PUC Regulated Municipal Utilities Don’t Have to Choose Between Liens and the Collection Tools in their PUC-Approved Tariff
December 20, 2019
In a case of first impression, the Commonwealth Court[1] clarified that the use of municipal liens does not preclude a utility from continuing to use other collection tools, such as the application of late payment charges authorized by the utility’s Pennsylvania Public Utility Commission (PUC)-approved tariff.
In an opinion authored by Judge Ceisler, the Commonwealth Court ruled that it was wrong to require Philadelphia Gas Work’s (PGW) to give back years’ worth of late payment fees charged to customers on overdue gas bills that were subject to docketed liens and to pay a fine because PGW had not complied with the PUC’s interpretation of the effect of liens on the PUC’s jurisdiction, first announced in this case.
The Commonwealth Court reversed a PUC decision[2] which concluded that once liens securing payment of delinquent gas bills are docketed against real property in the Philadelphia County Court of Common Pleas, the PUC no longer had jurisdiction over rate issues related to those bills. Based on that conclusion, PUC reasoned that the late fees of 1.5% per month charged by PGW, although authorized as rates under its PUC tariff, no longer could be charged to unpaid gas bills once liens were docketed relating to those bills. If the PUC Order had not been reversed, PGW would have lost millions in uncollected gas bills, which would have increased the rates for remaining customers.
The Commonwealth Court’s decision recognized that a lien is merely an in rem encumbrance on the property at which gas service had been provided, and is not a final judgment on the validity of the claim. Only final judgments can oust the PUC of jurisdiction over a claim over which it otherwise has jurisdiction.
The Court also pointed out that, under the Municipal Claims and Tax Liens Act,[3] a lien arises automatically and is not converted to a judgment merely by its docketing or perfecting it by recording it with Prothonotary (now the Office of Judicial Records in Philadelphia). The Court observed that charges for natural gas are a lien on the relevant property from the time those charges are imposed and that docketing does not change that fact. Therefore, the Court found, “PGW could never impose the late charges the [PUC] has approved in PGW’s tariff, because the lien would always predate any delinquency in payment.” Opinion at 9. The Court’s recognition that a municipal lien is created the moment a customer fails to pay his or her gas bill means that, the PUC’s interpretation would have essentially removed from PUC jurisdiction the vast majority of municipal utility bills, plainly an irrational result. And, as the Commonwealth Court found, one that was wrong as a matter of law.
The Commonwealth Court’s decision will not only benefit PGW but every municipal entity with liening authority that is regulated by the PUC (i.e., PWSA and any municipality providing regulated utility service beyond its corporate borders). In the end though, it will actually benefit the great majority of ratepayers who pay their utility bills on time and in full and will be saved from having to also pay for the increased uncollectibles caused by non-paying customers.
If you have any questions, please contact Dan Clearfield at (717) 237-7173 – dclearfield@eckertseamans.com or Carl Shultz (717-255-3742, cshultz@eckertseamans.com).
This Eckert Seamans Energy and Utilities Blog is intended to keep readers current on matters affecting businesses and is not intended to be legal advice.
[1] Philadelphia Gas Works v. Pennsylvania Public Utility Commission, Commonwealth Court Docket No. 1291 CD 2018, 2019 Pa. Commw. LEXIS 1081, 2019 WL 6690588 (“Opinion”). See also Philadelphia Gas Works v. Pennsylvania Public Utility Commission, Commonwealth Court Docket No. 1404 CD 2018, 2019 Pa. Commw. Unpub. LEXIS 666, 2019 WL 6698103; Philadelphia Gas Works v. Pennsylvania Public Utility Commission, Commonwealth Court Docket No. 1405 CD 2018, 2019 Pa. Commw. Unpub. LEXIS 664, 2019 WL 6698105.
[2] The Opinion reversed the orders of the PUC at PUC Docket Nos. C-2012-2304183 and C-2012-2304324. The related (unpublished) decisions reversed the orders of the PUC at (a) PUC Docket Nos. C-2012-2304167, C-2012-2304215 and C-2012-2304303 and (b) PUC Docket Nos. C-2012-2308454, C-2012-2308462 and C-2012-2308465.
[3] 53 P.S. §§ 7101, et. seq.
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