IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Tanya J. McCloskey, Acting : Consumer Advocate, : Petitioner :

:

v. :

: Pennsylvania Public Utility Commission, : No. 1183 C.D. 2018 Respondent : Argued: June 6, 2019

BEFORE: HONOR ABLE P. KEVIN BROBSON, Judge

HO NORABLE ANNE E. COVEY , Judge HONORABLE ELLEN CEISLER

, Judge

OPINION NOT REPORTED

MEMORANDUM OPINION BY JUDGE COVEY FILED: July 11, 2019

The Office of Consumer Advocate (OCA) petitions this Court for review

of t he Pennsylvania Public Utility Commission’s (PUC) April 26 , 2018 order (April

2018 Order) holding that Act 40 of 2016 (Act 40) 1 does not apply to Distribution

System Improvement Charge (DSIC) calculations

. The re are two issues before this

Court : (1) wheth er the OCA’s appeal was timely ; and (2) whether the PUC correctly

held that Act 40 is ambiguous and

, based upon its interpretation thereof, Newtown

Artesian Water Company (NAWC) was not required to include accumulated deferred

income taxes (ADIT) and state income taxes in its DSIC calculation. 2

1 Act 40 was added to the Public Utility Code by Section 1 of the Act of June 12, 2016, P.L.

332

, and consists only of Section 1301.1 of the Code, 66 Pa.C.S. § 1301.1

.

2 This matter was argued seriately with McCloskey v. Pa. Pub. Util. Comm’n (Pa. Cmwlth.

No. 697 C.D. 2018

, filed July 11 , 2019 ).2 Background

In order to address [concerns over aging infrastructure] , the [PUC] encouraged utilities to plan and implement accelerated replacement of their aging infrastructure. At the same time, however, it was understood by utilities making infrastructure investment that they would be unable to adjust the rates they charged to their customers between traditional ratemaking cases to recover those specific infrastructure investment costs in a timely manner.

Theref ore, on February 14, 2012, Act 11 [ of 2012, (Act 11), which amended Chapters 3, 13 and 33 of the Public Utility Code (Code)

, 66 Pa.C.S. § 101

- 3316 ] was signed into law. Among other things, Act 11 repealed the prior statute that permitted only water utilit ies to charge a DSIC (66 Pa.C.S. § 1307(g)), and authorized natural gas distribution, electric distribution, as well as water and wastewater utilities to charge a DSIC. Now, these utilities have access to an alternative ratemaking mechanism whereby the ut ilities may recover costs related to repair, improvement and replacement of eligible projects outside of a ratemaking

case. See 66 Pa.C.S. §§ 1350

- 1360.

Section 1353(a) of the Code, 66 Pa.C.S. § 1353(a) states in pertinent part [] :

[A] utility may petitio n the [PUC] , or the [PUC] after notice and hearing, may approve the establishment of a [DSIC] to provide for the timely recovery of the reasonable and prudent costs incurred to repair, improve or replace eligible property in order to ensure and maintain ad equate, efficient, safe, reliable and reasonable service.

66 Pa.C.S. § 1353(a).

Section 1352 of the Code, 66 Pa.C.S. § 1352, states that, as a prerequisite to the implementation of a DSIC, a utility must file a long

- term infrastructure improvement plan (LT IIP).3

McCloskey v. Pa. P ub. Util. Comm’n (McCloskey I) , 127 A.3d 860, 863 (Pa. Cmwlth.

2015) (footnotes omitted).

I n McCloskey I , this Court considered whether the PUC erred when it

concluded that a utility was not required to include an ADIT adjustment in its DSIC

calculation and permitted the utility to include the state income tax gross

- up in its

DSIC calculation. In affirming the PUC ’s order , this Court relied upon Section 1301

of the Code, which provides

, in relevant part

, that “[e]very rate made, d emanded, or

received by any public utility, or by any two or more public utilities jointly, shall be

just and reasonable, and in conformity with regulations or orders of the [PUC] .” 66

Pa.C.S. § 1301. This Court held that “there is no single way to arriv e at just and

reasonable rates and that the [PUC] is ‘ vested with discretion to decide what factors it

will consider in setting or evaluating a utility’s rates. ’ ” McCloskey I , 127 A.3d at 868

( quoting Popowsky v. Pa. Pub

. Util

. Comm ’n (Pa. Cable Televisio n Ass’n )

, 669 A.2d

1029, 1040 (Pa. Cmwlth. 1995)

, rev’d on other grounds , 706 A.2d 1197 (Pa. 1997) )

. “The bottom line is that the appropriate inquiry is whether the total effect of the

surcharge results in unjust and unreasonable rates.” Id . at 869.

The reafter, o n June 12, 2016, Act 40 was signed into law and became

effective on August 11, 2016. Act 40 added Section 1301.1 to the Code

, which

requires :

(a) Computation.

- - If an expense or investment is allowed

to be included in a public utility’s rates f or ratemaking purposes, the related income tax deductions and credits shall also be included in the computation of current or deferred income tax expense to reduce rates. If an expense or investment is not allowed to be included in a public utility’ s rate s, the related income tax deductions and credits, including tax losses of the public utility’s parent or affiliated companies, shall not be included in the computation of income tax expense to reduce rates. The deferred income taxes used to determine the rate base of a public utility for ratemaking purposes shall be based solely4 on the tax deductions and credits received by the public utility and shall not include any deductions or credits generated by the expenses or investments of a public utility’s pare nt or any affiliated entity. The income tax expense shall be computed using the applicable statutory income tax rates.

(b) Revenue use.

- - If a differential accrues to a public utility resulting from applying the ratemaking methods employed by the [PUC] p rior to the effective date of subsection (a) for ratemaking purposes, the differential shall be used as follows:

(1) Fifty percent to support reliability or infrastructure related to the rate base eligible capital investment as determined by the [PUC] ; and

(2) Fifty percent for general corporate purposes.

(c) Application.

- - The following shall apply:

(1) Subsection (b) shall no longer apply after December 31, 2025.

(2) This section shall apply to all cases where the final order is entered after the effecti ve date of this section.

66 Pa.C.S. § 1301.1.

On September 1, 2017, NAWC filed a supplement to its DSIC tariff

seeking to increase NAWC ’ s existing cap from 5% to 7.5%. On September 29, 2017,

the OCA filed a formal complaint with the PUC opposing the prop osed cap increase

(Complaint). 3 The OCA also asserted that given the enactment of Act 40, NAWC

must comply with Section 1301.1 of the Code by including related federal and state

income tax credits and deductions in its DSIC rate calculation

. On October 5 , 2017,

the PUC instituted an investigation into the lawfulness, justness, and reasonableness

of NAWC’s existing and proposed r ates, rules, and regulations. The PUC ordered

that NAWC’s supplement be suspended by operation of law until May 1, 2018,

3 The Complaint was docketed at C

- 2017

- 2626954.5

unless it directed otherwise. The matter was assigned to the Office of Administrative

Law Judge (ALJ). On Feb r uary 9, 2018, the ALJ issued a recommended decision

(Recommended Decision) denying NAWC’s request to increase its rate cap, and

directing NAWC to modif y its DSIC to account for all federal and state income tax

deductions and credits in its DSIC calculation

.

On March 1, 2018, NAWC filed exceptions to the Recommended

Decision and OCA filed reply exceptions. By the April 2018 O rder, the PUC

reversed the ALJ ’s Recommended Decision , concluding that Section 1301.1(a) of the

Code applies to base rate filings but not to DSIC rates

. The PUC explained:

[W] e disagree with the ALJ ’ s conclusion that Section 1301.1 [of the Code] requires [NAWC’s] DSIC to include f ederal and state income tax deductions and credits generated by DSIC investment. We find that the language in Section 1301.1 [of the Code] is ambiguous regarding whether Act 40 applies to the DSIC. Statutory language is considered ambiguous when a pertin ent provision is susceptible to more than one reasonable interpretation or when the language is vague, uncertain, or indefinite. Section 1301.1 [of the Code] is susceptible to more than one reasonable interpretation. The OCA argues that the language in t he first sentence of Section 1301.1(a) [of the Code] clearly provides that Act 40 applies to the DSIC because Act 40 applies to rates as broadly defined in Section 102 of the Code, [ 66 Pa.C.S. § 102,] and the DSIC is a rate that recovers utility investment and income tax expense related to that investment.

However, the OCA ’ s position does not account for the language in the third sentence of Section 1301.1(a) [of the Code] , which provides as follows:

The deferred income taxes used to determine the rate base of a public utility for ratemaking purposes shall be based solely on the tax deductions and credits received by the public utility and shall not include any deductions or credits generated by the expenses or6 investments of a public utility ’ s parent or any affiliated entity.

66 Pa.C.S. § 1301.1(a). This provision explains how the deductions and credits in the first sentence of Section 1301.1(a) [of the Code] should be calculated. It refers back to the first two sentences of Section 1301.1(a) [of the Code] and specifically uses the term ‘ rate base ’ and not the general

term ‘ rate. ’ The term ‘ rate base ’ is a technical term that is used in general base rate cases. The use of both the terms

‘ rate ’ and ‘ rate base ’ creates an ambiguity in the meaning of Section 1301.1 [of the Code] and supports [NAWC’s] position that the language in Section 1301.1 [of the Code] is ambiguous and, therefore, should be analyzed under Section 1921(c) [ of the Statutory Construction Act of 1972 (SCA)

, 4 ] 1 Pa.C.S. § 1921(c), to ascerta in the intention of the General Assembly.

April 2018 Order at 3 7

- 39 ( citations and footnotes omitted). 5

4 S ection 1921(c) of the SCA provides:

When the words of a statute are not explicit, the intention of the General Assembly may be ascertained by considering, among other

matters:

(1) Th e occasion and necessity for the statute.

(2) The circumstances under which it was enacted.

(3) The mischief to be remedied.

(4) The object to be attained.

(5) The former law, if any, including other statutes upon the same or similar subjects.

(6) The cons equences of a particular interpretation.

(7) The contemporaneous legislative history.

(8) Legislative and administrative interpretations of such

statute.

1 Pa.C.S. § 1921 (c).

5 The PUC adopted the April 2018 Order on April 19, 2018 . On that same date, th e PUC adopted and entered the order at issue in McCloskey v. P ennsylvani a Pub lic Util ity Comm issio n (Pa.
Cmwlth. No. 697 C.D. 2018 , filed July 11

, 2019 ) , argued seriately with the instant matter . Notably,

in that case , Commissioner David Sweet (Commission er Sweet) issued a dissenting statement, explaining, in relevant part:7 The PUC remanded the matter to the ALJ for a determination of whether

NAWC exceeded its rate cap and would continue to do so, thereby justifying the ra te

cap increase. T he OCA did not appeal from the April 2018 Order at that time . On

June 1 5 , 201 8

, the ALJ issued a recommended decision on remand (Recommended

Decision on Remand) concluding that NAWC exceeded its 5% DSIC rate cap and

would continue to do so, but denying the rate cap increase. NAWC filed exceptions

to the Recommended Decision on Remand and OCA filed reply exceptions

, but did

not further argue the applicability of Section 1301.1(a) of the Code to DSIC rates

therein

. By July 27, 2018 Opini on and Order (July 27, 2018 Order) , the PUC

formally adopted the Recommended Decision on Remand and denied NAWC’s rate

cap increase request. On August 27, 2018, the OCA appealed to this Court seeking

review of the April 2018 Order with respect to Act 40’s applicability to DSIC rates. 6

I agree with the ALJ that the language of the statute is clear in its use of the word ‘rate,’ and is free from ambiguity.

Chapter 13 of the . . . Code addresses ratemaking generally, an d the definition of the term ‘rates’ is broad, and includes but is not limited to base rates. Further, rate base is not the same as base rates. The reference, therefore, to ‘rate base’ within Section 1301.1 does not render that section ambiguous with reg ard to its applicability to a DSIC rate calculation, nor does it support the conclusion that the section is limited to base rate calculations only. If it was the intent of the General Assembly to limit this section to base rate calculations in base rate p roceedings, they [sic] could have so specified.

Pub. Util. Comm’n, No. P

- 2015

- 2508942, Dissenting Statement, Commissioner Sweet ( Apr. 19,

2018 ) (footnotes omitted)

. Commissioner Sweet did not issue a dissenting statement in the instant

case

. 6 This Court has explained:

On a petition to review a decision of [the] PUC, our standard of review is limited to determining whether substantial evidence supports the necessary findings of fact, whether [the] PUC erred as a matter of law, and whether constitutional ri ghts were violated. [ Coal. for Affordable Util. Servs. & Energy Efficiency in Pa. v. Pa. Pub. Util.
Comm’n

, ] 120 A.3d [1087,] 1094 [(Pa. Cmwlth. 2015)]

. We defer to [the] PUC’ s interpretation of the

. . . Code and its own regulations8 Discussion

T he PUC argues that the OCA’s appeal must be dismissed as untimely.

Because th at issue is dispositive, we will address it first. The PUC contends that the

PUC ’s April 2018 Order included, among other things, a determination as to Act 40 ’ s
applicability to the DSIC rate calculation . The PUC contends that

, although the April

2018 Order remanded the issue of whether NAWC had exceeded its DSIC rate cap

,
Act 40 ’s applicability to NAWC ’ s DSIC rate calculation was no t addressed on

remand because it had already been ruled upon in the April 2018 Order

. The PUC

further emphasizes that the OCA did not request reconsideration of the April 2018

Order

, n or did it timely petition this Court for review within 30 days there of

, and it

did not file its current appeal until 31 days 7 after the PUC issued its July 27, 2018

Order.

This Court has explained:

A final order is any order that disposes of all claims or of all parties

. . . . [P ennsylvania Rule of Appellate Procedure (Rul e) ] 341(b)(1)

. . . . Pa.R.A.P. 341(b)(1)[]. Appeals are permitted only from final orders so as to prevent piecemeal determinations and the consequent protraction of litigation.

unless [the] PUC ’ s i nterpretations are clearly erroneous. Id. at 1095. We may not substitute our judgment for that of [the] PUC ‘ when

substa ntial evidence supports the PUC’ s decision on a matter within

the [PUC’s] expertise. ’ Id. (internal quotation marks and citation

omit ted). ‘ Judicial deference is even more necessary when the statutory scheme is technically complex. ’ Id. (internal quotation marks and citation omitted). On issues of law, ‘ our standard of

review is de novo and our scope of review is plenary. ’ Id.

Retai l Energy Supply Ass ’ n v. Pa. P ub. Util. Comm’n , 185 A.3d 1206, 1220 (Pa. Cmwlth. 2018) (footnote omitted)

.

7 The OCA explains that since August 26, 2018, the 30 th day following July 27, 2018, was a Sunday

, the OCA filed its petition for review the followin g day. Section 1908 of the SCA , 1 Pa.C.S. § 1908, relating to the computation of time, omits the last day of a time period which falls on a Saturday, Sunday or a legal holiday.9 The general rule that a final order is required before an appeal may be tak en is fundamental to the exercise of jurisdiction by the appellate court and is rigorously applied.

Green M ountain Energy Co. v. Pa. P ub. Util. Comm’n , 812 A.2d 740, 743 (Pa.

Cmwlth. 2002) (citations omitted). Rule 341 provides

, in relevant part:

(b) Def inition of Final Order.

– A final order is any order that:

(1) disposes of all claims and of all parties; or

. . . .
(3) is entered as a final order pursuant to paragraph (c) of this rule.

(c) Determination of finality.

– When more than one claim for r elief is presented in an action, whether as a claim, counterclaim, cross

- claim, or third

- party claim or when multiple parties are involved, the trial court or other government unit may enter a final order as to one or more but fewer than all of the claims and parties only upon an express determination that an immediate appeal would facilitate resolution of the entire case. Such an order becomes appealable when entered. In the absence of such a determination and entry of a final order, any order or other f orm of decision that adjudicates fewer than all the claims and parties shall not constitute a final order

.

Pa.R.A.P. 341 ( bold text emphasis added). Thus, “ [a] n order is final if it disposes of

all claims and all parties, and an order is interlocutory whe n it does not effectively put

a litigant out of court. ” Koken v. Colonial Assurance Co. , 885 A.2d 1078, 1101 (Pa.

Cmwlth. 2005) (citation omitted)

, aff’d , 893 A.2d 98 (Pa. 2006)

.

Because t he April 2018 Order did not “dispose[] of all claims and all

par ties [

, ] ” it was not a final order. Pa.R.A.P. 341(b) (1)

. Accordingly

, the OCA was

not required to file its appeal within 30 days of when the April 2018 Order was

issue d . Rather, the OCA timely appealed from the July 27, 2018 Order which

disposed of all r emaining issues. The Court , therefore, reject s the PUC’s argument.10 T he OC A argues that the PUC erred when it concluded that Act 40 is

ambiguous and that the legislative intent was to limit its application to base rates.

The OCA contends that Act 40 is u nambiguous and that the relevant statutory

definitions mandate Act 40’s application to DSIC calculations. It f urther claims that

Act 40’s enactment super s edes this Court’s McCloskey I decision. The OCA

maintains that

, since it is undisputed that the DSIC is a statutorily defined rate

, Section 1301.1(a) of the Code applies to DSIC calculations and

, a ccordingly, the

PUC and this Court must accept the statutory definition and apply it to Section

1301.1(a) of the Code.

Specifically, the OCA argues:

[T] he statute contains no language limiting its application to a specific type of ‘ rate. ’ [66 Pa.C.S. § 1301.1(a).] Section 1301.1 [of the Code] does not mention ‘ DSIC ’ or ‘ base

rates. ’ The statute does mention ‘ rate base ’ in the third sentence of 1301.1(a) [of the Code]

. R ate base and base

rates , however, are not the same. Rate base is another technical word that is defined by the [ Code ] as follows: [‘] The value of the whole or any part of the property of a public utility which is used and useful in the pu blic service. [’ ] 66 Pa.C.S. § 102.

The DSIC rate, like base rates, is calculated to recover the value (depreciation and pretax return) of a utility’ s capital investment (property) which is used and useful in the public service. 66 Pa.C.S. § 1357(a)(1), (3). Specifically, the DSIC rate recovers the value of utility property that has

‘ been placed in service ’ in the prior quarter and has ‘ not previously been reflected in the utility ’ s rates or rate base. ’ 66 Pa.C.S. § 1357(a)(1). Thus, rate base is not particular to base rates and its usage in Section 1301.1(a) [ of the Code ] creates no limitation on the application of the
statute

.

OCA Br. at 2 3 ( emphasis added ).11 The PUC re

join s:

The initial inconsistency arises with use of the term ‘rates’ contained in the first sentence of subsection (a) with the use of the [term] ‘rate base’ in the third sentence of subsection (a).

The third sentence of the subsection specifically uses the term ‘rate base’ and not the general term ‘rate.’ The term ‘rate base’ is also a technical term defined by Section 102 of the Code and is primarily used in general base rate cases under Section 1308 of the Code [, 66 Pa.C.S. § 1308]

. A m biguity arises, however, when attempting to reconcile the third sentence of subsection (a) with th e first two sentences of the subsection. The third sentence refers back to the first two sentences and explains to what rates the computation of the related income tax deductions and credits in the first two sentences of subsection (a) should apply.

PUC B r. at 21

- 22 (footnote omitted).

Initially

,
[w] hen reviewing agency interpretations of statutes they are charged to enforce, our Supreme Court, in Pennsylvania Human Relations Commission v. Uniontown Area School
District

, . . . 313 A.2d 156 ( [Pa.] 1973) (a s well as the United States Supreme Court in Chevron v. Natural Resources Defense Council , 467 U.S. 837

. . . (1984)), has adopted a ‘ strong deference ’ standard for reviewing agency interpretations of statutes they are charged to enforce. Under the ‘ stro ng deference ’ standard, if we determine that the intent of the legislature is clear, that is the end of the matter and we, as well as the agency, must give effect to the unambiguously expressed intent of the legislature

. If, however, we determine that the precise question at issue has not been addressed by the legislature, we are not to impose our own construction on the statute as would be necessary in the absence of an administrative interpretation, but review the agency’s construction of the

statute to determine whether that construction is permissible. We must give deference to the interpretation of the legislative intent of a statute made by an administrative agency only where the language of12 that statute is not explicit or ambiguous

. A statute is

am biguous or unclear if its language is subject to two or more reasonable interpretations

.
Bethenergy Mines , Inc. v. Dep ’ t of Envtl. Prot. , 676 A.2d 711, 715 (Pa. Cmwlth.

1996) ( citation s omitted; emphasis added). Thus, resort ing to legislative intent

thr ough statutory construction principles to determine whether Section 1301.1(a) of

the Code applies to DSIC calculations is only necessary if the term “rate s , ” as used in

Section 1301.1(a) of the Code

, is ambiguous

.

The Pennsylvania Supreme Court explained:

Whether a statute is ambiguous cannot be determined in a

vacuum. A statute is ambiguous when there are at least two reasonable interpretations of the text. In construing and giving effect to the text, ‘ we should not interpret statutory words in isolation , but must read them with reference to the context in which they appear. ’ Roethlein v. Portnoff Law Assoc [ s ]

. , . . . 81 A.3d 816, 822 (Pa. 2013) (citing Mishoe v. Erie Ins. Co.

, . . . 824 A.2d 1153, 1155 (Pa. 2003)); accord Commonwealth v. Office of Open Records

, . . . 103 A.3d 1276, 1285 (Pa. 2014) (party ’ s argument that statutory language is ambiguous

‘ depends upon improperly viewing it in isolation; ’ when language is properly read together and in conjunction with rest of statute, legislative intent is p lain). The United States Supreme Court also takes a contextual approach in assessing statutes and in determining predicate ambiguity. See generally King v. Burwell

,

__ U.S.

__ , 135 S.Ct. 2480, 2489, 192 L. Ed. 2d 483 ( [] . 2015) ( ‘ If the statutory languag e is plain, we must enforce it according to its terms. But oftentimes the meaning

- or ambiguity

- of certain words or phrases may only become evident when placed in context. So when deciding whether the language is plain, we must read the words in their context and with a13 view to their place in the overall statutory scheme. ’ ( [I] nternal quotation marks and citations omitted)); Yates v. U [.] S [.]

,

__ U.S.

__, 135 S.Ct. 1074, 1081

- 82, 191 L. Ed. 2d 64 ( [] 2015) ( ‘ Whether a statutory term is unambiguous, how ever, does not turn solely on dictionary definitions of its component words. Rather, ‘ [t]he plainness or ambiguity of statutory language is determined [not only] by reference to the language itself, [but as well by] the specific context in which that lang uage is used, and the broader context of the statute as a whole. ’ Ordinarily, a word ’ s usage accords with its dictionary definition. In law as in life, however, the same words, placed in different contexts, sometimes mean different things. ’ ( [I] nternal citations omitted)).

A.S. v. Pa. State Police

, . . . 143 A.3d 896, 905

- 906 ( [ Pa. ] 2016) (some citations omitted, others modified).

In re Tr. Under Deed of Kulig , 175 A.3d 222, 231

- 32 (Pa. 2017)

.

Section 102 of the Code defines “ rate ” as:

Every individual, or joint fare, toll, charge , rental, or other compensation whatsoever of any public utility , or contract carrier by motor vehicle, made, demanded, or received for any service within this part, offered, rendered, or furnished by such public utility, or con tract carrier by motor vehicle, whether in currency, legal tender, or evidence thereof, in kind, in services or in any other medium or manner whatsoever, and whether received directly or indirectly

, and any rules, regulations, practices , classifications or contracts affecting any such compensation, charge , fare, toll, or rental.

66 Pa.C.S. § 102 (emphasis added)

.

T he Pennsylvania Supreme Court has held that “ if the General

Assembly defines words that are used in a statute, those definitions are binding

. ”

Pa. Associated Builders & Contractors, Inc. v. Dep ’ t of Gen. Servs. , 932 A.2d 1271,

1278 ( Pa. 2007) (emphasis added) ; see also Lower Swatara Twp. v. Pa. Labor14

Relations Bd

. , __ A.3d __ ( Pa. Cmwlth. No

. 1276 C.D. 2018, filed May 2, 2019).

“ When the [ Gene ral Assembly ] defines the words it uses in a statute , neither the

jury nor the court may define them otherwise

. ” Commonwealth v. Massini , 188

A.2d 816, 817 (Pa. Super. 1963) (emphasis added)

. “ When [ the General Assembly ]

does define the words used in a s tatute

, the courts need not refer to the technical

meaning and dev i ation of those words as given in dictionaries, but must accept the

statutory definitions

. ” Id. (emphasis added) ; see also Commonwealth v. Lobiondo

, 462 A.2d 662 (Pa. 1983). Thus, accordin g to the OCA, the term, “rate,” used in

Section 1301.1(a) of the Code is the broadly

- inclusive term defined in Section 102 of

the Code, and it is not limited to “base rate.” 8

This Court notes that Section 1353 of the Code authorizes the PUC to

grant or approve the establishment of a DSIC and sets forth the process to petition the

PUC for DSIC approval. See 66 Pa.C.S. § 1353 . Section 1357 of the Code details

the method for calculating a DSIC

, se e 66 Pa.C.S. § 1357 , and Section 1358 of the

Code

, en titled “[c]ustomer protections [

, ] ” inter alia , imposes a permissible DSIC cap

. 66 Pa.C.S. § 1358

. Significantly, Sections 1353, 1357 and 1358 of the Code refer to

the DSIC as a “charge” rather than a “rate

. ” 66 Pa.C.S. §§ 1353, 1357, 1358.

Regardless, as a c harge, the DSIC falls within Section 102 of the Code’s definition of

“rate.” 66 Pa.C.S. § 102.

“A statute is ambiguous when there are at least two reasonable

interpretations of the text under review.” Warrantech Consumer Prods. Servs. , Inc. v.

Relia nce Ins. Co. in Liquidation , 96 A.3d 346, 354

- 55 (Pa. 2014) (emphasis added)

. Nonetheless, an interpretation that disregards and/or contradicts an explicitly

stated , statutorily defined meaning cannot be reasonable

. By claiming and

8 Notably, the Code does not define the term “base rate,” and Section 1308(d) of the Code provides a detailed process for base rate proceedings using the defined term “rate” therein. 66 Pa.C.S. § 1308(d).15

concluding that the te rm “rates” as used in Section 1301.1(a) of the Code is

ambiguous and does not include DSIC, the PUC and NAWC simply disregard the

binding statutory definition under the guise of pursuing statutory intent. Sections

1353(b)(4),(5), 1357(b),(c), and 1358(b)( 1) of the Code specifically include the term

“base rate.” See 66 Pa.C.S. §§ 1353(b)(4),(5), 1357(b),(c), 1358(b)(1)

. It is clear

from the General Assembly’s use of the term “base rate” in those Code sections that

the General Assembly knew how to differen tiate between “base rate s ” and “rate s ”

and did so in drafting the legislation. In Section 1301.1(a) of the Code, it used the

defined term, “rate[s].” 66 Pa.C.S. § 102. That term in the first two sentences of

Section 1301.1(a) of the Code is not ambiguou s because it is defined to include

“ [ e ] very

. . . charge

. . . whatsoever of any public utility [

. ] ” 66 Pa.C.S. § 102

(emphasis added). In order for this Court to conclude that Section 1301.1(a) of the

Code is ambiguous, it would have to assign a meaning to the word “rate s ” different

from the General Assembly’s explicit definition , which t his Court may not do. 9 See

Pa. Associated Builders ; Lobiondo ; Lower Swatara ; Massini

.

As the ALJ clearly explained in his Recommended Decision :

The plain language of Se ction 1301.1 [of the Code] requires that the impact of any tax deductions and credits related to an expense or investment that is allowed to be included in a public utility ’ s rates for ratemaking purposes shall be included in the computation of current or deferred income tax expense to reduce rates. Use of the word ‘ shall ’ in statutes is generally accepted as imperative or mandatory and must be given a compulsory meaning as denoting obligation. I agree with [the] OCA that Act 40 now requires the inclusion of federal and state income tax deductions in the DSIC rate charged to customers.

9 Nor may this Court insert or read into Section 1301.1(a) of the Code the word “base”
before the word “rates .” “ This Court has consistently held that courts may not supply words omitted by the legislature as a means of interpreting a statute. This Court ’ s duty to interpret statutes does not include the right to add words or provisions that the legislature has left out. ” Roge le, Inc.

v. Workers ’ Comp. Appeal Bd.(Mattson)

, 969 A.2d 634, 637 (Pa. Cmwlth. 2009) (citations omitted).16 Although [NAWC] argued that Act 40 addresses consolidated income tax expense for base rate purposes, that this is not a base rate proceeding, that the DSIC rate is a surchar ge mechanism for the recovery of the costs related to the repair, improvement, and replacement of eligible property outside of a rate case, and that surcharges are not part of a base rate proceeding, the language of the aforementioned code provisions are c lear:

If an expense or investment is allowed to be included in a public utility ’ s rates for ratemaking purposes, the related income tax deductions and credits shall also be included in the computation of current or deferred income tax expense to reduce rat es.

66 Pa.C.S. § 1301.1(a). As previously noted, the term ‘ rate ’ is defined to include charges, such as the DSIC. Although this may not be a base rate proceeding, the language is clear, and Section 1301.1 [of the Code] applies.

[NAWC] also argues that th e legislative history behind Act 40 demonstrates that the purpose of [ Act 40] was to eliminate the consolidated tax adjustment. However, there is nothing in the plain language of the statute to suggest this. On the contrary, Subsection (a) of Section 130 1.1 [of the Code] says if an expense or investment is allowed to be included in a utility ’ s rates for ratemaking purposes then the related income tax deductions and credits must also be included. Subsection (a) then articulates the opposite: if the

expens e or investment is not allowed to be included in a utility ’ s rates for ratemaking purposes, any related income tax deductions and credits cannot be included. The third and fourth sentences in subsection (a) then articulate how those deductions and credits should be calculated. This language is clear and unambiguous.

The rules of statutory construction require that ‘ when the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit.’ [ 1 Pa.C.S. § 1921(b). ] In this case, the language of Section 1301.1 [ of the Code ] is clear and free from all ambiguity and therefore the letter of the statute cannot be disregarded.17 NAWC ’ s reliance on legislative history as a reason to adopt it s position in this proceeding is incorrect. Where the plain language of the statute is discernible, as is the case here, there is no need to look to the legislative history. As the rules of statutory construction further require, ‘ when the words of the s tatute are not explicit, the intention of the General Assembly may be ascertained by considering, among other matters:

. . . . (7) the contemporaneous legislative history. ’ [1 Pa.C.S. § 1921(c)(7).] In this case, however, the words of Section 1301.1 [ of the Code ] are explicit and, therefore, there is no need to look to the contemporaneous legislative history to ascertain the intention of the General Assembly.

Recommended Decision at 59

- 60 ( emphasis added; footnotes omitted). This Court

discerns no error in the ALJ’s analysis.

For all of the above reasons, the PUC’s April 2018 O rder is reversed

, and this matter is remanded to the PUC to require NAWC to revise its tariffs and

DSIC calculation pursuant to Section 1301.1(a) of the Code.

_____________ ______________ ANNE E. COVEY, JudgeIN THE COMMONWEALTH COURT OF PENNSYLVANIA

Tanya J. McCloskey, Acting : Consumer Advocate, : Petitioner :

:

v. :

: Pennsylvania Public Utility Commission, : No. 1183 C.D. 2018 Responde nt :

O R D E R

AND NOW, this 11 th day of July , 201 9

, the Pennsylvania Public Utility

Commission’s (PUC) April 26, 2018 order is reversed

, and the matter is remanded to

the PUC for the purpose of requiring Newtown Artesian Water Company to revise its

tariffs and Distribution System Improvement Charge calculation in accordance with

Section 1301.1 of the Public Utility Code , 66 Pa.C.S. § 1301.1.

Jurisdiction is relinquished.

___________________________ ANNE E. COVEY, Judge