Empire West v. Southern California Gas Co

In Empire West v. Southern California Gas Co. (1974) 12 Cal.3d 805, the defendant Gas Company prepared a cost analysis for the plaintiff, a developer building an apartment complex. In reliance on that analysis, the plaintiff installed a gas heating system. The actual operating costs were thousands of dollars a year more than the analysis indicated. The complaint alleged that the Gas Company knew that it did not have accurate data on which to base an estimate and that the estimate could not be accurate, and also alleged that but for the Gas Company's cost representations, plaintiff would have put in an electric system, far less costly to build. The Supreme Court found that the sole issue presented to it was whether the cause of action constituted an effort to obtain a preferential rate treatment in contravention to section 532, which forbids any utility from charging any rate other than that on the filed schedule, or from refunding or remitting, directly or indirectly, in any manner or by any device, any portion of the filed rates. The Court explained that under the statute, "Scheduled rates must be inflexibly enforced in order to maintain equality for all customers and to prevent collusion which otherwise might be easily and effectively disguised. Therefore, as a general rule, utility customers cannot recover damages which are tantamount to a preferential rate reduction even though the utility may have intentionally misquoted the applicable rate. These principles are most commonly applied in cases which involve mistaken rate quotations whereby the customer is quoted a lower rate than set forth in the published tariff. Upon discovery of the error, the utility may initiate an action against the customer to recover the full legal charges for the service, as filed and published in rate schedules. In granting recovery to the utility, the courts usually rely on the fact that the rates have been filed and published and have thereby become part of the contract between the utility and the customer. Under these circumstances the customer is charged with knowledge of the contents of the published rate schedules and, therefore, may not justifiably rely on misrepresentations regarding rates for utility service." (Empire West, supra, 12 Cal.3d at pp. 809-810.) The Court then found that the case before it did not involve rates, but instead involved the Gas Company's estimate of the amount of gas which the building would use. The case could thus proceed. "A utility customer who has been actually damaged by a utility's fraudulent misrepresentations regarding matters not contained in the published tariffs should be entitled to bring suit to recover those damages." (Empire West, supra, 12 Cal.3d at pp. 810-811.)