Verizon Pa. LLC v. Pa. Pub. Util. Comm'n

303 A.3d 219

VERIZON PENNSYLVANIA LLC and Verizon North LLC, Petitioners v. PENNSYLVANIA PUBLIC UTILITY COMMISSION, Respondent Metropolitan Edison Company, Pennsylvania Electric Company and Pennsylvania Power Company, Petitioners v. Pennsylvania Public Utility Commission, Respondent

No. 521 C.D. 2021

No. 530 C.D. 2021

Commonwealth Court of Pennsylvania.

Argued May 18, 2022

Decided September 21, 2023

David B. MacGregor, Philadelphia, for Designated Petitioners Metropolitan Edison Company, Pennsylvania Electric Company, and Pennsylvania Power Company.

Claire J. Evans, Washington, DC, for Designated Petitioners Verizon Pennsylvania LLC and Verizon North LLC.

Colin W. Scott, Assistant Counsel, Harrisburg, for Designated Respondent Pennsylvania Public Utility Commission.

BEFORE: HONORABLE RENÉE COHN JUBELIRER, President Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE ANNE E. COVEY, Judge, HONORABLE MICHAEL H. WOJCIK, Judge, HONORABLE ELLEN CEISLER, Judge, HONORABLE LORI A. DUMAS, Judge, HONORABLE STACY WALLACE, Judge

OPINION BY JUDGE WOJCIK

In these consolidated matters, Verizon Pennsylvania, LLC, and Verizon North, LLC (collectively, Verizon), and Metropolitan Edison Company (Met-Ed), Pennsylvania Electric Company (Penelec), and Pennsylvania Power Company (Penn Power) (collectively, FirstEnergy) petition for review of the order of the Pennsylvania Public Utility Commission (PUC) entered on April 15, 2021, denying Verizon's petition for partial reconsideration of the PUC's December 18, 2020 Opinion and Order. In the December 18, 2020 Opinion and Order, the PUC determined that FirstEnergy had charged Verizon unlawfully high rates dating back to July 2011, and ordered FirstEnergy to reduce rates going forward and issue refunds to Verizon effective November 20, 2019.

FirstEnergy seeks reversal of the PUC's determination in its entirety, asserting violations of Pennsylvania and federal law, and constitutional rights. FirstEnergy raises numerous points of error and abuses of discretion relating to the PUC's findings of unjust and unreasonable rates, calculations, and the award of retroactive relief. Verizon challenges the PUC's determination on the basis that it erred or abused its discretion by curtailing the retroactive date for the issuance of refunds for unlawful overcollections to November 20, 2019, instead of allowing refunds retroactive to July 12, 2011, or, at the very least, November 2015, which is consistent with the applicable statute of limitations period. Upon review, we affirm.

I. Background

This matter involves a dispute between Verizon and FirstEnergy over utility pole attachment ¹ rates. By way of background, pole attachment rates are the rates that utilities or pole owners charge each other or third parties to attach their equipment to their utility poles per joint user agreements (JUAs) or pole license attachment agreements. Utility poles are essential infrastructure "upon which all broadband deployment relies." Assumption of Commission Jurisdiction over Pole Attachments from the Federal Communications Commission (PUC, Docket No. L-2018-3002672, filed August 29, 2019) (2019 Assumption Order ), slip op. at 1, 2019 WL 4345730. The sharing of utility pole space to distribute various services – electricity, telephone, cable television, internet, etc. – promotes efficiency, ² but it is not devoid of problems. Congress recognized that "utilities by virtue of their size and exclusive control over access to pole lines, are unquestionably in a position to extract monopoly rents ... in the form of unreasonably high pole attachment rates." In the Matter of Implementation of Section 224 of the Act – A National Broadband Plan for Our Future , 26 FCC Rcd. 5240, 5242 (2011) ( 2011 Pole Attachment Order ) (internal quotation and citation removed).

To curb against "monopoly rents" and anti-competitive tendencies that would stymie the growth of the communications market, in 1978, the United States (U.S.) Congress enacted Section 224 of the Communications Act of 1934, ³ commonly known as the Pole Attachment Act (PAA), which Pennsylvania adopted in 2020, pursuant to 52 Pa. Code § 77.4. See Southern Company Services, Inc. v. Federal Communications Commission , 313 F.3d 574, 576 (3d Cir. 2002). Section 224(f)(1) of the PAA contains a "nondiscriminatory access" provision requiring any utility that uses its poles, ducts, conduits, or rights-of-way for wire communications to provide cable television or telecommunications companies with access to that space on a nondiscriminatory basis. 47 U.S.C. § 224(f)(1). In addition, Section 224(b)(1) of the PAA requires utilities to charge "just and reasonable" pole attachment rates. 47 U.S.C. § 224(b)(1). If a utility does not comply with the just and reasonable rate requirement, a telecommunications attacher may seek a lawful rate and a refund of its overpayments by filing a pole attachment complaint with the appropriate agency. See id.

In 2011, in the interest of promoting infrastructure deployment, the Federal Communications Commission (FCC) comprehensively revised its pole attachment rules so that similarly situated telecommunications providers would pay similar pole attachment rates for comparable access. See 2011 Pole Attachment Order , 26 FCC Rcd. at 5244. Of particular import, the FCC created a "New Telecom Rate" by adopting a definition of cost that yields a new "just and reasonable" telecommunications rate and reduces the apportionment of the common pole costs included in the "Old Telecom Rate" formula. ⁴ Id. at 5299. The New Telecom Rate was based on incremental costs rather than fully allocated costs. Id. The purpose of the new policy was "to improve the efficiency and reduce the potentially excessive costs of deploying telecommunications, cable, and broadband networks, in order to accelerate broadband buildout" and "promote competition and increase the availability of robust, affordable telecommunications and advanced services to consumers throughout the nation." Id. at 5241. The policy was targeted towards helping competitive local exchange carriers (CLECs) and cable operators, not incumbent local exchange carriers (ILECs). ⁵ See id . at 5335. The FCC noted that ILECs generally have access to utility pole space via negotiated, long standing JUAs, not pole license agreements. Id. at 5335. Recognizing that the JUAs were entered into between parties with relatively equivalent bargaining power, the FCC expressed reluctance to find rates, terms, and conditions in those JUAs unjust or unreasonable. Id. The 2011 Pole Attachment Order took effect on July 12, 2011.

However, in 2018, following complaints by ILECs that utility pole owners were charging them pole attachment rates significantly higher than the rates charged to their competition, the FCC revised its policy to level the playing field. See In the Matter of Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment , 33 FCC Rcd. 7705, 7707 (2018) ( 2018 Third Report and Order ). The FCC observed that the ILECs’ "bargaining power vis-à-vis utilities has eroded since 2011" because of the decline in ILEC pole ownership. Id. at 7768. The FCC revised its "rules to establish a presumption that, for newly-negotiated and newly-renewed pole attachment agreements between [ILECs] and utilities, an [ILEC] will receive comparable pole attachment rates, terms, and conditions as a similarly-situated telecommunications carrier or a cable television system (telecommunications attachers) ." Id. at 7767 (emphasis added). The FCC found that ILECs "are similarly situated" to "telecommunications attachers" and thus are entitled to "comparable" rates that are no higher than the New Telecom Rate. Id. at 7769. "The utility can rebut the presumption with clear and convincing evidence that the [ILEC] receives net benefits under its pole attachment agreement with the utility that materially advantage the [ILEC] over other telecommunications attachers." Id. at 7768 (emphasis added). In cases where a utility rebuts the presumption, the FCC designated the Old Telecom Rate as "the maximum rate that the utility and [ILEC] may negotiate." Id. at 7771.

Against this backdrop of rate reform, on November 20, 2019, Verizon, an ILEC, filed a pole attachment complaint (Complaint) against FirstEnergy, an electric utility, ⁶ with the FCC. See Reproduced Record (R.R.) at 19a-66a. In the Complaint, Verizon claimed that the negotiated rates FirstEnergy charged Verizon per their JUAs were "unjust and unreasonable" in light of Section 224 of the PAA, 47 U.S.C. § 224, and the FCC's implementing regulations and orders, i.e. , the 2011 Pole Attachment Order and the 2018 Third Report and Order . R.R. at 20a. Verizon asserted that the pole attachment rates should be comparable to New Telecom Rates that FirstEnergy charges to CLECs and cable companies under pole attachment license agreements. Id. at 20a. Verizon claimed it was entitled to a refund, reflecting the difference between the rates it paid and the New Telecom Rates it should have paid since July 12, 2011, the effective date of the 2011 Pole Attachment Order , plus interest. Id . at 20a, 64a. FirstEnergy filed an Answer denying all material allegations in the Complaint and raising affirmative defenses, which Verizon answered.

During the pendency of the proceedings before the FCC, the PUC assumed jurisdiction over pole attachment rate disputes. See 2019 Assumption Order , slip op. at 1. Consequently, on March 23, 2020, the FCC transferred Verizon's Complaint to the PUC. The PUC referred the matter to an administrative law judge (ALJ) for adjudication.

Before the ALJ, the parties submitted a Joint Statement, which included the following stipulated facts. R.R. at 1455a-60a. Verizon and FirstEnergy are parties to 10 substantially similar JUAs that contain the rates, terms, and conditions for each party's use of the other party's utility poles. Id. at...