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In re Petition of New Jersey Natural Gas Co.

Decided: March 26, 1970.

IN THE MATTER OF THE PETITION OF NEW JERSEY NATURAL GAS COMPANY TO HAVE RELE, INC. AND/OR REDI-FLO CORPORATION OF NEW JERSEY, ADJUDGED A PUBLIC UTILITY


Goldmann, Lewis and Matthews. The opinion of the court was delivered by Goldmann, P.J.A.D.

Goldmann

Rele, Inc. and Redi-Flo Corporation of New Jersey appeal from a determination of the Board of Public Utility Commissioners (Board) that they are subject to the jurisdiction of the Board in that they fall within the definition of a public utility and the requirements for jurisdiction set out in N.J.S.A. 48:2-13.

New Jersey Natural Gas Company filed a petition with the Board praying that Rele be declared a public utility by virtue of its distribution of oil from a central tank through a pipeline distribution system in a housing development known as Holiday City, located in Dover Township, and that it be made to comply with such provisions of Title 48, "Public Utilities," and Board rules and regulations as might be applicable. An answer was filed by Redi-Flo admitting that it was a New Jersey corporation "engaged in the business of distributing oil from a central tank through a pipeline distribution system to the owners of private homes in [Holiday City] and that its pipeline distribution system is located in part under land which is now or may become public streets." The answer denied that Redi-Flo was a public utility.

At the hearing before the Board the petition was amended to include Redi-Flo as a respondent, the same allegations

being made against it as had been asserted against Rele. The amended petition sought an adjudication that either company or both be adjudged a public utility. The answer was then amended so that it was equally applicable to both companies.

The evidence adduced before the Board consisted primarily of stipulated facts, documentary evidence and the testimony of the president of Hovsons, Inc., the developer of Holiday City.

Rele and Redi-Flo are related New Jersey corporations, engaged in the retail distribution of fuel oil to homes through a central pipeline system. They operate a single system of this type in the Holiday City subdivision in Dover Township. The installation consists of two 20,000-gallon storage tanks, a pumping station and a network of distribution mains in the streets, connecting with service lines running to the individual homes. Fuel consumption in each home is monitored and recorded by a meter located on the service connection for each house. Rele owned the entire distribution system until February 1968. After that date all the facilities were owned by Redi-Flo, with Rele continuing to manage and operate the system itself.

Holiday City is a planned retirement community consisting of one-family, duplex and quad units. The first two phases of the development contemplated some 1,530 residences. In addition, there are two adjoining tracts consisting of 24 acres which Hovsons, Inc. may develop in the future. The development was promoted in the usual manner by constructing model homes and by advertising in the New York metropolitan area. Hovsons would submit to prospective purchasers an estimate of living costs, including the cost of fuel oil. As of July 15, 1968, the date of the Board hearing, Hovsons had sold some 1,300 homes, and 950 families were already living in Holiday City. Every purchaser had entered into a form agreement, described hereinafter, to purchase oil from Rele.

In March 1965, while the Holiday City project was in the preliminary stages of development, Rele (the predecessor of Redi-Flo) entered into an agreement with Hovsons whereby it was given the "sole and exclusive right and privilege to install, maintain and operate a pipe line fuel oil distribution system (including meters, storage tanks, oil transmission lines, valves, and all other components and auxiliary equipment)" in Holiday City. Hovsons agreed to sell Rele a lot in the development for the installation, maintenance and operation of its fuel oil storage tanks, buildings, mains, feeder lines and other equipment. Hovsons further agreed to grant Rele such easements and rights of way throughout the tract as might be necessary for the installation, maintenance and operation of the system, including the streets intended to be dedicated to public use. In addition, Hovsons agreed that easements from the streets to the several residences would be reserved in favor of Rele at the time of sale of the houses.

The agreement also provided that the developer would use its best efforts to induce prospective homeowners to connect to the system. For this promotional effort Rele initially agreed to pay Hovsons $130 for each customer. (A supplemental contract covering the second phase of the Holiday City development provided that Hovsons would receive 2 cents a gallon for all oil sold to customers over a 25-year period, instead of the $130 payment which related to the first phase of the development.) If Hovsons obtained less than 99% of the homeowners for Rele, it agreed to pay Rele $75 for each home that did not tie into the system. Rele was to furnish all advertising literature to promote the system, Hovsons agreeing to have its salesmen learn about the system's benefits. Rele paid Hovsons $9,000 for brochures naming the system to be installed in Holiday City.

A significant provision of the Hovsons-Rele agreement was Hovsons' covenant that "no other system for distribution of fuel oil, heat, or other form of energy or fuel used to heat buildings shall be introduced or permitted ...


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