FRANKLIN—The city attorney says Franklin is required to collect more than $200,000 it accidentally under-billed 55 customers after a computer error, citing case law that includes a 1978 state Supreme Court decision in favor of a utility under similar circumstances.

Taylor Williams said the city is required to collect the money, “based on the case law and the research I have done.”

Williams cited the Chesapeake and Potomac Telephone Co. of Virginia v. Bles case, which was decided by the Supreme Court of Virginia in 1978. In that case, the court was asked whether a public utility, which had incorrectly quoted the cost of service and under-billed a customer, was prevented from collecting the undercharges. The court ruled in favor of the utility, reversing a decision by a lower court, and concluded that state law mandates “all customers in the same approved rate classification must be charged no more and no less than the rates shown on the schedule applicable to that category of users.”

The Virginia court also cited similar cases in Pennsylvania and Wisconsin, where utilities prevailed in their attempts to recover undercharges.

The Bles case was also referenced in City of Wilson v. Carolina Builders of Wilson Inc., which came before the Court of Appeals of North Carolina in 1989. The N.C. court reversed a lower court and ruled in favor of the city, stating, “the municipality cannot be prevented from collecting the correct amount for the services provided to (the) defendant, whether by a defense based on estoppel or a counterclaim based on negligence.”

According to the Law.com Dictionary, estoppel is “a bar or impediment (obstruction) which precludes a person from asserting a fact or a right or prevents one from denying a fact. Such a hindrance is due to a person’s actions, conduct, statements, admissions, failure to act or judgment against the person in an identical legal case.”

The federal court system has also weighed in on the debate. In 1989, the Fourth Circuit of the U.S. Court of Appeals cited several cases, including Bles, and ruled in favor of the utility in Marco Supply Co. Inc. v. AT&T Communications Inc.

“Marco’s problem in this case is that while it may have equity on its side, the law is against it,” the federal court said. “The general case law is that a regulated carrier must charge the tariff rate established with the appropriate regulatory agency, even if it has quoted or charged a lower rate to its customer … to do otherwise would be giving a preference to and discriminating in favor of the customer in question.”

The 55 church and business customers were under-billed for a period of 28 months, beginning in June 2006, when a city employee entered incorrect rate information into a computer. The error was discovered and fixed in October 2008. During that time frame, the customers, including The Tidewater News, were collectively under-billed $200,460.49.

Taylor said another city employee, who was helping a business customer look for ways to lower its electric bills, discovered the under-billing error.

“That was the precipitator,” Taylor said. “We had a business come and say ‘we’re looking for ways to cut back our energy usage.’ They were looking for savings as opposed to consumption. They felt like … they needed to cut their expenses.

“The (city) employee who was given the task of helping them with an energy audit, part of his due diligence was to go back and look at their bills. In looking at their bills, and examining their bills, that employee realized that they were being charged at the wrong rate.”

The discovery launched an internal audit that eventually found the 54 other customers. Taylor declined to identify the business where the error was originally discovered.

At Monday’s city council meeting, Williams said 22 of the 55 businesses had responded so far to a letter the city sent out in December. Six of those customers have paid their bills in full, giving the city $26,988.73. Of the remaining 16, eight have agreed to a payment agreement with the city, and will make incremental payments for the next 24 months. The other eight customers have asked for additional information or discussions with the city.

Williams said any customer who has not yet signed the payment agreement will be billed 1/24th of the amount they owe from the underbilling, along with their usual payment, on their bill that is due Jan. 20.