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PENNSYLVANIA GAS AND WATER COMPANY -- WATER DIVISION v. COMMONWEALTH PENNSYLVANIA (12/21/77)

decided: December 21, 1977.

PENNSYLVANIA GAS AND WATER COMPANY -- WATER DIVISION, PETITIONER
v.
COMMONWEALTH OF PENNSYLVANIA, PENNSYLVANIA PUBLIC UTILITY COMMISSION, RESPONDENT



Appeal from the Order of the Pennsylvania Public Utility Commission in case of Pennsylvania Public Utility Commission v. Pennsylvania Gas and Water Company, Rate Investigation Docket No. 209, dated July 7, 1976.

COUNSEL

Charles E. Thomas, with him D. Mark Thomas, Jack F. Aschinger, and, of counsel, Metzger, Hafer, Keefer, Thomas and Wood, for petitioner.

Melville G. M. Walwyn, Assistant Counsel, with him Daniel F. Joella, Assistant Counsel, and Barnett Satinsky, Acting Chief Counsel, for respondent.

President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Judge Kramer did not participate in the decision. Opinion by President Judge Bowman.

Author: Bowman

[ 33 Pa. Commw. Page 145]

This case is before us upon a petition for review filed by the Pennsylvania Gas and Water Company (PG&W) which challenges an order, dated July 7, 1976, issued by the Pennsylvania Public Utility Commission (PUC). PG&W is a combination public utility rendering both natural gas and water service.*fn1 At the end of the test year, September 30, 1974, it provided water service to 128,401 customers representing 144,559 consumer units.*fn2 Its service area covers a 165

[ 33 Pa. Commw. Page 146]

    square-mile area in Northeastern Pennsylvania and includes 60 municipalities. This service area is divided into two divisions, viz, Spring Brook Division and Scranton Division, which are not physically interconnected for the exchange of any appreciable volume of water. Over 60 reservoirs and 1600 miles of water mains make up its distribution system.

On January 17, 1975, PG&W filed Supplements No. 22 and No. 23 to Tariff Water -- Pa. P.U.C. No. 3 (Spring Brook Division) and Supplements No. 23 and No. 24 to Tariff Water -- Pa. P.U.C. No. 4 (Scranton Division), proposing increases in all existing rates to become effective March 18, 1975. The proposed increases were calculated to produce $2,643,212 in additional annual revenues, exclusive of the State Tax Adjustment Surcharge. This amount would constitute approximately a 20% increase in revenues, with each of two steps in the supplements providing a 10% increase as follows:

First Step

Supp. No. 22 to Tariff No. 3 (Spring Brook) $769,262

Supp. No. 23 to Tariff No. 4 (Scranton) 552,344

$1,321,606

Second Step

Supp. No. 23 to Tariff No. 3 (Spring Brook) $769,262

Supp. No. 24 to Tariff No. 4 (Scranton) 552,344

$1,321,606

As noted earlier, these supplements were based on a test year ended September 30, 1974, and they totaled $2,643,212. The proposed effective date was voluntarily postponed to March 26, 1975. Supplement No. 22 to Tariff No. 3 and Supplement No. 23 to Tariff No. 4 were not suspended by the PUC and became effective by operation of law on March 26, 1975. By PUC order dated March 25, 1975, docketed at R.I.D. No. 209, Supplements No. 23 to Tariff No. 3 and No.

[ 33 Pa. Commw. Page 14724]

to Tariff No. 4 were suspended to September 26, 1975. By an order dated September 23, 1975, the suspension was extended to December 26, 1975. PG&W voluntarily extended the suspension to January 1, 1976. On December 30, 1975, the PUC set existing rates as temporary rates for a period of 60 days. Through several extensions the temporary rates remained in effect until July 8, 1976. As a result of the PUC's investigation of the reasonableness and lawfulness of the supplements filed by PG&W, including four days of hearings held during July and September of 1975,*fn3 the PUC, by a 3 to 2 vote issued an order, dated July 7, 1976, which disallowed the entire $1,321,606 second step of the proposed rate increase. It is noteworthy that only PG&W presented any evidence at the hearings. Counsel for the PUC limited his participation to cross-examination of PG&W's witnesses.

In its adjudication, the PUC found a fair value of $87,700,000 and a fair rate of return of 8.53 percent, thus providing income available for return in the amount of $7,482,668. This return, together with the PUC's findings on operating expenses, depreciation, taxes, and other adjustments set forth in the adjudication, led the PUC to conclude that the allowable annual revenues were $14,574,017. This figure is precisely $1,321,606 less than the total revenues sought by PG&W in its filings and results in the precise ...


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