company. “We think Con Ed is responsible not just for gross negligence, but also for putting out false or misleading information,” he said. According to Hershman, his neighbors’ damages from the long outage range from hundreds to thousands of dollars. “My personal opinion, and what I told my neighbors, is that from the storm through Sunday was okay,” he said. “It was a bad storm. (Con Ed’s) response was poor, but I give them leeway. But this week, after warnings about the nor’easter? They just did not put the necessary equipment and personnel in place in Westchester.”

A Con Ed representative said she could not comment on litigation and referred me to the company’s website, which says that because the storm was beyond Con Ed’s control, the company “is not responsible for property damage or other losses.” Representatives of LIPA and power companies in New Jersey did not respond to phone and email messages, and a spokesman for New York’s PSC did not return my call.

Kreppein told me he’s planning to file a Freedom of Information Act request with LIPA to find out whether his power company had a plan for the storm and how it executed restoration of power. He’s not ruling out litigation, depending on what he finds out. “I don’t know what individual LIPA employees are doing. I’m sure they’re working as hard as they can,” he said. “But I’m not satisfied with LIPA’s efforts. I don’t have power.”



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