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DREXELBROOK ASSOCIATES v. PENNSYLVANIA PUBLIC UTILITY COMMISSION (12/31/64)

decided: December 31, 1964.

DREXELBROOK ASSOCIATES, APPELLANT,
v.
PENNSYLVANIA PUBLIC UTILITY COMMISSION



Appeals from order of Pennsylvania Public Utility Commission, Docket Nos. A. 90296, 90297, and 90298, in case of Drexelbrook Associates v. Pennsylvania Public Utility Commission.

COUNSEL

Irving R. Segal, with him Guy G. deFuria, Harold B. Bornemann, and deFuria, Larkin & deFuria, and Schnader, Harrison, Segal & Lewis, for appellant.

Daniel F. Joella, Assistant Counsel, with him Joseph C. Bruno, Chief Counsel, for Pennsylvania Public Utility Commission, appellee.

Ervin, Wright, Woodside, Watkins, Montgomery, and Flood, JJ. (Rhodes, P. J., absent). Opinion by Ervin, J. Flood, J., joins in this opinion. Opinion by Wright, J. Opinion by Watkins, J. Woodside and Montgomery, JJ., join in this opinion.

Author: Ervin

[ 206 Pa. Super. Page 123]

[EDIT ] The order of the commission refusing the transfer of gas, electric and water facilities denies appellant, Drexelbrook Associates, rights to which it is clearly entitled under the existing law, and constitutes an abuse of discretion by the commission.

The record in this case shows there are many instances where landlords and owners of large apartments and office buildings purchase utility service on a wholesale basis and furnish such service to their office or apartment tenants. Appellant's Exhibit No. 5 lists a large number of apartment houses and developments where single point metering of electric, gas and water service is furnished the landlord by the utilities. Included among these are the Presidential Apartments, Rittenhouse Claridge, Rittenhouse Savoy, in Philadelphia, and Lynnewood Gardens in Montgomery County, the latter containing 1,796 apartment units compared to appellant's 1223 apartments.

It is evident that the owner of a clearly defined apartment house development, by furnishing gas, electricity and water exclusively to tenants is not a public utility, subject to commission jurisdiction, under § 2, subsections 17(a) and (b) of the Public Utility Law, 66 PS § 1102. The reason for this is that the landlord is not furnishing service "to or for the public for compensation" (emphasis supplied) within the meaning of the statute. Drexelbrook is a private, as opposed to a public, enterprise, and its facilities are available only

[ 206 Pa. Super. Page 124]

    to tenants of Drexelbrook. The commission erred in holding that the proposed transfer would constitute appellant a public utility subject to commission jurisdiction, and that appellant had the burden of proving it would not be a public utility in rendering such services to its tenants.

The opinion of Judge Watkins errs in assuming that the transfer of the physical facilities here involved would remove a segment of the general public from the jurisdiction of the commission. The tenants of appellant are not part of the general public served by the utility, but rather are a well defined and exclusive group, clearly distinguishable and removed from the general public. As Chairman Sharfsin said in his dissenting opinion, "The community consists of tenants and tenants only."

The law is settled that where service is rendered not to the general public, but to a defined and exclusive group, including tenants, such service is private in nature and not subject to commission jurisdiction: Overlook Development Co. v. P.S.C., 101 Pa. Superior Ct. 217, 225, affirmed per curiam, 306 Pa. 43, 158 A. 869; Borough of Ambridge v. P.S.C., 108 Pa. Superior Ct. 298, 306, 165 A. 47. In Aronimink Transportation Co. v. P.S.C., 111 Pa. Superior Ct. 414, 170 A. 375, this Court ruled that a corporation owning 288 apartments and furnishing bus transportation to some 800 tenants was not a public utility by virtue of the bus service to a large number of tenants, but rather a private service which did not embrace all members of the public, nor did such service make the private corporation a common carrier. We there held, at page 419, that the service rendered tenants was "merely incidental to the main business of maintaining the apartment houses." Whether or not appellant would be a public utility is determined not by the landlord and tenant relationship, but by the character and extent of the service.

[ 206 Pa. Super. Page 125]

If the facilities here involved had been originally installed by the landlord under single metering and wholesale rates granted to the landlord by the utilities, there would be no doubt of the validity of the transaction. As the record in this case shows, such operations exist today in many large apartment buildings in Pennsylvania. The circumstance that the landlord now seeks single meter and wholesale rates should make no difference in the result. What is legal in one case does not thereby become invalid in the other. The sequence of events should not be controlling.

It is important to note there was no opposition to the proposals of the gas, electric and water companies to transfer facilities to the appellant landlord and give it the benefit of single meter service. Letters of consent were obtained from all tenants in which the landlord agreed to charge the same rate to the tenant as the utility charged the tenant. The petitioning utilities entered into specific contracts with the appellant whereby the appellant would maintain distribution facilities to tenants and receive from the utilities the benefit of wholesale and single meter rates.

While commission approval of the transfer of the facilities here involved may have been necessary, under § 202(e) of the Public Utility Law, 66 PS § 1122, the commission erred in holding the transferee would become a utility and would be required to seek "Commission authorization to furnish the public utility services now performed by applicants. . . ." Nor, from a realistic standpoint, would the applicant utilities be required to seek commission approval, under § 202(d), 66 PS § 1122, for "abandonment of service" to Drexelbrook tenants, as the commission implies. Service is not here being abandoned by the utilities, but simply continued on a different basis. In any event, all parties consented to the changeover, and the commission cannot arbitrarily withhold its approval in this case.

[ 206 Pa. Super. Page 126]

The commission order in this case deprived appellant of the benefit of wholesale rates to which it is entitled under the published tariffs of the petitioning utilities. Rule 13.1 of the electric and gas tariffs reads as follows: "Resale of Service: A Customer may resell energy [gas] purchased from the Company under a single contract at one application of an available rate when the purchased energy . . . is the exclusive source of the Customer's supply, is for the total requirements of the premises served, and the location and use of the resold energy conforms to the availability requirements of the Tariff for supply to Customer for his own account." In Pa. P.U.C. v. Phila. Elec. Co., 23 Pa. P.U.C. 320, the commission approved the resale and submetering of electric current by a landlord of an office building to tenants.

As regards water facilities, the right of appellant to single point water meter service is especially clear. Appellant proposes to furnish water service to tenants free, i.e., as part of the rent, in the same manner as it has in the past. In Phila. Suburban Water Co. v. Pa. P.U.C., 164 Pa. Superior Ct. 320, 64 A.2d 500, this Court affirmed an order of the Commission that an apartment development, known as Colonial Gardens, and consisting of some 186 units in 11 buildings, was a "commercial" consumer and entitled to single point water meter service.

The fact that many of the apartment house developments do not submeter the electricity or gas furnished tenants is, also, not controlling. Appellant should not be penalized because of the sequence of events or because submetering places their rental charges for gas and electricity on a more equitable basis. The commission retains jurisdiction over the rates charged appellant by the producing utilities. The tenants are protected from unreasonable charges under their contracts with appellant. As a practical matter, the rates charged the tenants are geared to the rates charged the

[ 206 Pa. Super. Page 127]

    landlord, whose main business is renting space. Economic competition in this field would prevent the landlord from making any unconscionable profit from utility charges.

The proposed transfers were sought by all parties, viz., the utilities, the landlord and all the tenants, and were unopposed. The approval of the transfers by the commission would not make appellant a public utility nor would it contravene any public policy against such transfer. On the contrary it would permit appellant to utilize provisions in the tariffs of the utilities setting up wholesale rates and single point service. To uphold the order of dismissal in the present case would mean that the commission must take jurisdiction and issue complaints against the owners of hundreds of apartments and office buildings in the Commonwealth, where the landlords are supplying gas, electric and water service to their tenants. As indicated by the cases, the law is that such transactions are valid under existing tariff provisions. The proposed transfers would clearly be legal, and not contrary to the public interest.

In refusing the transfers the commission acted on a mistaken view of the law, and abused its discretion. Cf. Chemical Tank Lines, Inc. v. Pa. P.U.C., 193 Pa. Superior Ct. 607, 165 A.2d 668, affirmed per curiam, 406 Pa. 359, 178 A.2d 698. The order of the commission should be reversed and the record remitted with instructions to grant the ...


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