Claim for Late Payment Charges

An opinion was requested as to the propriety of paying arrears and late payment charges on two contracts for utilities services provided to the Charleston Air Force Base by an electric and gas company. The utility company assessed these charges on the Air Force accounts since 1971, but the Air Force refused to pay them. The Air Force, in refusing payment, relies primarily on a provision in the contracts which states that bills for service shall be paid without penalty or interest. The utility company, however, maintains that the late payment charges are part of the general terms and conditions of service as approved by the Public Service Commission of South Carolina. In addition, the company relies on another provision of the contracts which states that the government will pay for service at the authorized tariff rate and that the service furnished shall be subject to regulation in the manner and to the extent prescribed by law or by any federal, state or local regulatory commission having jurisdiction. GAO concluded that the late payment charge is neither a penalty nor interest, and payment is not precluded by the provision of the contracts cited by the Air Force. The utility company offered to write off current charges if the base would acknowledge its reponsibility for any late payment charges incurred in the future. GAO recommended that the Air Force accept that offer.