Court Opinion

ID: 9647864
Source: CourtListenerOpinion
Date Created: 2023-08-23 13:53:23.11198+00
Date Added: 2024-06-11T18:11:54.319814
License: Public Domain

PELLEGRINI, Judge,
dissenting.
I respectfully dissent. The majority, by holding that a water purchasing municipal customer who maintains its own distribution and storage system, and bills and services its own customers, is “like” a multiple dwelling unit customer within the providing municipality, is at variance both with the intent of the parties and common parlance within the industry.
On February 19, 1973, the Borough of Aliquippa (Aliquippa), as Seller, and the Township of Raccoon (Raccoon), as Purchaser, entered into a water purchase contract (Contract). (58-61).1 The Contract provided in relevant part that:
B. The Purchaser Agrees:
1. (Rates and Payment Due) To pay the Seller, not later than the 20th day of each month, for water, delivered in accordance with the following schedule of rates:
*526According to the Municipal Water Authority’s Standard Adopted Rates, a copy of which is attached hereto and made a part of this contract.
(58-59) (emphasis added).
The Contract also contained a clause which allowed Aliquippa to modify the schedule of rates from time to time:
5. (Modification of Contract) That the provisions of the contract pertaining to Schedule of Rates to be paid by the Purchaser for water are subject to modification by the Seller at any time. It is noted that the Seller is required, in accordance with the terms of its Trust Indenture, to modify rates periodically as recommended by its consulting engineer, which recommendation is based on the total cost of the Seller’s operations. It is further noted that the Seller, in accordance with its Trust Indenture, must apply rate modifications equally to all like consumers purchasing water from the Seller. Other provisions of this contract may be modified or altered by mutual agreement of the parties to the said contract.
(59-60) (emphasis added).
From time to time, Aliquippa modified its Standard Adopted Rates pursuant to the language of the Contract. Raccoon paid in accordance with those rate schedules. On June 4, 1984, upon recommendation of Aliquippa’s then-consulting engineer, Maurice Moore, Aliquippa adopted Resolution No. 84-1 of 1984. (198-202). Resolution No. 84-1 for the first time established a multi-minimum rate structure which fixed a minimum charge for water services to each dwelling unit in apartment houses and other multiple occupied buildings. Each dwelling unit was then charged a minimum, even though it is served water through a single master meter. (198-202). Previously, master meter consumers within Aliquippa were charged a single minimum, regardless of the number of dwelling units served through the master meter.
On December 22, 1985, Aliquippa adopted Resolution No. 85-1, which extended the multi-minimum rate structure established by Resolution No. 84-1 to consumers outside *527the limits of Aliquippa, including Raccoon. (63-67). Aliquippa then began charging Raccoon as a multiple dwelling consumer, imposing a 6,000 gallon minimum fee for each and every dwelling unit that Raccoon served.2
Due to the change in the way its rates were calculated under these Resolutions, Raccoon’s rates dramatically increased, because it must now pay a relatively high “minimum” charge based on the number of consumers within its service area instead of the single “minimum” charged prior to Resolution No. 85-1. Raccoon, instead of paying a “minimum” of $10.91 for the first 6,000 gallons of water, and following the rate schedule for all gallons over 6,000, must now pay the “minimum” amount for each dwelling unit in Raccoon before it would reach the next tier in the rate schedule. (139-140). Each subsequent tier in the rate schedule would also be increased by the number of dwelling units in Raccoon.
Unlike the majority, I believe Aliquippa violated the Contract, because it failed to apply the rate modifications “equally to all like consumers purchasing water” from Aliquippa. Resolution No. 85-1 violates the Contract by changing Raccoon to a consumer “like” an apartment building, co-op or duplex with one master meter which, unlike Raccoon, utilize the services provided by Aliquippa.
In the typical case where the municipality sets the water rates for the consumers within its own borders, the municipality is subject to Section 4 B(h) of the Municipal Authorities Act of 1945 (MAA).3 Section 4 B(h) requires that the municipalities’ rates must be “reasonable and uniform.” 53 *528P.S. § 306 B(h). Because of the “reasonable and uniform” standards, rates must be reasonably proportional to the value of the service rendered. Hamilton’s Appeal, 340 Pa. 17, 16 A.2d 32 (1940); Kennedy Township v. Ohio Valley General, 129 Pa.Commonwealth Ct. 494, 566 A.2d 348 (1989). That includes service as actually consumed or as readily available for use. Life Services, Inc. v. Chalfont-New Britain Township Joint Sewage Authority, 107 Pa.Cmwlth. 484, 528 A.2d 1038 (1987). Ridgway Township v. Exotic Metals, 88 Pa.Cmwlth. 637, 491 A.2d 311 (1985). Moreover, the person or entity charged must obtain “some” benefit from the service. Kennedy Township, 129 Pa.Commonwealth Ct. at 499, 566 A.2d at 351. Services readily available for use would include water available for fire protection. See Ridgway Township.
However, as in the present case, Section 4 B(p) of the MAA gives a municipality the power to enter into a contract to supply water to another municipality and to fix the amount to be paid, 53 P.S. § 306 B(p), without the statutory limitation under § 4 B(h) of the MAA that they be “reasonable and uniform.” Municipal Authority of the City of Monongahela v. Carroll Township Authority, 123 Pa.Commonwealth Ct. 615, 555 A.2d 264, petition for allowance of appeal denied, 524 Pa. 599, 568 A.2d 1249 (1989). As between two municipalities, the rates charged and the terms of any rate increase are left solely to the provisions of the Contract between them. See Tamaqua Borough v. Rush Township Sewer Authority, 85 Pa.Commonwealth Ct. 421, 482 A.2d 1167 (1984).
To determine the import of the language in the Contract that Aliquippa “must apply rate modifications equally to all like consumers,” and whether Aliquippa’s modification of the rate schedule as applied to Raccoon violates this language, we must determine the intent of the parties when they entered the contract. The principles applicable to interpreting the language of a contract are well settled. As stated by our Supreme Court in R.F. Felte, Inc. v. White, 451 Pa. 137, 143-144, 302 A.2d 347, 351 (1973):
*529When interpreting a contract, the intention of the parties must be determined, and in ascertaining that intention, effect must be given to all the provisions of the contract____ In a written contract, the intent of the parties is the writing itself, and when the words are clear and unambiguous, the intent is to be determined only from the express language of the agreement. (Citations omitted.)
See also Latrobe Municipal Authority v. Youngstown Borough Municipal Authority, 72 Pa.Commonwealth Ct. 84, 456 A.2d 234 (1983).
Furthermore, in interpreting the meaning of a certain provision in the contract, it is important to remember that “every agreement is made and [should] be construed with due regard to the known characteristics of enterprises in which they are engaged, and that the language used in a contract will be construed according to its purport in that particular enterprise.” Latrobe Municipal Authority, 72 Pa.Commonwealth Ct. at 91, 456 A.2d at 238.
By including in the Contract the provision that any rate modifications were to apply “equally to all like consumers,” it was the intent of the parties that those rate modifications as applied to Raccoon were to conform to the “reasonable and uniform” standard as applied to consumers within a municipality. A “uniform” rate is one applied “equally to all like consumers.” The effect of this language was to insure that any rate modification will be applied uniformly to Raccoon in the same way as it is to a “like” consumer. The intent was not, as Aliquippa contends, to insure that the rate schedule is applied equally to all of its consumers, both within and without Aliquippa. Thus, the question in dispute is what consumer is “like” Raccoon.
The principle that the rate charged must be reasonably proportional to the service readily available is equally applicable here to determine whether Raccoon is “like” a multiple dwelling consumer. The cost of the service rendered or readily available for use by the multiple dwelling consumer in Aliquippa includes Aliquippa’s expense in providing and *530maintaining the service lines to each dwelling unit, providing and maintaining the service lines to fire hydrants and other outlets for fire protection, reading meters and billing consumers.4
Aliquippa does not incur consumer-related costs, since Raccoon maintains its own service lines and reads and bills its own metered customers, with Aliquippa merely reading and billing the master meter. (129-130, 178, 940-944). Aliquippa also incurs less demand-related costs, since Raccoon has its own water storage tank which draws a steady supply of water like a single large commercial consumer as opposed to hundreds of residential ones. (129-130, 178, 985-995).5 Because it provides services to its consumers that Aliquippa provides within its boundaries, Raccoon must charge its water consumers higher rates than Aliquippa charges its own residents within its borders in order to pay for these services. (156, 168). In essence, Raccoon residents are paying twice for the same service. As such, Raccoon is not a consumer “like” the multiple dwelling consumer in Aliquippa.
The majority’s reliance that two other municipal authorities, Hall and Division, have not challenged the rate is *531misplaced. Because each of their rates is also set by negotiated contract between each of them and Aliquippa, by very definition, they are not “like” other consumers within Aliquippa. To adopt the majority reason, each time each of them negotiated a new contract, those rates would be applied to Raccoon. Additionally, “like” consumer is used in a utility contract as one who uses “like” volume, not who is a “like” entity.
What Raccoon is “like” is a single consumer in Aliquippa. The services available from Aliquippa are only readily available up to Raccoon’s master meter, not beyond. Aliquippa maintains the service lines and fire protection lines only up to the meter. Aliquippa reads only that one meter and sends Raccoon only one bill. What “like” meant in the Contract was for it to be charged the same rates as any other large volume consumer who had one meter and who consumed the same amount of water.
Therefore, I would hold that Aliquippa’s Resolution No. 85-5 violates the Contract, because it treats Raccoon, a consumer outside Aliquippa, like a multiple dwelling consumer inside Aliquippa, when, in essence, it is “like” a single consumer. Under the language of the Contract, Raccoon should be billed as a single consumer. I would reverse the decision of the trial court.

. The numbers in the parenthesis refer to the Reproduced Record.

. The new rates established by Resolution Nos. 84-1 and 85-1 were as follows:
Metered Gallons/Quarter Water Rate/Quarter
First 6,000 Gallons $10.91/minimum
Next 12,000 Gallons 1.460/1,000
Next 42,000 Gallons 1.270/1,000
All over 60,000 Gallons $1,090/1,000
(65, 200).

. Act of May 2, 1945, P.L. 382, amended, 53 P.S. § 306 B(h).

. Raccoon maintains its own water storage facility, pump station, chemical treatment facility, twenty miles of water line and it employs its own maintenance and office staff which read the individual meters and bill each of the consumers. (55-57, 187, 540, 835, 934-935, 940-944).

. Aliquippa imprecisely uses the Commodity-Demand Rate Analysis Method (CDRAM) to modify its rates, since it factors in the value of Aliquippa’s services to justify its charges, even though those services are not provided to Raccoon. CDRAM is one of three cost-of-service analysis methods recognized by the American Water Works Association’s Water Rates Manual. CDRAM classifies the costs of operating a water utility into three types: consumer-related costs; demand-related costs and commodity-related costs. Customer-related costs are associated with servicing consumers irrespective of the amount of water used. They include meter reading, billing, accounting, office space and a portion of the general administrative costs. Demand-related costs are associated with providing facilities to meet the peak rates of use placed on the system by the consumers. These costs include capital charges and operating and maintenance costs. Commodity-related costs are costs that tend to vary with the quantity of water produced and sold. (129-132).