Appeal from the Order of the Pennsylvania Public Utility Commission, in case of Pennsylvania Public Utility Commission v. Western Pennsylvania Water Company -- Western Region, Warren District, Nos. R-850096 (Western Region), and R-850097 (Warren District), dated January 29, 1986.
Ashley C. Schannauer, Assistant City Solicitor, with him, D. R. Pellegrini, City Solicitor, for petitioner.
Frank B. Wilmarth, Assistant Counsel, with him, Daniel P. Delaney, Chief Counsel, for respondent.
Thomas P. Gadsden, with him, Anthony C. DeCusatis, Alan L. Reed, for intervenor, Western Pennsylvania Water Company.
President Judge Crumlish, Jr., Judges Craig, MacPhail, Doyle, Barry, Colins and Palladino. Opinion by Judge Craig.
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The Pennsylvania Public Utility Commission, by its order of January 29, 1986, (1) granted an increase in the annual revenues of the Western Pennsylvania Water Company amounting to $6,148,976 for the proposed Western Region and $110,252 for the Warren District, and (2) accepted a recommendation of the Administrative Law Judge (ALJ) to adopt a stipulation between the water company and trial staff which, among other things, permitted the water company to reduce from six to two its number of separate districts for ratemaking purposes. The City of Pittsburgh has appealed. The water company is an intervenor.
[ 106 Pa. Commw. Page 440]
On April 30, 1985, the water company filed tariff revisions designed to produce an overall increase in annual operating revenues of $9,028,877. The commission timely suspended the proposed rates until January 29, 1986, and instituted an investigation as to their lawfulness. The commission consolidated its investigation proceedings with the complaint proceedings which the city had instituted on June 12, 1985, alleging that the water company's proposal violated sections 1301 and 1304 of the Public Utility Code, 66 Pa. C.S. §§ 1301, 1304, which require that the rates be just and reasonable, and that the rates not be unreasonably discriminatory either as between localities or customer classes.
On December 18, 1985, the ALJ issued a recommended decision proposing an increase for the Western Region of $5,950,389, and an increase for the Warren District of $109,951. The ALJ also recommended that the commission approve the stipulation which permitted the company to consolidate its six districts into two districts, conditioned on the requirement that the water company continue to maintain separate records for those former six districts.
On January 29, 1986, the commission issued its opinion and order approving, among other things, the ALJ's recommendation to adopt the stipulation regarding rate structure. However, the commission rejected the ALJ's recommendation that the water company continue to maintain records for the six former districts.
On appeal here, the city raises the following four issues: (1) whether substantial evidence supports the reasonableness of the water company's allocation of revenue requirement among its operating districts; (2) whether the commission erred in failing to address the allocation of revenue requirement among customer classes, rendering the customer class allocation issue unreviewable; (3) whether substantial evidence supports
[ 106 Pa. Commw. Page 441]
the reasonableness of the company's allocation of the revenue requirement among customer classes if the commission's decision is reviewable on that issue; and (4) whether the commission's rejection of the city's discovery request regarding per-district and per-customer class costs violated discovery rules.
Before addressing the merits of those issues, a brief explanation of the water company's ratemaking history with the commission is necessary.
Water Company's Ratemaking History
In 1972, sixteen separate corporations, all subsidiaries of American Water Works, Inc., merged to establish the Western Pennsylvania Water Company. After those mergers, the water company continued to maintain separate districts, corresponding to the former separate corporations. Initially, the company treated each district separately for ratemaking purposes. Consequently, each district had its own tariff and separately determined rates.
In its 1973 rate case, the commission approved the water company's consolidation of its Pittsburgh and Valley districts. Pennsylvania Public Utility Commission v. Western Pennsylvania Water Co., 49 Pa. PUC 18 (1975). In declining to approve various district consolidations as the water company then proposed, the commission acknowledged that the consolidation and the establishment of uniform rates could be justifiable at a future date, and that the water company could attempt to achieve rate parity for those districts on a gradual basis through future rate filings.
In its 1978 rate case, the water company proposed consolidation of the Monongahela district with the previously consolidated Pittsburgh-Valley district, establishing a single schedule of uniform rates. Although the city opposed that consolidation, asserting cost-of-service
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differences, the commission approved the company's consolidation proposal. Pennsylvania Public Utility Commission v. Western Pennsylvania Water Co., 28 PUR 4th 89 (1979).
In its 1980 rate case, the commission approved a settlement between the trial staff and the water company which provided, among other things, the consolidation of the Washington and the Pittsburgh-Valley-Monongahela districts, to be known as the Pittsburgh Suburban District, and established the service territory of the former Washington district as a separate rate zone within the Pittsburgh Suburban district.
In its 1983 rate case, the water company proposed consolidation of all of its districts for ratemaking purposes on a gradual basis over a number of years, resulting in a single tariff and one schedule of rates for the water company's entire service territory. That concept is known as single tariff pricing. Although the commission did not agree to total consolidation, it did approve consolidation, for ratemaking purposes, of the Pittsburgh Suburban, Kittanning, McDonald, New Castle and Uniontown districts. ...