Central Hudson Gas & Electric Corp. v. Public Service Commission of New York

Facts

In December 1973, during a fuel shortage, the New York Public Service Commission ordered the State's electric utilities to stop all advertising that promotes the use of electricity. It based the order on a finding that the utility system lacked enough fuel stocks or sources of supply for the 1973-1974 winter. Three years later the shortage had eased. The Commission asked the public for comments on continuing the ban, and Central Hudson Gas & Electric Corp., a utility with a monopoly over the sale of electricity in its service area, objected on First Amendment grounds. On February 25, 1977, the Commission extended the ban in a Policy Statement. The Statement split advertising into promotional advertising, meant to boost sales of utility services, and institutional and informational advertising, which was allowed. Informational advertising meant to shift use from peak periods to low-demand periods was also allowed. The Commission admitted the ban was an imperfect way to save energy. It barred off-peak promotion that could make better use of existing plants, and oil dealers were outside its authority and stayed free to advertise. It still expected the ban to slow unnecessary growth in energy use. On rehearing it added a second reason. Electricity rates were not based on marginal cost (the extra cost of producing one more unit), so the Commission feared extra electricity would be priced below its true cost and all consumers would subsidize it.

Issues

1. Does a state regulation that completely bans promotional advertising by an electric utility violate the First and Fourteenth Amendments?
2. Is a utility's promotional advertising still protected commercial speech when the utility holds a monopoly over the sale of electricity in its service area?
3. Does the ban directly advance a substantial state interest, and is it no more extensive than necessary to serve that interest?

Holding

The Commission's complete ban on promotional advertising by the utility violated the First and Fourteenth Amendments. Energy conservation was a substantial interest and the ban directly advanced it, but the ban was more extensive than necessary, and the record did not show that a more limited restriction would fail.