In re Begley

• Decision Date: 28 September 1984
• Docket Number: Adv. No. 83-3102K.,Civ. A. No. 83-4657,Bankruptcy No. 82-02461K
• Citation: 46 BR 707
• Parties: In re Josephine and Daniel BEGLEY. Josephine and Daniel BEGLEY, et al. v. PHILADELPHIA ELECTRIC COMPANY, Pennsylvania Public Utility Commission, et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

46 B.R. 707 (1984)

In re Josephine and Daniel BEGLEY Josephine and Daniel BEGLEY, et al. v. PHILADELPHIA ELECTRIC COMPANY, Pennsylvania Public Utility Commission, et al.

Civ. A. No. 83-4657, Bankruptcy No. 82-02461K, Adv. No. 83-3102K.

United States District Court, E.D. Pennsylvania.

September 28, 1984.

Michael Donahue, Delaware County Legal Assistance Assn., Chester, Pa., for plaintiffs.

Kevin W. Gibson, Philadelphia, Pa., for defendant Philadelphia Elec. Co.

Alphonso Arnold, Jr., Asst. Counsel, Pennsylvania Public Utility Com'n, Harrisburg, Pa., for Pennsylvania Public Utility Com'n.

MEMORANDUM

LOUIS H. POLLAK, Judge.

I. INTRODUCTION

As explained more fully below, the regulations of the Pennsylvania Public Utility Commission ("PUC") impose certain obligations upon a public utility which seeks to terminate a residential utility customer because the customer has not paid his or her utility bills. Among these obligations is a requirement that the utility use its "good faith and fair judgment in attempting to enter a reasonable settlement or payment agreement. . . ." 52 Pa.Admin.Code § 56.97(b) (Shepard's 1983). Thus, a Pennsylvania utility will usually not terminate a residential customer without making an effort to negotiate an agreement whereby the customer remains current on future utility bills and makes regular payments toward retiring his or her arrearage.

The PUC has an administrative procedure initiated by an "informal complaint" through which a customer who feels that a utility has not met its obligation to negotiate a payment agreement may seek to enforce the utility's obligation. However, since 1981 the PUC has held itself powerless to enforce the negotiation obligation through its informal complaint procedure when the utility customer has filed a petition in bankruptcy. The PUC has ruled that section 366 of the Bankruptcy Code¹ preempts its jurisdiction.

Plaintiffs here—Josephine and Daniel Begley²—have filed petitions under Chapter 7 of the Bankruptcy Code, 11 U.S.C. §§ 701-766. They have also accumulated arrearages in their payment for service from the Philadelphia Electric Company ("PECO") received after the date of their bankruptcy petition. PECO sought to terminate the Begleys' service without negotiating a payment agreement. The Begleys contested that termination by attempting to file an informal complaint with the PUC. The PUC, however, declined to act because the Begleys had filed under Chapter 7. Consequently, the Begleys commenced this action in the bankruptcy court challenging (1) PECO's position that it had no obligation to negotiate a payment agreement with them and (2) the PUC's position that the PUC could not exercise jurisdiction to enforce any obligation that the PUC's regulations imposed on PECO to negotiate such an agreement.

On April 11, 1984, I withdrew the reference of this matter from the bankruptcy court. As this case involves purely legal issues, the parties renewed in this court cross-motions for summary judgment filed in the bankruptcy court. I heard argument on the cross-motions for summary judgment on June 1, 1984. On that date I announced from the bench that I disagreed with the PUC's view of the preemptive effect of section 366. In a Memorandum dated June 11, I explained my decision on the preemption question; in an accompanying Order I granted declaratory and injunctive relief against PECO.³ However, I reserved two questions for disposition after further submissions by the parties. I first reserved the question whether the PUC's refusal to exercise its jurisdiction constituted a violation of the Bankruptcy Code's antidiscrimination provision, 11 U.S.C. § 525. I also reserved the question of the relief that I should properly grant against the PUC⁴ in light of the Eleventh Amendment and my conclusion on the reserved section 525 issue.

A. Amortized Payment Agreements

The Pennsylvania Public Utilities Code imposes two general restrictions upon a utility's right to terminate residential service. First, a utility may not terminate service on certain days of the week or on certain holidays. 66 Pa.Cons.Stat.Ann. § 1503(a) (Purdon 1979). Second, "the commission shall not authorize . . . a public utility to discontinue . . . for non-payment of charges or for any other reason, the rendering of service without personally contacting the customer. . . ." Id., § 1503(b). The PUC has authority to supplement these statutory provisions with "regulations and orders" restricting the utility's ability to terminate service. See Id., § 1501.

The PUC has promulgated regulations concerning the provision and termination of service to residential utility customers. 52 Pa.Admin.Code chap. 56 (Shepard's 1983). These regulations prescribe limited situations in which a utility may terminate service. 52 Pa.Admin.Code § 56.81 (Shepard's 1983). A utility may, for example, terminate service for "non-payment of an undisputed delinquent account" or for "failure to comply with the material terms of a settlement or payment agreement." 52 Pa. Admin.Code § 56.81(1), (5) (Shepard's 1983).

Such a termination must, of course, comply with the Public Utilities Code's notice requirement. 66 Pa.Cons.Stat.Ann. § 1503(b) (Purdon 1979). The PUC has elaborated upon this requirement. 52 Pa. Admin.Code §§ 56.91-56.100 (Shepard's 1983). In particular, section 56.97(b) imposes upon the utility a duty to negotiate a payment agreement in the event that a customer communicates with the utility after receiving notice of impending termination. Section 56.97(b) provides:

The utility, through its employes, shall exerise sic good faith and fair judgment in attempting to enter a reasonable settlement or payment agreement or otherwise equitably to resolve the matter. Factors to be taken into account when attempting to enter a reasonable settlement or payment agreement shall include but not be limited to the size of the unpaid balance, the ability of the ratepayer to pay, the payment history of the ratepayer and the length of time over which the bill accumulated.

52 Pa.Admin.Code § 56.97(b) (Shepard's 1983).

If the customer feels that the utility has not exercised good faith in attempting to negotiate a payment agreement, the customer may give notice of a dispute to the utility and the PUC, thereby invoking the PUC's jurisdiction. Upon receipt of a notice of dispute, the utility must stay the termination and must attempt to resolve the dispute without PUC intervention. See 52 Pa.Admin.Code § 56.141 (Shepard's 1983). This obligation includes a requirement that the utility "make a diligent attempt to negotiate a reasonable payment agreement if the ratepayer . . . claims a temporary inability to pay an undisputed bill. . . ." 52 Pa.Admin.Code § 56.151(3) (Shepard's 1983). At the very least, the utility must prepare a report stating the nature of the dispute and the utility's position in regard to the dispute. 52 Pa.Admin. Code §§ 56.151(5), 56.152 (Shepard's 1983).

If the customer remains dissatisfied with the utility's negotiation efforts, the customer may file an informal complaint with the PUC. 52 Pa.Admin.Code § 56.161 (Shepard's 1983). Upon review of the utility's report, and after procedures ranging from informal conferences to more formal evidentiary hearings, the PUC will issue a decision. 52 Pa.Admin.Code § 56.163 (Shepard's 1983). Thus, the PUC may effectively require a utility to enter into an amortized payment agreement with a utility customer before terminating that customer for accumulating an unpaid arrearage.

The amortized payment agreement typically involves an agreement by the customer to remain current on his future utility bills and to pay a certain amount of his arrearage each month. If the customer defaults on a material provision of such an agreement, the utility may give notice and commence the termination procedure once again.

B. The PUC's Preemption Position

The PUC has declined to exercise its jurisdiction to require utilities to negotiate payment agreements with customers who have petitioned for relief under the Bankruptcy Code during the pendency of the customer's bankruptcy case. The PUC even declines to exercise jurisdiction when the utility seeks to terminate the customer on the basis of unpaid bills incurred after the customer filed his bankruptcy petition in a chapter 7 case. It is the latter position which gave rise to this suit. The PUC has based its preemption position upon the language of 11 U.S.C. § 366(b), which the PUC has read as vesting exclusive jurisdiction in the bankruptcy court to require terms for termination of post-petition utility service to a debtor.

The PUC's position was first expressed authoritatively in Anyanwu v. Philadelphia Electric Company, 55 Pa.P.U.C. 221 (1981). Anyanwu involved a dispute between a chapter 13 debtor and PECO over a termination based upon the accumulation of a $1848.77 arrearage after the customer's petition in bankruptcy. The PUC held that:

as provided by § 1471 of Title 28, United States Code, 28 USC § 1471, a United States district court and its bankruptcy court has jurisdiction over all civil proceedings arising under Title 11, and the bankruptcy court has exclusive jurisdiction of all property of the debtor, wherever located, as of the commencement of the proceeding. Thus, the complainant\'s filing of a petition for personal bankruptcy has preempted this commission from establishing any payment schedule with respect to any amounts owed by the complainant to the respondent.

55 Pa.P.U.C. at 222.

The opinion in Anyanwu does not make entirely clear whether the PUC rooted its preemption analysis on section 366(b), a provision of the Bankruptcy Code applying across the board to bankruptcy proceedings generally, or whether the PUC was limiting its attention to chapter 13 bankruptcy. In this litigation, however, the PUC argues that its Anyanwu rule depends on section 366(b) and hence applies to a chapter 7 bankruptcy such as...