Allegheny Ludlum Steel Corp. v. Pennsylvania Public Utility Com'n
| Decision Date | 04 May 1983 |
| Citation | 501 Pa. 71,459 A.2d 1218 |
| Parties | ALLEGHENY LUDLUM STEEL CORPORATION, Appellant, v. PENNSYLVANIA PUBLIC UTILITY COMMISSION and West Penn Power Company, Appellees. |
| Court | Pennsylvania Supreme Court |
Argued March 8, 1983.
Leonard J. Marsico, Stephen A. George, Buchanan Ingersoll, Rodewald, Kyle & Buerger, P.C., Pittsburgh, for appellant.
Charles F. Hoffman, Chief Counsel, Daniel P. Delaney, Deputy Chief Counsel, James P. Melia, Asst. Counsel, Harrisburg, for appellees.
Drew J. Kovalak, Greensburg, for intervenor.
Before ROBERTS, C.J., and NIX, LARSEN, FLAHERTY, McDERMOTT HUTCHINSON and ZAPPALA, JJ. OPINION OF THE COURT
This is an appeal from an order of the Commonwealth Court [1] which upheld the constitutionality of a public-utility rate-setting procedure employed by the Pennsylvania Public Utility Commission (PUC), appellee, in reviewing an increase in electric rates sought by West Penn Power Company (West Penn), appellee. The appellant, Allegheny Ludlum Steel Corporation (Allegheny Ludlum), a large industrial customer of West Penn, challenges, on procedural due process grounds, the statutory and regulatory framework under which the PUC approved an increase in West Penn's rates.
On November 20, 1981, West Penn applied to the PUC for an increase in its 1982 electric rates pursuant to Section 1307 of the Public Utility Code. [2] Section 1307(c) provides for automatic adjustment of rates, in a manner prescribed by the PUC, to reflect fuel cost increases. Accordingly, the PUC has adopted the Energy Cost Rate (ECR) [3] formula to govern automatic adjustment of rates. Allegheny Ludlum filed an objection to the proposed increase, yet on December 18, 1981 the PUC approved the increase, effective January 1, 1982. The meeting at which approval was granted was open to the public, but, although Allegheny Ludlum was provided notice of the proceeding by West Penn, the PUC denied Allegheny Ludlum an opportunity to be heard, in accordance with its policy of allowing the public to observe but not participate in such proceedings.
Allegheny Ludlum contends that, as a constitutional prerequisite to allowance of the rate increase, the PUC had a duty to provide advance notice, access to supplemental data, an opportunity to be heard, and a determination on the record. Specifically, it is asserted that the decisions of this Court in Conestoga National Bank of Lancaster v. Patterson, 442 Pa. 289, 275 A.2d 6 (1971) and Pennsylvania Coal Mining Assn. v. Insurance Department, 471 Pa. 437, 370 A.2d 685 (1977) require nullification of the instant agency action on procedural due process grounds. We disagree.
In Conestoga, where approval by the Department of Banking of an application for the establishment of a branch bank was held to be a judicial determination involving substantial property rights of the applicant, as well as of protesting banks and the surrounding financial community, the Court set forth the applicable principle of procedural due process as follows: 442 Pa. at 296, 275 A.2d at 9. Actions are adjudicatory in character when they culminate in a final determination affecting personal or property rights. See Id. at 298, 275 A.2d at 11. In the present case, Allegheny Ludlum has incurred substantial increases, of approximately $10,000 per day, in rates paid to West Penn. Safeguards are, however, afforded through a subsequent, year-end, automatic proceeding for final determination and adjustment of rate increases allowing full participation by all interested parties, and requiring refunds, with interest, calculated at the prevailing rate, [4] of overpayments in the event previous ECR increases are determined to have been excessive. See Section 1307(e), n. 2 supra; n. 3 supra. These are factors of significance to the procedural due process inquiry. See Pennsylvania Coal, 471 Pa. at 454, 370 A.2d at 694. In contrast, the process held unconstitutional by this Court in Conestoga afforded the protesting banks no opportunity to be heard, either prior or subsequent to the challenged administrative determination, and the determination was not merely provisional, but final.
A preference has been recognized for procedural protections effective prior to governmental action that threatens to deprive citizens of their interests, unless important governmental interests, or the preservation of others' interests, require otherwise. Pennsylvania Coal, 471 Pa. at 451, 370 A.2d at 692. The need for a public utility to receive a fair rate of return on its property to assure its continued financial integrity, necessary to achievement of the important goal of preserving modern, efficient, and dependable public service, consonant with rights of customers, is not to be ignored. The legislature, seeking to balance these competing interests, has authorized the PUC to employ an automatic fuel cost adjustment, the ECR, to maintain a just and reasonable return. In so doing, the legislature has not conferred broad discretion upon the PUC; rather, Section 1307(c) specifically sets forth factors to govern the fuel cost adjustment employed by the PUC. See n. 2, supra. Hence, the instant case is not comparable to that of Pennsylvania Coal, where the administrative agency acted without the equivalent of a legislatively guided formula governing rate increases.
In Pennsylvania Coal, this Court held that coal mining companies, required to carry insurance providing for black lung disease benefits, had an interest in insurance rate-setting proceedings that was entitled to the protection of due process. Under the applicable regulatory scheme, a private organization composed of insurance carriers offering black lung coverage proposed rates, which, after a waiting period of thirty days, were "deemed" approved unless disapproved or modified by the Insurance Commissioner. In holding that coal mining companies were entitled to notice of the proposed rates and an opportunity to present views, in writing, as to reasons the rates should not be deemed into effect, the Court stated that procedural due process protections were to be afforded the coal companies because of the "private" nature of the rate-setting process:
Where proposals by a private party must be reviewed and approved by a regulatory agency before they become effective, there is no unconstitutional delegation. The possibility of an arbitrary disregard of individual interests when the recommendations of a private body are deemed into effect without the specific approval of a public official, however, demands greater procedural protection than due process might otherwise require.
471 Pa. at 451, 370 A.2d at 692 (emphasis added). In the instant case, the challenged rate-setting scheme lacks the "private" character of that held unconstitutional in Pennsylvania Coal; indeed, the PUC must expressly approve ECR increases sought by West Penn.
We reject, therefore, the contention of Allegheny Ludlum that the decisions of this Court in Conestoga and Pennsylvania Coal mandate nullification of the rate-setting procedure in question. In view of the interest of West Penn to be protected, the automatic year-end final determination of rates through which excessive rates paid can be recovered with interest, calculated at the prevailing rate, the notice and full opportunity to be heard accompanying that determination, the specific guidelines restricting the PUC's formulation of the ECR formula, and the absence of a rate-setting process that could be characterized as "deeming" the proposals of "private" interests into effect, we find the instant rate-setting process not to be violative of procedural due process.
Affirmed.
"Procedural fairness and regularity are of the indispensable essence of liberty." Shaughnessy v. United States ex rel. Mezei, 345 U.S. 206, 224, 73 S.Ct. 625, 635, 97 L.Ed. 956 (1963). "It is procedure that spells much of the difference between rule by law and rule by whim or caprice." Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 179, 71 S.Ct. 624, 652, 95 L.Ed. 817 (1951). I believe that the due process clause is not as flimsy an article as is suggested by the majority and would find the procedures employed by the Pennsylvania Public Utility Commission (PUC) for automatically "adjusting" electric rates [1] to be fundamentally deficient in safeguarding the right of an electric utility's customers to be free from deprivation of property without due process of law.
In the instant case, Allegheny Ludlum, appellant, has been deprived of approximately $3.5 million for at least one year by a determination of the PUC rendered in what was, essentially an ex parte proceeding that did not afford appellant an opportunity to present objections in any form, either written or oral. Obviously, the PUC determination was made solely on the basis of the information contained in the papers filed by West Penn Power Company wherein West Penn proposed to increase its rates by some $75 million, [2] although we are informed by the PUC that West Penn's proposal was checked for accuracy by the PUC's Bureau of Audits which prepared an internal report which was, we are further informed, reviewed by the Commissioners before they granted West Penn's increase in full. Of course, in the absence of an on-the-record determination and/or written opinion, it is impossible for this...
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