DISCRIMINATION IN SERVICE

The word "discrimination" can be emotionally charged, particularly when used in racial, religious, nationality and similar contexts. In such settings, a legal prohibition against discrimination generally tends to be absolute.

In the public utilities world, a prohibition against "discrimination" also can be applicable. Typically, such discrimination can arise in two situations: (1) establishment of rates and (2) extension of service.

However, in the public utilities world, not all discrimination necessarily is illegal. Discrimination can be reasonable or just-a legal discrimination.

A future posting will discuss rate discrimination. An Illinois Appellate Court decision will illustrate a claim of service discrimination. (Schroeder v. City of Grayville, 520 NE2d 1032 (5th Dist. 1988)

Plaintiffs were non-residents of a city. In their complaint, they accused the city of discrimination because it refused to supply water to their property located outside the city limits. Plaintiffs alleged that refusal to extend water service to their property was in retaliation to their prior refusal to grant an easement requested by the city. The complaint alleged that the city improperly discriminated against plaintiffs because the city had supplied water to other non-residents similarly situated.

Plaintiffs argued that a city owning and operating a water system does so in its business or proprietary capacity and is obligated to refrain from unreasonable discrimination against persons similarly situated. The city argued that it had no duty to provide water to non-residents in absence of a contractual undertaking obligating it do so.

The Appellate Court noted established caselaw that a municipality owning and operating a water system is no different than a private water utility; and that private utilities are prohibited from engaging in unreasonable discrimination in rates or manner of service. The Court concluded that "the reasoning in these cases supports plaintiffs' claim that defendants' refusal to provide them water, while providing water to others similarly situated, is an unreasonably discriminatory manner of service." (Id. at 1034)

Arguably there may be circumstances where a municipality can refuse service to non-residents without bumping into a discrimination issue. For example, a city may have a firm policy requiring a non-resident to enter into an annexation or pre-annexation agreement. Or a city may not have sufficient "backbone" plant capacity to take on additional non-resident customers. Or the city may not have distribution facilities in proximity to the non-resident land and, therefore, requires payment for an extension of lines, for which the non-resident is unwilling to pay. The point is that establishing the existence of unreasonable discrimination in service is not always a simple matter.