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Painter v. Pennsylvania Public Utility Commission

Commonwealth Court of Pennsylvania

May 8, 2015

Walter Painter and Donna Painter, on behalf of themselves and all others similarly situated, Petitioners
v.
Pennsylvania Public Utility Commission, Respondent

Argued April 13, 2015

Appealed from No. C-2011-2239556. State Agency Public Utility Commission.

William S. Stickman, IV, Pittsburgh, for petitioners.

Stanley E. Brown, Assistant Counsel, Harrisburg, for respondent.

Michael W. Hassell, Harrisburg, for intervenor Aqua Pennsylvania, Inc.

BEFORE: HONORABLE DAN PELLEGRINI, President Judge, HONORABLE RENÉ E COHN JUBELIRER, Judge, HONORABLE ROBERT SIMPSON, Judge.

OPINION

Page 750

DAN PELLEGRINI, JUDGE.

Walter Painter and Donna Painter, on behalf of themselves and all others similarly situated (collectively, Customers) petition for review of the order of the Pennsylvania Public Utility Commission (Commission) adopting the Initial Decision of an Administrative Law Judge (ALJ); dismissing Customers' exceptions to the Initial Decision; and dismissing Customers' formal complaint regarding the distribution system improvement charge (DSIC)[1] imposed by Aqua Pennsylvania (Aqua), a provider of water and sewage services. We affirm.

In March 2010, Customers filed a class-action complaint against Aqua in the Lawrence County Court of Common Pleas (trial court) on their behalf and other similarly-situated customers alleging that Aqua engaged in unfair trade practices, conversion and breach of contract by imposing the DSIC on a " bills rendered" basis and not a " services rendered" basis.[2] In making their claim, Customers rely upon Supplement No. 88 relating to the computation of the DSIC which states, in relevant part:

DSIC Surcharge Amount: The charge will be expressed as a percentage carried to two decimal places and will be applied to the effective portion of the total amount billed to each customer under the Company's otherwise applicable rates and charges....

(Reproduced Record (R.R.) at 426a) (emphasis added). They argue that this provision requires the surcharge on a " services rendered" basis rather than a " bills rendered" basis. Specifically, Customers alleged that Aqua incorrectly assessed the

Page 751

DSIC by not prorating its application only to utility services rendered after its effective date and by applying it to the entire billed amount, including the portion pre-dating its effective date. Because the case involved a billing dispute, the trial court sustained Aqua's preliminary objections in part and stayed the matter pending the Commission's disposition of whether Aqua's DSIC billing practices violated its tariff.

As a result, in March 2011, Customers filed a formal complaint with the Commission on their behalf and other similarly-situated customers alleging that Aqua engaged in unfair trade practices, conversion and breach of contract and that its DSIC billing practices in place in 2009 violate its tariff. (R.R. 102a-111a). As relief, Customers sought class action status; damages; court costs; attorneys' fees; and a refund under Section 1312(a) of the Code, 66 Pa. C.S. § 1312(a).[3] ( Id. at 111 a). In May 2011, Aqua filed an answer and new matter admitting that, consistent with its tariff, it applies the DSIC on a " bills rendered" basis and adds the DSIC to bills rendered after the effective date. Aqua also argued that the Commission was without jurisdiction to treat the matter as a class action; adjudicate Customers' unfair trade practice claim; and/or order relief in the form of damages. Customers filed a reply to the new matter. In July 2011, Aqua filed a motion for judgment on the pleadings asking that the complaint be dismissed and Customers filed a brief in opposition.

While this was going on, the Commission issued an opinion and order in Pettko v. Pennsylvania-American Water Company, (Docket No. C-2011-2226096, filed February 28, 2013), dismissing a complaint against Pennsylvania-American Water Company (PAWC) which argued that PAWC was prohibited from billing its DSIC on a " bills rendered" basis. As a result, in May 2013, Aqua filed a motion for summary judgment raising the same claims in its motion for judgment on the pleadings and arguing that the holding in Pettko was dispositive of the instant complaint.[4]

Page 752

The ALJ found that summary judgment was the appropriate vehicle to resolve the matter because the only issue to be decided is the claim that there are incorrect charges on Customers' bill because Aqua applies the DSIC on a " bills rendered" basis and that there was no genuine issue of material fact. (R.R. at 598a). The ALJ also concluded that, as a matter of law, Aqua's assessment of the DSIC on a " bills rendered" basis was consistent with its tariff and the PUC's rules, regulations and orders and the Public Utility Code. ( Id. at 602a). Based on the foregoing, the ALJ recommended that summary judgment be granted and Customers' formal complaint be dismissed. ( Id. ).

Customers filed exceptions to the ALJ's decision[5] arguing, inter alia, that Supplement 88 to the tariff revising the DSIC requires that there be an " effective date of change" and that it " will be applied to the effective portion of the total amount billed to each customer," (R.R. at 426a), thereby requiring that it be applied on a " services rendered" basis as of the effective date of change.

The Commission denied the exceptions, adopted the ALJ's decision; and dismissed Customers' complaint. The Commission concluded that this case centers on the interpretation of Aqua's tariff and that such is a question of law. The Commission noted that " since 2002, Aqua's DSIC tariff provision has provided, in pertinent part, as follows: '[i]n addition to the net charges provided for in this Tariff, a surcharge ... will apply to all bills issued... on or after' the effective date of the surcharge (emphasis added)." (R.R. at 639a). The Commission concluded that it was proper to grant summary judgment without a hearing because it " ha[d] not identified any facts in the record and/or facts which could be revealed in discovery that would create a disputed issue of material fact necessitating a hearing...." ( Id. at 643a).

In this appeal,[6] Customers first argue that Aqua's tariff specifically states

Page 753

that DSIC surcharges have a definitive effective date and that its bills state a specific effective date for such surcharges, but Aqua charges the increased rate for usage prior to the effective date in violation of the tariff and Section 1303 of the Public Utility Code, 66 Pa. C.S. § 1303,[7] requiring adherence to tariffs and interpretation of its rates in a manner most favorable to the consumer. Customers contend that the tariff provisions regarding its calculation specifically provide that it " will be applied to the effective portion of the total amounts billed," (R.R. at 426a), thereby showing that it only applies to the proportional period after the DSIC's effective date. Even if the tariff allowed the DSIC to be calculated on a " bills rendered" basis, Customers assert that the Commission's interpretation also violates Section 1304 of the Public Utility Code, 66 Pa. C.S. § 1304,[8] because it treats customers disparately based exclusively on varying billing dates, and while the DSIC is reconciled on a regular basis, there is no mechanism by which the individually aggrieved customers are refunded their pro-rata overcharges.

As this Court has explained, " a tariff, like a statute, must be construed so as to give effect to all of its terms, and when the words are clear and free from ambiguity, they are not to be disregarded under the pretext of pursuing its spirit." PPL Elec. Utils. Corp. v. Pa. PUC, 912 A.2d 386, 403 (Pa. Cmwlth. 2006).[9] Additionally, as the administrative agency charged with regulating utilities under the Code, the Commission has a particular expertise in interpreting its tariffs and its expert interpretation of such is entitled to great deference and should only be reversed if clearly erroneous. United States Steel Corporation v. Pennsylvania Public Utility Commission, 850 A.2d 783, 789 (Pa. Cmwlth.), appeal denied, 581 Pa. 687, 863 A.2d 1151 (Pa. 2004). While there may be more than one plausible interpretation of Aqua's tariff, " we stress from the outset that we may only reverse if the Commission's interpretation was clearly erroneous." Id. (emphasis in original). Moreover, as the party filing the complaint with the Commission, Customers had the burden of establishing that Aqua's DSIC billing practices violate the terms of its tariff. Section 332(a) of the Code, 66 Pa. C.S. § 332(a); [10] Aronson v. Pennsylvania Public Utility Commission, 740 A.2d 1208, 1211 (Pa. Cmwlth.

Page 754

1999), appeal denied, 561 Pa. 700, 751 A.2d 193 (Pa. 2000).

As outlined above, the plain language of Aqua's tariff supports the Commission's conclusion that the DSIC should be applied to Customers' bills on a " bills rendered" basis rather than a " services rendered" basis. Initially, the tariff for Aqua's predecessor provided that the DSIC would be collected on a " service rendered" basis. See Supplement No. 34 (" In addition to the net charges provided for in this Tariff, a surcharge of 0.50% will apply to all service ... rendered on or after January 1, 1997." ) (R.R. at 391a). However, following an audit in 2000, the Commission noted that Aqua's " Tariff provides for the recognition of each years' over or undercollection in the DSIC rate commencing April 1 of each year" and " that recognition of the actual over or undercollections in the April rate is not possible due to [Aqua]'s application of the DSIC on a service, rather than a bills rendered, basis." ( Id. at 393a). As a result, since 2002, Aqua's DSIC tariff provision has provided that " [i]n addition to the net charges provided for in this Tariff, a surcharge will apply to all bills issued... on or after" the effective date of the change in the DSIC. ( Id. at 395a, 397a) (emphasis added).[11] The tariff language upon which Customers rely specifically relates to the amount of the DSIC surcharge and not to its recoupment, ( id. at 426a), and cannot be used to disregard the express tariff provisions regarding its effective date for billing purposes as outlined above. When read together, all of these tariff provisions show a " bills-rendered" basis for collection of the DSIC in Aqua's tariff and the Commission's conclusion in this regard is clearly not erroneous.

Additionally, as the Commission explained:

We note that there were valid reasons for the Commission's decision to adopt a " bills-rendered" procedure for the DSIC surcharge. The surcharge only recovers return and depreciation associated with [a] plant that actually is in-service at least one month prior to the effective date of the DSIC rate change. In other words, each quarterly change to Aqua's DSIC rate does not become effective until one to four months after the DSIC-qualified plant has been in service. Therefore, ratepayers receiving an increase to a DSIC surcharge on a " bills rendered" basis will have been receiving the benefit of the DSIC-eligible plant throughout the service period covered by their bills, and for several months prior. Additionally, because the amount to be recovered through the DSIC is fixed, based upon known plant investment incurred prior to the implementation of a new DSIC rate, and because the DSIC is a fully reconciled charge, ratepayers are paying an appropriate annualized level of costs on a 'bills rendered' basis.

(R.R. at 641a n.4).

The foregoing demonstrates that the " bills rendered" method of applying the DSIC complies with Aqua's tariff and is eminently reasonable and does not result in an unreasonable preference in violation of Section 1304 or an improper application

Page 755

of rates in violation of Section 1303. See, e.g., Mill v. Pennsylvania Public Utility Commission, 67 Pa.Cmwlth. 597, 447 A.2d 1100, 1102 (Pa. Cmwlth. 1982) (" It is true that Section 1303 prohibits a public utility from demanding or receiving a rate less than that established in the applicable tariff, but Section 1304 modifies that prohibition by providing that a utility shall not grant any unreasonable preference or advantage to any person. The clear implication from this language is that a person may be given a rate preference so long as it is not unreasonable, and we believe that it falls to the Commission to determine under what circumstances and in what amounts such a preference would be reasonable." ) (emphasis in original). In sum, Customers have failed to sustain their burden of proof and the Commission did not err in rejecting their claims in this regard.

Finally, Customers argue that the Commission erred in dismissing the petition without discovery and a hearing on the merits because they are entitled to engage in discovery and conduct depositions under the Code[12] and the Commission's regulations[13] and the failure to provide a hearing on the merits denied Customers due process.

However, Section 703(b) of the Code states, in relevant part, that " [t]he commission may dismiss any complaint without a hearing if, in its opinion, a hearing is not necessary in the public interest." 66 Pa. C.S. § 703(b).[14] " It is a fundamental proposition of law that a hearing or trial procedure is necessary only to resolve disputed questions of fact and is not required to decide questions of law, policy or discretion." Lehigh Valley Power Committee v. Pennsylvania Public Utility Commission, 128 Pa.Cmwlth. 259, 563 A.2d 548, 556 (Pa. Cmwlth. 1989). See also Chester Water Authority v. Pennsylvania Public Utility Commission, 581 Pa. 640, 868 A.2d 384, 392 (Pa. 2005) (" [A]s a matter of constitutional due process, an evidentiary hearing is most often implicated where there are material facts in dispute. Here, since the Commission was able to accept the material factual allegations of the authority's protest as true, a due process hearing was not essential, and the use of the procedure for judgment on the pleadings relative to the protest was not inappropriate." ).

The instant case exclusively involved the interpretation of the terms of Aqua's tariff; Aqua admitted that it applied the DSIC on a " bills rendered" basis; and Customers do not allege that any of the factual allegations raised in the complaint are in dispute. ( See R.R. at 105a-106a). As a result, Customers' due process rights were not violated by the Commission's failure to permit them to conduct discovery or to take depositions or conduct a hearing, or

Page 756

by its disposing of the instant complaint on summary judgment.

Accordingly, for the foregoing reasons, the Commission's order is affirmed.

ORDER

AND NOW, this 8th day of May, 2015, the order of the Pennsylvania Public Utility Commission dated May 22, 2014, at No. C-2011-2239556, is affirmed.


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