New Garden Twp. v. Pa. Pub. Util. Comm'n

244 A.3d 851

NEW GARDEN TOWNSHIP, Petitioner

v.PENNSYLVANIA PUBLIC UTILITY COMMISSION, Respondent

No. 1360 C.D. 2019

Commonwealth Court of Pennsylvania.

Argued September 17, 2020

Decided October 14, 2020

Publication Ordered January 4, 2021

Maureen M. McBride, West Chester, for Petitioner.

Alan M. Seltzer, Harrisburg, for Intervenor Artesian Water Pennsylvania, Inc.

Colin W. Scott, Assistant Counsel, Harrisburg, for Respondent.

BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE MICHAEL H. WOJCIK, Judge, HONORABLE CHRISTINE FIZZANO CANNON, Judge

OPINION BY JUDGE COHN JUBELIRER

New Garden Township (Township) petitions for review of the Order of the Pennsylvania Public Utility Commission (Commission) that, in relevant part, approved the Application of Artesian Water Pennsylvania, Inc. (AW-PA) seeking a certificate of public convenience and approval of certain affiliated interest agreements with Artesian Resources Corporation (ARC) related to the assignment of ARC's interests in the Broad Run Well, which is located in Township, to AW-PA (Assignment Agreements). The Commission held AW-PA demonstrated that granting the requested certificate of public convenience and approving the Assignment Agreements would provide affirmative public benefits to AW-PA's customers and be in the public interest, and, therefore, AW-PA met its burdens of proof under Sections 1103 and 2102 of the Public Utility Code (Code), 66 Pa.C.S. §§ 1103, 2102. On appeal, Township argues the Commission's findings are not supported by substantial evidence and do not support the conclusion that AW-PA met its burdens of proof. Township also asserts the Commission improperly relied upon the public benefits to customers located outside of Pennsylvania to find an affirmative public benefit. Upon review, we discern no error or abuse of discretion and, therefore, affirm the Commission's Order.

I. Background

A. Factual History

AW-PA is a Pennsylvania public utility and holds a certificate of public convenience, granted in 2002, to provide water service to 38 customers in the Broad Run Ridge Development (Development), which is located in Township and on the border with the State of Delaware. AW-PA has an affiliate, Artesian Water Company, Inc. (AW-DE), which is a public water utility located in Delaware. ARC is a holding company that wholly owns AW-PA and AW-DE. Pursuant to Section 2101(a)(1) and (3) of the Code, 66 Pa.C.S. § 2101(a)(1), (3), AW-PA is an "affiliated interest"¹ of both ARC and AW-DE. In 2002, the Commission approved an affiliated interest agreement (2002 Affiliated Interest Agreement) between AW-PA and AW-DE through which AW-DE provides AW-PA, which has no employees, with administrative and operating services and bulk water sales. (Recommended Decision (R.D.), Finding of Fact (FOF) ¶ 17.) Under the 2002 Affiliated Interest Agreement's bulk water sales provisions, "AW-DE's public water supply system interconnects with AW-PA's distribution system at the Delaware state line." (Commission Opinion and Order (Op.) at 2.) AW-DE obtains its water from sources in the Delaware River Basin, as allocated by the Delaware River Basin Commission (DRBC),² by importing water from sources in the Susquehanna River Basin and Chesapeake Bay Basin, and from the Chester Water Authority (CWA), which is located in Pennsylvania. The purpose of this water distribution system is to serve AW-DE's retail Delaware customers and AW-PA's 38 Pennsylvania customers. In December 2015, AW-DE obtained DRBC-approval to withdraw up to 288,000 gallons of water from the Broad Run Well per day. (R.D. FOF ¶ 35.) DRBC gave its approval after providing a period of public comment and holding public hearings. (Supplemental Reproduced Record (S.R.R.) at 150b-52b.)

Prior to AW-PA obtaining its certificate of public convenience, ARC entered into easement agreements with Charles Wilkinson and Broad Run Valley, Inc. (BRV) (Easement Agreements). The first agreement, entered into on September 27, 2001, granted ARC "an exclusive easement to, among other things, access, operate, maintain, repair, improve, replace and connect [ARC's] water system to the [Broad Run Well]." (R.D. at 8 (internal quotations omitted).) In exchange for monthly payments to BRV, ARC and its affiliates obtained access to the Broad Run Well to which they could connect their water facilities. The second easement agreement, entered into on April 30, 2002, provided ARC an easement across BRV-owned property in Township to construct and operate a well field and associated water treatment and storage facilities. This agreement also allowed ARC to construct the pipeline and conduit necessary to connect the Broad Run Well facilities to ARC/AW-DE's distribution system at the boundary between Pennsylvania and Delaware. The second agreement referenced the first agreement's provision requiring monthly payments to BRV. Without the Commission's approval, AW-PA assumed ARC's duties under the Easement Agreements, but written Assignment Agreements between ARC and AW-PA were subsequently executed in 2016. (R.D. FOF ¶¶ 42-43.) AW-PA has not claimed any costs of implementing the Easement Agreements in the rates it charged to its customers. (Id . ¶¶ 28-29, 31.) The water supply connection between the Broad Run Well and AW-DE's water system has not been completed. (Id. ¶ 32.)

The instant matter involves AW-PA's May 10, 2016 Application seeking, nunc pro tunc , Commission approval of the Assignment Agreements, through which ARC would formally assign its interests in the two Easement Agreements to AW-PA pursuant to Section 2102(a), (b) of the Code, 66 Pa.C.S. § 2102(a), (b).³ The Commission's Bureau of Technical Utility Services (TUS), Water/Wastewater Division, which reviews such applications, requested additional information, which AW-PA provided. Following in-person discussions, TUS issued, on March 7, 2017, a letter (Secretarial Letter) denying the Application without prejudice and marking the matter closed (Staff Action). TUS determined that the Application, which involved the transfer of tangible and intangible property, required a certificate of public convenience under Section 1102, not approval under Section 2102. The Secretarial Letter indicated AW-PA could seek reconsideration and/or file a new application seeking transfer of the ARC assets under Section 1102(a)(3). AW-PA sought reconsideration, and by December 7, 2017 Order, the Commission rescinded the Staff Action, holding that the Application required consideration under both Section 1102 and Section 2101. The Commission directed AW-PA to file any additional information AW-PA considered necessary for the review of the Application under Section 1102.⁴ AW-PA filed supplemental information related to review of the Application under both sections of the Code, and published the Application and supplemental information in the Pennsylvania Bulletin . Among others, Township and Save Our Water (SOW), a group of concerned citizens from both inside and outside Township, filed petitions to intervene and protests to the Application. The matter was assigned to an Administrative Law Judge (ALJ), who granted Township's and SOW's petitions to intervene.

B. Proceedings Before the ALJ

1. Parties’ Evidence

AW-PA, Township, and SOW filed their pre-served written testimony before the ALJ's August 21, 2018 evidentiary hearing, at which their witnesses were subject to cross-examination. AW-PA relied on the direct, rebuttal, and rejoinder testimony of David B. Spacht, its chief financial officer, who is responsible for AW-PA's financial integrity and manages AW-PA's regulatory matters,⁵ as well as exhibits related to, among other things, that testimony and the operation of AW-PA. Mr. Spacht testified that approving the Assignment Agreements would be in the public interest and create an affirmative benefit for AW-PA's customers by establishing an additional water supply source that would be available to those customers and creating a new stream of revenue for AW-PA, mitigating the potential need for future rate increases for AW-PA's customers. With regard to Broad Run Well being an additional water supply source, Mr. Spacht testified that there were times that water service from CWA was unavailable due to water quality and mechanical failures. (AW-PA Rebuttal Stmt. No. 1-R at 4, S.R.R. at 206b.) He further stated that, because the CWA contract expires on "December 31, 2021, there [wa]s no assurance that such arrangement w[ould] continue, let alone be based on terms and pricing that are acceptable and mitigate potential future rate increases for [AW-PA's] customers." (Id. at 5, S.R.R. at 207b.) With regard to the additional revenue source benefit, he explained that, if the Assignment Agreements were approved, AW-PA would: finalize its infrastructure designs allowing it to connect a raw water line from the Broad Run Well to AW-DE's facilities at the Pennsylvania-Delaware border and seek approval of a new affiliated interest agreement with AW-DE (Well and Water Services Agreement), through which AW-DE would compensate AW-PA for its use of the Pennsylvania infrastructure to obtain access to and use of the raw water drawn from the Broad Run Well as allocated by the DRBC. In addition, Mr. Spacht testified, the agreement would require AW-DE to reimburse AW-PA for all costs AW-PA had incurred and would incur related to the Broad Run Well and the associated infrastructure needed to deliver water to the Delaware state line. The Well and Water Services Agreement would provide AW-PA a new stream of revenue without it having to pay the costs associated with developing the Broad Run Well, which would be borne by AW-DE. Last, the Well and Water Services Agreement would allow AW-PA to retain the right to use the Broad Run Well itself should new land development occur that would add new customers to AW-PA.

Township sought to establish, through the testimony of G. Matthew Brown, P.E., that there was no benefit to AW-PA's customers by...