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decided: June 17, 1980.


Appeal from the Order of the Pennsylvania Public Utility Commission in case of Pennsylvania Public Utility Commission, Crucible, Inc., Bethlehem Steel Corporation, Braeburn Alloy Steel, Jones and Laughlin Steel Corporation, Volkswagen Manufacturing Corporation of America, United States Steel Corporation, Alliance for Consumer Protection, Rev. H. Dean Michaels, Sr., Mark Widoff, Consumer Advocate, and the City of Pittsburgh and Richard S. Caliguiri, Mayor v. The Peoples Natural Gas Company, No. 78010545, et al.


Robert H. Young, with him Walter R. Hall, II, and Thomas P. Gadsden ; of counsel, John J. Mullally, Roger E. Wright and Robert Jacobs, Morgan, Lewis & Bockius, for petitioner.

Gilbert L. Hamberg, Assistant Counsel, with him Steven A. McClaren, Deputy Chief Counsel, George M. Kashi, Chief Counsel and Joseph J. Malatesta, Jr., Chief Counsel, for respondent.

Daniel Clearfield, Assistant Consumer Advocate, with him Richard D. Spiegelman, Norman Kennard, Assistant Consumer Advocates, Walter W. Cohen, Consumer Advocate, and Charles J. Streiff, Wick, Vuono & LaVelle, for intervenor, Consumer Advocate.

Marvin A. Fein, Utilities Counsel, with him Mead J. Mulvihill, Jr., City Solicitor, for intervenors, City of Pittsburgh and Mayor Richard S. Caliguiri.

President Judge Crumlish, and Judges Wilkinson, Jr., Mencer, Rogers, Blatt, Craig and Williams, Jr. Judge MacPhail did not participate. Opinion by Judge Wilkinson, Jr. Concurring Opinion by Judge Rogers. President Judge Crumlish and Judge Craig join in this concurring opinion.

Author: Wilkinson

[ 52 Pa. Commw. Page 203]

The Peoples Natural Gas Company (Petitioner) has appealed a final order of the Pennsylvania Public Utility Commission (Commission), disallowing approximately 10.8 million dollars of a requested 14.3 million dollar increase in revenues. We affirm.

Petitioner is a wholly owned subsidiary of the Consolidated Natural Gas Company actively engaged in various phases of the natural gas business in Pennsylvania. On January 27, 1978, Supplement No. 14 to Tariff Gas -- Pa. P.U.C. No. 37 proposing additional annual revenues of $14,287,797*fn1 was filed by Petitioner. Complaints were filed against the proposed rates by the City of Pittsburgh, seven industrial customers, the Alliance for Consumer Protection, the Consumer Advocate, and the Reverend H. Dean Michaels, Sr. By order dated March 1, 1978, Supplement No. 14 was suspended pending investigation into the fairness, reasonableness, and lawfulness of the proposed rates. On September 11, 1978, the administrative law judge to whom the case had been assigned recommended that only $4,467,253 of the proposed increase be approved. The Commission in turn allowed an increase of only $3,573,974 from which order Petitioner now appeals.

[ 52 Pa. Commw. Page 204]

Petitioner's main argument concerns the adequacy of the rate of return allowed it by the Commission and in particular the mechanics of the analysis used to arrive at that figure. On a finding that the current cost of common equity was 13.50%, the Commission reasoned that an overall rate of return of 8.23% was appropriate when applied to a fair value rate base of 290 million dollars.*fn2 Petitioner contends that the Commission has, by the use of fictitious derived percentages unrelated to any cost of capital evidence, effectively set rates on an original cost basis rather than on fair value.

Although this Court has in the past struggled to evaluate the propriety of the Commission's methods and assess the accuracy and validity of its mathematical calculations,*fn3 such an approach is no longer appropriate. Pennsylvania Public Utility Commission v. Pennsylvania Gas & Water Co., Pa. , A.2d (filed February 1, 1980). Recognition of our narrow scope of review of Commission utility rate determinations should not, however, be misunderstood as a willingness to countenance arbitrary Commission action unsupported by the record or the implementation of ratemaking policy unfounded in law or reason.

Where, as here, the Commission has fully detailed the methods and reasoning underlying the contested rates and evidence of record supports its conclusions, a complaining utility on appeal to this Court must demonstrate the unreasonableness or unjustness of those rates. "Unless the [Commission's] decision does not bear a real and ...

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