NazAarah Sabree, Small Business Advocate v. Pennsylvania Public Utility Commission

Summary

The Pennsylvania Commonwealth Court reviewed the Pennsylvania Public Utility Commission’s approval of an Act 11 allocation requiring Aqua Water customers to subsidize a portion of Aqua Wastewater’s revenue requirement. The Court held that the Commission improperly treated the wastewater subsidy as part of the water cost of service and failed to apply the ratemaking principles described in Lloyd v. Pennsylvania Public Utility Commission. It vacated the Commission’s order denying reconsideration and remanded for further proceedings.

Holdings

1. The Commission erred by treating the Act 11 wastewater subsidy as part of the cost of providing water service and by evaluating the water rate increase on an overall or combined basis. Water and wastewater are separate utility services, and an Act 11 wastewater subsidy does not become a water revenue requirement merely because it is charged to water customers.
2. The Commission erred by allocating the Act 11 wastewater subsidy to Aqua's combined water and wastewater customer base regardless of substantial differences in wastewater usage among customer classifications. The subsidy must remain tied to the cost of providing wastewater service for each customer classification.

Questions Presented

1. Whether the Commission erred as a matter of law by evaluating Aqua's water revenue allocation together with the Act 11 wastewater subsidy and thereby masking the separate cost of providing water service.
2. Whether the Commission violated 66 Pa.C.S. § 1311(c) and established ratemaking principles by allocating the Act 11 wastewater subsidy across Aqua's combined water and wastewater customer base without accounting for differences in wastewater usage among customer classifications.

Disposition

reversed_and_remanded