A PSEG Long Island truck on July 10, 2014.

A PSEG Long Island truck on July 10, 2014. Credit: Newsday / John Paraskevas

Two Long Island schools have filed suit against LIPA, PSEG and the state Department of Public Service, charging the utility engaged in a “pattern” of misclassifying customers in the wrong rate class and failing to refund years of overbilling.

The filing by the Nesconset Elementary School and Great Hollow Middle School, both in the Smithtown school district, last month, followed reports in Newsday that more than 1,000 customers had been misclassified as large commercial customers even though their usage did not warrant it. Big commercial customers pay a $10 daily fee that smaller users don’t, among other differences.

“There is a pattern of improper assignment of billing to rate code 285,” the suit, filed as an article 78 proceeding in State Supreme Court in Mineola, states. It takes issue with the fact that LIPA and PSEG have awarded refunds to some wrongly classified customers but not others.

In December, Newsday reported that one such customer received $49,939 in credits and refunds after PSEG and the state found that his business, Structural Industries of Bohemia, had been misclassified for years. Several other entities referenced in the case, including the St. Charles Cemetery and the Sands Point Golf Club, also received refunds for tens of thousands of dollars.

The schools say granting refunds for some misclassified customers but not all amounts to “arbitrary and capricious” treatment, in violation of state law. PSEG has previously maintained that the schools didn’t provide enough documentation to show they’d been misclassified from the outset, and the Department of Public Service has ruled in LIPA/PSEG’s favor. A letter from PSEG in the case said the utility could not provide the documents proving its case “due to record retention and the aging of the accounts.”

PSEG spokesman Jeff Weir said the utility didn’t believe it had been served with the lawsuit, but will “review the filing and respond appropriately.” LIPA and DPS declined to comment.

More customers may soon be looking for refunds. Suffolk County Comptroller John Kennedy said the county last year identified and switched 12 separate accounts that were being billed at the wrong rate. He said the county thus far hasn’t pursued refunds for past amounts, which he said amounted to more than $100,000 over three years. “To me it’s a gotcha,” he said of the utility’s failure to pay the schools refunds. As for a county refund, he said, “I’m going to go after it.”

James Grossane, superintendent of Smithtown Central School District, said, “We are hopeful that the courts will rule in the district’s favor and that we will receive any appropriate refunds as a result.”

The school suit says the schools never reached the threshold to be billed at the commercial rate, going back for more than a decade. Further, the schools, like all other accounts in that rate class, had been barred from transferring to a proper rate by a no-exit clause. PSEG repealed that clause in its rate proceeding last year.

PSEG last year conducted an analysis that found 1,200 business, school and municipal customers had usage that fell below the threshold for the commercial rate, and that 680 would benefit by switching. PSEG last fall began informing customers about its findings and their options to switch. Around 400 have already switched.

Douglas DiCeglio, president of Lynbrook-based Utility Rate Analysis Consultants, which helped uncover the misclassifications, has previously said all overcharged customers should receive refunds.

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