IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Red Lion Municipal Authority, :

:

Petitioner :

:

 v. : No. 186 C.D. 2019

: Argued: September 9, 2019

Pennsylvania Public Utility :

Commission, :

:

Respondent :

BEFORE: HONORABLE ANNE E. COVEY, Judge

HONORABLE MICHAEL H. WOJCIK, Judge

HONORABLE ROBERT SIMPSON, Senior Judge

OPINION NOT REPORTED

MEMORANDUM OPINION 

BY JUDGE WOJCIK FILED: October 29, 2019

Red Lion Municipal Authority (Red Lion) petitions for review of the 

order of the Pennsylvania Public Utility Commission (PUC) denying Red Lion’s 

exceptions to an administrative law judge’s (ALJ) Initial Decision; granting Red 

Lion’s request for clarification of the Initial Decision; and modifying the Initial 

Decision. The Initial Decision had approved the application of The York Water 

Company (York Water) to enter an Emergency Interconnect Agreement with 

Dallastown-Yoe Water Authority (DYWA) and dismissed Red Lion’s challenge to 

the Emergency Interconnect Agreement. Red Lion also petitions for review of the 

PUC’s subsequent order denying its application for reconsideration of the PUC’s 

initial order with respect to the ALJ’s Initial Decision. We affirm.
2

The following are the relevant facts as found by the PUC.1 York 

Water is a public utility that supplies water and wastewater services to 66,100 

customers in York and Adams Counties. DYWA is a municipal authority 

organized under the former Municipality Authorities Act of 1945 (Act),2 and was 

created by Dallastown and Yoe Boroughs to oversee and manage their water 

services, providing water to approximately 4,300 customers. Red Lion is a 

municipal authority created under the Act to purchase the assets of the former Red 

Lion Water Company and to provide water service to Red Lion Borough and 

adjacent municipalities, including Dallastown and Yoe Boroughs. According to 

Red Lion, it has exclusively supplied water for DYWA since 1959, and the most 

recent May 8, 2013 Water Sales Agreement is for another 10-year term.

On May 10, 2017, DYWA executed the Emergency Interconnect 

Agreement with York Water to provide an additional supply of water for resale to 

its customers. Under the agreement, York Water will build a 12-inch main 

extension 600-feet long from its existing distribution system to connect to 

DYWA’s system. DYWA will build a 6-inch water main extension to the 

interconnection location. York Water will also build a booster station with 

 

1

“The PUC is the ultimate fact-finder, [that] determines the weight and credibility of the 

evidence presented, and this Court acknowledges the PUC’s findings are conclusive on appeal, 

unless they are not supported by substantial evidence.” Kviatkovsky v. Pennsylvania Public 

Utility Commission, 618 A.2d 1209, 1211 (Pa. Cmwlth. 1992) (citation omitted). “Substantial 

evidence is commonly defined as relevant evidence that a reasonable mind might accept as 

adequate to support a conclusion.” Id. at 1212 (citation omitted).

2 Act of May 2, 1945, P.L. 382, as amended formerly, 53 P.S. §§301-322, repealed by 

Section 3 of the Act of June 19, 2001, P.L. 287. See now Municipality Authorities Act, 53 

Pa. C.S. §§5601-5623.
3

chemical feed systems, data controls, and back-up power supply to DYWA. The 

total cost of the project is $726,049.

The Emergency Interconnect Agreement also states that York Water 

will only supply water to DYWA to the extent called upon by DYWA, so that 

DYWA is not required to draw a minimum amount of water. However, if called 

upon, York Water could supply DYWA with a maximum of 250,000 gallons of 

water per day at a flow rate not to exceed 200 gallons per minute. Because DYWA 

is not paying any upfront costs, York Water will bill DYWA monthly for a 

minimum of not less than 3,000,000 gallons of water, but no more than 250,000 

gallons per day, whether or not DYWA uses the Emergency Interconnect 

Agreement in a given month. Under its current tariff rates, and based on a 

minimum of 3,000,000 gallons per month, York Water estimates that DYWA will 

pay approximately $248,000 annually and that it will incur $69,596 in annual 

expenses exclusive of a return on investment under the agreement.

On June 16, 2017, York Water filed an application with the PUC to 

certify the Emergency Interconnect Agreement pursuant to Section 507 of the 

Public Utility Code (Code).3 On July 24, 2017, Red Lion filed a formal complaint 

 

3

66 Pa. C.S. §507. Section 507 of the Code states that “[e]xcept for a contract between a 

public utility and a municipal corporation to furnish service at the regularly filed and published 

tariff rates, no contract or agreement between any public utility and any municipal corporation 

shall be valid unless filed with the PUC,” and that the PUC “may, prior to the effective date of 

such contract or agreement, institute proceedings to determine the reasonableness, legality or any 

other matter affecting the validity thereof.” Section 507 also states that “[u]pon the institution of 

such proceedings, such contract or agreement shall not be effective until the [PUC] grants its 

approval thereof.” In turn, Section 508 provides:

 The [PUC] shall have power and authority to vary, reform, or 

revise, upon a fair, reasonable, and equitable basis, any 

obligations, terms, or conditions of any contract heretofore or 

(Footnote continued on next page...)
4

with the PUC and alleged, inter alia, that the Emergency Interconnect Agreement 

violated Section 4.3 of York Water’s PUC-approved tariff (Tariff Rule 4.3)4 and 

 

(continued...)

hereafter entered into between any public utility and any person, 

corporation, or municipal corporation, which embrace or concern a 

public right, benefit, privilege, duty, or franchise, or the grant 

thereof, or are otherwise affected or concerned with the public 

interest and the general well-being of this Commonwealth. 

Whenever the [PUC] shall determine, after reasonable notice and 

hearing, upon its own motion or upon complaint, that any such 

obligations, terms, or conditions are unjust, unreasonable, 

inequitable, or otherwise contrary or adverse to the public interest 

and the general well-being of this Commonwealth, the [PUC] shall 

determine and prescribe, by findings and order, the just, 

reasonable, and equitable obligations, terms, and conditions of 

such contract. Such contract, as modified by the order of the 

[PUC], shall become effective 30 days after service of such order 

upon the parties to such contract.

66 Pa. C.S. §508.

4 Tariff Rule 4.3 states:

When a York County municipality or authority has exhausted all 

alternatives to obtaining an adequate high-quality source of supply,

[it] may apply to [York Water] for the purchase of water. Upon 

the execution of an agreement satisfactory to [York Water], [York 

Water] will supply water to the municipality or authority for resale 

within the service boundaries of the municipality or authority. 

[York Water] will bill the municipality or authority at [York 

Water’s] single-point meter rate where monthly the number of 

customers of the municipality or authority times 1200 gallons will 

be billed at the first block rate and any remainder consumption will 

be billed at the regular block rate or rates.

Reproduced Record (R.R.) at 184a.
5

that it was an ordinary water purchase agreement. On August 15, 2017, Red Lion 

filed a petition to intervene in the application.

On August 18, 2017, Red Lion filed an amended complaint and again 

asserted that the Emergency Interconnect Agreement violates York Water’s Tariff 

Rule 4.3. Reproduced Record (R.R.) at 203a-204a. Red Lion also alleged that the 

agreement is a bulk water purchase agreement and that it violates Section 1501 of 

the Code5 because the introduction of York Water’s chloramine-treated water into 

DYWA’s free-chlorine-treated water supply will negatively impact the water 

chemistry and stability of DYWA’s water system. Id. at 204a-205a. Red Lion 

further alleged that the Emergency Interconnect Agreement is silent as to how a 

joint supervisory control and data acquisition (SCADA) system will be established 

to assure safe and consistent water supply and pressure among the three different 

water systems. Id. at 206a.

 

5

66 Pa. C.S. §1501. Section 1501 states, in pertinent part:

 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. Such service also 

shall be reasonably continuous and without unreasonable 

interruptions or delay. Such service and facilities shall be in 

conformity with the regulations and orders of the commission. 

Subject to the provisions of this part and the regulations or orders 

of the commission, every public utility may have reasonable rules 

and regulations governing the conditions under which it shall be 

required to render service. Any public utility service being 

furnished or rendered by a municipal corporation beyond its 

corporate limits shall be subject to regulation and control by the 

commission as to service and extensions, with the same force and 

in like manner as if such service were rendered by a public utility.
6

On September 7, 2017, York Water filed an answer to the amended 

complaint, with new matter and preliminary objections, that denied that the 

Emergency Interconnect Agreement violates Tariff Rule 4.3 or that it constitutes a 

bulk water purchase agreement. R.R. at 220a-230a. York Water also argued that 

the PUC is without jurisdiction to interpret or enforce the May 8, 2013 Water Sales 

Agreement between DYWA and Red Lion or Red Lion’s issues with the quality of 

DYWA’s water supply. Id. at 224a-225a. York Water also preliminarily objected 

because Red Lion lacked standing to raise claims of unreasonable service on behalf 

of DYWA or its customers. Id. at 231a-246a. Red Lion filed an answer to York 

Water’s preliminary objections and a PUC ALJ denied the preliminary objections. 

Id. at 247a-271a.6

Four witnesses testified before the ALJ, and exhibits were submitted, 

at a January 23, 2018 hearing. Joseph Hand, York Water’s Chief Operating 

Officer, testified that he is responsible for the day-to-day company operations. 

R.R. at 78a. He outlined the system to be constructed under the Emergency 

Interconnect Agreement, including the specifications and allocation of costs, and 

stated that York Water had enough water supply available to meet its commitment. 

Id. at 78a-80a. He testified that the Pennsylvania Department of Environmental 

Protection (DEP) encourages community water suppliers to maintain more than 

one source of water supply. Id. at 80a. He stated that Red Lion adds fluoride to its 

water while York Water does not, and that York Water uses chloramines to 

disinfect its water, but that Red Lion uses free chlorine. Id. Hand testified that 

York Water has supplied water to 7 municipalities over the last 25 years, including 

 

6

In September 2017, the matters were consolidated for disposition without objection at a 

Prehearing Conference.
7

3 with chorine-treated water, and that there have never been any issues regarding 

the blending of supplies. Id. 

Mark Snyder, York Water’s Vice President of Engineering, testified 

that he oversees the analysis, planning, engineering, and construction activities for 

its capital projects. R.R. at 81a. He outlined the connections and pumping station 

for the system supply, and stated that the results of hydraulic analysis showed that 

the emergency interconnect will not negatively affect the hydraulics of York 

Water’s system, DYWA’s system, or Red Lion’s system. Id. at 82a. He stated that 

communications between the Red Lion system and DYWA system via DYWA’s 

SCADA system will remain unchanged after the emergency interconnect is 

completed. Id.

Connie Stokes, Dallastown Borough’s and DYWA’s Manager, 

testified that DYWA customers have complained of issues with their water 

including discoloration, and that between December 4, 2016, and July 11, 2017, 

Red Lion’s water supplied to DYWA’s Park Street Tanks was below that which

was contractually required. R.R. at 82a. She stated that in 2009, there was a 

system-wide turbidity issue in Red Lion’s water system that affected all consumers

supplied by Red Lion. Id. She testified that DYWA determined that it would be in 

its best interest and that of its customers to have an additional source of water 

supply. Id. She stated that one of the main benefits of having an emergency 

interconnect with York Water is the existence of an alternative source when Red

Lion cannot supply its contractually obligated minimum amount of water. Id. at 

83a. She testified that DYWA determined that there would not be an issue with 

receiving the differently treated water supplies so long as York Water and Red 
8

Lion comply with their permits and DYWA monitors and controls the two supplies 

in its system. Id.

Keith Kahwajy, Red Lion’s Water and Sewer Superintendent, testified 

that he is not a licensed engineer and does not have any engineering or chemistry 

degrees, and has no experience in operating, managing or overseeing an emergency 

interconnect system. R.R. at 83a. He stated that undetected or unrepaired system 

leaks would cause the tank levels in DYWA’s system to fall below 77 feet, and 

that tank levels would have to fall significantly below 77 feet to be a safety 

concern. Id. at 84a. He testified that DYWA is required to notify Red Lion of any 

leaks or repairs so that he can record the information on the daily water usage 

spreadsheet and use the information for leak detection and other potential problems 

in the system. Id. He stated that there has never been an issue with Red Lion’s 

ability to supply water to meet the demands of DYWA’s customers, and that 

although its system is not connected to an alternative supply source, it has the 

option of using water from both Beaver Creek and the Susquehanna River if a 

problem arises with its main source of supply. Id.

On June 7, 2018, the ALJ issued an Initial Decision in which he 

concluded:

The request of York [Water] and DYWA for an 

emergency interconnect agreement is approved because it 

is reasonable and in the public interest. The agreement 

satisfies Sections 507 and 508 of the [Code] because it 

will provide DYWA with more than one source of 

supply, as is encouraged by the DEP. York [Water] and 

DYWA are commended for having the foresight to enter 

into this agreement so that DYWA can be prepared in the 

event of a problem with DYWA’s lone source of water 

supply. In contrast, the complaint filed by Red Lion will 

be dismissed because Red Lion has failed to demonstrate 

that the proposed emergency interconnect in anyway 
9

violates the [Code], a [PUC] order or regulation or a 

[PUC]-approved tariff of the company.

R.R. at 104a. Accordingly, the ALJ granted York Water’s application and 

dismissed Red Lion’s amended complaint. Id. at 106a. On July 6, 2018, Red Lion 

filed exceptions7to the ALJ’s Initial Decision and sought clarification of the 

decision.

On September 20, 2018, the PUC issued an Opinion and Order 

disposing of Red Lion’s exceptions. R.R. at 8a-37a. The PUC rejected Red Lion’s 

first exception that York Water satisfied its burden of proving that the Emergency 

Interconnect Agreement is reasonable and in the public interest. Id. at 24a-28a. In 

rejecting this exception, the PUC explained:

[W]e note that all the issues Red Lion raised in its 

Exception No. 1 have already been considered and 

rejected by the ALJ in his Initial Decision. Here, we 

concur with the ALJ’s conclusion that York Water 

satisfied its burden to demonstrate that the [Emergency] 

Interconnect Agreement is reasonable and in the public 

interest. We are not convinced by the arguments set forth 

by Red Lion to support its position that the agreement is 

not an emergency interconnect agreement but rather a 

bulk water sales agreement.

We find no merit in Red Lion’s argument that the 

[Emergency] Interconnect Agreement is a bulk water 

sales agreement because the word “emergency” is only 

referenced in passing in the agreement. We agree with 

York Water that the agreement provides an additional 

source of water supply to DYWA in case of an 

interruption to Red Lion, currently the only other source 

to provide water to DYWA. Further, the record is clear 

that DEP requires water utilities to have more than one 

 

7 Section 5.533(a) of the PUC’s regulations states, “In a proceeding, exceptions may be 

filed by a party and served within 20 days after the initial . . . decision is issued unless some 

other exception period is provided.” 52 Pa. Code §5.533(a) (emphasis added).
10

source of water supply. And as noted by DYWA, the 

DEP, has, in the past, encouraged DYWA to secure an 

additional water provider. We believe the [Emergency] 

Interconnect Agreement provides DYWA the ability to 

acquire an additional source of water supply in case of an 

emergency impacting DYWA’s current and only source 

of water supply. We also agree that while DYWA may 

never take advantage of the emergency interconnect, the 

fact that such an agreement is in place and will be 

available when the opportunity presents itself compels us 

to approve the [Emergency] Interconnect Agreement to 

protect the best interest of the public. As such, we shall 

deny Red Lion’s Exception No. 1.

Id. at 27a-28a.

The PUC also rejected Red Lion’s second exception, explaining:

Here, Red Lion’s argument is based on a statement made 

by DYWA’s Manager that DYWA did not explore, let 

alone exhaust, any alternatives to obtaining an inadequate 

high-quality source of water prior to entering into an 

agreement with York Water. The ALJ correctly 

determined that, as the party with the burden of proof, 

Red Lion needed to present more evidence than just 

relying on Ms. Stokes’ comment. Therefore, we agree 

with the ALJ’s determination that the comment made by 

Ms. Stokes is not substantial evidence to support Red 

Lion’s argument because more is required than a mere 

trace of evidence or a suspicion of the existence of a fact 

sought to be established. We also acknowledge York 

Water’s argument that it is the only other feasible water 

supplier alternative available to DYWA and the only 

certificated water utility at the proposed point of 

interconnection or within the general vicinity of 

DYWA’s lower pressure zone. In our opinion, Red Lion 

has not presented sufficient evidence to refute this claim; 

nor has Red Lion presented any viable alternative water 

supplier located at the proposed point of interconnection 

or within the general vicinity of DYWA’s lower pressure 

zone. Therefore, we conclude that Red Lion has failed to 

satisfy its burden of proof to show that York Water 

violated the Code, a [PUC] Order or Regulation, or its 
11

[PUC]-approved Tariff, when it entered into the instant 

emergency interconnect agreement with DYWA. As 

such, Red Lion’s Exception No. 2 is hereby, denied.

R.R. at 32a-33a (citation omitted).

Finally, with respect to Red Lion’s clarification request, the PUC 

stated:

Upon review, we shall grant Red Lion’s request 

for clarification to the extent that Red Lion is requesting 

that we clarify in this instant proceeding that our review 

of this matter is limited to the [Emergency] Interconnect 

Agreement and not the [2013] Water Sales Agreement 

[between Red Lion and DYWA]. We note that [we] do[] 

not have the authority to interpret, enforce or adjudicate 

claims regarding a contract between private, nonjurisdictional entities or municipalities. See, Pettko v. 

[Pennsylvania American Water Company], 39 A.3d 473, 

478 n.9 (Pa. Cmwlth. 2012) (“[T]here can be no dispute 

that the courts of common pleas have subject matter 

jurisdiction over common law claims such as conversion 

and breach of contract involving private individuals and 

businesses.”); Adams v. [Pennsylvania Public Utility 

Commission], 819 A.2d 631, 635 (Pa. Cmwlth. 2003) 

(“[T]he PUC lacks jurisdiction over private contractual 

disputes.”).

Here, the matter before the [PUC] is the 

“Emergency Interconnect Agreement” between York 

Water and DYWA[.] Pursuant to Section 507 of the 

Code, [] we have the authority to review the [Emergency] 

Interconnect Agreement. However, we are not 

authorized to review the Water Sales Agreement as both 

municipalities involved are non-jurisdictional entities. 

Consequently, our review in the instant proceeding is 

limited to the [Emergency] Interconnect Agreement and 

not the Water Sales Agreement. Accordingly, we shall 

grant Red Lion’s request and clarify, to the extent any 

clarification is needed, that our review in the instant 

proceeding does not make any determination regarding 

the Water Sales Agreement as that agreement is outside 

the purview of [the PUC].
12

Also, based on our review of the [Emergency] 

Interconnect Agreement, we find it to be reasonable and 

in the public interest. Therefore, we shall approve the 

[Emergency] Interconnect Agreement between York 

Water and DYWA.

R.R. at 34a-35a.

Accordingly, the PUC issued an order: (1) denying Red Lion’s 

exceptions to the ALJ’s Initial Decision; (2) granting Red Lion’s request for 

clarification to the extent that it is limited to the Emergency Interconnect 

Agreement and not the Water Sales Agreement; (3) adopting, as modified, the 

ALJ’s Initial Decision; (4) dismissing Red Lion’s Amended Formal Complaint; (5) 

approving the Emergency Interconnect Agreement between York Water and 

DYWA; and (6) closing the record in the matter. R.R. at 36a-37a.8

On October 5, 2018, Red Lion filed a petition for reconsideration and 

a stay that the PUC granted on October 19, 2018. On January 17, 2019, the PUC 

addressed the merits of the petition for reconsideration and a stay at a public 

meeting and denied the petition, essentially reaffirming its September 20, 2018 

Order. 9 Red Lion then filed the instant petition for review.10

 

8 On October 22, 2018, Red Lion filed a petition for review of the PUC’s September 20, 

2018 order, which was docketed in this Court at No. 1417 C.D. 2018. However, the notice of 

appeal was dismissed as inoperative by this Court’s October 25, 2018 order pursuant to 

Pa. R.A.P. 1701(b)(3) (providing that the PUC’s grant of reconsideration rendered inoperative 

the petition for review and that the time for filing a petition for review begins to run anew from 

the date of the entry of a subsequent PUC decision on reconsideration).

9 With respect to its disposition of Red Lion’s reconsideration request, the PUC outlined 

the legal standards to be applied:

The Code establishes a party’s right to seek relief following 

the issuance of our final decisions pursuant to Subsection 703(f), 

relating to rehearing, as well as Subsection 703(g), relating to the 

rescission and amendment of orders. 66 Pa. C.S. §703(f) and 

(Footnote continued on next page...)
13

 

(continued...)

§703(g). Such requests for relief must be consistent with Section 

5.572 of our Regulations, relating to petitions for relief following 

the issuance of a final decision. 52 Pa. Code §5.572.

The standards for granting a Petition for Reconsideration 

were set forth in Duick v. Pennsylvania Gas and Water Company, 

56 Pa P.U.C. 553[, 559] (1982):

A Petition for Reconsideration, under the provisions of 66 

Pa. C.S. §703(g), may properly raise any matters designed 

to convince the [PUC] that it should exercise its discretion 

under this Code section to rescind or amend a prior order in 

whole or in part. In this regard we agree with the Court in 

[Pennsylvania Railroad Co. v. Pennsylvania Public Service 

Commission, 179 A. 850, 854 (Pa. Super. 1935)], wherein 

it was stated that “[p]arties . . ., cannot be permitted by a 

second motion to review and reconsider, to raise the same 

questions which were specifically decided against them 

. . . .” What we expect to see raised in such petitions are 

new and novel arguments, not previously heard, or 

considerations which appear to have been overlooked by 

the [PUC].

R.R. at 46a-47a.

In support of its assertion that the Emergency Interconnect Agreement was actually a 

bulk water sales agreement, Red Lion relied upon, inter alia, York Water internal emails and the 

minutes of York Water’s Board of Director’s June 26, 2017 meeting that were not previously 

made part of the record. See R.R. at 52a. York Water argued that the PUC’s consideration of 

this extra-record evidence was improper. See id. at 54a. The PUC ultimately determined:

Red Lion asserts a sixth argument pertaining to alleged contacts 

between York Water and DYWA which were not raised 

previously. Specifically, Red Lion asserts arguments regarding 

York Water’s internal emails and minutes of York Water’s June 

26, 2017 Board of Directors meeting. These documents are not in 

the record and Red Lion has offered no excuse for its failure to 

present this evidence prior to the close of [the] record. We agree 

with York Water that Red Lion has failed to establish in this 

(Footnote continued on next page...)
14

In this appeal, Red Lion claims that the PUC erred in: (1) determining 

that the Emergency Interconnect Agreement between York Water and DYWA is 

legal, reasonable, and in the public interest under Sections 507 and 508 of the 

Code; (2) determining that Red Lion did not meet its burden of proving that the 

Emergency Interconnect Agreement is illegal, unreasonable, and that its approval 

is not in the public interest; and (3) denying Red Lion’s motion for 

reconsideration.

11

 

(continued...)

proceeding that this evidence is newly discovered or constitutes a 

change in circumstances. Because Red Lion is attempting to 

reference this new evidence in support of its argument, and there 

has been no good cause shown for considering this extra-record 

evidence, we shall decline to rely upon it for purposes of reaching 

a final determination in this proceeding pursuant to Section 5.431 

of our Regulations, 52 Pa. Code §5.431. See also, Hess v. Pa. 

PUC, 107 A.3d 246, 265-66 (Pa. Cmwlth. 2014).

Id. at 63a. See also Section 5.243(e) of the PUC’s regulations, 52 Pa. Code §5.243(e) (“A party 

will not be permitted to introduce evidence during a rebuttal phase which: (1) Is repetitive[;] (2) 

Should have been included in the party’s case-in-chief[; and] (3) Substantially varies from the 

party’s case-in-chief.”); Section 5.431(b), 52 Pa. Code §5.431(b) (“After the record is closed, 

additional matter may not be relied upon or accepted into the record unless allowed for good 

cause shown by the presiding officer or the [PUC] upon motion.”).

10 “This Court’s review is limited to a determination of whether an error of law was 

committed, whether necessary findings of fact were supported by substantial evidence, or 

whether constitutional rights were violated.” Pennsylvania State University v. Public Utility 

Commission, 988 A.2d 771, 777 n.15 (Pa. Cmwlth. 2010). 

11 We consolidate Red Lion’s appellate claims for the sake of clarity.
15

I.

Red Lion first claims that the PUC erred in determining that the 

Emergency Interconnect Agreement between York Water and DYWA is legal, 

reasonable, and in the public interest under Sections 507 and 508 of the Code. 

Specifically, Red Lion contends that Section 332(a) of the Code12 required York 

Water, as the applicant for approval of the Emergency Interconnect Agreement, to 

shoulder the burden to prove that the obligations, terms or conditions of the

agreement are reasonable and legal and that approval is in the public interest 

consistent with Sections 507 and 1501 of the Code and Tariff Rule 4.3,13 and that 

the PUC erred in prematurely shifting the burden of proof to Red Lion to rebut the 

legality, reasonableness, and public interest of the agreement. Red Lion contends 

that in doing so, the PUC capriciously disregarded York Water’s uncontradicted 

evidence that the agreement violates Tariff Rule 4.3 because DYWA may only 

enter such an agreement after it has “exhausted all alternatives to obtaining an 

adequate high-quality source of supply.” R.R. at 210a. The evidence demonstrates 

that DYWA has a safe and adequate supply from Red Lion under the 2013 Water 

Supply Agreement and York Water did not require DYWA to exhaust all other 

alternatives prior to executing the Emergency Interconnect Agreement. The 

evidence also establishes that although Red Lion has never had a problem with 

supplying adequate water, it has alternative supply sources from both Beaver

Creek and the Susquehanna River. Id. at 84a.

 

12 66 Pa. C.S. §332(a). Section 332(a) states, “Except as may be otherwise provided in 

section 315 (relating to burden of proof) or other provisions of this part or other relevant statute, 

the proponent of a rule or order has the burden of proof.”

13 Tariff Rule 4.3 has the force and effect of law. Brockway Glass Co. v. Pennsylvania 

Public Utility Commission, 437 A.2d 1067, 1070 (Pa. Cmwlth. 1981).
16

Additionally, Red Lion asserts that the Emergency Interconnect 

Agreement violates Section 1501 because the introduction of York Water’s 

chloramine-treated water into DYWA’s free-chlorine-treated water supply will 

negatively affect the water chemistry and the stability of DYWA’s water system, 

and it does not address the establishment and implementation of a SCADA system 

to assure safe and consistent water supply and pressure among the three different 

water systems. Further, the PUC erred in failing to look past the title of the 

agreement and examine its contents, which provide that it really acts as a bulk 

water sales agreement that can only serve a fraction of DYWA’s customers and is 

prohibited by Section 4.1 of the 2013 Water Sales Agreement.

Finally, Red Lion submits that the PUC applied the incorrect standard 

in determining that the Emergency Interconnect Agreement is in the public interest 

by failing to consider that the emergency interconnect is unnecessary because Red 

Lion’s service is adequate to cover all of DYWA’s customers; the water supplied 

under the interconnect agreement will only serve a fraction of DYWA’s customers; 

and yet all of DYWA’s customers are bearing the cost under the agreement. 

Moreover, the PUC abdicated its responsibility to reach its own public interest 

determination notwithstanding DEP’s policy regarding emergency interconnect 

agreements with more than one supplier.

However, Sections 102 and 501(b) of the Code, 66 Pa. C.S. §§102,

501(b), confer on the PUC the power to supervise and regulate public utilities in 

Pennsylvania. Sections 1302 and 1308, 66 Pa. C.S. §§1302, 1308, grant the PUC 

the authority to review and approve tariffs. Section 507 merely provides a 

mechanism by which a public utility may seek an exception to tariff rules, and the 

PUC may approve a contract for service at a rate other than the tariff. The relevant 
17

inquiry in a case such as this is whether the contract is reasonable and in the public 

interest and is within the PUC’s discretion. City of Pittsburgh v. Pennsylvania 

Public Utility Commission, 33 A.2d 641, 642 (Pa. Super. 1943).

The credited evidence shows that, at present, Red Lion is DYWA’s 

only source of a water supply. R.R. at 69a. If Red Lion’s water quality or quantity 

diminishes, DWYA would experience an interruption in service during which it 

could not meet the needs of its customers. Id. at 70a. The evidence also shows 

that DEP encourages water suppliers to maintain more than one source of supply 

including interconnections with other systems. Id. at 69a-70a. Likewise, the PUC 

encourages management practices such as the interconnection of water systems 

that enhance customer benefits. See, e.g., Section 69.721(a) of the PUC’s 

regulations, 52 Pa. Code §69.721(a) (“The [PUC] believes that further 

consolidation of water and wastewater systems within this Commonwealth may, 

with appropriate management, result in greater environmental and economic 

benefits to customers. The regionalization of water and wastewater systems 

through mergers and acquisitions will allow the water industry to institute better 

management practices and achieve greater economies of scale.”).

DYWA presented evidence that it has experienced issues with Red 

Lion’s supply in the past. R.R. at 334a. DYWA determined that, based on the 

issues that it has experienced with Red Lion’s supply, it is in the best interest of its 

customers to have an additional source. Id. at 335a. The PUC agreed with the ALJ 

and DYWA that the Emergency Interconnect Agreement with York Water is 

reasonable and in the public interest. Id. at 58a, 69a. The evidence also shows that 

although the agreement with York Water only affects a portion of DYWA’s 

customers, during a period of interruption it can divert the remaining supply from 
18

Red Lion to the other customers. Id. at 498a-499a. Thus, there is ample 

substantial evidence from the witnesses presented at the hearing to support the 

PUC’s conclusion that the agreement is reasonable and in the public interest and 

should be approved.

Contrary to its assertion, the PUC did not “ignore” the evidence 

presented by Red Lion. Rather, the PUC does not have jurisdiction over the 

services provided and rates charged by municipal authorities operating under the 

Municipality Authorities Act, 53 Pa. C.S. §§5601-5623, because Section 

5607(d)(9) of that statute vests jurisdiction over such matters in the courts of 

common pleas. 53 Pa. C.S. §5607(d)(9)14 As a result, the PUC cannot review 

DYWA’s consideration of alternative sources or whether the Emergency 

Interconnect Agreement violates the 2013 Water Sales Agreement. Likewise, 

Section 1501 of the Code does not confer PUC jurisdiction over water disinfection 

methods such as the use of chloramines versus chlorine, which is within the 

jurisdiction of the DEP. Pickford v. Pennsylvania Public Utility Commission, 4 

A.3d 707, 714-15 (Pa. Cmwlth. 2010). Further, the PUC can properly bifurcate 

and decide the issue within its jurisdiction, i.e., whether the Emergency 

Interconnect Agreement is reasonable and in the public interest.

 

14 Specifically, Section 5607(d)(9) states, in relevant part:

Any person questioning the reasonableness or uniformity of a rate 

fixed by an authority or the adequacy, safety and reasonableness of 

the authority’s services, including extensions thereof, may bring 

suit against the authority in the court of common pleas of the 

county where the project is located or, if the project is located in 

more than one county, in the court of common pleas of the county 

where the principal office of the project is located. The court of 

common pleas shall have exclusive jurisdiction to determine 

questions involving rates or service.
19

In sum, there is ample substantial evidence demonstrating: (1) an 

alternative source of water supply will benefit DYWA and its customers; (2) the 

minimum charge under the Emergency Interconnect Agreement will meet 

DYWA’s goals and protect York Water’s customers; (3) there will be no 

operational issues resulting from the emergency interconnect; and (4) there will be 

no issues with the blending of York Water’s and Red Lion’s differently-treated 

water supplies. R.R. at 28a, 57a-58a, 61a-62a, 273a, 276a-278a, 278a-279a, 284a, 

360a-367a, 389a, 394a. Moreover, the PUC properly found that the agreement is 

permissible under the Water Sales Agreement, id. at 27a-28a, 57a, and does not 

violate Tariff Rule 4.3 because “[m]atters relating to the tariff . . . are peculiarly 

within the expertise of the [PUC].” County of Erie v. Verizon North, Inc., 879 

A.2d 357, 364 (Pa. Cmwlth. 2005). See R.R. at 28a-33a, 57a-59a. Moreover, the 

PUC expressly evaluated the benefits of the proposal, including the benefits to 

DYWA’s customers, and rejected Red Lion’s claims in determining that the 

agreement was in the public interest. R.R. at 24a-28a, 56a-63a.

II.

Red Lion next claims that the PUC erred in determining that Red Lion 

did not meet its burden of proving that the Emergency Interconnect Agreement is 

illegal and unreasonable, and that its approval is not in the public interest. Red 

Lion asserts that assuming that York Water established a prima facie case under 

Section 507, the PUC erred in determining that Red Lion did not sustain its burden 

of proving15 that the Emergency Interconnect Agreement is illegal, unreasonable, 

 

15 As this Court has stated:

(Footnote continued on next page...)
20

and not in the public interest. DYWA agreed in Section 4.1 of the 2013 Water 

Sales Agreement to purchase its water supply from Red Lion unless Red Lion is 

unable to do so due to a force majeure or to purchase water for an emergency 

interconnect. R.R. at 124a. Red Lion contends that, as a result, the Emergency 

Interconnect Agreement clearly violates this provision because it acts as a bulk 

water sales agreement as evidenced by: (1) the language of the agreement itself; 

(2) Ms. Stokes’ testimony that DYWA intends to use it as a bulk purchase 

agreement; and (3) the consequences effectuated by the agreement.

However, under Section 332(a) of the Code, “the proponent of a rule 

or order has the burden of proof.” 66 Pa. C.S. §332(a). York Water was the 

proponent and bore the burden of proof with respect to the application for Section 

507 approval. Likewise, Red Lion bore the burden of proof with respect to the 

complaint that York Water violated Tariff Rule 4.3 and Section 1501. Regarding 

its intervention in York Water’s application proceeding, Red Lion only had the 

secondary burden of production, which shifted to Red Lion after York Water had 

established its prima facie case. After York Water sustained its initial burden of 

proving that the Emergency Interconnect Agreement is reasonable and in the 

public interest, as required by Section 507, the PUC determined that Red Lion 

 

(continued...)

The term “burden of proof” is used to refer to two distinct 

burdens—the burden of production and the burden of persuasion. 

The burden of persuasion never leaves the party on whom it is 

originally cast, but the burden of production may shift during the 

course of the proceedings. The burdened party cannot shift the 

burden of the production of evidence it has failed to establish.

Department of Transportation v. Agricultural Lands Condemnation Approval Board, 5 A.3d 

821, 828 (Pa. Cmwlth. 2010) (citations omitted).
21

failed to present sufficient credible evidence to sustain the shifted burden of 

production to refute the reasonableness of the agreement and the resultant public 

benefits. R.R. at 27a, 32a, 49a, 61a. As to the purported Tariff Rule 4.3 violation, 

the PUC also determined that Red Lion failed to establish its prima facie case 

because it primarily relied on evidence pertaining to matters outside the PUC’s 

jurisdiction. Id. at 32a-33a, 69a.

Contrary to Red Lion’s assertion, the PUC did not prematurely require 

it to demonstrate that the agreement is not reasonable or in the public interest. The 

PUC merely required Red Lion to rebut York Water’s evidence to the contrary. As 

outlined above, the PUC does not have jurisdiction over the services provided and 

rates charged by municipal authorities operating under the Municipality

Authorities Act because Section 5607(d)(9) of that statute vests jurisdiction over 

such matters in the courts of common pleas. As a result, the PUC cannot compel 

DYWA service or rates, lacks authority over the Water Sales Agreement, and does 

not regulate water disinfection as a service under Section 1501 of the Code. 

Accordingly, Red Lion could not have prevailed on its request for relief in this 

regard.

Finally, the only claim that Red Lion presented regarding the 

application of a “burden of proof” related to the showing of alternatives relative to 

the Emergency Interconnect Agreement. R.R. at 565a. Now Red Lion challenges 

the burden of proof regarding all aspects of the approval of the Emergency 

Interconnect Agreement. Red Lion has waived all of these alternative burden of 

proof claims. See Pa. R.A.P. 1551(a) (“No question shall be heard or considered 

by the court which was not raised before the government unit . . . .”); Section 

703(a) of the Administrative Agency Law, 2 Pa. C.S. §703(a) (“[A] party may not 
22

raise upon appeal any other question not raised before the agency . . . unless 

allowed by the court upon due cause shown.”).

Red Lion alleged in its amended complaint that York Water was 

acting in violation of its Tariff and Section 1501. R.R. at 19a. As a result, the 

burden was on Red Lion to prove these allegations because they were not part of 

the proceedings on York Water’s application until the two separate matters were 

consolidated for disposition. Moreover, assuming that the PUC erred in placing 

the burden of proof on Red Lion, the burden of proof applied by the PUC is 

immaterial with respect to our review on appeal. When the PUC reviews and 

evaluates “the weight and probative value of all the evidence,” the burden of proof 

standard that the PUC applied “is of no consequence on appeal.” Milkie v. 

Pennsylvania Public Utility Commission, 768 A.2d 1217, 1220-21 (Pa. Cmwlth. 

2001). Rather, “the proper focus of [this Court’s] review is whether the [PUC’s] 

decision is supported by substantial evidence.” Id. In this case, the PUC weighed 

the competing evidence and found York Water’s evidence to be more compelling 

and the PUC’s determination in this regard is supported by substantial evidence 

and this Court will not disturb the PUC’s determination on appeal. Id.

III.

Finally, Red Lion claims that the PUC erred in denying its petition for 

reconsideration by concluding that its arguments were either waived or without 

merit.16 Red Lion contends that the PUC improperly based its determinations on 

 

16

“[T]his Court’s scope of review of [the PUC’s] denial of reconsideration is limited to 

determining whether the [PUC] abused its discretion. An abuse of discretion occurs if the [PUC]

decision demonstrates bad faith, fraud, capricious action or an abuse of power. Moreover, in 

deciding whether to deny reconsideration, the [PUC] considers whether the petitioner has 

(Footnote continued on next page...)
23

justifications regarding DYWA’s exhaustion of alternatives that were not advanced 

by York Water until it filed its reply exceptions. 52 Pa. Code §5.243(e). 

Moreover, Red Lion’s failure to introduce York Water’s internal emails or the 

minutes of its Board of Directors’ June 26, 2017 meeting is excused because York 

Water had the burden of proof with respect to the approval of the Emergency 

Interconnect Agreement. Red Lion further asserts that the PUC’s failure to 

consider these arguments violates Red Lion’s due process rights because they were 

offered to rebut the assertion that York Water raised in its reply exceptions, which 

were considered and accepted by the PUC in denying Red Lion’s reconsideration 

motion. 

However, Red Lion’s argument ignores that it had the burden of 

production to refute York Water’s prima facie case for Section 507 approval in 

addition to having the burden of proof with respect to its amended complaint. Red 

Lion does not contest the denial of its stay request. Requests for reconsideration 

cannot raise the same questions that were previously decided; rather, they should 

present new and novel arguments not previously heard or considerations that the 

PUC may have overlooked. See, e.g., J.A.M. Cab Co. v. Pennsylvania Public 

Utility Commission, 572 A.2d 1317 (Pa. Cmwlth. 1989); Pennsylvania Railroad 

Co. v. Pennsylvania Public Service Commission, 179 A. 850 (Pa. Super. 1935); 

Duick v. Pennsylvania Gas and Water Company, 56 Pa P.U.C. 553 (1982): 

The PUC denied Red Lion’s reconsideration request because Red 

Lion failed to raise any new or novel legal or factual questions and failed to raise 

 

(continued...)

presented new evidence, changed circumstances, or previously unconsidered law.” J.A.M. Cab 

Co. v. Pennsylvania Public Utility Commission, 572 A.2d 1317, 1318 (Pa. Cmwlth. 1989).
24

and preserve several issues in its exceptions. R.R. at 57a, 59a, 63a. For example, 

Red Lion did not raise the mixing of chloramines with chlorine, the number of 

customers served by the interconnection, and the minimum charge for DYWA 

service under the agreement. Id. at 59a. As the PUC explained, it is not required 

to grant reconsideration when a party fails to preserve an argument, id. at 60a, and 

the failure to preserve issues in exceptions results in a waiver of those arguments. 

See HIKO Energy, LLC v. Pennsylvania Public Utility Commission, 209 A.3d 246, 

263 (Pa. 2019) (“[W]e find that HIKO failed to preserve a constitutional challenge 

to the fines imposed pursuant to Section 54.4(a) [of the regulations, 52 Pa. Code 

§54.4(a),] because it did not articulate its constitutional theory until its application 

for a stay of the [PUC’s] decision.”) (citation omitted); Springfield Township v. 

Pennsylvania Public Utility Commission, 676 A.2d 304, 309 (Pa. Cmwlth. 1996) 

(“The Township also challenges PUC’s conclusion that the Township failed to 

prove an unreasonable delay by PECO in changing the rate . . . . However, that 

issue was not raised by the Township in its exceptions to the ALJ’s initial decision 

and was not considered by PUC. Therefore, the issue was waived and may not be 

considered on appeal.”) (citations omitted). Even if preserved for review, the PUC 

rejected these claims on the merits by “adopt[ing] the ALJ’s thorough disposition 

of these issues.” R.R. at 59a-63a.

Additionally, Red Lion failed to timely introduce York Water’s 

internal emails and Board minutes and attempted to introduce them after the record 

was closed. Red Lion has not demonstrated the “good cause” that is required by 

the PUC’s regulations to permit reopening the record for the consideration of this 

evidence by the PUC. See, e.g., City of Lancaster (Sewer Fund) v. Pennsylvania 

Public Utility Commission, 793 A.2d 978, 984 (Pa. Cmwlth. 2002) (“Concerning 
25

the claimed 4 percent wage increase [as an administrative expense], the City 

improperly proffered direct evidence of this wage increase in the rebuttal phase of 

the rate proceeding. See 52 Pa. Code. §5.243(e) (prohibiting the introduction of 

evidence during a rebuttal phase that ought to have been included in the case-inchief).”); Shoemaker v. State Employes’ Retirement Board, 688 A.2d 751, 753 (Pa. 

Cmwlth. 1997) (“[T]o serve as a basis to reopen the record, the material changes of 

fact must not have been discoverable prior to the conclusion of the hearing. See 

generally, Pennsylvania Labor Relations Board v. Northeastern Educational 

Intermediate Unit No. 19, [505 A.2d 1068 (Pa. Cmwlth. 1986)].”). Herein, the 

PUC properly found that Red Lion’s reconsideration petition should be denied 

because Red Lion either re-raised arguments that the PUC previously considered 

and rejected or tried to raise new arguments not preserved in its exceptions or 

introduce new evidence. 17

Accordingly, the PUC’s orders are affirmed.

MICHAEL H. WOJCIK, Judge

Judge Fizzano Cannon did not participate in the decision of this case.

 

17 Red Lion’s due process argument in this regard is untenable because it is based on the 

false premise that York Water bore the burden of proof with respect to its application. As 

outlined above, Red Lion bore the initial burden of proving a violation of Tariff Rule 4.3 and the 

PUC properly found that it failed to sustain its burden in this regard. See R.R. at 32a (“[W]e 

agree with the ALJ’s determination that the comment made by Ms. Stokes is not substantial 

evidence to support Red Lion’s argument because more is required than a mere trace of evidence 

or a suspicion of the existence of a fact sought to be established.”). Moreover, the purported 

violation is based on a theory that Red Lion did not present prior to filing its Main Brief and in 

support of which it did not present any relevant or material evidence in its case in chief. In sum, 

Red Lion was afforded any process that was due on this claim and its failure to sufficiently 

exploit its opportunity in this regard is not a basis for finding a constitutional violation. 
IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Red Lion Municipal Authority, :

:

Petitioner :

:

 v. : No. 186 C.D. 2019

: 

Pennsylvania Public Utility :

Commission, :

:

Respondent :

O R D E R

AND NOW, this 29th day of October, 2019, the orders of the 

Pennsylvania Public Utility Commission dated September 20, 2018, and January 

17, 2019, are AFFIRMED.

__________________________________

MICHAEL H. WOJCIK, Judge