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decided: February 17, 1983.


Appeals from the Order of the Pennsylvania Public Utility Commission in the case of Pennsylvania Public Utility Commission v. Philadelphia Electric Company, No. R-79060865.


Kenneth R. Pepperney, with him Wayne L. Emery, of counsel: Henry M. Wick, Jr., and Charles J. Streiff, Wick, Vuono & Lavelle, for petitioner, United States Steel Corporation.

Edward J. Riehl, McNees, Wallace & Nurick, for petitioners, Lukens Steel Company et al.

Albert W. Johnson, III, Assistant Counsel, with him Steven A. McClaren, Deputy Chief Counsel, and Joseph J. Malatesta, Jr., Chief Counsel, for respondent.

Mark B. Segal, for intervenors, CEPA, ACORN, and Action Alliance of Senior Citizens of Greater Philadelphia.

Walter R. Hall, II, with him Robert H. Young and Susan L. Gordon, Morgan, Lewis & Bockius, and of counsel: Edward G. Bauer, Jr., for intervenor, Philadelphia Electric Company.

Michael P. Kerrigan, Pepper, Hamilton & Scheetz, for intervenor, Delaware Valley Hospital Council.

Martha W. Bush, Assistant Consumer Advocate, with her Walter W. Cohen, Consumer Advocate, for intervenor, Consumer Advocate.

President Judge Crumlish, Jr. and Judges Rogers, Blatt, Williams, Jr. and Craig. Opinion by President Judge Crumlish, Jr. Judge Mencer and Palladino did not participate in the decision in this case.

Author: Crumlish

[ 72 Pa. Commw. Page 173]

In this consolidated proceeding, United States Steel Corporation, Lukens Steel Company, The Celotex Corporation, Union Carbide Corporation and a number of intervenors*fn1 petition this Court for review of the October 14, 1980 order of the Pennsylvania Public Utility Commission (Commission) at No. R-79060865 which affirmed and clarified the Commission's May 9, 1980 order. The Commission's orders allowed a portion of a rate increase by the Philadelphia Electric Company (PECO) but exempted from any increase the first 500 kwh of residential usage. The exemption provision is herein challenged.

[ 72 Pa. Commw. Page 174]

History of This Case

On July 27, 1979, PECO filed with the Commission Supplement No. 6 to Tariff Electric -- Pa. P.U.C. No. 25, effective September 29, 1979. By order of August 14, 1979, an investigation was instituted to determine the lawfulness, justness and reasonableness of the proposed rates. PECO's rate request was designed to produce revenue increases of $122,731,000 or 10.9% of base rate revenues based upon the future test year ending March 31, 1980. Following twenty-nine days of evidentiary hearings, Administrative Law Judge (ALJ) Joseph J. Klovekorn recommended a grant of $79,871,000 in added revenues, 7.1% of base rate revenues, or 65% of PECO's requested increase.

On May 9, 1980, the Commission entered an Order at R-79060865 granting PECO an estimated revenue increase of $88,813,000, 7.9% of base rate revenues, or 72% of PECO's request. In order to simplify its May 9, 1980 order, the Commission only addressed the ALJ's conclusions with which it disagreed and adopted those conclusions of the ALJ with which it agreed and adopted the remainder of his opinion.

In the May 9, 1980 order, the Commission exempted from any increase "the first five hundred (500) kwh of consumption for Rate R and Rate R-H . . . from any increase."*fn2 The Commission, relying upon this

[ 72 Pa. Commw. Page 175]

Court's decision in United States Steel Corp. v. Pennsylvania Public Utility Commission (U.S. Steel II), 37 Pa. Commonwealth Ct. 173, 390 A.2d 865 (1978), exempted the first 500 kwh of residential monthly usage from the instant rate proceeding

     on the basis that high consumption customers would receive greater benefit from new generating capacity than low use customers. We also concluded that the cost of newer generating plant, allocated on a coincident peak responsibility basis, does not afford adequate recognition of the benefits that accrue to high consumption customers as a result of decreased operating expenses associated with added new generating capacity.

(May 9, 1980 Commission op. at p. 49.) The Commission, in continuing the 500 kwh exclusion concept first approved in U.S. Steel II, went on to say in its order:

In the instant proceeding, the same rationale is still appropriate, because the Company will be able to utilize the newer plant (which has been included in rate base in this case) during the period when the rates will be in effect.

We are also aware that in adopting major portions of the ALJ's recommended decision we have rejected the application of the concept of lifeline rates. We do not believe that the exclusion of an increase to the first 500 Kwh of residential consumption violates our rejection of lifeline rates, but rather is a policy decision founded upon the same type of record facts which existed at R.I.D. 129 and R.I.D. 295 [U.S.

[ 72 Pa. Commw. Page 176]

Steel II]. The portion of the increase in rates for consumption above 500 Kwh, resulting from not increasing the first 500 Kwh, will serve as a price signal to decrease consumption, thereby stimulating conservation efforts.

(May 9, 1980 Commission op. at p. 49.)

On June 4, 1980, after entry of the Commission's order, certain industrial complainants*fn3 filed a petition for reconsideration of the Commission's May 9, 1980 order "to the extent that this order exempts from any increase in rates the first 500 kwh of residential usage and prohibits implementation of a customer charge for residential electric service."

Essentially, the industrial complainants averred in their petition for reconsideration that that portion of the total "across-the-board" rate increase which would have been allocated to the residential customer, as recommended by the ALJ, would in fact be redistributed among all the classes of kwh consumers. The petitioners, in seeking reconsideration, argue that the "transfer" is inconsistent with the rest of the order, unsupported by the evidence, discriminates against non-residential customers and sought an amendment to include the residential class in the rate increase.

On October 9, 1980, a public hearing on the petition for reconsideration was held. On October 14, 1980, the Commission affirmed its prior order to exempt from rate increase the first 500 kwh of monthly residential usage. In its October 14, 1980 order, the ...

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