PENNSYLVANIA PUBLIC UTILITY COMMISSION
Section 1307(e) Reconciliation Statement Pilot Program
[43 Pa.B. 2971]
[Saturday, May 25, 2013]
Public Meeting held
May 9, 2013
Commissioners Present: Robert F. Powelson, Chairperson; John F. Coleman, Jr., Vice Chairperson; Wayne E. Gardner; James H. Cawley; Pamela A. Witmer
Section 1307(e) Reconciliation Statement Pilot Program;
Doc. No. M-2013-2345492
By the Commission:
On February 28, 2013, the Pennsylvania Public Utility Commission (Commission) entered a Tentative Order proposing a one-year pilot program (the Pilot Program or the Pilot) intended to streamline administrative procedures governing the filing and review of Section 1307(e) reconciliation statements. Before the Commission are comments filed by the Energy Association of Pennsylvania (EAP) and the Office of Consumer Advocate (OCA).
We have carefully considered the comments filed by the parties. For reasons more fully described herein, we have clarified and modified the Tentative Order and will move forward with the Pilot Program in accordance with this Implementation Order.
In an effort to save time and resources for the Commission and interested parties, the Commission issued a Tentative Order on February 28, 2013 proposing a one-year pilot program with streamlined procedures governing the filings of Section 1307(e) reconciliation statements.
Upon receiving a reconciliation statement required by Section 1307(e)(1), the Commission assigns the matter to the Bureau of Audits (Audits) to review the statement and verify mathematical accuracy and compliance with the tariff. Audits prepares a hearing exhibit and summary of the filing for the Bureau of Investigation and Enforcement (I&E). I&E then files a notice of appearance in the Office of Administrative Law Judge (OALJ) proceeding. Parties can object to and challenge the reconciliation statement in writing. OALJ schedules and holds a hearing with an I&E attorney, an Audits witness, and utility attorneys and witnesses. Several hearings are held consecutively on the same day for multiple public utilities. The assigned Administrative Law Judge (ALJ) admits the reconciliation statement into record on motion of the utility or I&E. I&E offers a statement into evidence indicating that acceptance of the statement is subject to further review as to accuracy or reasonableness of the underlying transactions. The ALJ then issues a recommended decision and accepts the filing insofar as it is undisputed, noting that it is subject to further review and revision as may be necessary as a result of an audit or other proceeding. The ALJ also notes that acceptance does not constitute approval of accuracy or reasonableness of underlying transactions. Finally, the Commission adopts the recommended decision through an order at Public Meeting. Since most reconciliation statements are not contested, the Commission finds that current procedures governing uncontested statements need to be streamlined, especially in light of the considerable time and resources expended by the Commission and utilities regarding these uncontested statements.
In its Tentative Order, the Commission proposed eliminating an evidentiary hearing, a recommended decision, and Commission Public Meeting action regarding Section 1307(e) reconciliation statements when there is no material issue of fact in dispute. When there is no material issue of fact in dispute, the Commission proposed foregoing the evidentiary hearing process and instead issuing a Secretarial Letter accepting the reconciliation statement. When there is a material issue of fact in dispute or other challenge that requires an evidentiary hearing, the Commission proposed that OALJ, after hearing and briefing, issue an initial decision rather than a recommended decision. If no exceptions are filed and no Commission review is requested, the initial decision would become final by operation of law. This would eliminate the need for the Commission to act at a subsequent Public Meeting.
While EAP applauds the Commission's goal of streamlining administrative procedures through the Pilot Program, EAP expressed concern that the proposed pilot appears to be inconsistent with the public hearing and order requirements in Sections 1307(e)(2)—(3) of the Public Utility Code. See 66 Pa.C.S. § 1307(e)(2)—(3). EAP Comments at 2. Observing that the proposed procedures appear to run contrary to the plain meaning of Sections 1307(e)(2)—(3), EAP noted that the proposed procedures ''may undermine the finality of those reconciliation statements approved during the Pilot and of any refund or recovery of over/under collections by the utility in reliance on the calculations in those statements, particularly with respect to any third party challenges.'' Id. at 3. EAP therefore recommended that amending the statutory language would be a more certain and lawful measure for the Commission to streamline its procedures as necessary in accordance with the Tentative Order. Id. at 4.
In its comments, the OCA stressed that since Section 1307(e) reconciliation statements serve an important role in setting just and reasonable rates, any pilot program intended to streamline the process should ensure that all rights remain protected in accordance with due process and the Public Utility Code. OCA Comments at 2-3. The OCA identified four concerns regarding the Commission's proposed Pilot Program.
First, the OCA sought clarification on the specific Section 1307(e) reconciliation statements that would be covered by the Pilot Program, advising that the Pilot should be limited to a subset of reconciliation filings and not encompass Distribution System Improvement Charges filings at this time. Id. at 4-5.
Second, the OCA requested that the Commission extend the time period for written objections from the 20 days proposed in the Tentative Order to 45 days in order to give parties more time to review the reconciliation statements. Id. at 5.
Third, the OCA sought clarification on the effect of Secretarial Letters on parties when no written objections are filed. Id. at 5. Specifically, the OCA requested that the Commission ''clarify that the absence of a written objection is not dispositive as to any person or party in any other proceeding.'' Id. at 6.
Fourth, the OCA requested the Commission to recognize that the Section 1307(e) reconciliation is part of a rate determination. Id. at 7. Accordingly, the OCA requested that the Commission revise the Tentative Order to require the ALJ to issue a recommended decision instead of an initial decision when an interested party has filed written objections to a Section 1307(e) reconciliation statement filing. Id. at 8.
In their comments, both EAP and OCA express concern that the proposed procedures in the Pilot Program may be inconsistent with Sections 1307(e)(2)—(3) of the Public Utility Code and due process rights of parties. We will first provide a legal framework to demonstrate that the Commission's proposed Pilot Program does not circumvent the Public Utility Code or violate due process. Then, we will respond directly to the concerns raised by the commenters.
Legal Framework For Due Process
Determining the adequacy of particular due process procedures requires a case-by-case analysis balancing the interests of the individual in receiving certain procedural protections against the government's interest in proceeding without those protections. Pa. Coal Mining Assoc. v. Ins. Dept., 370 A.2d 685, 689, 691 (Pa. 1977) (citing Goldberg v. Kelly, 397 U.S. 254 (1970); Morrissey v. Brewer, 408 U.S. 471, 481 (1972)). The protections already provided by current procedures will be considered in determining whether due process requires more procedures. Id. at 692 (citing Boddie v. Conn., 401 U.S. 371, 378 (1971)). Notice, the most basic requirement of due process, should be reasonably calculated to inform interested parties of the pending action and to provide interested parties with an opportunity to present objections. Id. at 692-93.
In regard to hearings, the Pennsylvania Supreme Court has explained that while oral proceedings may be necessary for determinations likely to turn on witness credibility, written objections may be adequate when economic or statistical questions are at issue. Id. at 693 (citing Matthews v. Eldridge, 424 U.S. 319, 342 (1976)). If there is an absence of disputed facts and a lack of specific language in the statute requiring an oral hearing, the Commission's use of a ''paper'' hearing does not violate due process. Diamond Energy v. Pa. PUC, 653 A.2d 1360, 1367 (Pa. Cmwlth. 1995). In Diamond Energy, the Commonwealth Court determined that a hearing or trial procedure is only necessary to resolve disputed questions of fact and is not required to decide questions of law, policy, or discretion. Id.
Finally, we note that it is the substance and not the form of a Commission action that determines whether the Commission has entered a final, definitive order. Dept. of Highways v. Pa. Public Utility Commission, 149 A.2d 552, 555 (Pa. Super. 1959) (determining that a letter issued by the Commission denying the reopening of a case had the effect of a law of an order); West Penn Power v. Pa. PUC, 100 A.2d 110, 113 (Pa. Super. 1953) (finding that a 'release' issued by the Commission had the same force of law as a Commission order based upon the substance of the release). Therefore, so long as a Commission Secretarial Letter orders, directs, or requires a party to do something, a Secretarial Letter will have the same equivalent force of law as a Commission Order. By reverse implication, if a Secretarial Letter does not order, direct, or require a party to do something, the Secretarial Letter will not have the force of law.
Response to Commenters
Due Process Concerns: Public Hearing Requirement in Section 1307(e)(2)
OCA and EAP both raise concerns that the Commission's proposed procedures in the Section 1307(e) Reconciliation Statement Pilot Program may run contrary to the Public Utility Code and potentially infringe upon due process rights of interested parties. Because the current process has become one of form with no real substance, the Commission has proposed eliminating a trial-type evidentiary hearing, a recommended decision, and Public Meeting action regarding Section 1307(e) reconciliation statements when there is no material issue of fact in dispute. The Commission has determined that its interest in eliminating those additional procedures is greater than proceeding with those procedures. See Pa. Coal Mining, 370 A.2d at 689, 691.
Section 1307(e) does require the Commission to ''hold a public hearing'' within 60 days of the filing of the reconciliation statement and to issue an ''order'' within 60 days of that hearing. 66 Pa.C.S. § 1307(e)(2)—(3). The EAP has expressed concern that the statute requires an oral, evidentiary trial-type hearing and the issuance of an order instead of a Secretarial Letter regardless of whether material factual issues have been raised. However, in the Commission's judgment, EAP's reading of Section 1307(e) is overly restrictive and inconsistent with the practical nature and purpose of these proceedings. Moreover, guiding case law precedent demonstrates that the Pilot Program will fulfill the basic due process requirements of providing interested parties with (1) adequate notice and (2) an opportunity to be heard and file objections.
The Rules of Statutory Construction provide that the object of all interpretation and construction of statutes is ''to ascertain and effectuate the intention of the General Assembly.'' 1 Pa.C.S. § 1921(a). Where the words of a statute are clear and free from ambiguity, one must not look beyond the text to glean legislative intent. 1 Pa.C.S. § 1921(b); Com v. McCoy, 599 Pa. 599, 610 (2009). Importantly, we note here that, where there is ambiguity, the language should not be interpreted in a manner that would be ''absurd, impossible of execution or unreasonable.'' 1 Pa.C.S. § 1922(1).
The adjective ''public'' does not necessarily connote a physical, in-person presence. The Commonwealth Court has invoked the common, ordinary definition of ''public'' as ''accessible to or shared by all members of the community.''1 Council of Middletown Twp. v. Benham, 496 A.2d 1293, 1296 (Pa. Cmwlth. 1985) (aff'd 523 A.2d 311 (Pa. Mar 23, 1987)). Black's Law Dictionary similarly defines ''public'' as ''open or available for all to use, share, or enjoy.'' Black's Law Dictionary (9th Ed. 2009). Therefore, as to the Section 1307(e)(2) ''public hearing'' requirement, the Commission interprets a ''public hearing'' in Section 1307(e)(2) as an accessible, public forum that provides interested parties with an opportunity to be heard and to file objections, if desired. Indeed, it would be an unreasonable interpretation of Section 1307(e) to require an in-person, oral hearing when no factual issue or even objections have been raised regarding the reconciliation statement, after adequate notice has been provided to all interested parties. Accordingly, we find that the term ''public hearing'' in Section 1307(e) does not require an oral hearing in all circumstances.
In the Pilot Program, a public utility must file the reconciliation statement with the Commission and must serve the OCA, the Office of Small Business Advocate, and I&E. The Commission will also publicize the filing online at the Commission's web site. Interested parties will have 30 days to file objections.2 Accordingly, public notice has been reasonably calculated to inform interested parties of the filing and provide interested parties with an opportunity to present written objections. See Pa. Coal Mining, 370 A.2d at 692-693.
Here, written objections will be sufficient since only arithmetic computations are at issue and not matters of witness credibility. See Pa. Coal Mining, 370 A.2d at 693. As in Diamond Energy, the Commission does not violate due process by holding a ''paper'' or electronic hearing since an oral, trial-type hearing is only necessary to resolve disputed questions of fact. 653 A.2d at 1367. Therefore, the Commission's proposed procedures in the Pilot Program satisfy due process requirements.
Effect of Secretarial Letter on Parties When No Written Objections Are Filed
OCA expressed concerns as to the effect of a Commission Secretarial Letter on parties when no written objections are filed. OCA wants the Commission to stress that the ''decision on the reconciliation statement is not a substantive determination.'' OCA Comments at 5. In its comments, EAP raised concerns that issuance of a Secretarial Letter in these non-contested filings ''may undermine the finality of those reconciliation statements approved during the Pilot and of any refund or recovery of over/under collections by the utility in reliance on the calculations in those statements.'' EAP Comments at 3.
The substance and not the form of the Commission action is controlling on whether the Commission has entered a final, definitive order. Dept. of Highways, 149 A.2d at 555. If a Commission Secretarial Letter does not order, direct, or require a party to do something, the Secretarial Letter does not contain the substance of an order and will thus not have the same equivalent force of law as a Commission Order.
As in the Commission's current procedures regarding a Section 1307(e) reconciliation statement filings, the Secretarial Letter issued by the Commission regarding a Section 1307(e) statement filing will note that the statement is still subject to further review and revision as may be necessary as a result of an audit or other proceeding. The Commission staff merely reviews the statement for mathematical accuracy and does not evaluate the substantive reasonableness or prudency of the underlying costs incurred. Accordingly, EAP's concerns that the Commission's ''proposed procedure may undermine the finality of those reconciliation statements'' is misplaced. A utility should only rely on the Commission's review of the mathematical accuracy and not the substantive reasonableness or prudency of any refund or recovery of the over/under collections. Furthermore, this Secretarial Letter does not preclude a party from later filing a complaint on the substance or operation of an adjustment clause rate change filing.
Requiring the Commission to Issue a Recommended Decision and Not an Initial Decision in Disputed Section 1307(e) Reconciliation Statement Filings
In the Tentative Order, the Commission proposed that OALJ, after hearing and briefing, issue an initial decision rather than a recommended decision when there is a material issue of fact in dispute regarding a Section 1307(e) statement or other challenge that requires an evidentiary hearing. In its Comments, OCA contends that a Section 1307(e) reconciliation statement filing is part of the rate determination process, requiring the issuance of a recommended decision instead of an initial decision. The OCA notes that issuing an initial decision in a disputed Section 1307(e) filing is unlikely to have a major impact on streamlining the process since parties may (and will likely) file exceptions to the initial decision, requiring Commission review and a final, recommended decision.
Therefore, OCA requests that the Commission revise the Tentative Order to require the Commission to issue a recommended decision instead of an initial decision when an interested party has filed written objections to a Section 1307(e) reconciliation statement filing. The Commission finds OCA's request persuasive and prudent, and amends the Tentative Order accordingly.
The Pilot Program Will Apply to All Non-Section 1307(f) Adjustment Clause Filings
OCA asked the Commission to clarify which automatic adjustment clause rate mechanisms will be subject to the proposed streamlined processes for review of Section 1307(e) reconciliation statements. OCA Comments at 4. The Commission intends the streamlined processes to apply to all non-Section 1307(f) automatic adjustment clause tariff filings. Since the list and types of adjustment clauses is continually open to change through revisions of old adjustment clauses and additions of new clauses, the Commission intends for the streamlined processes to apply broadly to all non-Section 1307(f) filings. Therefore, the Pilot Program will encompass all non-Section 1307(f) automatic adjustment clause tariff filings, including the newly enacted Section 1358 Distribution System Improvement Charges. See 66 Pa.C.S. § 1358(e).
Extending the Time to File Written Objections to Thirty Days
In the Tentative Order, the Commission proposed that a person or party must file a written objection within twenty days to challenge a Section 1307(e) reconciliation statement. In its comments, OCA requested that the Commission extend the time to file written objections to 45 days to ensure that parties have adequate time to thoroughly review the statement. Since Section 1307(e)(2) directs the Commission to hold a hearing within 60 days of the submission of a reconciliation statement, the Commission would be too time-pressed to schedule hearings if parties had 45 days to file objections. However, since providing interested parties adequate time to thoroughly review a reconciliation statement serves the public interest, the Commission will modify the Tentative Order and extend the time to file objections to 30 days.
Consistent with the above discussion, we amend the Tentative Order and issue this Final Order, implementing the Section 1307(e) Reconciliation Statement Pilot Program. In the Pilot Program, the Commission will eliminate an evidentiary hearing, a recommended decision, and Commission Public Meeting action regarding Section 1307(e) reconciliation statements when there is no material issue of fact in dispute. When there is no material issue of fact in dispute, the Commission will forego the evidentiary hearing process and issue a Secretarial Letter accepting the reconciliation statement as to the statement's mathematical accuracy, subject to further review and revision as may be necessary as a result of an audit or other proceeding.
When there is a material issue of fact in dispute or other challenge, the OALJ will conduct an evidentiary hearing and briefing. The Commission revises the Tentative Order to require the Commission to issue a recom-mended decision instead of an initial decision when an interested party has filed written objections to a Section 1307(e) reconciliation statement filing. The recommended decision will then be acted on by the Commission at Public Meeting.
By way of this Order, the Commission will implement these new administrative procedures governing the filing of Section 1307(e) reconciliation statements for a one-year pilot period, effective for statements filed on or after July 1, 2013. In the event the Commission determines that it will continue the new procedures after the initial one-year pilot period, the Commission will notify the appropriate stakeholders, subject to initiation of a proposed rulemaking to reflect such new procedures; Therefore,
It Is Ordered That:
1. During a one-year pilot period, the Commission will adopt the above-noted procedures governing the filing and review of Section 1307(e) reconciliation statements as set forth in this Order, subject to initiation of a proposed rulemaking.
2. During the pilot period, in addition to the Section 1307(e) reconciliation statement filings served with the Commission, the Commission will require public utilities to serve the Office of Consumer Advocate, the Office of Small Business Advocate, and the Bureau of Investigation and Enforcement with Section 1307(e) reconciliation statement filings. A person or party must file a written objection within thirty (30) days to challenge a Section 1307(e) reconciliation statement.
3. The effective date for the Pilot Program's new procedures is for Section 1307(e) reconciliation statements filed on or after July 1, 2013.
4. A copy of this Order shall be published in the Pennsylvania Bulletin and posted on the Commission's website at www.puc.pa.gov.
5. A copy of this Order be served on the appropriate stakeholders in this matter, including all natural gas, electric, steam, water, and wastewater public utilities, the Bureau of Investigation and Enforcement, the Bureau of Audits, the Office of Administrative Law Judge, the Office of Consumer Advocate, and the Office of Small Business Advocate.
[Pa.B. Doc. No. 13-976. Filed for public inspection May 24, 2013, 9:00 a.m.]
1 The Court cited Webster's Third New International Dictionary definition of public, which is consistent with the current definition in Merriam-Webster's Online Dictionary. See ''public'' definition 6(a), available at http://www.merriam-webster.com/dictionary/public (last accessed Apr. 22, 2013).
2 In response to OCA's comments, the Commission will extend the time to file written objections from 20 days to 30 days, as discussed in more detail later in this Order.
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