PHILADELPHIA SUBURBAN WATER COMPANY, Petitioner, v. PENNSYLVANIA PUBLIC UTILITY COMMISSION, Respondent.
Commonwealth Court of Pennsylvania.
Argued March 13, 2002. Decided Oct. 21, 2002.
Accordingly, like the majority, I believe that the Board‘s order should be affirmed.
Daniel Clearfield, Harrisburg, for petitioner.
Stanley E. Brown, Harrisburg, for respondent.
John S. Carnes, Jr., West Chester, for amicus curiae, The City of Coatesville Authority and The City of Coatesville.
John J. Gallagher, Harrisburg, for amicus curiae, PA American Water Co.
BEFORE: COLINS, President Judge, and MCGINLEY, Judge, SMITH-RIBNER, Judge, PELLEGRINI, Judge, FRIEDMAN, Judge, COHN, Judge, and LEAVITT, Judge.
Philadelphia Suburban Water Company (Suburban Water) petitions for review of an adjudication of the Pennsylvania Public Utility Commission (PUC or Commissioners) approving several agreements by which the City of Coatesville Authority (Authority) sold its water system to the Pennsylvania-American Water Company (Pennsylvania-American).1 Specifically, Suburban Water challenges the PUC‘s approval of an Asset Purchase Agreement (Agreement) that obligates Pennsylvania-American to make an annual contribution, in perpetuity, to the Coatesville Economic Development Fund in an amount exactly equal to the annual rates paid by the City of Coatesville (Coatesville) to Pennsylvania-American for fire hydrant service. Suburban Water contends that this arrangement effects free water service to Coatesville and, further, that free service deviates unlawfully from Pennsylvania-American‘s approved tariff and discriminates against municipalities that pay the utility‘s approved tariff for their fire hydrant service. We agree and reverse the PUC‘s approval of this provision of the Agreement.
HISTORY OF THE CASE
In 1998, Coatesville announced that it would accept bids for the acquisition of its waterworks system, stating that the bid had to include free fire hydrant service to Coatesville, in perpetuity, as a non-negotiable term.2 Suburban Water, a putative bidder, sought a declaratory order from the PUC on the question of whether Coatesville‘s non-negotiable bid term was lawful under the Public Utility Code. The PUC heard the case and on October 1, 1999, entered an order that did not directly address the validity of the bid term. Instead, it simply recited the law, stating that: (1) the acquisition of Coatesville‘s water system must be reviewed and approved by the PUC, and (2) the utility chosen as purchaser must “charge rates that are consistent with its approved tariff rate.”
On February 9, 2000, having been selected as the winning bidder, Pennsylvania-American submitted an application to the PUC requesting approval of the proposed acquisition. Attached to its application was the Agreement, which provided that Pennsylvania-American would pay Coatesville $37,000,000 for its water system and, inter alia, would give Coatesville free fire hydrant service in perpetuity (Free Service Covenant). In response, protests were filed by the Office of Consumer Advocate (OCA), the Office of Trial Staff (OTS) and Suburban Water. All protestants asserted that the Free Service Covenant violated the Public Utility Code as well as the PUC‘s October 1, 1999 declaratory order. Hearings were conducted on Pennsylvania-American‘s application and the protests it generated.
On January 19, 2001, the Administrative Law Judge, Louis G. Cocheres (ALJ), issued an Initial Decision recommending that Pennsylvania-American‘s acquisition of the Coatesville waterworks system be approved, subject to certain amendments to the Agreement. Specifically, he recommended deletion of both the Free Service Covenant and the Amendment for the reason that they violated the Public Utility Code. The ALJ concluded that the Amendment did not cure the deficiencies of the Free Service Covenant, reasoning as follows:
[T]he City is still receiving free hydrant service. And free hydrant service continues to contradict PAWC‘s tariff and the Declaratory Order. Any attempt by PAWC to characterize the changes set forth in the Amendment as a “charge and contribution” format is nothing more than an untenable form over substance argument.
R.R. 288a.
Pennsylvania-American and Coatesville filed exceptions to the ALJ‘s Initial Decision, and Suburban Water responded to them. On February 13, 2001, the Commissioners, in a 4-1 vote, rejected the ALJ‘s recommendation to delete the Amendment and, instead, approved it subject to the establishment of a tracking mechanism designed to ensure that only shareholder funds would be used to make the annual payments to Coatesville‘s Economic Development Fund. Commissioner Terrance J. Fitzpatrick, in dissent, concluded that the Amendment was illegal, noting that the
On September 4, 2001, approximately six months after it sought this Court‘s review of the PUC‘s decision in this case, Suburban Water, along with the Borough of Chalfont (Chalfont), submitted an application to the PUC seeking approval of Suburban Water‘s acquisition of Chalfont‘s water system. As part of this transaction, Suburban Water agreed that it would not charge Chalfont for fire hydrant service for three years, but after this grace period, Suburban Water would charge Chalfont a gradually increasing hydrant service charge until the charge equaled Suburban Water‘s tariff for hydrant service. After a hearing, on October 25, 2001, the PUC approved the transaction between Suburban Water and Chalfont.
Suburban Water seeks to have this Court reverse the PUC‘s approval of the Agreement to the extent it includes either the Free Service Covenant or Amendment. The heart of Suburban Water‘s challenge is that the Amendment violates two provi-
SECTION 1303 OF THE PUBLIC UTILITY CODE
The Amendment was not the first choice of Pennsylvania-American and Coatesville. It was developed to meet the objections of the OTS, the OCA and Suburban Water to the Free Service Covenant. Whether the Amendment has transformed the Agreement from one that violates the Public Utility Code3 into one that satisfies it is the central issue before us. It cannot be resolved without evaluation of the Free Service Covenant, which, if valid, moots the objection to the Amendment.
The Free Service Covenant is one of the several covenants found in Article 3 of the Agreement. In relevant part, the Free Service Covenant provides as follows:
3.4 Special Covenants of PAWC for the Water System
PAWC hereby covenants and agrees to comply with the following special covenants relating to the Water System:
(a) Rates. At Closing, PAWC shall implement, in the area currently served by the Water System, CCA‘s water rates then in effect as of December 16, 1999. PAWC shall freeze said rates for a minimum of three (3) years following Closing during which time no other rates shall be charged in the area served by the Water System. PAWC shall have the option, at any time, to charge rates lower than CCA‘s water rates in effect as of December 16, 1999.
Nothing in this Section shall prevent PAWC from applying its rules and regulations regarding conditions of service after Closing.
(b) Municipal Service Credit. PAWC shall provide the City a one-time Ten Thousand Dollar ($10,000) credit for future water service.
The City shall not, at any time, be required to pay charges for public fire hydrants.
Agreement, Art. 3, Section 3.4 (emphasis added). R.R. 65a. Pennsylvania-American‘s approved tariff includes a charge for “public fire hydrants,”4 from which the “City,” Coatesville, is excused. Indeed, it is excused from any future revision to the present charge.
No public utility shall, directly or indirectly, by any device whatsoever, or in anywise, demand or receive from any person, corporation, or municipal corporation a greater or less rate for any service rendered or to be rendered by such public utility than that specified in the tariffs of such public utility applicable thereto. The rates specified in such tariffs shall be the lawful rates of such public utility until changed, as provided in this part. Any public utility, having more than one rate applicable to service rendered to a patron, shall, after notice of service conditions, compute bills under the rate most advantageous to the patron.
Under the Free Service Covenant, Pennsylvania-American (a “public utility“) “will receive” from Coatesville (a “municipal corporation“), a “less rate” for its fire hydrant “service” than that “specified in the tariffs of such public utility....”
Free public utility service has been examined by our appellate courts and found to be anathema to a system of regulation and publication of a utility‘s tariffs. In American Aniline Products, Inc. v. City of Lock Haven, 288 Pa. 420, 425, 135 A. 726, 727 (1927), our Supreme Court determined that a city‘s agreement to provide free water service in order to induce an industry to locate within its boundaries “is discrimination against other users and void against public policy,” reasoning that “[t]he discriminatory engagements of both [the municipal utility and the customer] are prohibited as matters of public policy for reasons so frequently stated we need not repeat them here.” In Wayne Sewerage Co. v. Fronefield, 76 Pa. Superior Ct. 491 (1921), certain landowners claimed the right to discharge their sewage into the utility‘s system free of charge because of easements granted to the utility by the landowners or their predecessors. The Superior Court held that landowners had to pay the utility‘s scheduled rates because “[f]ree use of public service by certain favored persons cannot be permitted under any form, whether deed, contract, ordinance, agreement, or otherwise.” Id. at 499. In Scranton Electric Co. v. School District of Borough of Avoca, 155 Pa. Super. 270, 37 A.2d 725 (1944), a borough ordinance granted a utility the right to use the borough‘s streets in exchange for free electrical service to the borough and the schools. The Superior Court found that regardless of the source of the alleged rights, which the school district claimed was an oral, “tripartite contract,” the grant of free service was unlawful. Finally, in Henshaw v. Fayette Gas Co., 105 Pa. Super. 564, 161 A. 896 (1932), the Superior Court rejected a contractual arrangement by which a utility had agreed to provide free utility service in exchange for a right-of-way. The Court held that the purpose of the Public Service Company Law5 was
Coatesville argues that as a municipality, it should be free to accept payment for its water system6 in the form of free hydrant service. This claim is defeated by the above-discussed precedent. The fact that it is a municipality that asserts a contract right to free utility service, as opposed to a private individual or enterprise, does not authorize a tariff deviation. Scranton Electric Co., 37 A.2d at 727. Further, the fact that the tariff deviation is claimed to be a payment for an asset, such as in this case, or for the grant of an easement, does not sanction the deviation. Henshaw, 161 A. at 898.
In light of the language of
NOW THEREFORE, CCA and PAWC agree to amend Section 3.4(b) of the Agreement as follows:
(b) Municipal Service Credit and Contribution.
PAWC shall provide the City a one-time Ten Thousand Dollar ($10,000) credit for future water service.
Upon the effective date of the new tariff rates for public fire hydrant service applicable to the City, PAWC shall issue bills to the City for public fire hydrant service and collect amounts owed in accordance with PAWC‘s effective tariff. The City shall pay those charges for public fire hydrant service. In each year that the City makes payments for public fire service, PAWC shall make a contribution equal in amount to the public fire service payments during that year, to the City‘s Economic Development Fund. PAWC agrees not to seek recovery of the contributions to the City‘s Economic Development Fund in any future base rate case.
All other terms and provisions of the Agreement shall continue in full force and effect.
R.R. 197a. The PUC‘s approval of the Stipulation and Amendment included the following proviso:
4. That Pennsylvania-American Water Company shall file an annual tracking report with the Commission which details the accounting treatment of its annual payments to the City of Coatesville Economic Development Fund.
Opinion and Order of February 8, 2001 at 28.
The question for this Court is whether the Stipulation, the heart of which is the Amendment to the Agreement, and the tracking report ordered by the PUC, taken together, overcome the deficiency in
We return to the language of
The Pennsylvania General Assembly did not invent the language of
That if any common carrier subject to the provisions of this act shall, directly or indirectly, by any special rate, rebate, drawback, or other device, charge, demand, collect, or receive from any person or persons a greater or less compensation for any service rendered, or to be rendered, in the transportation of passengers or property, subject to the provisions of this act, than it charges, demands, collects or receives from any other person or persons for doing for him or them a like and contemporaneous service in the transportation of a like kind of traffic under substantially similar circumstances and conditions, such common carrier shall be deemed guilty of unjust discrimination, which is hereby prohibited and declared to be unlawful.
24 Stat. 379 (1887) (emphasis added). Although renamed and amended multiple times, the essential provisions of the Act of 1887, including the requirement that carriers adhere to published tariffs, have been retained and remain effective. Rene Sacasas, The Filed Rate Doctrine: Casualty or Survivor of Deregulation? 29 DUQ. L.REV. 1, 6 (1990).
Courts have applied Section 2 of the Act of 1887 strictly.11 In New York, New Haven & Hartford Railroad Co. v. Interstate Commerce Commission, 200 U.S. 361, 391, 26 S.Ct. 272, 50 L.Ed. 515 (1906), one of the early Section 2 decisions,12 the U.S.
[T]he rate of the carrier duly filed is the only lawful charge. Deviation from it is not permitted upon any pretext. Shippers and travelers are charged with notice of it, and they as well as the carrier must abide by it.... Ignorance or misquotation of rates is not an excuse for paying or charging either less or more than the rate filed. The rule is undeniably strict, and it obviously may work hardship in some cases, but it embodies the policy which has been adopted by Congress in the regulation of interstate commerce in order to prevent unjust discrimination.
Louisville & Nashville Railroad Co. v. Maxwell, 237 U.S. 94, 97, 35 S.Ct. 494, 59 L.Ed. 853 (1915) (emphasis added). Accordingly, the U.S. Supreme Court held that a passenger who was misquoted the price of a railroad ticket by the ticket agent could be compelled to pay the higher tariff rate filed by the railroad. The reason for the strict rule has been recently explained by the Supreme Court:
While the filed rate doctrine may seem harsh in some circumstances, its strict application is necessary to “prevent carriers from intentionally ‘misquoting’ rates to shippers as a means of offering them rebates or discounts,” the very evil the filing requirement seeks to prevent. Regardless of the carrier‘s-motive whether it seeks to benefit or harm a particular customer the policy of non-discriminatory rates is violated when similarly situated customers pay different rates for the same services.
American Telephone & Telegraph Co. v. Central Office Telephone, Inc., 524 U.S. 214, 223, 118 S.Ct. 1956, 141 L.Ed.2d 222 (1998) (citations omitted).
Intolerance for utility tariff deviation has been expressed with equal force by Pennsylvania‘s appellate courts and on numerous occasions. In Leiper v. Baltimore & Philadelphia Railroad Co., 262 Pa. 328, 105.A. 551 (1918), our Supreme Court acknowledged the debt owed by the Pennsylvania General Assembly to Congress for Pennsylvania‘s scheme of utility regulation.13 Indeed, the Court stated that the U.S. Supreme Court‘s description of the Act of 1887 as securing equality of rates by destroying favoritism, rebates and preferences “applies with equal force to the language of the act of 1913.” Leiper, 262 Pa.
Pennsylvania appellate courts have held firmly to the principles Leiper established. In Borough of Dormont v. South Pittsburgh Water Co., 322 Pa. 60, 62, 185 A. 263, 264 (1936) in a per curiam opinion, our Supreme Court refused to allow a municipality to assert its contract right to fixed hydrant service rates for 20 years, in avoidance of intervening rate increases, even though the 1912 contract providing for those rates preceded the enactment of the Public Service Company Law in 1913. The excuse of mistake or misquote does not suffice to avoid a tariff. Accordingly, in West Penn Power Co. v. Nationwide Mutual Insurance Co., 209 Pa.Super. 509, 228 A.2d 218 (1967), Nationwide, which had been erroneously underbilled for electrical service, was required to make up the difference. The form of agreement is of no moment in attempting to bypass a scheduled tariff. In Bell Telephone Co. v. Pennsylvania Public Utility Commission, 53 Pa.Cmwlth. 241, 417 A.2d 827, 829 (1980), this Court reinforced West Penn Power, noting that “the nature or form of the contract could not affect the Commission‘s power to change its terms by imposing new rates.”
The object of the General Assembly in choosing language almost identical to Section 2 of the Act of 1887 is clear: it sought to prevent “secret departures” from a scheduled tariff. The language “indirectly, by any device, or in anywise” must be given effect. It is the very complexity15 of the Amendment and the Stipulation that mark the arrangement as an unlawful “device.”16 The Amendment will in “anywise” do “indirectly”17 what the
Pennsylvania-American and the PUC argue that the PUC has the authority to allow tariff deviation where it is in the public interest. Administrative agencies do not have the authority to order a regulated company to change lawful conduct on the theory that it is in the best interest of their customers. Aetna Casualty and Surety Insurance Co. v. Insurance Department, 536 Pa. 105, 638 A.2d 194 (1994). The corollary is equally true; an agency cannot waive a mandate of statute because it is in the public interest. In Pennsylvania Electric Co., 663 A.2d at 284-285, we specifically held that the PUC lacks the authority to waive a tariff eligibility requirement for the stated reason that it would advance the “public interest.” Indeed, a statutory command defines the public interest,18 and an administrative agency established to enforce that statutory command simply lacks the authority to issue countermand orders. It is for the General Assembly, and not for utilities, their customers or even the PUC, to decide whether free fire hydrant service is appropriate in circumstances such as these.
The PUC, in its adjudication, defended its approval of the Amendment by stating that it could only accept the ALJ‘s reasoning were it to find the arrangement “unlawful per se.”19 The financial strength of Pennsylvania-American‘s shareholder, American Water Works Company, Inc., a publicly-traded company with capitalization of $4.1 billion, led the PUC to conclude that Pennsylvania-American could bear the obligation to make eternal donations to the Coatesville Economic Development Fund. On appeal, the PUC offers only a conclusory argument to support its adjudication: “the contribution by PAWC‘s sole shareholder and parent company, American Water Works Company, Inc., to the City‘s Economic Development Fund, is not violative of the Public Utility Code.” Respondent Brief at 14. The PUC does not parse or explain
First, it is Pennsylvania-American, not its shareholder, that has the contractual obligation to make payments to the Coatesville Economic Development Fund. American Water is not a party to the Agreement. If the payments are not made, Coatesville can seek contract remedies only from Pennsylvania-American.
Second, the funds used to make the “contributions” are those of Pennsylvania-
Third, the financial might of American Water is nearly meaningless. The events of this year have shown that public companies have feet of clay, but more importantly, American Water is free to sell Pennsylvania-American for any reason or no reason. There is no basis for the PUC‘s confidence that American Water will be around in perpetuity21 to support Pennsylvania-American‘s obligation
Pennsylvania-American contends that if we do not affirm the PUC, we sound the death knell for charitable donations by utilities. It argues from a false premise. Pennsylvania-American‘s payments to the Coatesville Economic Development Fund are not donations but, rather, contractual obligations. We sound the death knell only for pretextual “donations”22 that are, in actuality, rebates.23
We are not unmindful of or unsympathetic to the economic plight of Coatesville. As a matter of course, it needed to consider the cost of future fire hydrant service, which was free so long as it owned the water system, when it developed its sales price. The transaction could have been structured to accomplish Coatesville‘s budgetary needs in a way that complied with the
Section 3.4(b) of the Agreement, in both its original and amended form, violates
SECTION 1304 OF THE PUBLIC UTILITY CODE
Suburban Water challenges the PUC‘s approval of the Amendment on the additional theory that the Amendment violates the statutory prohibition against a utility giving an “unreasonable preference” to one customer while subjecting another to an “unreasonable disadvantage.” Pennsylvania-American notes, correctly, that it is Suburban Water‘s burden to show the arrangement “unreasonably preferential.” It further argues that before a preference can be found unreasonable, the advantage to one service class must be balanced against the injury to another and the injury found to outweigh the benefit. Under any analytical approach, Section 3.4(b) of the Agreement gives an unreasonable preference to Coatesville. It cannot be justified by or even related to Pennsylvania-American‘s costs to deliver fire hydrant service to Coatesville.
No public utility shall, as to rates, make or grant any unreasonable preference or advantage to any person, corporation, or municipal corporation, or subject any person, corporation, or municipal corporation to any unreasonable prejudice or disadvantage. No public utility shall establish or maintain any unreasonable difference as to rates, either as between localities or as between classes of service.
* * *
No rate charged by a municipality for any public utility service rendered or furnished beyond its corporate limits shall be considered unjustly discriminatory solely by reason of the fact that a different rate is charged for a similar service within its corporate limits.
That it shall be unlawful for any common carrier subject to the provisions of this act to make or give any undue or unreasonable preference or advantage to any particular person, company, firm,
corporation, or locality, or any particular description of traffic, in any respect whatsoever, or to subject any particular person, company, firm, corporation, or locality, or any particular description of traffic, to any undue or unreasonable prejudice or disadvantage in any respect whatsoever.
24 Stat. 379 (1887).27 Section 3 of the Act of 1887 was intended to recognize differences in classes of service; Congress did not seek to establish a system of “equal mileage rates.” Stated otherwise, the Act of 1887 did not seek to end discrimination in any form, but it did seek to regulate the “relative differences between local and through rates upon a just and equitable basis.” CULLOM COMMITTEE REPORT OF 1886, S. REP NO. 46, at 176.
One of the first cases to consider the meaning of “undue or unreasonable preference” in Section 3 of the Act of 1887 was Interstate Commerce Commission v. Baltimore & Ohio Railroad Co., 145 U.S. 263, 12 S.Ct. 844, 36 L.Ed. 699 (1892). The Commission, upon complaint of a competitor railroad, ordered the Baltimore & Ohio to terminate the sale of “party rate” tickets, which allowed a group of ten or more persons to travel on a single ticket at a lower price than if ten individual tickets were purchased. The Commission held that the discount was an unreasonable preference, and the U.S. Supreme Court reversed. The Court did an exhaustive review of the longstanding practice of giving reduced rates for increased mileage, which was recognized to be a valid form of competition between railroads. It also considered discounts for “frequent” travelers, the 1,000-mile ticket and other means by which railroads sought to increase their traffic. The Court concluded that as long as an increase in business more than made up for the per capita reduction in charge, the reduction was reasonable and in the interests of both the carrier and the public. Further, as long as one party of ten was treated the same as another party of ten, there was no “undue preference.” Baltimore & Ohio, 145 U.S. at 284, 12 S.Ct. 844.
Suburban Water contends that the Free Service Covenant and the Amendment establish an unreasonable preference for Coatesville, which, alone among Pennsylvania-American‘s municipal customers, will receive hydrant service for effectively no charge. In response, Pennsylvania-American argues that consideration of what is “reasonable” depends on the facts and circumstances of each case, and that this Court should in any case, defer to the exercise of the PUC‘s discretion in evaluating whether a rate differential is unreasonable.
Our appellate courts have followed the approach of the U.S. Supreme Court in Baltimore & Ohio. Mere variation in rates among classes of customers does not per se create an intolerable preference. Building Owners and Managers Association v. Pennsylvania Public Utility Commission, 79 Pa.Cmwlth. 598, 470 A.2d 1092 (1984). Different rates may be charged to customers that receive a different type, grade or class of service. Carpenter v. Pennsylvania Public Utility Commission, 141 Pa.Super. 447, 15 A.2d 473 (1940). However, if the total sum demanded of one customer is illegally high and illegally low for another, there is rate discrimination. Allegheny Ludlum Corp. v. Pennsylvania Public Utility Commission, 149 Pa. Cmwlth. 106, 612 A.2d 604 (1992). Rate
It is true that rate-making questions require the exercise of the PUC‘s expertise, and we tend to defer to the PUC‘s exercise of discretion in this area. Sharon Steel Corp. v. Pennsylvania Public Utility Commission, 447 A.2d 860 (1983) (wherein we affirmed a classification system that used risk and graduation criteria). However, this Court reviews the PUC‘s exercise of discretion and will reverse where appropriate. In Barasch v. Pennsylvania Public Utility Commission, 111 Pa.Cmwlth. 339, 533 A.2d 1108 (1987), for example, we refused to allow a rate classification that would impose a surcharge to customers living outside Emmaus to fund improvements to telephone service within Emmaus, which was receiving sub-standard service. We found that it would be unreasonable to make non-Emmaus customers bear the burden of the utility‘s inadequate service to Emmaus customers.
In sum, in order for a rate differential to survive a challenge brought under
Pennsylvania-American‘s tariff does not express a rate preference for Coatesville. It does not state, for example, that municipalities with nothing to sell must pay a higher rate for fire hydrant service than municipalities blessed with an asset sold to Pennsylvania-American. It is not that the Amendment satisfies
This is a deviation case, not a case where the tariff30 itself provides an undue preference for class at the expense of another. The Amendment, not Pennsylvania-American‘s tariff, established a rate differential based upon the personal identity of the customer, which is indefensible discrimination. See, e.g., Wight, 167 U.S. at 517-518; Leiper, 262 Pa. at 336, 105 A. at 554. Although Pennsylvania-American‘s tariff does not violate
JUDICIAL ESTOPPEL
The PUC argues that Suburban Water should be barred from bringing a challenge to free utility service because of its agreement with Chalfont, which requires a temporary freeze of Chalfont‘s rates for existing hydrant service. Suburban Water‘s acquisition of Chalfont was approved in a proceeding before the PUC subsequent to the instant proceeding. Thus, the PUC contends that it would violate the doctrine of judicial estoppel to permit Suburban Water to challenge free utility service in this proceeding. We disagree.
As a general proposition, a litigant is estopped from assuming a position inconsistent with his position in a previous action, if the litigant was successful in that contention. Associated Hospital Service v. Pustilnik, 497 Pa. 221, 227, 439 A.2d 1149, 1151 (1981). To be successful, the court in the prior proceeding must have been persuaded to accept the litigant‘s position; in other words, the position must be litigated to conclusion. It will not be applied where the other proceeding has terminated in a settlement. Id. The purpose of the doctrine is to uphold the integrity of the courts by preventing litigants from changing positions as the moment requires. Trowbridge v. Scranton Artificial Limb Co., 560 Pa. 640, 645, 747 A.2d 862, 865 (2000); Koschak v. Redevelopment Authority of Wilkes-Barre, 758 A.2d 291, 293 (Pa.Cmwlth.2000). However, for the doctrine to apply, the issues and the parties have to be the same, and the inconsistent positions must be asserted in the same or subsequent phase of the same proceeding or in a subsequent proceeding involving the same parties. Little v. State Employes’ Retirement Board, 760 A.2d 488, 491 (Pa.Cmwlth.2000).
Moreover, judicial estoppel only bars a party from taking a position inconsistent with its earlier position in a previous action if its contention was successfully maintained. Associated Hospital Service, 497 Pa. at 227, 439 A.2d at 1151. Here, Suburban Water‘s position in the Coatesville proceeding was not successful; thus, the doctrine does not apply. Indeed, to remain competitive, Suburban Water had no choice in its business dealings with Chalfont but to follow the PUC‘s interpretation of
Because of the difference in parties31 and the difference in the two proceedings, we find little merit in the PUC‘s contention32 that Suburban Water is barred by the doctrine of judicial estoppel from challenging the PUC‘s approval of the Amendment. The transaction with Chalfont was developed long after Suburban Water appealed the PUC‘s determination. Suburban Water was not required to become non-competitive while it prosecuted this appeal.
CONCLUSION
In its request for proposal, Coatesville stated that the successful bidder had to make “whatever arrangements necessary to waive or pay these charges on behalf of the City.” Pennsylvania-American honored this demand by structuring the payment of Coatesville‘s fire hydrant service charge as a contribution to a special fund of the City. However, the law does not permit such an arrangement for relieving Coatesville of the obligation to pay Pennsylvania-American‘s scheduled tariff amount for fire hydrant service.
Accordingly, we reverse the PUC.
ORDER
AND NOW, this 21st day of October, 2002 the Decision and Order of the Pennsylvania Public Utility Commission in the above-captioned proceeding is reversed with respect to approval of Section 3.4(b) of the Asset Purchase Agreement as originally proposed or as amended.
DISSENTING OPINION BY Judge PELLEGRINI.
I respectfully dissent from the majority decision because this case does not involve tariff violations, but only a business decision by Pennsylvania-American Water Company affecting its shareholders.
Following hearings before an Administrative Law Judge (ALJ), PAWC and Coatesville amended the Agreement by deleting the free service covenant and replacing it with a new provision in which PAWC agreed to bill Coatesville for the fire hydrant service and Coatesville agreed to pay PAWC the invoiced amount. Further, PAWC agreed to make an annual contribution to the Coatesville Economic Development Fund in an amount equal to Coatesville‘s annual charge for fire hydrant service. PAWC agreed to use shareholder funds rather than ratepayer funds to make these contributions. The ALJ issued a decision recommending the approval of PAWC‘s acquisition but with the stipulation that the free service covenant and the amendment be deleted because they violated the Code as PAWC would be receiving free fire hydrant service. PAWC and Coatesville filed exceptions to the ALJ‘s decision. Finding that the use of shareholder funds as a below-the-line item to consummate the acquisition was not without precedent and was not improper under the Code, the PUC rejected the ALJ‘s recommendation and approved the amendment to the Agreement subject to the establishment of a tracking mechanism to ensure that only shareholder funds were used to make the annual payments. Suburban Water then appealed, requesting this Court to reverse the PUC‘s approval of the Agreement allowing for the free fire hydrant service because it violates the Code.
The majority agrees with Suburban Water and reverses the PUC, concluding that the Agreement violates
Although
Accordingly, because I agree with the PUC that the Agreement as amended does not violate the Code, I would affirm the PUC‘s decision.
Judge SMITH-RIBNER joins in this dissenting opinion.
Notes
FIRE HYDRANT FEES
It has been decided that the Non-negotiable Term for free fire hydrant services for the City in perpetuity remains a requirement. The City will never pay any such fees. The successful Proposer will be required to make whatever arrangements necessary to waive or pay these charges on behalf of the City. Proposals may not be conditioned upon PUC approval of this requirement. Reproduced Record 22a (R.R. ___) (emphasis added).
The Baltimore & Ohio, which had its siding across town, offered to ship the beer to the wholesaler‘s warehouse from Cincinnati for the same charge; it intended to accomplish this by paying for local hauling to the warehouse. After discussion, the wholesaler agreed to haul his own beer for three and one-half cents per hundred pounds. Accordingly, the wholesaler paid the Baltimore & Ohio fifteen cents for moving his beer from Cincinnati to Pittsburgh, and then received three and one-half cents from the Baltimore & Ohio for delivering his own beer to his warehouse. The Court observed as follows:
Id. at 517-518, 17 S.Ct. 822 (emphasis added).It is true, he formally paid 15 cents, but he received a rebate of 3 1/2 cents; and regard must always be had to the substance, and not to the form. Indeed, the section itself forbids the carrier, “directly or indirectly by any special rate, rebate, drawback or other device,” to charge, demand, collect, or receive from any person or persons a greater or less compensation, etc. And section 6 of the act...throws light upon the intent of the statute; for it requires the common carrier, in publishing schedules, to “state separately the te”
The Wight holding has application here. Coatesville will pay the hydrant service charge, but it will receive a rebate in the form of a “contribution” to the Coatesville Economic Development Fund. It is an arrangement that violates the scheduled tariff of Pennsylvania-American. The argument to the contrary exalts form over substance, as noted by the ALJ in his Initial Decision. The U.S. Supreme Court reasoned in Wight that, “regard must always be had to the substance, and not to the form.” Id. at 517-518, 17 S.Ct. 822.
As with Section 2 of the Act of 1887, there is a paucity of case law on Section 1303‘s prohibition against tariff deviation. The explanation may lie in the clarity of the statutory command. As observed by our Supreme Court, the “principles governing a case of this nature are too well settled to require discussion.” Borough of Dormont v. South Pittsburgh Water Co., 322 Pa. 60, 62, 185 A. 263 (1936).
State v. Pielsticker, 118 Neb. 419, 225 N.W. 51, 52 (1929). In Amicable Life Insurance Co. v. O‘Reilly, 97 S.W.2d 246, 249 (Tex.Civ.App. 1936), the Texas Supreme Court noted that “indirectly” cannot be treated as surplusage; this word must be given its meaning in the adjudicated case. Here, Pennsylvania-American seeks to do by an obscure circuitous method, i.e., the Amendment, that which it cannot do directly, i.e., the Free Service Covenant.“Indirectly” signifies the doing by an obscure circuitous method something which is prohibited from being done directly, and includes all methods of doing the things prohibited except the direct one. Farmers’ State Bank v. Mincher (Tex. Civ.App.) 267 S.W. 996.
Israel, 356 Pa. at 406, 52 A.2d at 321.The argument that a violation of law can be a benefit to the public is without merit. When the Legislature declares certain conduct to be unlawful it is tantamount in law to calling it injurious to the public. For one to continue such unlawful conduct constitutes irreparable injury.
[E]very public utility shall file with the commission, within such time and in such form as the commission may designate, tariffs showing all rates established by it and collected or enforced, or to be collected or enforced, within the jurisdiction of the commission.... Every public utility shall keep copies of such tariffs open to public inspection under such rules and regulations as the commission may prescribe. One copy of any rate filing shall be made available, at a convenient location and for a reasonable length of time within each of the utilities’ service areas, for inspection and study by customers, upon request to the utility.