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decided: November 17, 1972.


Appeal from orders of Commonwealth Court, Nos. 996 and 997, Transfer Docket, 1970, in re City of Philadelphia and Pennsylvania Department of Transportation v. Pennsylvania Public Utility Commission et al.


Alan R. Squires, Assistant Counsel, with him Edward Munce, Acting Counsel, for Public Utility Commission, appellant.

Frederic J. Ballard, with him Tyson W. Coughlin, James W. Sutton, Edward G. Bauer, Jr., Eugene J. Bradley, and Ballard, Spahr, Andrews & Ingersoll, for Philadelphia Electric Company, intervening appellant.

John B. King, with him Donald F. Clarke, and Thomas A. Everly, Jr., for The Bell Telephone Company of Pennsylvania, intervening appellant.

Herbert G. Zahn, Assistant Attorney General, for Pennsylvania Department of Transportation, appellee.

John Mattioni, Deputy City Solicitor, with him James M. Penny, Jr., Assistant City Solicitor, and Levy Anderson, City Solicitor, for City of Philadelphia, appellee.

David P. Bruton, with him J. Freedley Hunsicker, Jr., Lewis H. Van Dusen, Jr., and Drinker, Biddle & Reath, for Southeastern Pennsylvania Transportation Authority.

Jones, C. J., Eagen, O'Brien, Roberts, Pomeroy and Nix, JJ. Opinion by Mr. Chief Justice Jones. Mr. Justice Manderino took no part in the consideration or decision of this case. Dissenting Opinion by Mr. Justice Pomeroy. Mr. Justice Roberts joins in this dissent.

Author: Jones

[ 449 Pa. Page 404]

This appeal involves the question whether the burden of financing the relocation of utility lines and equipment necessitated by the extension of the Broad Street Subway in Philadelphia, must be borne by utility companies (intervening appellants)*fn1 or whether the expense shall be allocated between the City of Philadelphia and the utility companies in such proportions as determined by the Pennsylvania Public Utility Commission.

The proposed subway extension is intended to expand rapid transit service to the inhabitants of South

[ 449 Pa. Page 405]

Philadelphia, provide public transportation to the newly constructed sports complex at Broad Street and Pattison Avenue and relieve traffic congestion in the area. The construction requires street crossings over the subway line at fifteen separate locations. Appellees, the City of Philadelphia (City) and the Southeastern Pennsylvania Transportation Authority (SEPTA), filed an application with the Public Utility Commission (Commission) pursuant to the Public Utility Law of 1937, Act of May 28, 1937, P. L. 1053, art. I, §§ 1 et seq., 66 P.S. §§ 1101 et seq., for approval of the construction of the above grade crossings. The utility companies which are affected by crossing construction necessitating facility relocation include, among others, the Bell Telephone Company of Pennsylvania (Bell) and the Philadelphia Electric Company (Electric).

The Commission issued a preliminary order on May 5, 1969, temporarily approving the project and directing the utilities to make the necessary relocations at the utilities' expense pending a hearing and final order.

The Commission hearing adduced the following relevant evidence. Exclusive of the cost of relocating the intervening appellants' facilities, the subway construction and grade crossings would cost $33,000,000. The project is to be financed by a self-sustaining bond issue by the City, the debt service of which is to be paid from revenue generated by appellee SEPTA in the operation of the subway pursuant to an agreement between SEPTA and the City. SEPTA will operate the subway extension on its completion. The City has agreed to relocate all City-owned water mains, drainage facilities and transit ducts and to defray as much of the cost of relocation of the facilities of the Philadelphia Gas Works as the City assumed by agreement with the Gas Works dated December 29, 1961. All of these expenses will be defrayed from the proceeds of the City bond issue.

[ 449 Pa. Page 406]

The cost of relocating the utility lines of Bell and Electric was estimated at $19,500 and $448,000, respectively. Appellees City and SEPTA urged the Commission to impose the entire cost of facility relocation on the utility companies. At the Commission hearings, the City disclaimed liability for the costs associated with utility companies' relocations. The City argued that since these utility facilities were implanted pursuant to permits granted by the City,*fn2 which permits required the utilities to relocate at their own expense when the change in location was necessitated by public project,*fn3 the terms of these permits should here apply.

The Commission, in its final order dated June 1, 1970, determined that its power to allocate costs in crossing cases was plenary and exclusive, notwithstanding that the permit provisions dictate that relocation expenses should be borne by the utility companies. The Commission directed, in paragraphs 21 and 22 of its order, that the City pay the utility companies 75% of the cost of relocation exclusive of any betterment to their facilities. On appeal by the City and SEPTA, the Commonwealth Court vacated and set aside paragraphs

[ 449 Pa. Page 40721]

and 22 of the Commission's order and relieved the City of any duty of reimbursement for the costs incurred by Bell and Electric pursuant to facility relocation.

This Court is asked to decide the questions: (1) whether the Public Utility Commission has statutory authority to allocate the cost of relocating the facilities of Bell and Electric between the City and said utilities in view of the permit agreements imposing the entire cost of relocation on appellants utilities; and (2) whether the Commission exceeded its statutory powers by abrogating the provisions of the permits here involved.*fn4

That a valid, binding contractual obligation was created when the utility companies obtained permits for the laying of conduits in the City's streets was decided by this Court in Philadelphia Electric Company v. Philadelphia, 301 Pa. 291, 152 Atl. 23 (1930). "The contractual conditions imposed by the City, which [appellants] could either accept or reject, were impositions certainly within the scope of its municipal powers." 301 Pa. at 298, 152 Atl. at 26. Since the permits were granted as part of contractual agreements between the City and the utility companies, there can be no doubt that the covenants of Bell and Electric providing that the cost of facility relocation would be borne by facility owners were part of the quid pro quo which the utility companies proffered in exchange for the City's permit grants.

Appellants would have this Court disturb vested contractual rights derived from ...

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