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COMMONWEALTH PENNSYLVANIA v. LAUREL PIPE LINE COMPANY (03/05/76)

COMMONWEALTH COURT OF PENNSYLVANIA


decided: March 5, 1976.

COMMONWEALTH OF PENNSYLVANIA, PENNSYLVANIA PUBLIC UTILITY COMMISSION
v.
LAUREL PIPE LINE COMPANY, APPELLANT

Appeal from the Order of the Pennsylvania Public Utility Commission in case of Pennsylvania Public Utility Commission v. Laurel Pipe Line Company, Rate Investigation Docket, No. 184.

COUNSEL

Glenn E. Davis, for appellant.

Edward Munce, Assistant Counsel, with him Edward J. Morris, Counsel, for appellee.

President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by Judge Kramer.

Author: Kramer

[ 23 Pa. Commw. Page 560]

This is an appeal by Laurel Pipe Line Company from a temporary rate order entered August 22, 1975, by the Pennsylvania Public Utility Commission (PUC). The

[ 23 Pa. Commw. Page 561]

    question presented is whether the PUC committed an error of law in ordering a temporary rate after having suspended the effectiveness of Laurel's increased rate tariff filing for nine months. We hold that the PUC did not commit an error of law.

Laurel, a public utility subject to the jurisdiction of the PUC, filed the proposed tariff increases on September 30, 1974, to become effective November 1, 1974. Laurel voluntarily postponed the effectiveness of the tariff increases until December 1, 1974. By an order "adopted" November 26, 1974, and "entered" December 3, 1974, the PUC suspended the effectiveness or operation of the increased tariff from December 1, 1974 to June 1, 1975, a period of six months. By an order "adopted" May 22, 1975, and "entered" May 30, 1975, the PUC further suspended the effectiveness or operation of the increased tariff from June 1, 1975 to September 1, 1975, a period of three months, making a total suspension of nine months, as provided for in Section 308 of the Public Utility Law.*fn1

[ 23 Pa. Commw. Page 562]

In an order "adopted" August 19, 1975, and "entered" August 22, 1975, the PUC ordered that the effective rates collected during the suspension period be prescribed as temporary rates pursuant to Section 310(a) of the Act,*fn2 for a 90-day period on and after September 1, 1975. On August 27, 1975, Laurel appealed to this Court specifying that the PUC erred in establishing the temporary rates because Laurel was not afforded notice, an opportunity to be heard, and a hearing, and also erred because the temporary rate order was, in effect, a suspension beyond the nine month period provided for in Section 308 of the Act.

The PUC filed a Motion to Quash alleging that the order appealed from was interlocutory and that the appeal did not state a cause of action. The PUC notes that

[ 23 Pa. Commw. Page 563]

    the statute provides for a mandatory recoupment in the event that the final rate order establishes rates higher than those set in the temporary rate order,*fn3 and argues that such an order is interlocutory and not appealable, unless the utility alleges that the formula set forth in Section 310 of the Act was not followed by the PUC. We will dismiss the Motion to Quash because if the PUC committed an error of law in issuing the temporary rate order, Laurel had a right to appeal with specifications of error. The PUC must follow the requirements of the Act when it fixes temporary rates.

Our scope of review is to determine if there was an error of law, a violation of constitutional rights, or lack of evidence to support the Commission's order. Section 1107 of the Act, 66 P.S. ยง 1437.

Laurel contends that it did not receive the notice and an opportunity to be heard, which Section 310 of the Act requires before the Commission may fix temporary rates. This contention cannot stand the test of scrutiny of the record. The PUC's order of December 3, 1974, which

[ 23 Pa. Commw. Page 564]

    ordered the investigation into the rate increase, specifically provided:

"2. That this inquiry and investigation include consideration of the lawfulness of existing rates, rules and regulations, and the imposition of temporary rates under provisions of Section 310 of the Public Utility Law." (Emphasis added.)

This order gave Laurel notice that the PUC's investigation and hearings would include consideration of the imposition of temporary rates. Next, Laurel contends that it was not given a hearing. The record reveals that prior to the temporary rate order, entered August 22, 1975, hearings were held and evidence was received, which permitted the PUC to decide that the revenues received under the rates in existence prior to the rate filing and during the period of suspension provided a rate or return in excess of the 5 percent minimum set forth in Section 310 of the Act. In order to reach this decision the PUC adopted the original cost measure of value of plant in service, and the operating revenues and revenue deductions claimed by Laurel. The PUC adopted these claims "only for the purpose of this temporary rate order." Laurel did not make any specification of error or offer any objection to the statistics used by the PUC.*fn4

Laurel argues that the PUC committed an error of law because the effect of the temporary rate order was to suspend the effectiveness of the increased rates for more than the nine-month statutory period provided for in Section 308 of the Act. This argument has no merit. Section 310(a) of the Act provides that the PUC may fix temporary rates "in any proceeding involving the rates of

[ 23 Pa. Commw. Page 565]

    a public utility . . . pending the final determination of such rate proceeding." Section 310(e) of the Act provides that temporary rates "shall be effective until the final determination of the rate proceeding, unless terminated sooner by the commission."

Laurel seems to argue that the words "temporary rates" imply rates higher than those in existence before the rate filing is made. There is no such implication in the statute. The only proscription placed upon the PUC is that temporary rates must provide "a return of not less than five per centum upon the original cost, less accrued depreciation, of the physical property (when first devoted to public use) of such public utility. . . ." The whole purpose of temporary rates is to protect both the public and the public utility, the former so that it will not be overcharged, and the latter so that it may recoup any loss suffered during the period the temporary rate order is in effect. Recoupment for the loss suffered by the utility during a suspension period of a proposed rate increase which is later sustained, is discretionary; but recoupment for the period that a temporary rate order is in effect is mandatory, See Pennsylvania Public Utility Commission v. Commonwealth of Pennsylvania, 23 Pa. Commonwealth Ct. 566, A.2d (1976). Laurel is quite correct that the PUC is without power to extend the suspension period beyond nine months. If the PUC has suspended the effectiveness of Laurel's rate filing beyond September 1, 1975, we would reverse, because the statute clearly states that the filed tariff would become effective by operation of law, unless temporary rates are set before the filed tariff becomes effective by operation of law. The PUC, however, did not suspend beyond nine months. The PUC, in accordance with Section 310 of the Act, established temporary rates pending the final determination of the rate proceeding. The fact that the application of the legislatively mandated formula for temporary rates indicated

[ 23 Pa. Commw. Page 566]

    that the rates in existence prior to Laurel's rate filing were higher than the minimum required by Section 310 of the Act, permitted the PUC to establish those prior rates as temporary rates. As we have already stated, if those temporary rates were lower than the rates finally determined at the end of the rate proceeding, Laurel was fully protected in that it would have been permitted to recoup any difference. The PUC followed the requirements of the Act and did not commit an error of law. We therefore

Order

And Now, this 5th day of March, 1976, the order of the Pennsylvania Public Utility Commission in the above captioned matter, entered August 22, 1975, is hereby affirmed.

Disposition

Affirmed.


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