2010 Summaries of PUC Court Decisions

First Quarter

Core Communications, Inc. v. Federal Communications Comm’n

592 F. 3d 139, (D.C. Cir. 2010)(Decided January 12, 2010).
The U.S. Court of Appeals for the District of Columbia denied the petitions of review filed by Core Communications, Inc. and supporting intervenors, including the Pennsylvania Public Utility Commission. The petitions sought review of an order of the Federal Communications Commission (FCC) that capped the rates that sending local exchange carriers (LEC) pay to receiving LECs for dial-up internet access. The FCC based its legal authority to cap interstate rates under 47 U.S.C. § 201, which requires that the charges of a common carrier engaged in interstate or foreign communication by wire to be just and reasonable. Petitioners argued that 47 U.S.C. §§ 251-252 withdrew the FCC’s authority to set the compensation rate for dial-up internet calls.

The Court determined that the FCC has consistently applied the end-to-end analysis, which classifies a communication as local or interstate depending on whether its origin and destination were in the same state. The Court further determined that dial-up internet traffic is unique because it involves interstate communications that are delivered through local calls; dial-up internet traffic intersects between section 201 and sections 251 and 252. The Court found that the FCC had a reasonable basis to find authority under section 201because section 251(i) specifically saved the Commission’s 201 authority. The Court also found that the FCC acted reasonably in requiring that LECS be compensated under the rate cap regime because the rates for dial-up internet traffic were so distorted that competitive LECs were paying internet service providers to become customers.

The Pennsylvania State University v. Pa. PUC

No. 18 C.D. 2009 (Pa. Cmwlth. 2009)(Filed January 22, 2010).
In a reported opinion, the Commonwealth Court affirmed the Commission’s Order, which declined The Pennsylvania State University’s (PSU) request to extend West Penn Power Company d/b/a Allegheny Power’s (Allegheny Power) generation rate cap to the university under its Tariff 37 account through 2010. PSU is the only customer receiving service under the Tariff 37.

In 2003, Allegheny Power filed a petition to extend the stranded cost recovery period beyond December 31, 2008, the final date of Allegheny Power’s stranded cost recovery period and generation rate cap under the 1998 Restructuring Settlement. The Office of Consumer Affairs and Office of Small Business Advocate intervened and the parties reached a settlement that permitted Allegheny Power to extend its stranded cost recovery period for an additional two years, through 2010, in return for extending its generation rate cap for two years for specific rate schedules. The Commission approved the settlement in 2005. Notice of the terms of the settlement was included in Allegheny Power bill inserts and published in the PA Bulletin, which referenced an appendix that outlined specific proposed rates. Tariff 37 was not listed in the rate schedule because PSU paid its stranded cost obligation prior to 2003.

In 2007, PSU filed a petition for declaratory order seeking a declaration that the extension of the generation rate cap applied to the university under its Tariff 37 account. The Commission affirmed the ALJ’s recommended decision, which denied PSU’s declaratory order and found that Allegheny Power provided PSU with adequate notice.

The Court agreed with the Commission that since PSU already paid its stranded cost obligation before 2003 petition was filed, the extension of the generation rate cap did not apply to PSU. The Court found that PSU’s exclusion from the rate cap extension was not discriminatory because all parties were treated equally. The Court further found that the Commission properly applied the provisions of the Competition Act, 66 Pa. C.S. § 2804, and that PSU received adequate notice.

Judge Cohn Jubelirer dissented and concurred, and stated that PSU did not receive adequate notice because the bill inserts stated that the generation rate cap would be extended to “all customers;” the notice did not exclude Tariff 37. Likewise, the notice in the PA Bulletin did not specify which tariffs would be affected by the extension of the generation rate cap.

Norfolk S. Ry. Corp. v. Pa. PUC

Civil Action No. 09-835, (W.D. Pa. 2010) (filed March 24, 2010).
In a Memorandum and Order, the U.S. District Court for the Western District of Pennsylvania denied the Commission’s motion to dismiss. Norfolk Southern sought a judicial declaration that an order issued by the PUC in 1973 has been preempted by regulations promulgated in June 2008 under the Federal Railroad Safety Act, 49 U.S.C.S. §§ 20101 et seq. In its motion, the Commission argued that Norfolk Southern failed to exhaust administrative remedies available before the PUC. The Court found that the Commission did not demonstrate that prudential exhaustion was required to dismiss the case, because when Norfolk Southern filed its lawsuit, there was no existing PUC process with which to interfere. The Court further noted that deference to the PUC’s expertise does not warrant dismissal, as the question of federal preemption is within the expertise of federal courts.

The Court also held that the Commission failed to meet its burden in proving that the Union should be joined as a necessary party to the lawsuit and why the court is unable to accord complete relief among the existing parties. Additionally, the Commission argued that venue in the western district is improper because the PUC is located in Harrisburg. The Court disagreed, stating that Norfolk Southern’s choice of venue should not be lightly disturbed. The Court also noted that Norfolk Southern’s Railway is located in the western district and that the PUC has offices in Pittsburgh.

Southeastern Pa. Transp. Auth. v. Pa. PUC

No. 1603 C.D. 2009 (Pa. Cmwlth. 2010)(filed March 30, 2010).
In a reported opinion, the Commonwealth Court affirmed the Commission’s order that approved PPL Electric Utilities Corporation’s (PPL) application for siting and construction of a power line in Bucks and Lehigh Counties, and refrained from deciding whether PPL had the authority to condemn the Southeastern Pennsylvania Transportation Authority’s (SEPTA) property.

PPL filed a siting application, which sought to upgrade power transmission in Bucks and Lehigh Counties and proposed that the “Coopersburg Line” was the best route after offering two alternative routes. PPL also filed an application seeking to exercise eminent domain over SEPTA’s tracks. SEPTA protested the applications. After a hearing, the ALJ issued a decision recommending that PPL’s applications be approved and concluding that the PUC was not the proper forum to dispute the lawfulness of the proposed condemnation of SEPTA’s property pursuant to the Business Corporation Law, 15 Pa. C.S. § 1511(c), which states that condemnation shall not be an issue in Commission proceedings. The Commission adopted the ALJ’s recommendations.

On appeal, SEPTA argued that the PUC erred in granting the application because the use of eminent domain was not necessary or proper. The Court disagreed with SEPTA and determined that 15 Pa. C.S. § 1511 limited the PUC’s role to considering whether the project is necessary or proper for the benefit of the public. Therefore, the PUC properly refused to decide the merits of whether PPL could condemn SEPTA’s property. The Court noted that after the PUC authorizes a utility to exercise the power of eminent domain, the utility must prevail in a condemnation action at the Court of Common Pleas.

Second Quarter

Robert J. Davis v. Pa. PUC

No. 1673 C.D. 2009 (Pa. Cmwlth. 2010)(filed April 22, 2010).
In an unreported memorandum opinion, Commonwealth Court affirmed the Commission’s order that approved the petition of the Sustainable Energy Fund of Central Eastern Pennsylvania (SEF) for the removal of Robert J. Davis (Davis) as a member of the board of directors.

In September 2006, the Commission approved the appointment of Davis as a replacement SEF board member and in October 2007, the SEF board appointed Davis to a full three-year term. Pursuant to SEF by-laws, the Commission may remove a board member for cause upon motion by SEF. Accordingly, SEF filed a petition with the Commission in March 2009 that requested the removal of Davis from the board. The petition alleged that Davis communicated confidential information to a loan applicant and failed to disclose a potential business relationship with a loan applicant. Davis did not file an answer to the petition. In approving the SEF’s petition, the Commission found that it was unopposed and that Davis violated SEF’s conflict of interest policy, SEF’s by-laws and his fiduciary duty to SEF.

On appeal, Davis argued that the Commission violated his due process rights and that 66 Pa.C.S. § 703(g) affords him a hearing before the Commission can amend or rescind an order. The Court found that Davis did not avail himself of the Commission’s procedures because he failed to file an answer to SEF’s petition. The Court further concluded that the Commission did not err in not scheduling a hearing because the Commission is not required to hold hearings in cases where no material facts are in dispute.

Energy Conservation Council of Pa. v. Pa. PUC

No. 51 C.D. 2009 (Pa. Cmwlth. 2010)(filed May 6, 2010).
In a reported opinion, Commonwealth Court affirmed the Commission’s order granting the site location of a 1.2 mile electric high voltage line and substation, referred to as the 502 Junction Facilities, which was proposed by the Trans-Allegheny Interstate Line Company (TrAIL Co.).

TrAIL Co. filed applications with the Commission requesting a certificate of public convenience to furnish electrical transmission service and to construct, operate and maintain the 502 Facilities in Greene County. The Energy Conservation Council of Pennsylvania (ECC) and others opposed the applications. After hearings, the ALJs found that there is no public need for the 502 Facilities in Greene County and the siting process did not support a finding that the proposed route was reasonable. The ALJs further concluded that TrAIL Co. failed to satisfy its burden in proving that it acted reasonably to mitigate the environmental impact of the project. TrAIL Co. filed exceptions to the ALJs’ decision, which recommended that the Commission deny the applications. The Commission disagreed with the ALJs’ decision and found that the record establishes that the 502 Facilities are needed to address reliability issues and are the best alternative to achieve that result.

On appeal, the ECC alleged that the Commission’s finding that the 502 Facilities were necessary was not supported by substantial evidence. The ECC also alleged that the Commission’s order inappropriately considered regional concerns and improperly applied Commission regulations and Article I, Section 27 of the Pennsylvania Constitution.

The Court concluded that the evidence supports the Commission’s finding that TrAIL Co. considered alternate routes and the proposed route was reasonable. Regarding the environmental impact of the project, the Court found that the proposed route crossed over one small stream, did not cross over wetlands and would only cross one quarter mile of steep soils; further, only two residences are located within 500 feet of the line and no historic (architectural) sites are located within one quarter mile of the route. The Court also noted that the Commission imposed numerous conditions requiring TrAIL Co. to perform additional studies and report the results of those studies before beginning construction on the 502 Facilities. Accordingly, the Court found that the proposed route of 1.2 miles would have a minimum adverse environmental impact, particularly with the conditions the Commission imposed, and is supported by substantial evidence.

Additionally, the Court concluded that the Commission did not err or abuse its discretion in finding a public need for the 502 Facilities based on regional reliability factors. The Court reasoned that Pennsylvania courts and the General Assembly have recognized the importance of ensuring the reliability of electric transmission systems. Lastly, the Court found the Commission properly applied its regulations and Article I, Section 27 of the Pennsylvania Constitution.

Judge Leavitt dissented, disagreeing with the majority’s interpretation that the Commission’s regulations presume that there is a minimum adverse environmental impact with transmission lines less than two miles in length. Judge Leavitt also disagreed that TrAIL Co. met its burden of proof in its applications and found that the Commission erred in approving incomplete applications conditioned upon the submission of additional studies. Judge Leavitt also stated that the Commissioners incorrectly considered regional interests over those of the Commonwealth.

Pickford v. Pa. PUC

No. 1157 C.D. 2009 (Pa. Cmwlth. 2010)(filed June 29, 2010).
In an unreported memorandum opinion, Commonwealth Court affirmed the Commission’s Order that dismissed Petitioners’ complaint for failure to establish a prima facie violation of Section 1501 of the Public Utility Code, 66 Pa.C.S. § 1501.

Susan Pickford and 24 other customers (collectively, Petitioners) of the Pennsylvania American Water Company (PAWC) filed complaints alleging adverse health effects from chloraminated water and requested that PAWC refrain from implementing chloramines until health issues were further studied. Prior to Petitioners’ complaints, the Department of Environmental Protection (DEP) had granted PAWC’s permits to convert its water treatment plants from chlorinated water to chloraminated water. Although no comments were filed to DEP’s published notice of its approval, Pickford filed an appeal to the Environmental Hearing Board (EHB) seeking review of the DEP-issued permits and alleging inadequate notice. The EHB dismissed her appeal as untimely and Pickford appealed to the Commonwealth Court, who affirmed the EHB. The Supreme Court of Pennsylvania denied Pickford’s Petition for Allowance of Appeal.

PAWC moved to dismiss the complaints Petitioners filed before the PUC for lack of subject matter jurisdiction and the ALJ granted the dismissal. Petitioners filed exceptions and the Commission remanded the matter for a determination of whether PAWC’s choice of treatment alternatives and cost was prudent and appropriate, whether the tap water was suitable for household purposes and whether adequate notice was given to PAWC customers of the change. Before the hearings took place, the Commission clarified that DEP has primary jurisdiction with regard to water quality and public health issues, and that DEP’s permitting process cannot be collaterally attacked.

A public hearing was held at which Petitioners offered the testimony of 13 lay witnesses who conveyed concerns about the health effects of chloramination. The ALJ ruled that the testimony was inadmissible as hearsay and were opinions that required expert testimony. Petitioners also offered the written testimony of an expert witness. PAWC and DEP filed objections to the admissibility of this testimony because it discussed health and environmental impacts of chloramines. Petitioners filed no response and the ALJ sustained the objections. After Petitioners presented their case-in-chief, PAWC moved to dismiss the complaints for failure to establish a prima facie case. The ALJ granted the motion, finding that Petitioners failed to present evidence that chloraminated water would be unsuitable for household use, PAWC abused its managerial discretion in selecting chloramines and Petitioners received inadequate notice of the change. The PUC adopted the ALJ’s decision and dismissed the complaints.

On appeal, Petitioners argued that the Commission erred by denying them an opportunity to present evidence of the relative adverse health effects of chloramine when compared to treatment alternatives and in excluding their expert testimony.

The Court concluded that Petitioners did not challenge PAWC’s choice of treatment under section 1501 and instead challenged the substances used in the treatment of the water and the resultant impact on public health. The Court held that DEP has jurisdiction over water purity and enforces the Safe Drinking Water Act, while the PUC has jurisdiction over water service. Therefore, the PUC did not err in refusing to re-litigate the DEP determinations regarding water quality. The Court further determined that PAWC’s choice to use chloramines was a permissible management decision, since the treatment method was deemed safe, and that the ALJ properly excluded the testimony of the lay witnesses, since their opinions were scientific and required an expert.

The Court also concluded that the PUC did not abuse its discretion by excluding the written testimony of an expert witness because Petitioners did not respond to PAWC’s and DEP’s objections to the testimony.

Third Quarter

Reading, Blue Mountain and Northern R.R. Co. v. Pa. PUC

No. 2168 C.D. 2009 (Pa. Cmwlth. 2010)(filed July 23, 2010).
In an unreported memorandum opinion, Commonwealth Court affirmed the PUC’s order and found that the PUC did not abuse its discretion in denying Reading, Blue Mountain and Northern Railroad Company’s (Railroad) petition for reconsideration. The Railroad alleged in its petition for reconsideration, filed on August 1, 2008, that the PUC erred by not serving its most recent attorney of record and the Railroad with a copy of the final order, entered on February 19, 2008, that adopted the ALJ’s recommended decision and denied the Railroad’s exceptions. The order directed the Railroad to replace a retaining wall at its sole cost and expense within one year of entry of the order.

The Court examined the record below and noted that the Railroad’s prior attorney of record never withdrew his appearance as counsel pursuant to the PUC’s regulations at 52 Pa. Code § 1.24(3), and that this attorney acknowledged receipt of the PUC’s final order, which was evidenced by his signed return receipt. Further, the Railroad’s prior attorney was its attorney from the commencement of the proceeding in September 2000 and continuously filed pleadings on the Railroad’s behalf throughout the entire litigation. Because he did not withdraw his appearance, the Court found that the PUC did not abuse its discretion in denying the Railroad’s petition for reconsideration merely because the PUC did not serve its most recent attorney of record. The Court also held that the PUC was not required to serve the Railroad, since service upon a party’s attorney is sufficient under the PUC’s regulations at 52 Pa. Code § 1.55(b).

Fourth Quarter

Collazo v. Pa. PUC

No. 725 C.D. 2010 (Pa. Cmwlth. 2010)(filed October 21, 2010).
In an unreported memorandum opinion, Commonwealth Court affirmed the Commission’s decision, which dismissed Ruben Collazo’s complaint. In September 2006, Collazo filed a complaint with the PUC alleging that Stillwater Lake Estates, a planned residential community where Collazo owns property, provided wastewater utility services without a certificate of public convenience. After a hearing, the ALJ dismissed the complaint finding that Stillwater was not a public utility under Section 102 of the Public Utility Code because it served only property owners within the geographical limits of the community. The Commission reversed the ALJ’s decision and remanded the matter for a determination as to whether the community was a bona fide cooperative association, and thus exempt from the Commission’s jurisdiction, under Section 102 of the Code. Upon remand, the ALJ concluded that the community met all of the requirements of a bona fide cooperative association under Adrian Water Co., 53 P.U.C. 139 (1979) and dismissed Collazo’s complaint. The Commission adopted the ALJ’s decision.

On appeal, Collazo argued that the Commission erred by failing to give binding effect to a settlement agreement that he had entered into with the community to resolve a civil action that Collazo brought in federal court in 2002. The Court concluded that the federal decision has no bearing upon the underlying issues of this case, since it did not address the community’s status as a bona fide cooperative association; the federal district court merely reviewed and approved the terms of the settlement. Collazo also argued that the community operates on a “for profit” basis and thus is not eligible for the bona fide cooperative association exemption. The Court disagreed that the community operated on a profit basis and noted that the Community passes along any economic benefits or detriments to its members.

Eagle Rock Cmty. Ass’n, Inc. v. Pa. PUC

No. 2099 C.D. 2009 (Pa. Cmwlth. 2010)(Filed December 6, 2010).
In an unreported memorandum opinion, Commonwealth Court affirmed the PUC’s order dismissing Eagle Rock Community Association, Inc.’s (Eagle Rock) complaint against Little Washington Wastewater Company (LWWC). Eagle Rock alleged that LWWC provided deficient service in violation of Section 1501 of the Public Utility Code, 66 Pa.C.S. § 1501.

In 2003, LWWC and Eagle Rock entered into an agreement where LWWC agreed to provide wastewater service to the existing Eagle Rock community and would negotiate in good faith to provide service to additional parcels. In 2006, Eagle Rock purchased a 541 acre parcel, which LWWC advised that it could not serve. Sometime thereafter, Eagle Rock put sewer pipe into the ground to serve the additional acreage. The pipe was not connected to the wastewater system and raw sewage went into the ground. The Department of Environmental Protection (DEP) imposed a moratorium preventing any new wastewater connections at Eagle Rock because Eagle Rock failed to obtain the necessary DEP permits prior to constructing sewer extensions. DEP also prohibited the local township from issuing building permits to Eagle Rock.

The present complaint arose when LWWC proposed a rate increase before the PUC. Eagle Rock alleged that the proposed rate increase violated their agreement and that LWWC violated Section 1501 by failing to provide service to the 541 acre parcel and design details, which prevented property owners from obtaining building permits. After evidentiary hearings, the ALJ concluded that Eagle Rock failed to establish a prima facie case that a Section 1501 violation had occurred. The PUC adopted the ALJ’s decision.

On appeal, Eagle Rock argued that the PUC’s opinion and order was deficient because it failed to consider relevant pieces of evidence, arrived at erroneous legal conclusions, was not supported by substantial evidence and failed to contain meaningful analysis. The Court disagreed and noted that the PUC properly evaluated the evidence and dissected each issue.

Eagle Rock also argued that LWWC was obligated to serve the additional acreage. The PUC found that Eagle Rock created a legal impediment by failing to obtain requisite DEP permits, which prevented LWWC from providing wastewater services. The PUC also found that LWWC was excused from providing service pursuant to 52 Pa. Code § 65.15, which allows a public utility to refuse to serve an applicant until the applicant has complied with regulations governing water service. The Court found no error in the PUC’s interpretation that Section 65.15 applied to wastewater service as well as to water service. The Court also concluded that the PUC did not err in refusing to require LWWC to provide service that would violate the DEP moratorium and regulations.

Eagle Rock further argued that LWWC was contractually obligated to provide service to the additional acreage. The Court agreed with the PUC’s conclusion that the newly acquired tract of land was outside of LWWC’s certificated territory and it would have been unlawful for LWWC to provide service to an area beyond its territory. The Court also found that a “will serve letter” that LWWC sent to Eagle Rock was an offer and not a binding contract to serve the additional acreage.

Eagle Rock also argued that LWWC violated their agreement by failing to automatically increase rates by 4% per year over 8 years. In 2004, LWWC proposed this graduated rate increase and the Office of Consumer Advocate objected. An amendment was filed that excluded the automatic rate increase. Because Eagle Rock never participated in the rate proceeding, despite being notified, the Court agreed with the PUC that Eagle Rock’s opportunity to challenge the rejection of the rate increase was in 2004 and not in this proceeding.