Opinion
421 C.D. 2020 422 C.D. 2020
09-29-2021
John R. Evans, Small Business Advocate, Petitioner v. Pennsylvania Public Utility Commission, Respondent Tanya J. McCloskey, Acting Consumer Advocate, Petitioner v. Pennsylvania Public Utility Commission, Respondent
OPINION NOT REPORTED
Argued: May 12, 2021
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE MARY HANNAH LEAVITT, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge HONORABLE ANNE E. COVEY, Judge HONORABLE CHRISTINE FIZZANO CANNON, Judge HONORABLE ELLEN CEISLER, Judge HONORABLE J. ANDREW CROMPTON, Judge
MEMORANDUM OPINION
RENÉE COHN JUBELIRER, JUDGE
In these consolidated petitions for review, John R. Evans, Small Business Advocate of the Office of Small Business Advocate (OSBA), and Tanya J. McCloskey, Acting Consumer Advocate of the Office of Consumer Advocate (OCA), challenge the March 26, 2020 Order of the Pennsylvania Public Utility Commission (Commission) that approved, on an expedited basis, the Petition to Amend Philadelphia Gas Works' (PGW) Universal Service and Energy Conservation Plan (USECP) (Petition) filed by PGW. OCA and OSBA intervened, and OCA filed an Answer objecting to expedited review and to PGW's proposed changes. Without holding hearings or allowing OCA or OSBA to investigate the Petition or submit responses or recommendations beyond an answer, the Commission granted the Petition. OCA and OSBA argue, on appeal, that the grant of the Petition in this fashion violated the due process rights of interested parties as guaranteed by the United States and Pennsylvania Constitutions. Upon review, we hold the Commission erred in granting the Petition without providing interested parties, like OCA and OSBA, adequate notice of the grant of expedited consideration of the Petition and a meaningful opportunity to respond to the particular facts of the proposed changes to PGW's USECP set forth in the Petition. Therefore, we must vacate and remand for further proceedings.
The March 26, 2020 Opinion and Order is attached to both OCA's and OSBA's briefs as Appendix A.
"Universal service and energy conservation" plans refer to the "policies, protections and services that help low-income customers to maintain service[.]" (Final Policy Statement and Order at 3.) USECPs previously were required to be updated every three years; the current requirement is for them to be updated every five years. (March 26, 2020 Opinion (Op.) and Order at 3.)
OCA and OSBA further assert that the Commission abused its discretion in granting the Petition without analyzing the facts specifically related to PGW's request and that the Commission's findings are not supported by substantial evidence. However, because of our disposition, we do not address these other allegations of error.
I. BACKGROUND
A. The Commission's Customer Assistance Program Policy Statement Amendments
An electric distribution company (EDC) or natural gas distribution company (NGDC) must provide a customer assistance program (CAP) to enrolled low-income residential customers to help those customers maintain service. (Final Policy Statement and Order at 3.) In November 2019, the Commission issued Amendments to its Policy Statement on CAPs (CAP Policy Statement Amendments) after two years of proceedings that included review and comment by various stakeholders, including regulated utilities, OCA, OSBA, advocates for low-income customers, and advocates for business and industry. The intent of these proceedings "was to review the impact on energy affordability for low-income customers." (Id. at 4.) In the CAP Policy Statement Amendments, the Commission adopted 17 policy changes, including reducing the percentage of the CAP energy burdens and eliminating co-payments for pre-program arrears (PPA). These changes would reduce the payment requirements for customers participating in a CAP and would also increase the cost to operate CAPs, which is recovered from other ratepayers. These changes were not mandatory, but the Commission "[s]trongly urge[d] the EDCs and the NGDCs to incorporate the[] CAP Policy Statement [A]mendments in[to] their USECPs as fully and quickly as possible . . . ." (Id. at 100.) The Commission indicated that EDCs and NGDCs should file and serve amendments to their existing USECPs "reflecting [the] anticipated timeframes for implementing" the changes within 60 days of the entry of the CAP Policy Statement Amendments. (Id. at 100, 106.) If they did not voluntarily implement the amendments, the changes would be addressed in future utility-specific proceedings. (Id. at 13.)
The CAP Policy Statement Amendments are attached to OCA's and OSBA's briefs as, respectively, Appendix C.
These advocates, the Coalition for Affordable Utility Services and Energy Efficiency in Pennsylvania, Tenant Union Representative Network, and Action Alliance of Senior Citizens of Greater Philadelphia, also intervened in the Petition and in this appeal, arguing in support of PGW's proposed changes.
The CAP Policy Statement, as amended, may be found at 52 Pa. Code §§ 69.261-69.267.
"'Energy burden' is the percentage of household income required to pay for household energy usage." (Final Policy Statement and Order at 3.)
OCA filed a petition for reconsideration of the CAP Policy Statement Amendments, raising concerns, as it had during the review process, about the impact the amendments would have on the Low-Income Home Energy Assistance Program (LIHEAP). (Order on Reconsideration/Clarification at 3-4.) The Commission noted that OCA was "not challenging, in its petition for reconsideration, the substance of amendments 2 through 17[, which included the changes at issue here, ] . . . but . . . reserve[d] the right to address specific substantive issues of [those] amendments in utility-specific proceedings . . . ." (Id. at 4 n.13.) OCA further asked that utilities be required to provide enrollment and budget projections for the implementation of the CAP Policy Statement Amendments, which would be "important to determine the impact of these changes on residential ratepayer[s'] bills . . . ." (Id. at 8.) The Commission denied reconsideration (Reconsideration Order) because LIHEAP issues were beyond its control and, to the extent "further granularity" was needed in the enrollment and budget projections provided by utilities in their addendums, "it c[ould] be addressed in utility-specific proceedings." (Id. at 10-11.) The Commission again clarified that the CAP Policy Statement Amendments were not mandatory, but it encouraged utilities to implement program changes consistent with the CAP Policy Statement as quickly as possible. (Id. at 11.)
LIHEAP is a program, operated through the Pennsylvania Department of Human Services, that provides qualifying low-income families with a one-time grant that is paid directly to the families' utility companies or fuel providers. Pennsylvania Department of Human Services, Heating Assistance/LIHEAP, https://www.dhs.pa.gov/Services/Assistance/Pages/LIHEAP.aspx (last visited Sept. 28, 2021).
The Commission's Order denying reconsideration is attached to OCA's and OSBA's briefs as Appendix D.
The Commission denied a separate reconsideration petition filed by the Energy Association of Pennsylvania, but in that denial it clarified, among other things, that all utilities that were voluntarily choosing to amend their CAPs/USECPs had to file, relevantly, a cover letter that listed those amendments, submit enrollment and budget projections for the additional two-year USECP term, and file a "Petition to Amend and Addendum to reflect proposed CAP changes to existing USECP" with enrollment and budget implications thereof. (See March 26, 2020 Op. and Order at 5-6.)
B. PGW's Filings and Responses
"PGW is a city natural gas distribution operation" and, for the purposes of USECPs, is subject to the same requirements as NGDCs. (March 26, 2020 Opinion (Op.) and Order at 2.) PGW filed an Addendum to its 2017-2022 USECP on January 6, 2020, prior to the Commission's Order denying OCA's reconsideration petition. PGW's filing consisted of a cover letter (Cover Letter), reflecting that PGW sought to implement a Pilot Program adopting some of the specific provisions of the CAP Policy Statement Amendments, including the reduction in energy burdens on its CAP customers and elimination of the $5 PPA co-payment. Along with the Cover Letter, PGW included a red-lined version of its 2017-2022 USECP reflecting the proposed changes and financial projections relating to the extension of its USECP for an additional two years, through 2022, as well as costs related to the Pilot Program. (OSBA Reproduced Record (R.R.) at 3a-118a.) The Cover Letter acknowledged that the increased costs of the Pilot Program on PGW's ratepayers "could be significant and . . . create a financial burden for Philadelphians." (Id. at 9a.) PGW did not include a clean copy of the proposed amended USECP or file an actual petition requesting an amendment. The Cover Letter was served on, among others, OCA and OSBA. However, "[b]ecause PGW did not file and serve a proposed 2017-2022 USECP incorporating the changes articulated in the Cover Letter," this "filing was not initially docketed as a petition to amend the 2017 USECP." (March 26, 2020 Op. and Order at 6.)
PGW refers to its CAP as the Customer Responsibility Program. (OSBA Reproduced Record at 4a.)
On February 21, 2020, PGW filed a petition seeking expedited review and approval of the Pilot Program and amendments to its USECP by March 31, 2020, noting that the Pilot Program was "consistent with the Commission's policy directives" set forth in the CAP Policy Statement Amendments and that the Commission had denied OCA's request for reconsideration. (R.R. at 119a.) PGW claimed "that the Commission ha[d] definitively determined that the energy burdens proposed in the Pilot Program are likely the appropriate burdens for low-income, regulated utility customers . . . from a policy perspective." (Id. at 121a-22a.) PGW sought the expedited review mainly due to its need to have time to implement the changes before completing an update to its Customer Information System. Secondarily, PGW wanted to begin the Pilot Program to have actual experience with the CAP Policy Statement Amendments before it submitted its next USECP in November 2021. If the Pilot Program and amendments were not approved by March 31, 2020, PGW would withdraw the proposals and would address changes to its CAP in its November 2021 USECP filing. PGW requested that "any Answers to this Petition be filed within 10 days" and represented that it "ha[d] discussed its proposed Pilot Program with the parties in this proceedings [sic]." (Id. at 119a, 121a.) The Coalition for Affordable Utility Services and Energy Efficiency in Pennsylvania, Tenant Union Representative Network, and Action Alliance of Senior Citizens of Greater Philadelphia (collectively, Low Income Advocates) supported PGW's proposals. (Id. at 121a.) Low Income Advocates and OCA did "not oppose the shortened 10-day period for the submission of Answers to this Petition[.]" (Id.)
The Commission re-docketed the Cover Letter, along with the February 21, 2021 filing, as the Petition. (March 26, 2020 Op. and Order at 6-7.) Because of how the Cover Letter was initially filed, "[s]takeholders were not on notice to answer th[at] . . . filing until after that filing was re-docketed as a petition." (Id. at 7.)
On March 2, 2020, Low Income Advocates filed a letter in lieu of an answer in support of the Petition. (R.R. at 136a-41a.) Also, on March 2, 2020, OCA filed an Answer opposing expedited review and approval of any changes to PGW's existing USECP, even as a Pilot Program, citing its prior concerns regarding LIHEAP funds. (Id. at 129a-35a.) OCA also asserted that the proposed changes "should not be approved until a full review [was] completed," which could not occur in 30 days. (Id. at 133a.) In addition, OCA argued that the anticipated increase of $27.5 million in costs for the USECP, from $69.6 million in 2020 to $97.1 million in 2021, required a full and complete analysis of the impact on ratepayers, especially where PGW had just filed a request to increase its distribution rates by approximately $70 million. (Id. at 132a-33a.) OCA asserted that "[s]uch a significant change in [PGW's] program design and increase to the costs of the program should not be confined to a short timeframe to accommodate larger billing system changes." (Id. at 133a.) OCA maintained that PGW's proposals "raise[d] significant questions as to the cost of the program, the increased costs related to the proposed amendments, the impact of the amendments on the overall plan, and the continued cost-effectiveness of [PGW's p]lan." (Id.) OCA further challenged the characterization of the proposed plan as a "pilot program," where the program would increase costs to ratepayers by approximately $27.5 million. (Id. at 134a.) OCA maintained that "[t]he Commission should provide an adequate forum to evaluate the proposed program changes and sufficient time for the collection of necessary information and an analysis of the data." (Id. at 133a-34a.)
On March 19, 2020, OSBA filed a Notice of Intervention and a Public Statement. (Id. at 142a-46a.) OSBA pointed out that although only residential customers may participate in the CAP, PGW's business customers are required to pay a portion of the costs related to that program, and, therefore, the proposed changes would affect the rates of those businesses. (Id. at 144a-45a.) Accordingly, OSBA stated its intent to participate in the proceedings to protect the interests of PGW's small business customers. Although it intervened and filed the Public Statement, OSBA did not file a responsive answer to PGW's filings prior to the Commission issuing its March 26, 2020 Opinion and Order.
C. The Commission's Decision
The Commission granted PGW's request for the matter to be expedited, reasoning that PGW had made "compelling argument[s] in favor of having actual experience with the new CAP Policy Statement [Amendments'] recommendations prior to making the changes a regular part of its next USECP." (March 26, 2020 Op. and Order at 9.) The Commission acknowledged OCA's concerns, which were "also compelling," but was persuaded to address the merits of PGW's amendment request by the fact that the proposed "changes [were] strictly . . . a Pilot Program." (Id.)
The Commission then turned to the merits of the Petition. Based on the filings received, the CAP Policy Statement Amendments, and its order denying OCA's reconsideration petition, the Commission concluded that the proposed changes in the Pilot Program relating to the new energy burdens of CAP customers were consistent with the CAP Policy Statement Amendments. (Id. at 15.) The Commission agreed with PGW that approving the Pilot Program would "provide a good starting point" for PGW's future USECP and that PGW's plan to eliminate the $5 PPA co-payments for certain CAP customers would help ensure that the monthly CAP payments would not exceed the maximum energy burden levels. (Id.) Regarding the cost of the Pilot Program, PGW's budget projections showed that the "proposed cost increases could create a considerable impact on [PGW's CAP] budget and could impose an increased financial burden on its non-CAP ratepayers[]" and "that CAP cost controls may need to be implemented in the future." (Id. at 19.) The Commission "acknowledge[d] that increased CAP costs [would] likely result in a greater financial burden on some ratepayers[]" but concluded "that these changes would likely provide a greater benefit than the harm that could be caused by the projected increased costs." (Id.) It noted, however, that the changes were only being approved as a Pilot Program, and the Commission would further examine the impact of the increased costs in PGW's next USECP filing to determine if cost control measures or changes would be necessary.
The Commission addressed, and approved, other changes to PGW's USECP as part of the Pilot Program.
The Commission did not directly address OCA's requests for additional information regarding the costs, impact, and cost-effectiveness of the proposed program and time to analyze that data beyond its statements that it was approving PGW's changes as a Pilot Program and that the impacts could be analyzed in future proceedings. In this regard, the Commission required PGW to file monthly status reports regarding the implementation of the Pilot Program and track the program's costs monthly and file a report thereof with the Commission on a quarterly basis. (Id. at 23.)
Commissioner John F. Coleman, Jr. and Commissioner Ralph V. Yanora dissented and filed a Joint Statement, in which they "emphasize[d] the need for transparency in these proceedings[ that] includes a meaningful opportunity for comments[]" and "the need to fully appreciate the cost impact of universal service plans." (Joint Statement at 1.) They believed that "[b]ased on the magnitude of the costs associated with PGW's amended CAP, . . . a comprehensive review of the filings [wa]s necessary[, ]" which could be done "in an efficient manner to support the Commission's goal of reviewing [the] . . . amendments as expeditiously as possible." (Id. (emphasis added).) Commissioners Coleman and Yanora noted that the Commission did not formally respond to PGW's request for an abbreviated answer period or formally notify the parties that the Cover Letter and other filings would be treated as a petition to amend the USECP, thereby not providing proper notice to answer the Cover Letter. They acknowledged that the parties received notice of PGW's Petition to Expedite Approval but pointed out that OSBA had filed a Notice of Intervention, and OCA had filed the Answer in opposition that set forth "significant questions as to the cost of the program, the increased costs related to the proposed amendments, the impact of the amendments on the overall USECP, and the continued cost-effectiveness of PGW's USECP[, ] among other issues." (Id. at 2-3.) Due to these considerable issues, Commissioners Coleman and Yanora were "confounded by the" Commission's "decision to proceed with a final order based on a superficial and cursory review, marked by procedural anomalies." (Id. at 3 (emphasis added).) Given "the significant costs associated with the proposed changes," they "would have . . . appreciated stakeholder comments on appropriate and meaningful limitations to the Pilot Program," such as limiting it to a certain number of customers, cost, or time period. (Id. (emphasis added).) Commissioners Coleman and Yanora distinguished this matter from other modifications to universal service plans that had been "unopposed, and/or modest in nature," where no comment period was needed, while the request here "clearly lends itself to a more robust review[.]" (Id. at 4.) As for PGW's projected costs and program participation, they questioned whether these numbers were under-estimated given the state of the economy during the COVID-19 pandemic. Commissioners Coleman and Yanora posited that "[t]his is not the time to increase [the cost] burden" "on PGW's customers, particularly the non-CAP low-income customers," "especially without due process for the parties and the absence of cost controls." (Id. (emphasis added).) "By proceeding in this rushed fashion, [the Commission] ha[d] not allowed the parties to develop a PGW-specific rationale to support [PGW's] limited adoption of the new CAP guidelines at this time[]" and "simply rel[ied] on adherence to a policy statement and data gathering [which wa]s an insufficient basis to approve a proposed USECP change." (Id. at 5.)
The Joint Statement is attached to OCA's and OSBA's briefs as Appendix B.
Both OCA and OSBA filed requests for reconsideration. The Commission denied reconsideration, with Commissioners Coleman and Yanora dissenting. OCA and OSBA have each filed a petition for review, consolidated by the Court at the Commission's request without objection.
"Appellate review of a [Commission] order is limited to determining whether a constitutional violation, an error of law, or a violation of [Commission] procedure has occurred[, ] and whether necessary findings of fact are supported by substantial evidence." Popowsky v. Pa. Pub. Util. Comm'n, 910 A.2d 38, 48 (Pa. 2006).
II. PARTIES' ARGUMENTS
OCA and OSBA argue that in approving PGW's Petition using expedited review and without giving interested parties proper notice and the opportunity to investigate and respond, the Commission violated the fundamental principles of due process set forth in the United States and Pennsylvania Constitutions, as well as under Section 504 of the Administrative Agency Law, 2 Pa.C.S. § 504. They assert that PGW's customers, whose interests OCA and OSBA represent, have property rights that will be substantially impacted through the increased costs of the Pilot Program that will be passed on to them. The increase in residential customers' monthly bills, as projected, will be up to $3.62 per month compared to 2018 charges, and the increase for PGW's small business customers was not projected. Because these property interests are impacted, OCA and OSBA maintain that due process required them to receive reasonable notice and an opportunity to be heard, which were not afforded here. Without due process now, any challenge to the merits of the Pilot Program must wait until PGW's formal USECP proceedings despite PGW's residential and small business customers having to pay the costs of the Pilot Program in the meantime.
OCA and OSBA analogize this matter to Barasch v. Pennsylvania Public Utility Commission, 546 A.2d 1296, 1302-03 (Pa. Cmwlth. 1988). In Barasch, this Court reversed a Commission decision that had approved an electric energy purchase agreement without holding a hearing or providing notice to the utility's customers of the proposed agreement. The Court held that the Commission's approval of the agreement was an adjudicative action that involved substantial property rights and, therefore, required due process, which had not been provided. OCA and OSBA assert that, like the approval in Barasch, the Commission's March 26, 2020 Order was adjudicative in nature and substantially affected the property rights of PGW's non-CAP customers and, therefore, required proper notice and a meaningful opportunity to be heard. They argue that pre-deprivation process is necessary because, although the available post-deprivation process would allow them to seek review of the costs incurred and collected from ratepayers, they may not necessarily be able to recover those costs, if, ultimately, the proposed changes are not upheld. OCA and OSBA ask that the Court remand this matter to the Commission for further proceedings consistent with due process.
The Commission responds that it provided the appropriate level of due process given the lack of detrimental effect of the Pilot Program, where such program was of limited duration, the estimates of the potential costs involved were not high, and the procedure used was also used to approve changes in other USECPs. The Commission contends that OCA and OSBA had ample notice and opportunity to "fully participate in all proceedings leading up to the approval of PGW's Petition for expedited treatment," as both "allowed PGW to represent to the Commission that there was no objection to an expedited review," "OSBA did not even file a responsive answer to PGW's proposal," and both filed petitions for reconsideration, "which were duly considered . . . [but] not granted." (Commission's Brief (Br.) at 17, 24.) As to the hardship claimed by OCA, the Commission argues it exercised its discretion and concluded that the benefits would be greater than any harm and that the projections and actual enrollments and costs can be considered at PGW's next annual proceeding. It notes that OCA and OSBA participated in the proceedings on the CAP Policy Statement Amendments, at which they had the opportunity (and did) to challenge many of the policies that form the basis of PGW's Pilot Program. The Commission maintains that OCA did not actually challenge PGW's cost estimates or the impact the amendments to the USECP would have on ratepayers but raised general questions regarding the cost and impact of the program, which were addressed by the Commission's decision. The Commission argues that this is not a case that turns on its facts but instead on legal determinations, and, accordingly, a paper hearing was all that was needed to satisfy due process. (Id. at 23 (citing Lehigh Valley Power Comm. v. Pa. Pub. Util. Comm'n, 563 A.2d 557, 564 (Pa. Cmwlth. 1989)).) The rates will not be permanent until after formal hearings are held, which the Commission maintains is sufficient to satisfy due process.
PGW and Low Income Advocates, which have intervened, argue in favor of affirming the Commission's decision. Both argue that the Commission's approval of PGW's Pilot Program was merely the approval of PGW's implementation of the CAP Policy Statement Amendments, which was the culmination of numerous proceedings. The proceedings here, both PGW and Low Income Advocates assert, gave OCA and OSBA adequate due process, as OCA and OSBA were served with PGW's Cover Letter (giving them notice of the amendment based on the CAP Policy Statement Amendments), OCA filed its Answer - allowing it to comment, and OSBA chose not to respond. Thus, PGW and Low Income Advocates argue that due process was satisfied, and the Commission's Order should be affirmed.
PGW argues that OCA's objections to the Pilot Program were, essentially, the same concerns it raised in the underlying proceedings on the CAP Policy Statement Amendments, and OSBA did not file a response beyond its notice of intervention. It further argues that the use of a short review period does not violate due process where the objecting parties had the opportunity to review substantially similar information in other proceedings, including the proceedings on the CAP Policy Statement Amendments.
Low Income Advocates assert the Commission's Order should be affirmed because due process is a flexible notion and the process provided here, the opportunity to respond prior to review, was all that was needed because the changes would be for limited duration, were based on the CAP Policy Statement Amendments, and would be subject to review in PGW's upcoming USECP proceeding. Low Income Advocates further assert that the financial projections provided by PGW were not contested. They point to other proceedings involving amendments to other utilities' USECPs where no formal hearings were held, and the Commission granted the amendments based only on the petitions and comments received. (Low Income Advocates' Br. at 25 (citing Petition of Nat'l Fuel Gas Distrib. Corp. (Pa. P.U.C., No. M-2016-2573847, filed Oct. 24, 2019), 2019 WL 5592897 (National Fuel Gas)).) Low Income Advocates further argue that OCA and OSBA could have raised their objections to the affordability of PGW's CAP in other proceedings but did not, and, as such, their due process rights were not infringed by the Commission's March 26, 2020 Order. They maintain that OSBA's failure to participate is not a due process issue, as OSBA had an adequate opportunity to object to the Petition and simply did not take that opportunity.
OSBA responds, disagreeing with the Commission's contention that the detrimental effect of the proposed changes is minimal because they are a Pilot Program. OSBA points out that the Pilot Program results in a substantial and permanent deprivation because it increases annual costs on ratepayers by at least $27.5 million that are collected through surcharges on their bills, which may only be reviewed through a reconciliation process that does not necessarily provide for the recovery of any monies. (OSBA Reply Br. at 3.) Further, it asserts that the ability to compare the Pilot Program's projections with the actual enrollment and costs in PGW's upcoming USECP proceeding is not a substitute for due process. At oral argument, OSBA pointed out that PGW's filings did not project the amount of the increase of costs on PGW's small business ratepayers, thereby raising a factual question on what impact the Pilot Program would have on those ratepayers.
For its part, OCA responds that the arguments of the Commission, PGW, and Low Income Advocates that procedural due process was afforded or would be provided in future proceedings are without merit because the Commission's expedited grant of the Petition deprived OCA, and other interested parties, an adequate opportunity to be heard regarding the imposition of a program that would increase PGW's CAP by approximately $27.5 million. These costs, OCA argues, are automatically recovered from PGW's ratepayers pursuant to Section 1307 of the Public Utility Code (Code), 66 Pa.C.S. § 1307, and while mathematical reconciliation is available, such process does not allow for future challenge to the justness and reasonableness of the costs themselves. OCA disputes the Commission's statement that OCA did not object to expedited review where OCA specifically did so in its Answer and only agreed to the shortened initial response period. OCA asserts that the argument that a paper hearing was all that was required is without merit as there are disputes in both fact and law. Moreover, OCA points out that it was only able to review the Petition, which contained a preliminary cost estimate, and a more thorough review of the matter may result in further disputed facts. Finally, OCA maintains that its participation in the proceedings on the CAP Policy Statement Amendments did not provide it with due process relating to this Petition, as those other proceedings were generalized, and, per the Commission's Reconsideration Order, challenges to a particular utility's implementation of those changes would occur when each utility sought to do so, which is what OCA attempted to do in this matter.
III. DISCUSSION
A. The Requirements of Procedural Due Process
OCA and OSBA challenge the Commission's expedited review and grant of PGW's Petition on the basis that the Commission violated procedural due process when it did not provide them with proper notice and a meaningful opportunity to be heard. The bases of the right to procedural due process are found in: Section 1 of the Fourteenth Amendment to the United States Constitution; article I, sections 1, 9, and 11 of the Pennsylvania Constitution; and Section 504 of the Administrative Agency Law. "As an administrative body, the Commission is bound by the due process provisions of constitutional law and by fundamental principles of fairness." Popowsky v. Pa. Pub. Util. Comm'n, 805 A.2d 637, 642 (Pa. Cmwlth. 2002) (quotation omitted). In determining if a violation of procedural due process has occurred, the Court must consider whether due process is required and, if so, what type of process is due.
Section 1 of the Fourteenth Amendment to the United States Constitution states, in pertinent part, that "[n]o State shall . . . deprive any person of life, liberty, or property, without due process of law[.]" U.S. Const. amend. XIV, § 1. Article I, section 1 of the Pennsylvania Constitution provides:
All men are born equally free and independent, and have certain inherent and indefeasible rights, among which are those of enjoying and defending life and liberty, of acquiring, possessing and protecting property and reputation, and of pursuing their own happiness.Pa. Const. art. I, § 1. Article I, section 9 of the Pennsylvania Constitution states, in pertinent part, that a person shall not be "deprived of his life, liberty or property, unless by the judgment of his peers or the law of the land." Pa. Const. art. I, § 9. Article I, section 11 of the Pennsylvania Constitution states:
All courts shall be open; and every man for an injury done him in his lands, goods, person or reputation shall have a remedy by due course of law, and right and justice administered without sale, denial or delay. Suits may be brought against the Commonwealth in such manner, in such courts and in such cases as the Legislature may by law direct.Pa. Const. art. I, § 11. Our Supreme Court has held that "[t]he guarantee of due process of law, in Pennsylvania jurisprudence, emanates from . . . [a]rticle I, [s]ections 1, 9, and 11 of the Pennsylvania Constitution." Lyness v. State Bd. of Med., 605 A.2d 1204, 1207 (Pa. 1992).Finally, Section 504 of the Administrative Agency Law provides, in relevant part, that "[n]o adjudication of a Commonwealth agency shall be valid as to any party unless [the party] shall have been afforded reasonable notice of a hearing and an opportunity to be heard." 2 Pa.C.S. § 504. "One of the purposes of the . . . Administrative Agency Law . . . is to provide for procedural due process and to provide for appeals from an adjudication which is thought not to have complied with due process requirements." Conestoga Nat'l Bank of Lancaster v. Patterson, 275 A.2d 6, 10 n.4 (Pa. 1971) (internal quotation marks omitted).
Procedural due process applies where "the challenged action has caused [a] party an injury in fact, economic or otherwise," and "the interest asserted by the plaintiff is within the zone of interests sought to be protected or regulated by the statute or constitutional guarantee in question." Muscarella v. Commonwealth, 87 A.3d 966, 973 (Pa. Cmwlth. 2014) (citation omitted). When an administrative agency takes administrative action that "is adjudicatory in nature and involves substantial property rights[, ]" procedural due process applies. Conestoga Nat'l Bank of Lancaster v. Patterson, 275 A.2d 6, 9 (Pa. 1971) (citation omitted). There is no dispute that procedural due process protections apply here because the Commission's approval of PGW's Petition will affect the property interests of its residential and small business ratepayers, whose interests are represented by OCA and OSBA, respectively. At issue is the extent of the process that was due to interested parties and whether such process was afforded.
The type of process due is determined by considering the private interest at stake, the value of additional procedural safeguards, and the government's interest in proceeding without providing such procedures. Pa. Coal Mining Ass'n v. Ins. Dep't, 370 A.2d 685, 691 (Pa. 1977) (citing Mathews v. Eldridge, 424 U.S. 319, 334-35 (1976)). "[D]ue process is flexible and calls for such procedural protections as the particular situation demands." Id. (internal quotation marks omitted) (alteration in original). "The fundamental requirement of due process is the opportunity to be heard at a meaningful time and in a meaningful manner." Mathews, 424 U.S. at 333 (emphasis added) (internal quotation marks omitted). Our Supreme Court "recognize[d] a preference for procedures which provide [interested parties] with protections before [the parties are] deprived of an interest protected by due process[, ]" "unless important governmental interests, or the preservation of the interests of others, requires otherwise." Pa. Coal Mining Ass'n, 370 A.2d at 692 (emphasis added). While there are situations where a full hearing may not be required, interested parties are entitled to adequate notice and a reasonable opportunity to respond. Id. at 693-94. Accordingly, in some situations, such as "when economic or statistical questions[, ]" rather than witness credibility, "are at issue[, ]" a proceeding based on written submissions may be adequate. Id. at 693. However, "due process . . . requires an evidentiary hearing . . . if there are disputed questions of fact to be resolved . . . ." W. Penn Power Co. v. Pa. Pub. Util. Comm'n, 659 A.2d 1055, 1062 (Pa. Cmwlth. 1995).
B. Whether the Pre-Deprivation Process Provided Satisfied the Requirements of Procedural Due Process
Procedural due process requires that interested parties be given adequate notice and a reasonable opportunity to respond. Pa. Coal Mining Ass'n, 370 A.2d at 693-94. We begin with notice. "Notice is the most basic requirement of due process." Id. at 692. "Notice must be . . . reasonably calculated . . . to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Id. at 693 n.14 (internal quotation marks omitted). Further, adequate notice must also "convey . . . required information[] and . . . afford a reasonable time for those to make their appearance." Id.
As acknowledged by the Commission and pointed out by Commissioners Coleman and Yanora, the parties did not have notice of the need to file answers to the Cover Letter until after February 21, 2020, the date the Commission re-docketed the Cover Letter, along with PGW's request for expedited review, as the Petition. (March 26, 2020 Op. and Order at 6-7; Joint Statement at 2.) While the re-docketing of PGW's filings as the Petition provided notice of the need to file an answer under the Commission's regulations, see 52 Pa. Code § 5.61(a) (providing for the filing of answers to petitions, complaints, motions, and preliminary objections), questions remained regarding when such answers had to be filed, within the 10 days requested by PGW or within the time period provided by the regulations, and whether expedited review would occur. Instead of granting the request to expedite separately and directing the filing of answers, or any other responses, within a specified shortened time period, the Commission granted the request for expedited review in its March 26, 2020 Opinion and Order at the same time as it ruled on the merits of the Petition. In not promptly acting on PGW's requests for expedited review and a shortened response period independent of its review of the merits of PGW's Petition, the Commission did not "convey . . . required information[]" to the interested parties regarding the "time for those [interested] to make their appearance" and file responses. Pa. Coal Mining Ass'n, 370 A.2d at 693 n.14 (internal quotation marks omitted). The Commission likewise failed to convey to the interested parties that it was granting expedited review to the Petition until after that review was granted and performed, thereby precluding them from submitting additional responses prior to the Commission's merits decision. Under these circumstances, the Commission did not provide adequate notice of the need for interested parties to file answers in a shortened period and that it would be giving expedited review of the Petition.
We now turn to whether the Commission provided OCA and OSBA an adequate, meaningful opportunity to respond before it granted the Petition. The opportunity to respond provided here consisted solely of the ability to file an answer, expedited or otherwise, to what effectively was considered PGW's pleading.
The Commission and Low Income Advocates point to the "informal" discussions or discovery that occurred, which they assert provided sufficient time for OCA and OSBA to obtain information and respond to the Petition. (Commission's Br. at 44; Low Income Advocates' Br. at 13-14, 30.) However, no formal discovery took place and, given the abbreviated nature of the proceedings, the Commission did not provide the interested parties with time to investigate the accuracy of PGW's cost projections and the reasonableness and justness of the increased costs of the Pilot Program, or to submit other responses or recommendations. Although the Commission maintains that the matter involves only legal issues, OCA asserted in its Answer that PGW's Petition "raised significant questions" regarding "the cost of the program, the increased costs related to the proposed amendments, the impact of the amendments on the overall plan, and the continued cost-effectiveness of [PGW's p]lan, among others." (OSBA's R.R. at 133a.) OCA further pointed out that the Petition did not explain "why the proposed costs [would] decrease in 2021 and 2022 without the [P]ilot [P]rogram." (Id.) OCA further requested that it be "provide[d] an adequate forum to evaluate the proposed program changes and sufficient time for the collection of necessary information and an analysis of the data." (Id. at 134a.) It additionally challenged whether the proposed changes were, in fact, a Pilot Program given the amount of the alleged cost increase. In its filing, OSBA raised the issue of the effect of the increased costs of the CAP on PGW's small business ratepayers, which, while not being able to participate in the CAP, bore part of the costs of that program. These assertions raised sufficient factual issues and questions to have warranted evidentiary proceedings prior to the Commission rendering a decision on the merits of the Petition. W. Penn Power Co., 659 A.2d at 1062.
As a statutory advocate, OSBA could intervene at any time per the Commission's regulation at 52 Pa. Code § 5.74(b)(4).
The Commission and Low Income Advocates also assert that there was no need for a hearing because OCA accepted or, at least did not object to, PGW's cost calculations, citing OCA's references to the Petition's cost calculations in its Answer. Although OCA's Answer cites the cost calculations set forth in the Petition, we do not view those citations as OCA's acceptance of or lack of objection to those cost calculations. OCA asserted in the Answer that the Petition raised significant questions regarding, among other things, the costs of the Pilot Program and the costs and impacts associated with implementing the proposed CAP Policy Statement Amendments through the Pilot Program. (R.R. at 133a.) Further, the Answer specifically requested that OCA be "provide[d] an adequate forum to evaluate the proposed program changes and sufficient time for the collection of necessary information and an analysis of the data." (Id. at 134a (emphasis added).) This language does not reflect acceptance of or a lack of objection to the calculations in the Petition, but an attempt to question the proposed costs and a request that expedited review not be granted so that OCA could collect additional information to fully analyze the proposed program.
The Commission, PGW, and Low Income Advocates next argue that the process given by the Commission is sufficient because the changes would not be detrimental, citing the abbreviated nature of the Pilot Program and the fact that the changes were based on the CAP Policy Statement Amendments, the proceedings in which OCA and OSBA participated. As to the claim that the Pilot Program would not be detrimental, OCA raised factual questions regarding the scope and costs of the Pilot Program, which could impact a determination on whether the program would be detrimental. OCA was then prevented from further investigating and responding by the expedited grant of the Petition on what amounted to PGW's pleadings. While the Pilot Program may be temporary and based on the Commission's overall policies on CAPs, when factual questions were raised about the costs and scope of PGW's Petition, an evidentiary hearing should have been provided. W. Penn Power Co., 659 A.2d at 1062.
As to OCA's and OSBA's participation in the general proceedings related to the CAP Policy Statement Amendments, that participation did not constitute a real and meaningful opportunity to respond to the proposals set forth in this Petition filed by PGW specifically. Indeed, the Commission acknowledged the general nature of the CAP Policy Statement Amendments' proceedings in its Reconsideration Order denying OCA's reconsideration request. In its reconsideration petition, OCA "reserve[d] the right to address specific substantive issues of [those] amendments in utility-specific proceedings . . . ." (Order on Reconsideration/Clarification at 4 n.13 (emphasis added).) Although the Commission denied reconsideration, it held that to the extent "further granularity" was needed in the enrollment and budget projections provided by utilities in their addendums, "it c[ould] be addressed in utility-specific proceedings." (Id. at 10- 11 (emphasis added).) Notwithstanding its recognition of OCA's reservation and its statements, the Commission denied OCA, and others, a real and meaningful opportunity "to address substantive issues" regarding the "granularity" of PGW's enrollment and budget projections as set forth in PGW's specific addendum, i.e., the Petition. (Id. at 4 n.13, 10-11.) That these "utility-specific proceedings," (id.), resulted in what is referred to as a "temporary" implementation, in our view, does not alter the consequences of the Petition's approval - which was the imposition of a program that was projected to increase costs of PGW's CAP by more than $27.5 million and which, as acknowledged by PGW itself, "could be significant and . . . create a financial burden for Philadelphians." (Cover Letter at 7, R.R. at 9a.) Such effects warranted a real and meaningful opportunity for OCA and OSBA to investigate and obtain additional facts about the proposed changes in the Petition in order to provide further response and/or recommendation for the Commission's consideration. OCA's challenge to the cost calculations and request for additional time to investigate the Pilot Program reflect that this was not, as the Commission maintains, just a paper case limited to legal issues.
Finally, Low Income Advocates argue that the lack of a hearing in this matter did not violate due process because the Commission has approved modifications to USECPs in the past without a hearing. In particular, Low Income Advocates rely on the Commission's decisions in Dominion Peoples Universal Service and Energy Conservation Plan for 2009-2011, (Pa. P.U.C., No. M-2008-2044646, filed March 26, 2009), 2009 WL 1103764 (Dominion Peoples USECP), and National Fuel Gas. However, those cases are distinguishable.
The Commission's order in Dominion Peoples USECP was adopted on March 26, 2009, and entered on March 30, 2009.
Low Income Advocates cite a statement by the Commission in Dominion Peoples USECP, to argue that hearings are not required in reviewing USECP updates. In Dominion Peoples USECP, the Commission stated it "has generally reviewed [USECP] updates and approved them without notice and a hearing when the filings complied with law." 2009 WL 1103764, at *7. Although the Commission made this general statement, it also recognized that different procedures are used depending on the facts of the case and that "the matter could be referred to the Office of Administrative Law Judges for hearings if factual questions are raised by the comments." Id. (emphasis added). Thus, Dominion Peoples USECP does not stand for the proposition that all USECP updates will be approved without notice or hearings. Rather, it recognizes that hearings are appropriate where factual questions are raised, which is the case in the matter sub judice.
Low Income Advocates also cite to National Fuel Gas, which, as here, involved the approval of a modification of an existing USECP via a pilot program without a hearing and based only on the utility's petition and the written answers of interested parties. However, unlike here, the answers filed in National Fuel Gas generally supported the proposed modification, while arguing that the eligibility requirements for the proposed pilot program, which involved the expenditure of $250,000 and 40 customers over a 2-year period, were too restrictive. Upon reviewing the answers, and prior to the Commission's ruling on the petition, the utility voluntarily agreed to modify the proposed pilot program to address that concern. The Commission ultimately approved the petition based on these filings. Thus, the pilot program approved in National Fuel Gas differs significantly from the Pilot Program here, which covers all of PGW's CAP customers and the costs of which exceed $27.5 million, dwarfing the 40 customers and $250,000 at issue in National Fuel Gas. Further, unlike the interested parties' answers in National Fuel Gas, which agreed with and sought the expansion of that pilot program, OCA's Answer objected to the scope and costs of the Pilot Program, as well as to the expedited consideration of the Petition, and sought additional time to investigate the Petition further. And, although OSBA did not file an answer, it did file the Public Statement plainly indicating that it intended to participate to protect the interests of the small businesses that would be affected by the Pilot Program. Such questions should have warranted a "more robust review" of the Petition than was given here. (Joint Statement at 4.)
The process provided by the Commission here to review and approve the Petition was truncated and limited, effectively, to the pleadings, despite there being factual questions about the proposed Pilot Program, the increased costs of which would be automatically collected from PGW's non-CAP ratepayers through a USECP surcharge. (Cover Letter at 7, R.R. at 9a (stating the Pilot Program would increase PGW's USECP surcharge).) This limited and truncated process did not provide OCA or OSBA a real and meaningful opportunity to be heard on PGW's Petition. Nor did OCA's and OSBA's participation in the general proceedings on the CAP Policy Statement Amendments provide them with a real and meaningful opportunity to challenge this Petition, notwithstanding the Commission's reference in the Reconsideration Order to utility-specific proceedings. Finally, the Commission's past approval of USECP modifications without a hearing and based only on the filings in situations where there were no factual disputes does not mean that hearings are not required to satisfy due process in the face of such disputes. Accordingly, we agree with OCA and OSBA, as well as Commissioners Coleman and Yanora, that the process provided by the Commission in approving the Petition did not comport with the requirements of due process.
C. Whether the Available Post-Deprivation Proceedings Cure the Due Process Violation
Both the Commission and Low Income Advocates argue that any due process violation in granting expedited review and approval of the Petition is cured by the available post-deprivation processes, which are the reconciliation process under Section 1307 of the Code and PGW's upcoming USECP proceedings. OCA and OSBA deny that these post-deprivation processes would be adequate to cure the constitutional violation caused by the approval of the Petition under these circumstances, where PGW's non-CAP ratepayers have been subject to the surcharges since the March 26, 2020 Opinion and Order. We note that, while a meaningful post-deprivation remedy may satisfy due process where it is not feasible to provide pre-deprivation due process, Bundy v. Wetzel, 184 A.3d 551, 557 (Pa. 2018), there is a "recognize[d] . . . preference for procedures which provide . . . protections before [the parties are] deprived of an interest protected by due process," Pennsylvania Coal Mining Association, 370 A.2d at 692 (emphasis added).
The reconciliation process occurs at a year-end hearing designed only to ensure that the amounts projected, and, therefore, collected, from ratepayers and the amount spent by the utility are the same. 66 Pa.C.S. § 1307(a), (e); Barasch, 546 A.2d at 1304-05 & n.10. We held, in Barasch, that the reconciliation process under Section 1307(e) does not provide the opportunity to challenge the "propriety" of a Commission-approved contractual rate, and, therefore, that due process requires interested parties be given notice and an opportunity to be heard prior to the Commission's approval of a contract or program that results in an automatic surcharge. Barasch, 546 A.2d at 1304-05 & n.10. Thus, this after-the-fact, year-end reconciliation would not provide OCA and OSBA the opportunity to challenge the "propriety" of the Pilot Program itself, nor the Pilot Program's approval, which is what they seek to do here. Reconciliation would only determine whether PGW collected from its customers the amount needed to cover the increase in its CAP costs. Accordingly, this post-deprivation process does not cure the due process violation.
Section 1307(a) and (e) state, in pertinent part:
(a) General rule.Any public utility . . . 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. . . . The [C]ommission may revoke its approval at any time and fix other rates for any such public utility if, after notice and hearing, the [C]ommission finds the existing rates unjust or unreasonable. . . . .
(e) Automatic adjustment reports and proceedings.
(1) Within 30 days following the end of such 12-month period as the [C]ommission shall designate, each public utility using an automatic adjustment clause shall file with the [C]ommission a statement which shall specify for such period:
(i) the total revenues received pursuant to the automatic adjustment clause;
(ii) the total amount of that expense or class of expenses incurred which is the basis of the automatic adjustment clause; and
(iii) the difference between the amounts specified by subparagraphs (i) and (ii).
Such report shall be a matter of public record and copies thereof shall be made available to any person upon request to the [C]ommission.
(2) Within 60 days following the submission of such report by a public utility, the [C]ommission shall hold a public hearing on the substance of the report and any matters pertaining to the use by such public utility of such automatic adjustment clause in the preceding period and may include the present and subsequent periods.
(3) Absent good reason being shown to the contrary, the [C]ommission shall, within
60 days following such hearing, by order direct each such public utility to, over an appropriate 12-month period, refund to its patrons an amount equal to that by which its revenues received pursuant to such automatic adjustment clause exceeded the amount of such expense or class of expenses, or recover from its patrons an amount equal to that by which such expense or class of expenses exceeded the revenues received pursuant to such automatic adjustment clause.
(4) For the purpose of this subsection, where a 12-month report period and 12-month refund or recovery period shall have been previously established or designated, nothing in this section shall impair the continued use of such previously established or designated periods nor shall anything in this section prevent the [C]ommission from amending at any time any method used by any utility in automatically adjusting its rates, so as to provide the [C]ommission more adequate supervision of the administration by a utility of such method and to decrease the likelihood of collection by a utility, in subsequent periods, of amounts greater or less than that to which it is entitled, or, in the event that such deficiency or surplus in collected amounts is found, more prompt readjustment thereof.66 Pa.C.S. § 1307(a), (e) (second emphasis added).
PGW's upcoming USECP proceedings likewise will not provide OCA and OSBA the opportunity to challenge the "propriety" of the Pilot Program itself, nor the Pilot Program's approval. The Commission stated in the March 26, 2020 Opinion and Order that its review of the Pilot Program in PGW's upcoming USECP proceedings would be to "examine and explore the impact of the increased costs on ratepayers," which it acknowledged would be "a greater financial burden on some ratepayers," "to determine if further cost control measures or changes [would be] appropriate or required." (March 26, 2020 Op. at 19.) This after-the-fact review, however, does not provide OCA and OSBA the ability to challenge the Pilot Program itself and whether those changes should have been implemented under Sections 1301(a) and 2203(8) of the Code, 66 Pa.C.S. §§ 1301(a) (requiring just and reasonable rates), 2203(8) (requiring USECPs to be cost-effective). Nor is it clear how this post-deprivation process, even if it results in future cost control measures, provides a remedy to PGW's ratepayers, who have been paying for the increased CAP costs since the Commission's approval of the Pilot Program, should it ultimately be determined that the changes implemented in the Pilot Program were not consistent with the Code. Thus, the upcoming USECP proceeding does not provide a meaningful post-deprivation process and remedy that cures the due process violation.
Section 1301(a) requires, among other things, 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 . . . ." 66 Pa.C.S. § 1301(a).
Section 2203(8) provides that the Commission has "administrative oversight [over USECPs] . . ., which shall ensure that the [USECPs] are operated in a cost-effective manner." 66 Pa.C.S. § 2203(8).
IV. CONCLUSION
For the foregoing reasons, the Commission did not provide OCA and OSBA adequate notice of the expedited consideration and resolution of the Petition and the need to file an expedited answer or a real and meaningful opportunity to be heard in the consideration of the Petition thereby violating their right to due process. This violation is not cured by the post-deprivation process proposed by the Commission and Low Income Advocates. Accordingly, the Commission's Order is vacated, and this matter is remanded for further proceedings.
As to the nature of those proceedings, we note that when questioned at oral argument, neither OCA nor OSBA objected to expediting the evidentiary proceedings on the Petition but seek only the opportunity to investigate the Petition's assertions and present evidence and recommendations for the Commission's consideration. They further want the Commission to engage in a full, rather than truncated and cursory, review of the Petition. Our Supreme Court has recognized that there are some situations where a full hearing is not required for due process to be satisfied, such as "when economic or statistical questions," rather than witness credibility, "are at issue." Pa. Coal Mining Ass'n, 370 A.2d at 693. In those situations, a proceeding based on written submissions may be adequate. Id. However, the result of such proceedings should be the creation of a factual record and a decision based on evidence relating to the Petition, rather than on the CAP Policy Statement Amendments alone. See Aizen v. Pa. Pub. Util. Comm'n, 60 A.2d 443, 449 (Pa. Super. 1948) (holding that "[a] previously adopted policy may not furnish the sole basis for the [C]ommission's action in a particular case" and that "[p]olicy cannot be made a substitute for evidence in a proceeding before" the Commission). Thus, on remand, the Commission is directed to provide evidentiary proceedings and issue a new decision consistent with this Opinion.
President Judge Brobson did not participate in the consideration of this matter.
ORDER
NOW, September 29, 2021, the Order of the Pennsylvania Public Utility Commission, dated March 26, 2020, is VACATED, and the matter is REMANDED for proceedings consistent with the foregoing Opinion, including an order or adjudication from which an appeal may be taken.
Jurisdiction relinquished.