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decided: September 21, 1984.


Appeals from the Order of the Pennsylvania Public Utility Commission in case of Application of Middletown Township for approval of the right to begin to offer or furnish water service to the public in that portion of Middletown Township, Bucks County, now being served by Newtown Artesian Water Company, and for a determination of the costs of acquisition, No. A-00101054.


Marcel L. Groen, for petitioner, Middletown Township.

D. Mark Thomas, with him, Charles E. Thomas, Thomas & Thomas, for petitioner/intervenor, The Newtown Artesian Water Company.

Charles F. Hoffman, Chief Counsel, with him, Barbara S. Kahoe, Assistant Counsel, Louise A. Knight, Deputy Chief Counsel, for respondent.

William E. Zeiter, Morgan, Lewis & Bockius, for Amicus Curiae, National Association of Water Companies, Pennsylvania Chapter.

Judges Williams, Jr., Barry and Blatt, sitting as a panel of three. Opinion by Judge Barbieri.

Author: Barry

[ 85 Pa. Commw. Page 193]

Before us are two petitions for review of an order of the Pennsylvania Public Utility Commission (Commission) adopted February 4, 1983, and entered February 23, 1983, (docketed at No. A-0010154).

On June 23, 1977, Middletown Township (Township) located in Bucks County, filed an application with the Commission for a certificate of public convenience as a necessary part of its effort to acquire that part of the water facilities of the Newtown Artesian Water Company (Water Company) located within Middletown Township. The application was brought under Section 34(7) of the Corporation Act of April 29, 1874, P.L. 73, 15 P.S. § 3202 (1874 Act), under

[ 85 Pa. Commw. Page 194]

    which a municipality has the right to acquire, despite objection, the facilities of a utility incorporated under the 1874 Act and located within the municipality's boundaries.

The 1874 Act provides, in pertinent part, that:

It shall be lawful, at any time after twenty years from the introduction of water or gas, as the case may be, into any place as aforesaid, for the town, borough, city or district in which the said company shall be located, to become the owners of said works, and the property of said company, by paying therefor the net cost of erecting and maintaining the same, with interest thereon at the rate of ten percentum per annum, deducting from said interest all dividends theretofore declared.

The Township's application specifically requested that the Commission: (1) issue a certificate of public convenience; (2) set the compensation to be paid by the Township to the Water Company for those facilities sought to be acquired; (3) verify the Township's ability to finance the acquisition; and (4) authorize the Township to provide water service to the public in that portion of the Township then being served by the Water Company.

Newtown Artesian Water Company was incorporated under the 1874 Act and operates an integrated water supply and distribution system providing water service to the Borough of Newtown, Newtown Township, and the northern portion of Middletown Township.*fn1 At the time of the Township's application, the Water Company was serving eighteen customers in

[ 85 Pa. Commw. Page 195]

Middletown Township, among which were the Water Company's two largest customers, St. Mary's Hospital and George School. The Water Company also had contractual commitments to serve several new developments then under construction in Newtown Township.

On August 30, 1978, the Water Company filed a petition to intervene and a protest to the Township's application. The Commission did the same. The matter was assigned to an Administrative Law Judge (ALJ) who granted both the Water Company (October 12, 1978) and the Commission (November 1, 1978) intervenor status.

Before the ALJ, the Water Company opposed the issuance of the certificate of public convenience arguing (1) that the 1874 Act does not provide a municipality with the statutory right to acquire just a portion of a public utility's integrated water supply which may serve more than one municipality and (2) that before issuing a certificate, the Commission was required to determine whether the proposed acquisition was in the public interest. The Water Company contended that the proposed acquisition was not in the public interest.

Conversely, the Township argued (1) that its right to the proposed acquisition was absolute and that there need not be any finding before the Commission issued a certificate of public convenience approving the application whether the acquisition was in the public interest and, (2) that if, in fact, a demonstration that the acquisition was in the public interest be required, then based upon the evidence this was shown. Following hearings and the submission of briefs the ALJ, by initial decision dated August 13, 1982 and issued September 1, 1982, determined that the Township, as a matter of law, had the right, pursuant to the 1874 Act, to initiate an application to acquire that portion

[ 85 Pa. Commw. Page 196]

    of the Water Company's property lying within the Township. However, the ALJ determined that the Township's right was qualified by the Public Service Company Law, Act of July 26, 1913, P.L. 1374 which required that a municipality obtain a certificate of public convenience before any acquisition took place,*fn2 and that obtaining the certificate necessitated a showing that the acquisition would be in the public interest. The applicable language of the relevant statute provides:

Upon the application of any public utility and the approval of such application by the Commission, evidenced by its certificate . . ., and upon compliance with existing laws, it shall be lawful [f]or any public utility . . . to acquire from, or to transfer to, any person or corporation, including a municipal corporation by any method or device whatsoever. . . .

A certificate of public convenience shall be granted by order of the Commission, only if the Commission shall find or determine that the granting of such certificate is necessary or

[ 85 Pa. Commw. Page 197]

    proper for the service, accommodation, convenience or safety of the public. . . .

66 Pa. C.S. § 1102.*fn3

The ALJ found that the Township had demonstrated that the acquisition would be of substantial benefit to both the present customers of Middletown Township, and most of those customers of the Water Company located in Middletown Township who would be serviced by the Township's acquisition. Nevertheless, the ALJ determined that the acquisition would have an adverse effect on the Water Company's remaining customers located in Newtown Borough and Newtown Township, as well as the Water Company's commercial customers located in Middletown Township.*fn4 Consequently, the ALJ, after considering the interests of all affected parties, determined that the Township's application should be denied since it did not affirmatively promote the service, accommodation, convenience, or safety of the public in any substantial way. Both parties filed exceptions to ...

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