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: HONORABLE P. KEVIN BROBSON, Judge

HONORABLE 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 the 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. There are two issues before this 

Court: (1) whether 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.

Therefore, 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Among other things, Act 11 repealed the prior statute that 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 utilities 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 utilities 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 petition 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 adequate, 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 

(LTIIP).
3

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

2015) (footnotes omitted). 

In 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, demanded, 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 arrive 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 Television 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.

Thereafter, on 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 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 rates. If an expense 

or investment is not allowed to be included in a public 

utility’s rates, 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 solely 
4

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 parent 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] prior 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 effective 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 proposed 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 rates, 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 February 9, 2018, the ALJ issued a recommended decision 

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

directing NAWC to modify 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 Order, 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 

federal 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 pertinent 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 the 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 or 
6

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 ascertain the intention of the General 

Assembly.

April 2018 Order at 37-39 (citations and footnotes omitted).5

 

4 Section 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) The 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 consequences 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, the PUC 

adopted and entered the order at issue in McCloskey v. Pennsylvania Public Utility Commission (Pa. 

Cmwlth. No. 697 C.D. 2018, filed July 11, 2019), argued seriately with the instant matter. Notably, 

in that case, Commissioner David Sweet (Commissioner 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 rate 

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

June 15, 2018, 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 Opinion 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, and 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 regard 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 proceedings, 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 rights 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 regulations 
8

Discussion

The PUC argues that the OCA’s appeal must be dismissed as untimely. 

Because that 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 not 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, nor did it timely petition this Court for review within 30 days thereof, and it 

did not file its current appeal until 31 days7after 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 . . . . [Pennsylvania Rule of Appellate Procedure

(Rule)] 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 interpretations are clearly erroneous. Id. at 1095. 

We may not substitute our judgment for that of [the] PUC ‘when 

substantial evidence supports the PUC’s decision on a matter within 

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

omitted). ‘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.

Retail Energy Supply Ass’n v. Pa. Pub. Util. Comm’n, 185 A.3d 1206, 1220 (Pa. Cmwlth. 2018)

(footnote omitted).

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

Sunday, the OCA filed its petition for review the following 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 taken is fundamental to the exercise of 

jurisdiction by the appellate court and is rigorously applied. 

Green Mountain Energy Co. v. Pa. Pub. Util. Comm’n, 812 A.2d 740, 743 (Pa. 

Cmwlth. 2002) (citations omitted). Rule 341 provides, in relevant part:

(b) Definition 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 relief 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 form 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 when 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 the April 2018 Order did not “dispose[] of all claims and all 

parties[,]” 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

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

disposed of all remaining issues. The Court, therefore, rejects the PUC’s argument.
10

The OCA 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 unambiguous and that the relevant statutory 

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

Act 40’s enactment supersedes 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, accordingly, 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]. Rate 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 public 

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 23 (emphasis added).
11

The PUC rejoins:

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]. 

Ambiguity arises, however, when attempting to reconcile 

the third sentence of subsection (a) with the 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 Br. 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) (as 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 ‘strong 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 of 
12

that statute is not explicit or ambiguous. A statute is 

ambiguous 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) (citations omitted; emphasis added). Thus, resorting to legislative intent 

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

the Code applies to DSIC calculations is only necessary if the term “rates,” 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 plain). 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 language 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 a 
13

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, however, 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 language 

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 contract 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). 

The 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. Labor 
14

Relations Bd., __ A.3d __ (Pa. Cmwlth. No. 1276 C.D. 2018, filed May 2, 2019). 

“When the [General 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 statute, the courts need not refer to the technical 

meaning and deviation 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, according 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, see 66 Pa.C.S. § 1357, and Section 1358 of the 

Code, entitled “[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 charge, 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. 

Reliance 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 term “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 differentiate between “base rates” and “rates” 

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 ambiguous 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 “rates” different 

from the General Assembly’s explicit definition, which this 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 Section 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.” Rogele, 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

surcharge 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 clear:

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 rates.

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 the 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 1301.1 [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 

expense 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 its 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 statute 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 Order 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, Judge
IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Tanya J. McCloskey, Acting :

Consumer Advocate, :

Petitioner :

:

v. :

:

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

Respondent :

O R D E R

AND NOW, this 11th day of July, 2019, 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