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The Municipal Authority of the Borough of West View v. Public Utility Commission

March 22, 2012

THE MUNICIPAL AUTHORITY OF THE BOROUGH OF WEST VIEW, PETITIONER
v.
PUBLIC UTILITY COMMISSION, RESPONDENT



The opinion of the court was delivered by: P. Kevin Brobson, Judge

Argued: November 16, 2011

BEFORE: HONORABLE DAN PELLEGRINI, President Judge HONORABLE BERNARD L. McGINLEY, Judge HONORABLE BONNIE BRIGANCE LEADBETTER, Judge HONORABLE RENEE COHN JUBELIRER, Judge HONORABLE ROBERT SIMPSON, Judge HONORABLE P. KEVIN BROBSON, Judge HONORABLE ANNE E. COVEY, Judge

OPINION BY JUDGE BROBSON*fn1

The Municipal Authority of the Borough of West View (Authority) petitions this Court for review of the July 15, 2010 Opinion and Order of the Pennsylvania Public Utility Commission (PUC), which denied, inter alia, the Authority‟s exceptions to the Initial Decision of an Administrative Law Judge (ALJ) and adopted the ALJ‟s Initial Decision. In so doing, the PUC dismissed the Authority‟s complaint, in which the Authority challenged the rate that Pennsylvania American Water Company (PAWC), a PUC-regulated utility, used to acquire new business from the Evans City Water and Sewer Authority (Evans City). The PUC, however, also ruled on the merits of the Authority‟s complaint, granting judgment on the pleadings in favor of PAWC. For the reasons that follow, we will affirm the portion of the PUC‟s Order that denied the Authority‟s exceptions and dismissed the Authority‟s complaint for lack of standing. As a consequence, we vacate the portion of the PUC‟s Opinion and Order that granted PAWC‟s motion for judgment on the pleadings.

BACKGROUND*fn2

Faced with a directive by the Pennsylvania Department of Environmental Protection (DEP) to upgrade its own water treatment plant to meet current drinking water requirements, Evans City issued a request for proposals (RFP) to purchase treated water from a third-party supplier as an alternative to upgrading its treatment plant. Three entities submitted proposals: (1) PAWC; (2) Cranberry Township; and (3) the Municipal Authority of Adams Township (Adams Township). In its proposal, PAWC indicated that it would propose a rate in accordance with its PUC-approved Tariff Rider Demand-Based Resale Service, or "Rider DRS." Based on the Rider DRS, PAWC offered two alternative rates: (a) $2.85 per thousand gallons, if PAWC was required to make capital improvements at a cost to PAWC of $320,000; or (b) $2.60 per thousand gallons, if Evans City installed a meter pit at a cost to Evans City of $120,000. Both alternative rates were less than the rates proposed by Cranberry Township ($3.85 per thousand gallons) and Adams Township ($4.25 per thousand gallons). The Authority contends that the rates PAWC proposed are far lower than the per thousand gallon rate that PAWC should have quoted ($7.89).

Evans City selected PAWC as its water provider.*fn3 On January 15, 2010, the Authority filed a complaint with the PUC, challenging the proposed agreement between Evans City and PAWC. The gravamen of the Authority‟s complaint is that PAWC improperly used Rider DRS to acquire a new customer, Evans City, when, according to the Authority, Rider DRS can only be used with respect to services provided to existing customers of PAWC.

On February 12, 2010, PAWC filed its answer to the complaint. That same day, PAWC also filed a single document styled as "motions" to dismiss the complaint for lack of standing and/or for judgment on the pleadings. The Authority filed responsive papers on March 1, 2010, and April 12, 2010. The PUC assigned PAWC‟s motions to the ALJ for an initial decision. With respect to standing, the ALJ concluded that the Authority lacked standing because: (1) it did not allege an immediate interest in the litigation, asserting only the interests of bidders Cranberry Township and Adams Township; and (2) it does not participate in a regulatory scheme that prohibits the competitive injury alleged. With respect to judgment on the pleadings, the ALJ held that "[t]he question of the permissibility of PAWC using [Rider DRS] to compete for and acquire a new water service customer has been settled. It is permissible." (ALJ Initial Decision at 8.) In support of his ruling on the merits, the ALJ cited prior PUC decisions on the subject, including a PUC decision that this Court affirmed in an unreported memorandum opinion. See Municipal Auth. of the Twp. of Robinson v. Pa. Pub. Util. Comm'n, No. 2008 C.D. 2004 (Pa. Cmwlth. July 15, 2005) (MATR).*fn4

The Authority filed exceptions to the ALJ‟s Initial Decision, and PAWC filed reply exceptions. In its Opinion and Order, the PUC denied all exceptions. In so doing, the PUC specifically addressed and rejected the Authority‟s exceptions to the ALJ‟s standing and merits decisions. The PUC adopted the ALJ‟s Initial Decision to the extent it is consistent with the PUC‟s Opinion and Order. This appeal followed.*fn5

The Authority raises the following issues for our consideration, which we will reorder and rephrase for purposes of our analysis: (1) did the PUC err in concluding that the Authority lacks standing in this matter; (2) if the PUC did not so err, has the Authority been deprived of procedural due process; and (3) is the Authority limited by law to charging municipalities reasonable and uniform rates based on the cost of service, such that it lacks the ability to offer lower rates to entice new customers. With respect to the third issue, the Authority contends that the uniform rate requirement prevents the Authority from using the rates it charges to existing clients to subsidize lower rates to entice new customers. It contends that by granting judgment on the pleadings in this case, the PUC, in effect, has improperly allowed PAWC to engage in this very practice. Although the PUC does not appear to address this argument in its Opinion and Order, we will treat the argument as a legal challenge to the PUC‟s decision to enter judgment on the pleadings in favor of PAWC.*fn6

DISCUSSION

Standing

In support of its challenge to the PUC‟s standing decision, the Authority notes that while it did not submit its own bid to Evans City in response to the RFP, Cranberry Township and Adams Township did submit bids. Both Cranberry Township and Adams Township purchase all of their water, by contract, from the Authority. Evans City, however, selected PAWC as its water supplier over Cranberry Township and Adams Township. According to the Authority, this selection meant that the Authority missed out on additional revenue under its contracts with the townships because, had Evans City selected one of the townships over PAWC, the selected township would have had to draw greater amounts of water from the ...


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