Everett v. Baltimore Gas & Electric Co.

COLE, Judge. We shall decide in this case whether a utility company may terminate a customer’s service because the customer failed to pay for service at a prior address where she allegedly resided. We shall also decide whether the utility company or the customer bears the burden of proof in a service termination proceeding. Finally, we must determine the standard of proof that applies in the service termination proceeding at issue.

We set forth the facts giving rise to these questions as follows. Appellee, the Baltimore Gas & Electric Company (BG & E), proposed to terminate the service of appellant, Janice Everett, at 1600 Chilton Street. After Everett requested an explanation of the basis for the proposed termination, BG & E on May 7, 1981 wrote to Everett as follows: ²⁹⁰ In reference to your inquiry, the following information is submitted. We have evidence which we feel holds you responsible for $4242.60 in unpaid bills.

Listed below are the addresses, amounts and time periods of those bills. Cut-in - Cut-out Address Amount Miscellaneous Charges 5/59 1737 Abbottation St. $139.03 $6.50 Court Cost 7/73 , - 3/74 1520 Homestead St. 207.95 4/75 - 4/77 508 E. 43rd St, 691.25 6.00 Recon Chg. 5/77 - 8/78 508 E. 43rd St. 1078.04 8/78 - 5/79 508 E. 43rd St. 772.77 3.00 Recon Chg. 5/79 - 9/79 508 E. 43rd St. 544.03 9/79 - 5-80 508 E. 43rd St. 794.03 If you dispute these billings, you do have the right to request a formal hearing by the Public Service Commission of the State of Maryland. On June 4, .1981, Everett filed a complaint 1 against BG & E with the Public Service Commission. In her complaint, Everett asserted that she had never resided or had service in her name at any of the addresses listed in the letter.

She asked that the Commission stay the proposed termination, that BG & E be prohibited from collecting the alleged debt, and that a hearing be held on the matter. After informal attempts to resolve the dispute failed, the Commission ordered BG & E to answer the complaint and referred the case to a hearing examiner pursuant to Maryland Code (1957, 1980 Repl.Vol.), Art. 78, §§ 20(b) and (c). In its answer to Everett’s complaint, BG & E alleged that between May 1977 and May 1980, Complainant resided at 508 E. 43rd Street and fraudulently used gas and electric service supplied from BG & E by (1) failing to contract for service in May 1977, (2) making application in a fictitious name or in the name of another family mem ²⁹¹ ber or occupant in August 1978, (3) failing to contract for service in May 1979 and (4) making application in a fictitious name or name of another family member or occupant in September 1979. BG & E further avers that Complainant is liable for such fraudulent use in the amount of $3,188.87 and that BG & E is entitled to terminate service for non-payment of said outstanding amount. [Emphasis supplied.] On October 28, 1981, a hearing was held before a hearing examiner.

At the outset of the hearing, Everett’s counsel, relying upon the allegation of “fraudulent use” set forth in BG & E’s answer, moved that the burden be placed on BG & E to “go forward and present proof to that effect rather than my client having to disprove an allegation for which no basis has yet been presented.” In opposition to Everett’s motion, BG & E contended that the answer’s allegations of “fraudulent use” merely “tracked” the applicable regulation and that Everett, as the complaining party, bears the burden of proof as to facts necessary to establish her basis for relief. The hearing examiner, agreed with Everett, however, and granted her motion. BG & E proceeded to present its evidence, after which Everett presented evidence in rebuttal. BG & E’s evidence indicated that Everett did reside at 508 E. 43rd Street during the period in question and that she did obtain service unlawfully at that address.

On the other hand, Everett produced evidence that tended to show that she lived with her mother and brothers on Round Road, not at the 43rd Street address, during the relevant time period. According to her evidence, the house on 43rd Street was occupied by her daughter Janet, her grandchildren and a boarder. The hearing examiner issued his proposed order on May 17, 1982. He concluded that the burden of proof should be borne by BG & E and that BG & E must satisfy this burden by clear and convincing evidence.

Applying this standard, the hearing examiner found that the evidence was not “sufficiently reliable” in showing that Everett was living at the premises in question. Thus, he held that BG & E had ²⁹² failed to satisfy the. standard of proof and proposed that the utility company be prohibited from terminating service to Everett “on the basis of its claim of fraudulent use at 508 E. 43rd Street.” BG & E appealed to the Commission. In its final order issued on November 5, 1983, the Commission agreed with the hearing examiner as to the burden of proof, declaring that “where a utility seeks to terminate service for fraudulent use, the burden of proof shall be upon the utility to show the customer has engaged in such fraudulent use.” The Commission disagreed, however, that the standard of proof should be clear and convincing evidence. Rather, the Commission determined the appropriate standard to be preponderance of the evidence.

Applying the preponderance standard to the record before the examiner, the Commission concluded that BG & E met its burden of showing fraudulent use and that Everett was responsible for the disputed bills. Thus, the Commission dismissed her complaint. Everett appealed the Commission’s order to the Circuit Court for Baltimore City. BG & E also appealed that part of the Commission’s order placing the burden of proof on the utility.

The circuit court, in a memorandum opinion filed February 24,1984, held that BG & E had the burden of proof and that the proper standard was clear and convincing evidence, not merely preponderance of the evidence. Thus, the court reversed the Commission’s order and remanded the case to the Commission for further proceedings. BG & E and the Commission appealed the circuit court’s decision to the Court of Special Appeals. In Baltimore Gas & Electric Co. v. Everett, 61 Md.App. 288 , 486 A.2d 248 (1985), the intermediate appellate court agreed with the Commission and the circuit court that the burden was on BG & E to justify the proposed termination.

The Court of Special Appeals, however, disagreed with the prior rulings of the Commission and the circuit court as to the applicability of the fraudulent use regulation, COMAR 20.31.02.04. ²⁹³ Instead, the court declared “at issue was not the characterization of Everett’s actions as fraudulent, but only whether they, or her alleged residence at that address, sufficed to make her liable for the charges.” Id. at 296 , 486 A.2d at 252 . The court applied the preponderance of the evidence standard to the resolution of that issue and concluded that the Commission did not err in finding that BG & E had met its burden. Everett petitioned this Court to issue a writ of certiorari. Shortly thereafter, BG & E cross-petitioned, raising the question pertaining to the allocation of the burdens.

We granted both petitions and issued a writ of certiorari. I We begin by addressing the issue concerning the allocation of the burdens of proof. BG & E contends that the Commission failed to allocate the burdens in accordance with the procedures for handling complaints set forth in Article 78, § 77(a) and COMAR 20.07.03.02A. 2 BG & E asserts that these provisions impose on Everett, as com ²⁹⁴ plainant, the burden to plead a prima facie case or face dismissal. According to BG & E’s argument, if Everett meets this burden, then the burden shifts to BG & E to rebut with evidence of “fraudulent use” or facts making Everett responsible for the bills in question.

Further, BG & E contends that because Everett disputes the proposed termination on the ground that she never lived at the address in question, she bears the burden of persuasion as to where she resided during the relevant time period. In response, Everett asserts that the provisions relied upon by BG & E do not apply to her complaint and that BG & E, under the regulations governing termination of gas and electric service, bears the burden in service termination disputes. Along with Everett, Maryland People’s Counsel (MPC), amicus curiae, contends that BG & E is misguided in its attempt to place the burden of proof on the customer. MPC argues that BG & E should bear the burden of proof because it desires to change the status quo and it alleges that Everett acted wrongfully.

Further, MPC asserts that BG & E should bear the burden because it possesses the facts that prompted its allegation of fraudulent use. The regulations set forth in Subtitle 31 of Title 20 of the Code of Maryland Regulations govern all terminations of electric service, gas service, or both, where the service is for residential use. COMAR 20.31.01.03c requires that the customer take the first step where the customer wishes to dispute the reasons for termination of his service. The customer shall first “contact the utility before contacting the Commission.” COMAR 20.31.04.02 establishes procedures for the handling of disputes between the utility and the customer regarding a proposed termination of service.

It provides, in pertinent part: B. If there is a disputed bill rendered by a utility in accordance with its tariff as on file with the Commission or a dispute regarding a proposed termination, the utility shall immediately make such investigation as is required by the particular case and report the result to the customer. ²⁹⁵ C. Pending the ultimate resolution of a dispute concerning a proposed termination, the customer’s service may not be terminated. E. If, following the investigation into a disputed bill, the utility determines that the disputed service has been provided and the bill rendered pursuant to its tariffs on file with the Commission and to the requirements, orders, and regulations of the Commission, the utility shall inform the customer of this determination and may require full payment of the bill. F. In a dispute concerning a proposed termination, the utility shall permit the customer to dispute or correct the reason or reasons for the termination. The utility shall make a decision regarding the dispute and shall promptly inform the customer of that decision.

G. The customer may file a complaint with the Consumer Assistance Section of the Commission within 7 days of being notified by the utility of its determination. H. The complaint may be written or oral and shall contain, at a minimum, the following information: (1) The name, address, and account number of the customer; (2) The utility involved in the dispute; (3) Either the disputed portion of the bill and the full amount of the bill, or the reason or reasons for the proposed termination; (4) The reason for the dispute. I. A complaint made pursuant to this regulation may be dismissed and the utility may terminate the service if the Commission or its staff determines that the customer has not negotiated with the utility in good faith or that the customer has otherwise failed to comply with the provisions of this subtitle. For purposes of these regulations, a "disputed bill” is defined as “a bill which is the subject of a bona-fide controversy between a customer and the utility regarding ²⁹⁶ any billing error, including, but not limited to, matters such as errors in computation, failure of the bill to reflect a payment or other credit, and billing for service which the customer alleges was not used or was used by another person. ” COMAR 20.31.01.0213(3) (emphasis supplied).

It is clear that the Commission adopted these procedures for settling disputes as an alternative to the formal complaint provisions contained in § 77 and in the regulation promulgated thereunder, COMAR 20.07.03. The adoption of alternate procedures is consistent with the broad supervisory and regulatory powers given to the Commission under § 56 of the Public Service Commission Law. The differences between the formal complaint procedures and the service termination dispute procedures are readily apparent. Section 77 requires a written complaint, “setting forth the circumstances allegedly constituting a violation of the provisions of [the Public Service Commission Law] by any public service company.” COMAR 20.31.04.02H, in contrast, provides that the complaint may be oral or written, and shall contain “the reason or reasons for the proposed termination” and “the reason for the dispute.” Thus, we think it clear that the informality of the dispute procedures set forth in COMAR 20.31.04 evinces the Commission’s intent to make itself, in its regulatory capacity, more accessible to the consumer where the vital services of gas and electricity are at stake.

Nevertheless, BG & E urges us to adhere to the formal requirements contained in § 77 and COMAR 20.07.03. Pointing to these provisions, BG & E asserts that Everett, the party disputing the proposed termination, bears the burden of pleading a prima facie case that “the utility has violated the Public Service Commission Law.” While we agree that Everett bears the initial burden of pleading, we do not agree that she must allege a violation of the Public Service Commission Law. As a customer disputing the proposed termination of her service, Everett bears the burden of alleging sufficient facts to show that a ²⁹⁷ bona fide dispute exists between her and the utility as to the proposed termination of service. In an analogous case, Carter v. Suburban Water Co., 131 Md. 91 , 101 A. 771 (1917), the plaintiff sought to enjoin termination of water service for non-payment of a bill on grounds that an irregular supply of water to houses owned by the plaintiff caused him damage.

This Court held that [wjhile a public service company has the right to cut off a consumer’s water supply for non-payment of recent and just bills for water rents, and may refuse to engage to furnish further supply until said bills are paid, the right cannot be exercised so as to coerce the consumer into paying a bill which is unjust or which the consumer in good faith and with show of reason disputes. 131 Md. at 94 , 101 A. at 772 (quoting Poole v. Paris Mountain Company, 81 S.C. 438, 442 , 62 S.E. 874, 877 (1908)); see also Surratt v. C & P Telephone Company, 156 Md. 510, 514-15 , 144 A. 495, 497 (1929). In the instant case, Everett alleged in her complaint that she neither resided, nor had service in her name, at the address in question. This allegation clearly raised questions as to whether Everett should be held responsible for the unpaid bills at that address and whether BG & E’s proposed termination of service at her current residence is justified. Therefore, we find that Everett has met her burden of alleging facts that show a bona fide controversy exists between the utility and the customer.

BG & E further contends that Everett “had the initial burden of going forward with evidence and had the burden of persuasion as to where she resided from May 1977 to May 1980.” We disagree. At a hearing to determine the appropriateness of the proposed termination of a customer’s service, the burden of going forward and the burden of persuasion rest on the utility to establish sufficient grounds to justify the proposed termination. This conclusion is in accord with public policy and our prior decisions. BG & E, as a regulated public utility, has an ²⁹⁸ affirmative duty to provide service to the public.

See Art. 78, § 28(c). In order to discontinue service, it must have grounds for termination and must state those grounds in a notice sent to the customer prior to termination. 3 See COMAR 20.31.02.05C and COMAR 20.31.02.06C. As this Court demonstrated in its decision in Carter, supra, a utility does not have an absolute right to terminate service. Indeed, COMAR 20.31.04.02C evidences this fact by prohibiting the termination of the customer’s service pending the ultimate resolution of the dispute.

Where a bona fide controversy or dispute exists between the utility and the customer, the utility must show that the proposed termination is justified. Moreover, we think that placing the burden of persuasion on the utility in a service termination hearing is consistent with basic common-law principles regarding the allocation of the burden of proof. Generally, the party seeking to change the status quo bears the risk of failure of proof or persuasion. See McCormick on Evidence § 337 (E. Cleary 3d ed. 1984).

We see no reason to deviate from this general rule under the present facts, where the utility seeks to terminate the customer’s access to the vital services of gas and electricity. In similar situations, other jurisdictions have reached the same conclusion. See Montalvo v. Consolidated Edison Co. of New York, 110 Misc.2d 24 , 441 N.Y.S.2d 768 (1981); Fay v. Miller, 183 F.2d 986 (D.C.Cir. 1950); Pennsylvania Publications, Inc. v. Pennsylvania Public Utilities Comm’n, 349 Pa. 184 , 36 A.2d 777 (1944). In the instant case, both the Commission and the circuit court ruled that the burden was on BG & E to justify the proposed termination.

We hold that where a customer demonstrates a bona fide controversy or dispute as to a proposed termination of service, the utility bears the burden of going forward and the burden of persuasion in establishing sufficient grounds for termination. ²⁹⁹ II Having decided the proper allocation of the burden of proof, we turn next to determine the standard by which this burden must be met. Both the Commission and the Court of Special Appeals concluded that preponderance of the evidence is the correct standard to be applied in this proceeding. We disagree. At the outset, it is necessary to examine closely the nature of the dispute between the