Cable television provider Altice USA has sued New Jersey's board of public utilities over a demand it provide prorated refunds to customers who discontinue service in the middle of the month.

Altice is not subject to rate regulation by New Jersey because the Federal Communications Commission has declared it faces effective competition from other providers, according to the lawsuit filed Dec. 13 in U.S. District Court for the District of New Jersey in Trenton. The suit was prompted by an order from the board of public utilities, which wants to compel Altice to issue prorated refunds to former customers.

Jenner & Block in Washington, D.C., and Schenck, Price, Smith & King in Florham Park represent Altice.

Altice's suit says New Jersey's requirement constitutes "quintessential rate regulation" and thus violates orders finding it subject to competition. The suit cites a series of orders, beginning in 2002, finding Altice's predecessor, Cablevision, is subject to competition as well as a later presumption by the FCC that all cable operators nationwide are subject to effective competition. New Jersey's proration requirement, and the BPU's attempts to enforce it, are preempted under the Supremacy Clause, and Altice is entitled to injunctive and declaratory relief to prevent the state's actions, the lawsuit claims.

Altice also calls BPU's attempts to compel Altice to prorate its fees arbitrary and capricious. The suit says BPU's demand for prorated fees is in direct conflict with a 2011 order by the board guaranteeing Cablevision a waiver.

Altice said in court papers that complying with New Jersey's order for prorated refunds would cost it approximately $5 million. While the company now has a uniform, whole-month billing policy for the 21 states where it operates, a requirement that it engage in prorated billing in New Jersey would require it to make costly and time-consuming changes to its billing system, the company said. Such a change would also require it to retrain nearly 3,500 call center agents on a new policy for New Jersey, at a cost of roughly $200,000, Altice said in court papers.

In addition, if Altice is forced to suspend its whole-month billing policy, only to change it back several months later when the BPU's order is held unlawful, it could suffer reputational harm and lose customer goodwill, the suit claims.

The lawsuit said complying with the New Jersey order would be harmful to Altice because its competitors are not subject to the increased costs of prorated billing. For example, DIRECTV, DISH, Amazon Prime, Hulu + Live TV, Netflix and Sling TV do not provide prorated credits when subscribers cancel their service in the middle of a billing cycle, the suit said.

The suit brings counts for declaratory and injunctive relief to enjoin an unlawful state action in violation of the Supremacy Clause, for declaratory and injunctive relief under federal civil rights law, for equitable relief under the Federal Communications Act, and for review of a state agency action under Article VI of the New Jersey Constitution.

Sidney Sayovitz, co-chair of the Telecommunications Practice Group at Schenck Price, who is representing Altice, declined to comment. The Board of Public Utilities did not respond to requests for comment.