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decided: November 21, 1983.


Appeal from the Order of the Pennsylvania Public Utility Commission in case of Pennsylvania Public Utility Commission v. National Fuel Gas Distribution Corporation, No. R-811600C004, dated March 26, 1982.


Stephen A. George, Buchanan, Ingersoll, Rodewald, Kyle & Buerger, for petitioner.

Veronica A. Smith, with her Albert W. Johnson, Allison K. Turner, Assistant Counsel, Steven A. McClaren, Deputy Chief Counsel, and Charles F. Hoffman, Chief Counsel, for respondent.

Michael W. Gang, with him W. Russel Hoerner, Morgan, Lewis & Bockius, for intervenor, National Fuel Gas Distribution Corporation.

Daniel Clearfield, Assistant Consumer Advocate, with him Walter W. Cohen, Consumer Advocate, for intervenor, Consumer Advocate.

President Judge Crumlish, Jr., and Judges Craig, MacPhail, Doyle and Barry. Opinion by Judge Craig.

Author: Craig

[ 78 Pa. Commw. Page 449]

Sharon Steel Corporation (Sharon or the company) appeals from a Public Utility Commission (PUC) opinion and order which (1) granted National Fuel Gas Distribution Corporation (NFG or the utility) a general rate increase of $8,548,115 in annual base-rate operating revenues and (2) adopted a rate structure which neither allocated a portion of the increase to Sharon nor permitted a reduction in then-existing rates for NFG's Large Industrial Service (LIS) class, of which Sharon is the sole member.

We must decide if the PUC's decision not to order a reduction in the LIS class return contribution under NFG'S existing rate structure was in error, as a matter of law, or because unsupported by substantial evidence. U.S. Steel Corp. v. Pennsylvania Public Utility Commission, 37 Pa. Commonwealth Ct. 195, 201, 390 A.2d 849, 853 (1978).

[ 78 Pa. Commw. Page 450]

The PUC consolidated all complaints with its own investigation.

After twenty-one days of hearings, the administrative law judge (ALJ) determined that NFG had established a total annual operating revenue requirement of $252,492,367, and recommended that the PUC permit a change in rates calculated to increase total annual operating revenues by $10,709,488.

The PUC, however, concluded, among other things, that NFG had demonstrated only an annual operating revenue requirement of $250,330,994 and a need for additional annual operating revenue of $8,548,115, and, except as modified by its opinion and order, adopted the ALJ's recommended decision otherwise.

Revenue Determination and Burden of Proof

As quoted above, the PUC's initiating order instituted an investigation upon commission motion into the propriety of NFG's existing rates as well as the proposed rates. Sharon maintains that, by virtue of the PUC's motion, NFG had the burden of proving that, not only its proposed rates, but also its existing rates, were just and reasonable under section 1301, because section 315 of the Code provides that "[i]n any proceeding upon the motion of the commission, involving any proposed or existing rate . . . the burden of proof to show that the rate involved is just and reasonable shall be upon the public utility." 66 Pa. C.S. ยง 315(a).

The PUC, however, relying upon the Code's section 332(a),*fn3 the residuary provision as to burden of proof, and Zucker v. Pennsylvania Public Utility Commission,

[ 78 Pa. Commw. Page 45243]

Pa. Commonwealth Ct. 207, 401 A.2d 1377 (1979), submits that Sharon had the burden to prove that the existing rates were unjust and unreasonable. We disagree.

By ordering an investigation into the propriety of existing and proposed rates on commission motion, the PUC clearly placed the burden of justifying those rates upon NFG. Zucker is inapposite because, in that case, no motion of the commission initiated the proceeding. Id. at 209, 401 A.2d at 1379. See also Brockway Glass Co. v. Pennsylvania Public Utility Commission, 63 Pa. Commonwealth Ct. 238, 243, 437 A.2d 1067, 1070 (1981) (where customer-initiated complaint involves existing rate, burden falls upon customer to prove that charge is no longer reasonable).

On the other hand, we cannot agree with Sharon that NFG failed to satisfy its evidentiary burden. Specifically, Sharon appears to contend that NFG came forward only with evidence to support the need for revenue over amounts currently received under existing rates, thereby ignoring the commission's order to justify its revenue needs at existing rates.

However, the utility, in presenting evidence to justify an increment in revenue of approximately $12.2 million under the proposed rates, put in a case for its total revenue requirements, including those which support the existing rates as well. When we scrutinize the evaluation of various trial staff and Office of Consumer Advocate (OCA) challenges to the utility's revenue, rate of return, and operating and maintenance expense data for projected levels of operation, and when we review the PUC's allowance of a significant portion of NFG's request, we observe that this commission proceeding indeed embraced the propriety of present as well as proposed rates. For example, Table I -- appended to the PUC's decision -- established NFG's rate base at $93,403,175 and NFG's projected

[ 78 Pa. Commw. Page 453]

    operation and maintenance expense total for Pennsylvania at approximately $217 million dollars.

There is no evidence of record to suggest that Sharon ever challenged the NFG data relating to the Utility's total revenue needs; indeed, in the introduction to his recommended decision, the ALJ observed that "Sharon Steel has limited its participation to rate structure issues."

We conclude that NFG affirmatively met its burden as to the rates overall, as well as to the incremental increase. Substantial evidence, not countered by Sharon, supports that element of the PUC decision.

Rate Structure

In its original filing to increase annual revenues by approximately $12.2 million, NFG proposed to distribute the increase among its various customer classes as follows:

Residential $7,411,812 7.1%


Authority $1,828,618 4.9%

Industrial $2,338,155 3.3%

Large Industrial

(Sharon) ...

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