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decided: July 13, 1982.


Appeals from the Orders of the Pennsylvania Public Utility Commission in cases of Freedom Forge Corporation, t/d/b/a Standard Steel v. Pennsylvania Electric Company, Docket No. M-810294C008 and Allegheny Ludlum Steel Corporation v. West Penn Power Company, Docket No. M-810294C004 and Original Jurisdiction No. 3159 C.D. 1981, in the Commonwealth Court of Pennsylvania in case of Allegheny Ludlum Steel Corporation v. Pennsylvania Public Utility Commission.


Stephen A. George, with him Leonard J. Marsico, Buchanan, Ingersoll, Rodewald, Kyle & Buerger, for petitioners.

James P. Melia, Assistant Counsel, with him Daniel P. Delaney, Special Counsel, and Joseph J. Malatesta, Jr., and Charles F. Hoffman, Chief Counsels, for respondent.

Drew J. Kovalak, with him Thomas K. Henderson and John L. Munsch, for intervenor, West Penn Power Company.

Samuel B. Russell, with him Alan Michael Seltzer, Ryan, Russell & McConaghy, for Amici Curiae, Metropolitan Edison Company and Pennsylvania Electric Company.

President Judge Crumlish and Judges Rogers, Blatt, Craig and MacPhail. Opinion by Judge Craig.

Author: Craig

[ 67 Pa. Commw. Page 402]

These three consolidated actions involve the central issue of whether Section 1307 of the Public Utility Code,*fn1 the energy cost rate (ECR) adjustment provision, is unconstitutional on the ground that it fails to afford procedural due process.

[ 67 Pa. Commw. Page 403]

Allegheny Ludlum Steel Corporation (Allegheny Ludlum) initiated these proceedings, addressing our

[ 67 Pa. Commw. Page 404]

    original jurisdiction by filing a petition for review in the nature of a complaint for a declaratory judgment

[ 67 Pa. Commw. Page 405]

    that Section 1307 is unconstitutional.*fn2 The Public Utility Commission (PUC) is a respondent and West Penn Power Company (West Penn) is an intervening respondent. Metropolitan Edison Company has filed a brief amicus curiae.

Allegheny Ludlum also filed a precautionary appeal in the event that the matter should be regarded as calling for an appeal from an administrative agency order.*fn3

In addition, we here have a precautionary appeal taken by Freedom Forge Corporation (Freedom Forge) from PUC action, which is identical to that taken by Allegheny Ludlum.*fn4 In that appeal, the PUC is respondent and Pennsylvania Electric Company (Penn Electric) is an intervening respondent.

The history of these actions began on November 20, 1981, when West Penn and Penn Electric (utility companies) proposed to the PUC that they be allowed to

[ 67 Pa. Commw. Page 406]

    increase the ECR component of their rates*fn5 under the provisions of Section 1307, for bills rendered between December 29, 1981 and December 31, 1982. Allegheny Ludlum and Freedom Forge, upon learning of the proposed increase,*fn6 filed complaints and petitions for suspension against the utility companies with the PUC.

On December 18, 1981, the PUC, in accordance with its normal procedures, met to deliberate the proposed ECR increases and adopted a motion allowing the utility companies to increase their ECR. Although the meeting was open to the public, neither the public nor Allegheny Ludlum and Freedom Forge were allowed

[ 67 Pa. Commw. Page 407]

    to address the PUC. Then, on January 4, 1982, the PUC issued a letter informing Allegheny Ludlum and Freedom Forge that initial proceedings approving the 1982 ECR proposals had been terminated and noting that their complaints before the PUC remained outstanding.*fn7

Earlier, on December 23, 1981, Allegheny Ludlum had filed its original jurisdiction action against the PUC with this court, accompanied by an application for stay of the PUC's action of December 18, 1981, approving West Penn's ECR. In response, the PUC has filed -- and West Penn has adopted -- preliminary objections which include the contention that declaratory relief was improper because Allegheny Ludlum's action was actually an appeal from a final determination of the PUC "in the guise of a petition for declaratory relief." Thereafter, Allegheny Ludlum and Freedom Forge filed their precautionary appeals, to which the PUC and the respective utility companies have responded by filing their motions to quash.

On January 20, 1982, this court granted Allegheny Ludlum's stay request and on February 18, 1982, our Supreme Court assumed plenary jurisdiction of these proceedings, vacated the stay granted by this court and gave instructions to consider and dispose of the preliminary objections, as well as to conduct an expedited hearing on the merits.*fn8

[ 67 Pa. Commw. Page 408]

With respect thereto, the parties have filed a stipulation of the facts, which we hereby adopt as our findings of fact herein.

The Appeals

We will first consider the precautionary appeals filed by Allegheny Ludlum and Freedom Forge, which assert that the letter of January 4, 1982, informing them that the temporary rates had been approved, was a final order.

Our Supreme Court has said:

It is fundamental law in the Commonwealth that an appeal will lie only from final orders, unless otherwise expressly permitted by statute. . . . In ascertaining what is a "final order," we have looked beyond the technical effect of the adjudication to its practical ramifications. . . . We have variously defined a final order as one which ends the litigation, or alternatively disposes of the entire case. . . . Conversely phrased, an order is interlocutory and not final unless it effectively puts the litigant "out of court." (Citations omitted.)

T.C.R. Realty, Inc. v. Cox, 472 Pa. 331, 337, 372 A.2d 721, 724 (1977). Relying on this definition, we held in Duquesne Light Co. v. Pennsylvania Public Utility Commission, 34 Pa. Commonwealth Ct. 50, 382 A.2d 991 (1978), that an order fixing temporary utility rates is interlocutory and unappealable.*fn9 Because the terms of Section 1307(e) provide for review of the

[ 67 Pa. Commw. Page 409]

ECR adjustment pursuant to public hearing, with provision for refunds to consumers in the event of downward revisions, the ECR scheme is genuinely analogous to temporary rates. We therefore grant the motions to quash.

The Original Jurisdiction Case

Next, in considering the original jurisdiction matter before us, we can summarize the respondents' preliminary objections as follows: (1) jurisdiction for declaratory relief is unavailable because (a) the matter involves a disguised appeal from an order of the PUC;*fn10 and (b) this matter is within the exclusive jurisdiction of the PUC; (2) Allegheny Ludlum has failed to exhaust those administrative remedies available to it; and (3) Section 1307(e)(2) provides adequate due process safeguards to protect Allegheny Ludlum until final adjudication of the ECR proposal.

Respondents' first preliminary objection category involves Section 7541(c) of the new Declaratory Judgment Act (D.J.A.),*fn11 which provides that declaratory relief shall not be available with respect to any:

(2) Proceeding within the exclusive jurisdiction of a tribunal other than a court.

(3) Proceeding involving an appeal from an order of a tribunal.

Concerning the claim regarding Section 7541(c)(3), Allegheny Ludlum's petition does not address the merits of the decision reached by the PUC regarding

[ 67 Pa. Commw. Page 410]

    the ECR increase; rather, Allegheny Ludlum challenges the process whereby ECR increases can occur without public participation. Thus, Allegheny Ludlum's petition cannot be classified as an appeal from the order.

Furthermore, we cannot accede to that aspect of the respondents' preliminary objections which urge us to dispose of the petition on the basis that the dispute remains within the exclusive jurisdiction of an administrative tribunal, the PUC. Declaratory judgment is the proper procedure to determine whether a statute violates the constitutional rights of those whom the statute affects. Snider v. Shapp, 45 Pa. Commonwealth Ct. 337, 405 A.2d 602 (1979). "[W]hile statutory remedies are not rendered inappropriate merely because a constitutional issue is raised, an administrative agency cannot determine the constitutionality of its own enabling legislation." Myers v. Department of Revenue, 55 Pa. Commonwealth Ct. 509, 515, 423 A.2d 1101, 1104 (1980). The rationale behind this doctrine was explained by our Supreme Court in Borough of Green Tree v. Board of Property Assessment, 459 Pa. 268, 281, 328 A.2d 819, 825 (1974):

The more clearly it appears that the question raised goes directly to the validity of the statute the less need exists for the agency involved to throw light on the issue through exercise of its specialized fact-finding function or application of its administrative expertise. Further, the less need there is for compliance with an agency's procedures as a prerequisite to informed constitutional decision making, then correspondingly greater is the embarrassment caused to litigants by requiring conformity with the statutorily-prescribed remedy.

[ 67 Pa. Commw. Page 411]

Moreover, the D.J.A., which has substantially broadened the availability of declaratory relief, see Page 411} Myers v. Department of Revenue, 55 Pa. Commonwealth Ct. 509, 423 A.2d 1101, (1980), provides that, although a court continues to have discretion to refuse declaratory relief if the controversy or uncertainty at issue would not thereby be resolved, "the existence of an alternative remedy shall not be a ground for the refusal to proceed under [the D.J.A.]." (Emphasis added.)*fn12 Thus, the respondents' second set of preliminary objections, regarding the necessity to exhaust administrative remedies, are without merit.*fn13

The remaining aspect of the preliminary objections are the demurrers, which go to the legal merits of the original jurisdiction action, i.e., the constitutional sufficiency of Section 1307 of the Public Utility Code as a matter of procedural due process. We are able to consider the issues raised in the demurrers and the merits of the action together because the parties have provided us with a stipulation of the facts, in lieu of conducting a hearing.

Our court has recognized the need for utility companies to increase rates subject to future review as long as the consumer is adequately protected:

It is well-settled that the PUC without notice or hearing may permit rates to become effective or suspend them pending decision concerning their lawfulness. Baker v. Pennsylvania Public Utility Commission, 14 Pa. Commonwealth Ct. 245,

[ 67 Pa. Commw. Page 412322]

A.2d 735 (1974). The reason that no hearing is required on the initial question of the suspension is that the failure to suspend does not amount to commission approval and refunds are available if the increase is later held to be unjustified. (Citation omitted.) Of course, if the rates are suspended, the consumer does not have to pay them. Thus, in either case the rights of the consumers are protected.

City of Pittsburgh v. Public Utility Commission, 55 Pa. Commonwealth Ct. 177, 184-85, 423 A.2d 454, 457 (1980).

Nevertheless, Allegheny Ludlum contends that two decisions of our Supreme Court, Conestoga National Bank of Lancaster v. Patterson, 442 Pa. 289, 275 A.2d 6 (1971) and Pennsylvania Coal Mining Association v. Insurance Department, 471 Pa. 437, 370 A.2d 685 (1977), when read together, establish that the absence of advance notice, lack of access to supplemental data, and negation of an opportunity to present objections to an administrative agency in a meaningful manner for a subsequent determination on the record, are constitutional defects which nullify agency action in the nature of that which is here at issue.

In Conestoga, our Supreme Court, in an opinion by Mr. Justice Roberts, ruling that the approval by the Department of Banking of an application for the establishment of a branch bank is a judicial determination involving substantial property rights in relation to protesting banks, also said:

Procedural due process does not require notice and a hearing in every conceivable situation involving administrative action. (Citation omitted.) However, these procedural safeguards should accompany a situation where the administrative action is adjudicatory in nature and involves substantial property rights.

[ 67 Pa. Commw. Page 413]

    likely to turn on witness credibility, written submissions may be adequate when economic or statistical questions are at issue. See Mathews v. Eldridge, 424 U.S. 319, 342, 96 S.Ct. 893, 907, 47 L.Ed. 2d 18 (1976); Friendly, Some Kind of a Hearing, 123 U. Pa. L. Rev. 1267, 1281-85 (1975). Moreover, unlike the opportunity to present written objections, a full hearing would entail extended delay, during which time the insurance carriers may be deprived of their interest in receiving adequate premiums. The opportunity to recover any excessive rates paid, after proceedings pursuant to 40 P.S. ยง 814 (Supp. 1976), in addition to notice and an opportunity to present written objections before the rates become effective, satisfies procedural due process. Cf. Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed. 2d 18 (1976) (existing procedures, which include notice and an opportunity to present written objections before termination, and a full hearing after termination, adequately protect an individual's interest in disability benefits). . . .

Id. at 454-55, 370 A.2d at 693-694. In the present case, Allegheny Ludlum also has the opportunity to recover refunds with interest if the rate increase is found to be unreasonable.*fn15

[ 67 Pa. Commw. Page 415]

In Pennsylvania Coal, the Supreme Court's final conclusion was that the minimum amount of procedural due process protection due the coal mining companies included, in addition to notice that proposed rates had been filed and would be deemed to be in effect unless action were taken by the Insurance Commissioner before a certain date, a provision that any interested person may present written objections to the proposed rates before they went into effect. However, the court further noted:

Thus, procedural protection should be given before the government takes action which threatens to deprive a citizen of an interest, unless important governmental interests, or the preservation of the interests of others, requires otherwise. (Emphasis added.)

Id. at 451, 370 A.2d at 692. Important concerns as to both governmental interests and the preservation of the interests of others are present here. In City of Pittsburgh, 55 Pa. Commonwealth Ct. at 183, 423 A.2d at 456, we recognized the important interests involved in expediting certain rate increases:

[A]lthough the PUC must not ignore the customer's rights, it also has a duty to consider other factors protecting the right of a public

[ 67 Pa. Commw. Page 416]

    utility to receive a fair return on its investment.*fn16

Moreover, the Supreme Court in Pennsylvania Coal was concerned that the Insurance Commissioner, by not acting within thirty days, effectively could approve the proposed increases without substantive consideration. The court emphasized the distinction between private party review and public agency review:

Where proposals by a private party must be reviewed and approved by a regulatory agency before they become effective, there is no unconstitutional delegation. The possibility of an arbitrary disregard of individual interests when the recommendations of a private body are deemed into effect without the specific approval of a public official, however, demands greater procedural protection than due process might otherwise require.

Id. at 451, 370 A.2d at 692. Thus the court felt that the opportunity to present written objections was "necessary to enable them to present to the Insurance Commissioner any reasons why rate increases should not be allowed, or why hearings should be held before rates became effective." Id. at 453-454, 370 A.2d 693.

However, in the present case, the PUC is given limited discretion in determining ECR increases because Section 1307(c) explicitly describes the factors the PUC is to consider to an ECR application.

Therefore, we conclude that Section 1307 meets the procedural due process standards established by our Supreme Court decisions in Conestoga and Pennsylvania Coal, recognizing the often conflicting interests involved

[ 67 Pa. Commw. Page 417]

    in ratemaking policy, because Allegheny Ludlum will be entitled to an adjudication at the end of one year, at which point it can recover any excessive rates paid, computed with interest. Furthermore, Allegheny Ludlum has the benefit of reasonable protection in the interim because the proposed rates are subject to review by a governmental body (PUC), which is restricted by specific guidelines as to which factors can be considered in ascertaining an ECR proposal.

Accordingly, the demurrers in respondents' preliminary objections are sustained, and the original jurisdiction action is dismissed.

Order in 3519 C.D. 1981

Now, July 13, 1982, Preliminary Objections Nos. 1-10, inclusive, of the Pennsylvania Public Utility Commission (PUC), as adopted by West Penn Power Company, intervenor, are overruled; Preliminary Objections Nos. 11-15, inclusive, are sustained; and this action is hereby dismissed.

Order in 242 C.D. and 257 C.D. 1982

Now, July 13, 1982, the motions to quash filed by the Public Utility Commission, West Penn Power Company and Pennsylvania Electric Company are hereby granted.


Motions to quash appeals granted. Preliminary objections to petition for declaratory judgment overruled in part and sustained in part. Action dismissed.

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