Court Opinion

ID: 9701039
Source: CourtListenerOpinion
Date Created: 2023-08-25 21:59:53.096067+00
Date Added: 2024-06-11T15:00:03.583179
License: Public Domain

Dissenting Opinion by
Judge SIMPSON.
Although the majority opinion is exquisitely researched and beautifully written, I respectfully disagree with its conclusions. As more fully discussed below, I believe the plain language of the “general rule,” Section 1807(a) of the Public Utility Code (Code), 66 Pa.C.S. § 1307(a), grants the Public Utility Commission (PUC) authority to approve surcharges, including the one it approved here. Therefore, I would affirm.
I. Statutory Provisions
Section 1307 of the Code provides in pertinent part (with emphasis added):
(a) General rule. — Any public utility, except common carriers and those natural gas distributors with gross intrastate annual operating revenues in excess of $40,000,000 with respect to the gas costs of such natural gas distributors, may establish a sliding scale of rates or such other method for the automatic adjustment of the rates of the public utility as shall provide a just and reasonable return on the rate base of such public utility, to be determined upon such equitable or reasonable basis as shall provide such fair return. A tariff showing the scale of rates under such arrangement shall first be filed with the commission, and such tariff, and each rate set out therein, approved by it. The commission may revoke its approval at any time and fix other rates for any such public utility if, after notice and hearing, the commission finds the existing rates unjust or unreasonable.
(b) Mandatory system for automatic adjustment. — The commission, by regulation or order, upon reasonable notice and after hearing, may prescribe for any class of public utilities, except common carriers and those natural gas distributors with gross intrastate annual operating revenues in excess of $ 40,-000,000, a mandatory system for the automatic adjustment of their rates, by means of a sliding scale of rates or other method, on the same basis as provided in subsection (a), to become effective when and in the manner prescribed in such regulation or order. Every such public utility shall, within such time as shall be prescribed by the commission, file tariffs showing the rates established in accordance with such regulation or order.
Section 1307 also specifically allows the recovery of fuel costs, including natural gas, through automatic adjustment procedures in subsections (c) and (f). 66 Pa. C.S. § 1307(e), (f). In subsection (e), the General Assembly provided a year-end adjustment of recovery based on the total of actual expenses for the period as compared to the projected expenses used to determine the charge. After a public hearing on the report of adjustments needed, the PUC is given the authority to order a refund to customers if the charges exceeded the actual expenses. 66 Pa.C.S. § 1307(e); Pennsylvania Indus. Energy Coalition v. Pennsylvania Pub. Util. Comm’n (PIEC), 653 A.2d 1336 (Pa. Cmwlth.1995), aff'd per curiam, 543 Pa. 307 670 A.2d 1152 (1996). Also relevant here is subsection (g):
(g) Recovery of costs related to distribution system improvement projects designed to enhance water quali*1162ty, fire protection reliability and long-term system viability. — Water utilities may file tariffs establishing a sliding scale of rates or other method for the automatic adjustment of the rates of the water utility as shall provide for recovery of the fixed costs (depreciation and pretax return) of certain distribution system, improvement projects, as approved by the commission, that are completed and placed in service between base rate proceedings. The commission, by regulation or order, shall prescribe the specific procedures to be followed in establishing the sliding scale or other automatic adjustment method.
66 Pa.C.S. § 1307(g)(emphasis added).1
A. Plain Language
The PUC concluded the plain language of the “general rule” in subsection (a) empowered it to approve the collection system improvement surcharge. PUC Adjudication at 12.
In general, the interpretation of a statute is a question of law, Tritt v. Cortes, 578 Pa. 317, 851 A.2d 903 (2004), with the objective being to ascertain and effectuate the intent of the General Assembly. Id.; see 1 Pa.C.S. § 1921(a). In this regard, the plain language of a statute is the foremost indication of legislative intent. Tritt. When assessing ambiguity, we may consider whether a separate provision is contrary to or inconsistent with the provision in question. Id. (comparison of education requirement for new applicants with reappointment requirements for those already commissioned under amended Notary Public Law). 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 my view, the plain language of the “general rule” permits applications for automatic adjustments of rates from “[a]ny public utility,” save certain limitations not here pertinent. The only limitation on the terms of the automatic adjustment is that it shall “provide a just and reasonable return on the rate base of such public utility, to be determined on such equitable or reasonable basis as shall provide such fair return.” Thus, there is little express limitation on the type of public utility authorized to apply, and there is no express limitation on the type, location, timing or amount of expense which may be the basis for adjustment.
The plain language in subsection (g) is not inconsistent with this provision. Subsection (g) is limited to water utilities. Also, subsection (g) limits the type of expenses which may be considered, as only “fixed costs (depreciation and pretax return) of certain distribution improvement projects” may be recovered. Further, there is a time limit on the automatic adjustment, which is limited to recover costs for projects “placed in service between base rate proceedings.”
Subsection (g) does not limit the “general rule” beyond its terms. Rather, subsection (g) limits a utility’s ability to request surcharge based on fixed costs of certain water distribution improvement projects. Neither the plain language of the “general rule” nor the plain language of the particular rule in subsection (g) restricts surcharge recovery of costs for wastewater collection system improvements. Therefore, nothing in the plain language of the statute contradicts the PUC’s conclusion as to statutory authorization.
*1163Unfortunately, the majority opinion does not undertake a plain language analysis. This is the primary reason for my disagreement.
The majority appropriately questions the purpose of subsection (g) if not to express new authority not otherwise existing. However, the answer to this question is found in the majority opinion, where it discusses the circumstances in which subsection (g) was adopted:
[The ALJ] noted that the PUC had previously held that [the “general rule” provision of Section 1307(a)] authorized Utility’s Distribution System Improvement Charge. While the PUC’s adjudication was on appeal to this Court, the General Assembly adopted Section 1307(g) of the Public Utility Code, which expressly authorizes the Distribution System Improvement Charge. The effect of this statutory amendment was to moot the appeal. The ALJ concluded that in this provision, 66 Pa.C.S. § 1307(g), the legislature did not mean that the funding of infrastructure improvements by a surcharge mechanism was to be limited to water utilities.
Op. at 1151 (footnote omitted, emphasis added). Clearly, the purpose of subsection (g) was to moot an appeal over “general rule” authority already exercised by the PUC. At the very least, these circumstances invite a plain language analysis of the “general rule.”
B. Statutoiy Construction
Assuming for present purposes there exists an inconsistency between the subsections, I reach the same result by using principles of statutory construction. Thus, one may presume that the General Assembly intended the entire statute to be effective and certain. 1 Pa.C.S. § 1922(2). That can be accomplished by reading the “general rule” as being generally applicable and the particular provision of subsection (g) as being an exception to the general rule. The same conclusion is reached by considering the heading entitled “general rale.” See 1 Pa.C.S. § 1924. Also noteworthy is the recognition that the “general rale” predates the 1996 addition of subsection (g). Under those circumstances, one may presume the General Assembly intended no change in prior law beyond that expressly declared. See Commonwealth v. Miller, 469 Pa. 24, 364 A.2d 886 (1976). Finally, interpretation of a statute by those charged with its administration and enforcement is entitled to deference, although such consideration most appropriately pertains to circumstances in which the provision is not explicit or is ambiguous. Tritt. Using this approach, and noting the PUC’s prior exercise of “general rule” authority to approve a surcharge, the action taken by the PUC here is supportable.
In contrast stands the interpretation adopted by the majority. This approach gives no effect to the plain language of the “general rule.” Also, the contention that the later addition of subsection (g) implicitly limits the breadth of the pre-existing “general rule” conflicts with the presumption that only express changes are intended. Finally, the majority’s approach gives no deference to the PUC’s interpretation. Because this interpretation is not consistent with these rules of statutory construction, I decline to embrace it.
II. Case Law
The majority concludes that cases limit the breadth of the “general rale,” necessitating the conclusion that as so limited it cannot authorize the surcharge here. The simple response to this conclusion is that the plain language of the “general rale” authorizes the PUC’s action here. The referenced sentence fragments in prior de*1164cisions do not mandate a different result. I address the prior decisions in more detail.
A. Used and Useful
Citing Barasch v. Pennsylvania Pub. Util. Commn. (Barasch), 516 Pa. 142, 532 A.2d 325 (1987), aff'd sub nom., Duquesne Light Co. v. Barasch, 488 U.S. 299, 109 S.Ct. 609, 102 L.Ed.2d 646 (1989), and PIEC, the majority concludes the recovery of capital costs through a surcharge is prohibited until the PUC determines the facility is “used and useful.” Further, the majority concludes the PUC’s surcharge review procedures are inadequate under various decisions.2
In Masthope Rapids Prop. Owners Council v. Pennsylvania Pub. Util. Comm’n (Masthope II), 135 Pa.Cmwlth. 437, 581 A.2d 994 (1990), a case dealing primarily with a general rate increase, this Court also mentioned a water utility could not recover the principal and interest of a loan received under the Water Facilities Restoration Act3 through a surcharge because Section 1307 did not provide the necessary prior review required by that statute. In doing so we discussed the nature of the PUC’s review of surcharge applications:
The automatic adjustment of public utility rates may only occur in certain limited instances.... Section 1307 has been customarily employed, for example, as the statutory predicate for the implementation of electric cost rates by certain electric utilities ... and is also employed for recovery of natural gas costs by natural gas utilities. Further, in all such proceedings the Commission’s review is appropriately characterized as preliminary and cursory. Indeed, the very function of the typical automatic adjustment clause is to permit rapid recovery of a specific identifiable expense item, with a more comprehensive analysis upon reconciliation of actual costs with previously projected costs used to establish the effective rate. The initial process is essentially a mathematical review of the projections provided by the public utility. Therefore, there is no initial review to determine the appropriateness or necessity of the rate request.
Masthope II, 581 A.2d at 999-1000 (emphasis added; identifiable emphasis in original).
Our Supreme Court considered whether surcharge review procedures violated due process protections in Allegheny Ludlum Steel Corp. v. Pennsylvania Pub. Util. Comm’n, 501 Pa. 71, 459 A.2d 1218 (1983). Citing Section 1307(e) of the Code, 66 Pa. C.S. § 1307(e), the Court considered the required, subsequent, year-end automatic proceeding for final determination and adjustment of surcharge increases allowing full participation of all parties, and requiring refunds of overpayments with interest at the prevailing rate. It also recognized the legislature’s determination that automatic rate adjustments serve the important governmental interest of maintaining a just and reasonable return so as to preserve modern, efficient, and dependable public utility service. In addition, restrictions on PUC discretion were considered. Finally, the Court distinguished the public utility surcharge process from the disapproved “deeming” of “private” interest *1165proposals into effect. It concluded the surcharge rate-setting process not to be violative of procedural due process.
I agree that a “used and useful” analysis is necessary for surcharge recovery of costs of new facilities. PIEC; see Bar-asch. Any analysis, however, is undertaken within the confínes of the current application. Under the surcharge here proposed, eligible investment consists of property installed to replace existing, functioning facilities and capitalized rehabilitation work done on existing facilities. I presume a used and useful analysis was initially undertaken when the facilities were new, a presumption unchallenged here. Further, the eligible replacement property must actually be in service for at least a month to qualify for recovery. Also, the proposal incorporates the statutory limitations set forth for water distribution system improvement projects. This incorporation effectively restricts the PUC’s discretion in a manner consistent with the legislatively guided formula for similar capital projects.
In my view, the current review procedure comports with precedent, because various reviews verify the used and useful nature of the replacement expenditures. First, in the current proceedings extensive information about the public health basis for replacement was received. Second, relevant information is updated quarterly and submitted to the PUC and interested parties at least 10 days before approval. Reproduced Record (R.R.) at 11a, 342a. Third, compliance with the limitations of eligible replacement property is subject to comprehensive audits at regular’ intervals. R.R. at 344a. Fourth, the required, automatic year-end inclusive proceedings referenced with approval by our Supreme Court in Allegheny Ludlum Steel exist.
This court is not free to substitute its discretion for the discretion properly exercised by the PUC in establishing the surcharge method. PIEC. Given the limitations on eligible property and the multiple reviews including all interested parties, I discern no relevant conflict between prior decisions and the PUC approval here.
Nothing in PIEC compels a different conclusion. That case involved a challenge to surcharge for costs of a mandated program for conservation of electricity. Capital costs were not at issue. We essentially affirmed the surcharge for recovery of the costs. In doing so we observed that “in the unlikely event that [conservation] programs require new physical facilities, those costs should be raised in a base rate case only.” Id. at 1347. That observation reflected explicit statutory limits on recovery of costs for electric utilities. 66 Pa.C.S. § 1315; PIEC, 653 A.2d at 1346-47. The case does not address costs for replacement and rehabilitation of parts of existing, functioning wastewater facilities, as are at issue here.
B. Traditional Rate-Making
The majority opinion questions whether the surcharge represents a disassembling of traditional rate-making contrary to this Court’s caution in PIEC. The majority suggests a surcharge for the type of capital costs routinely claimed in base rate proceedings violates the test year concept or “matching principle” of traditional rate-making. It also suggests that the surcharge cap of 5% may result in an increase meeting the statutory definition of a “general rate increase,” which requires the detailed review of a base rate proceeding.
The PUC concluded the surcharge will not “disassemble” traditional rate-making because it is tailored to recover clearly defined costs for specific, narrow categories of plant and is capped at 5%. PUC Adjudication at 14. Finally, the PUC observed that investment in property eligible *1166for the proposed surcharge is typically not contested in base rate proceedings, thus making the issue one of the timing of cost recovery. Id.
The relationship between surcharges and general rate increases is not fully explained in the Code. Under the statutory language there may be surcharges of such amount as may also qualify as general rate increases. As previously discussed, the “general rule” permits approval of surcharges without limit on amount. Other subsections of Section 1307 specifically authorize fuel cost adjustments and recovery of natural gas costs without limit in relation to the public utility’s revenue. 66 Pa.C.S. § 1307(c), (f). Also, subsection (g) specifically authorizes surcharge without limit on amount to recover costs very similar to those proposed here. 66 Pa.C.S. § 1307(g). In contrast, Section 1308(d) of the Code describes the procedures for a general rate increase, defined as “a tariff filing which affects more than 5% of the customers and amounts to in excess of 3% of the total gross annual intrastate operating revenues of the public utility.”
Pennsylvania appellate courts exercise caution in comparing the methods of setting rates. For example, in PIEC\ this Court considered the propriety of a surcharge to recover electricity conservation program expenses. While essentially affirming the surcharge, we stated:
Although we agree that Section 1307 should have limited application and the PUC should not use it to disassemble the traditional rate-making process, the General Assembly did not limit the allowance of automatic adjustment to only fuel costs and taxes which are generally beyond the control of the utility. Instead, the General Assembly specifically allowed the recovery of fuel costs and also allowed the PUC or the utilities to initiate the automatic adjustment of costs within specific procedures.... Because Section 1319 directs the PUC to allow recovery of all prudent and reasonable costs for developing, managing, financing and operating [electricity conservation] programs and because Section 1307 gives the PUC the discretion to establish by either regulations or order the manner in which automatic adjustment recovery may be instituted and when such automatic adjustment of rates should be mandated, the surcharge method is permitted.
PIEC, 653 A.2d at 1349 (emphasis added). In Allegheny Ludlum Steel our Supreme Court affirmed a surcharge for fuel cost recovery, observing that its purpose “is to provide an automatic mechanism enabling utilities to recover specific energy costs not covered by general rates.... ” 501 Pa. at 75, n. 3, 459 A.2d at 1220, n. 3. Significantly, in each case, approval of surcharge was affirmed.
After these cases the General Assembly added Section 1307(g) of the Code. That subsection authorizes surcharge recovery of a class of costs also recoverable in base rate proceedings as investment in property.
I do not now attempt to further define the relationship between surcharges and general rate increases beyond acknowledging the potential for overlap and acknowledging the statutory scheme of reposing discretion in the PUC to determine when to approve a surcharge. As there is neither a specific statutory provision nor a controlling case prohibiting a surcharge similar to the current proposal, I discern no error of law in the PUC’s action here.
Regarding the potential for surcharge increase which meets the definition of “general rate increase,” I recognize the hypothetical possibility. However, as the General Assembly declined to place limits on the amounts of surcharges approved, I *1167see no legal error in the 5% limit on the surcharge here.
For all the foregoing reasons, I reject the conclusion that cases so limit the breadth of the “general rule” that it cannot authorize the surcharge here. I would affirm the PUC.
President Judge COLINS joins in this dissent.

. Section 1 of the Act of December 18, 1996, P.L. 1061, amended Section 1307 of the Code to add language of subsection (g).

. Allegheny Ludlum Steel Corp. v. Pennsylvania Pub. Util. Comm’n, 501 Pa. 71, 459 A.2d 1218 (1983); Masthope Rapids Prop. Owners Council v. Pennsylvania Pub. Util. Comm’n (Masthope II), 135 Pa.Cmwlth. 437, 581 A.2d 994 (1990); National Fuel Gas Distrib. Corp. v. Pennsylvania Pub. Util. Comm’n, 81 Pa. Cmwlth. 148, 473 A.2d 1109 (1984).

. 32Pa.C.S.§§ 7501-7518.