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May 19, 1997


Appealed From No. C-00945802. State Agency Pennsylvania Public Utility Commission.

Before: Honorable Bernard L. McGINLEY, Judge, Honorable Jim Flaherty, Judge, Honorable Emil E. Narick, Senior Judge. Opinion BY Judge Flaherty

The opinion of the court was delivered by: Flaherty


FILED: May 19, 1997

Paul Kossman (Kossman) petitions for review of an order from the Public Utility Commission (Commission) dismissing his exceptions and adopting the decision of the administrative law Judge (ALJ) which concluded that Kossman is not entitled to a refund of the "contributions-in-aid-of-construction" (CIAC) that Duquesne Light Company (Duquesne) charged Kossman for service line extensions to his commercial developments and that Duquesne properly charged Kossman an "income tax gross-up," calculated pursuant to the relevant regulations promulgated by the Commission, Duquesne's Tariff, and the Public Utility Code (Code). *fn1 We affirm.

The parties have stipulated to the following facts. Kossman is a commercial real estate developer in Allegheny County. On May 13, 1994, Kossman filed a complaint before the Commission seeking a refund in the amount of $26,826.28 for CIAC payments that Duquesne required of Kossman prior to extending electrical service to four commercial developments built by Kossman between 1991 and 1994. All of these commercial developments are within Duquesne's electric service area and include the Penn Hills Municipal Shopping Center (Penn Hills), the Pittsburgh Plaza East Shopping Center (Pittsburgh Plaza), the Whitlock Auto Store (Whitlock), and the Taco Bell Restaurant (Taco Bell). Duquesne refunds CIAC payments for supply lines but not for service lines. Under Tariff Rule No. 8, Duquesne is permitted to charge reasonable installation fees in advance, including the income tax liability that accrues to Duquesne by the advancement of those fees, for service lines and equipment installed for the exclusive use of a customer which exceeds Duquesne's standards for free electric service installation.

On appeal, Kossman raises the following issues: (1) whether the Commission erred by concluding that the service line extensions to the four Kossman properties cannot, by definition, be the functional equivalent of a supply line for purposes of qualifying for a refund of CIAC payments; (2) whether the Commission erred in concluding that Duquesne's own policy of imposing non-refundable CIAC charges upon service line extensions while imposing refundable CIAC charges for supply line extensions was not unreasonable, unlawful, or discriminatory; and (3) whether the Commission erred in concluding that Duquesne lawfully included "income tax gross-ups" for the CIAC charges imposed upon Kossman.[] *fn2


Kossman argues that, although he was properly required to advance CIAC payments to Duquesne for service line extensions to the four commercial properties in the instant case, he should qualify for a refund of that money because there is no significant distinction between the service lines and a supply line under the respective definitions of those terms. In this regard, Kossman maintains that the ALJ's decision, which was adopted by the Commission, places form over substance by relying on the definitional difference between service lines and supply lines, rather than relying on the functional equivalence of the two, when it determined that CIAC for service lines are not refundable. We disagree.

Section 1501 of the Code, 66 Pa. C.S. § 1501, provides, in relevant part, the following:

Every public utility shall furnish and maintain adequate, efficient, safe, and reasonable service and facilities, and shall make all such repairs, changes, alterations, substitutions, extensions, and improvements in or to such service and facilities as shall be necessary or proper for the accommodation, convenience, and safety of its patrons, employees, and the public.

Id. However, this section also provides that "every public utility may have reasonable rules and regulations governing the conditions under which it shall be required to render service." Id. Where one customer receives the benefit and convenience of a utility's improvements, that customer should be expected to contribute to the cost of those improvements. Colonial Products Co. v. Public Utility Commission, 188 Pa. Super. 163, 172-73, 146 A.2d 657, 663 (1958). Additionally, in Lynch v. Public Utility Commission, 140 Pa. Commw. 599, 594 A.2d 816, 818 (Pa. Commw. 1991), we stated that "it is appropriate for customers to bear the cost of extensions when the extension is sought by a developer." Id. Therefore, although Duquesne generally has the burden of supplying and maintaining electrical service to its customers, it may develop rules that require developers to bear the burden of constructing facilities that extend service to their developments. Such a rule is at issue in the case sub judice.

The Commission's regulations define an electric supply line as "the wires or cables, with the necessary supporting or containing structures and appurtenances, used in connection with an overhead or underground system of a public utility, providing electric power, located on a public highway or utility right-of-way and used to transmit or distribute electric energy." 52 Pa. Code § 57.1. This section of the administrative regulations further defines a service line in the following manner:

The wires or cables and appurtenances which connect the electric supply line of the public utility with the customer's installation and which comply with either of the following: (i) If overhead-open-wire or cable-construction, the span, normally 100 feet, extending to a suitable support provided by the customer. (ii) If the electric supply line is of underground construction, the underground facilities extending to but not exceeding 18 inches inside the property line of the customer.

Id. Duquesne's Electric Service Installation Rules provide similar definitions for these terms. Kossman argues that, although the regulations distinguish between supply lines and service lines, as a practical matter, Kossman's service line extensions are the functional equivalent of a supply line, and the Commission erred in concluding that ...

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