Philadelphia v. Pennsylvania Public Utility Commission , 449 Pa. 402 ( 1972 )

Dissenting Opinion by

Mr. Justice Pomeroy:

On numerous occasions in the past, this court has recognized that in enacting the Public Utility Code and creating the Public Utility Commission, the legislature sought to eliminate the vagaries and inequities of local utility regulation and to substitute a statewide standardization of all facets of the operation of public utilities, including but not limited to rates, service, installation and safety. Chester County v. Philadelphia Electric, 420 Pa. 422, 218 A. 2d 331 (1966) ; Einhorn v. Philadelphia Electric, 410 Pa. 630, 190 A. 2d 569 (1963); Lansdale Borough v. Philadelphia Electric, 403 Pa. 647, 170 A. 2d 565 (1961); Duquesne Light v. Upper St. Clair, 377 Pa. 323, 105 A. 2d 287 (1954); York Water Co. v. York, 250 Pa. 115, 95 A. 396 (1915). Indeed, by its opinion in Duquesne Light Co. v. Monroeville Borough, 449 Pa. 573, 298 A. 2d 252 (1972), the court again recognizes this purpose. Whether local interference with this policy is expressed in the form of an ordinance or, as in the case at bar, a street occupancy permit, it should not be countenanced. As this Court said in Fogelsville & T. Elec. Co. v. Pennsylvania

P. & L., 271 Pa. 237, 240, 114 A. 822 (1921): “. . . [T]he legislature has the power to determine who shall promulgate and enforce its declared public policy, and, when an agency of the government is selected or created for that purpose, no other body, judicial, executive or municipal, can step in and, by decree, order, ordinance or otherwise, actively enforce the policy to do other acts in relation thereto, except possibly to sustain the legislatively created or designated body.” (Emphasis added.) Today’s holding, by elevating into an inviolable contract obligation a stereotype permit entered into in a different time and setting altogether, paralyzes the exercise of powers bestowed upon the Public Utility Commission by the legislature and erodes the salutary scheme of comprehensive public utility regulation achieved over the last half a century.

The instant dissent is compelled not only out of regard for the above principle, but also because I am unable to agree with the majority’s two main conclusions: (1) that the proportions to be paid in the Broad Street subway project have been both “mutually agreed upon” and “paid” within the meaning of Section 411 (a) of the Public Utility Code, thereby ousting the Commission of jurisdiction to allocate costs; and (2) that even if the Commission has jurisdiction, its order assessing 75 percent of the cost of the project to the City of Philadelphia unconstitutionally abrogates preexisting contract rights. I address these points in turn.

I.

The Jurisdiction of the Public Utility Commission to Allocate Costs

While the jurisdiction of the Public Utility Commission over rail-highway crossings is not unlimited, it is, when it attaches, exclusive. Pittsburgh Railways v.

PUC, 198 Pa. Superior Ct. 415, 423, 182 A. 2d 80 (1962); Bridgwater Borough v. PUC, 181 Pa. Superior Ct. 84, 98, 124 A. 2d 165 (1956). Section 409(a) and (b) of the Public Utility Law of 1937, Act of May 28, 1937, P. L. 1053, art. IV, as amended, 66 P.S. §1179 (a) and (b) provides:

“(a) No public utility, engaged in the transportation of passengers or property, shall, without prior order of the commission, construct its facilities across the facilities of any other such public utility or across any highway at grade or above or below grade, or at the same or different levels; and no highway, without like order, shall be so constructed across the facilities of any such public utility, and, without like order, no such crossing heretofore or hereafter constructed shall be altered, relocated or abolished.

“(b) The commission is hereby vested with exclusive power to appropriate property for any such crossing, and to determine and prescribe, by regulation or order, the points at which, and the manner in which, such crossing may be constructed, altered, relocated or abolished, and the manner and conditions in or under which such crossings shall be maintained, operated, and protected to effectuate the prevention of accidents and the promotion of the safety of the public.”¹ Until 1963, §411 (a) of the same Act, 66 P.S. 1181(a) also provided in pertinent part: “Such compensation [of adjacent property owners for property taken, injured or destroyed in connection with a crossing], as well as the expense of such construction, relocation, alteration, protection, or abolition of any crossing, shall be borne and paid, as hereinafter provided by the public utilities or municipal corporations concerned, or by the Commonwealth, in such proportion as the commission may, after due notice and hearing, determine, unless such proper proportions are mutally agreed upon and paid by the interested parties.”² It will be noted that §409 relates to crossings involving utilities engaged in transportation of passengers or property, and that §411 as above quoted was similarly limited. This limitation reflected the common law rule that no-transportation utilities must relocate solely at their own expense.³ In 1963, §411 (a) was amended to include nontransportation utilities as well, so that the provision quoted immediately above now reads in pertinent part: “Such compensation, as well as the cost of construction, relocation, alteration, protection, or abolition of such crossing, and of facilities at or adjacent to such crossing which are used in any hind of public utility service, shall be borne and paid. . . .” (Emphasis added.) The intervening utility appellants, therefore, are now within the ambit of commission jurisdiction unless they have by agreement taken themselves out of it.

The Commonwealth Court concluded, and a majority of this Court agree, that the proportions to be borne by the parties in this case had been both “mutually agreed upon and paid” within the meaning of Section 411(a), supra> thus depriving the Public Utility Commission of jurisdiction to allocate the costs. The majority rely for this conclusion, as did the court below, on Philadelphia Electric v. Philadelphia, 301 Pa. 291, 152 A. 23 (1930). In that case we had occasion to interpret permits similar to those involved here.⁴ The Electric Company had sued the City in a common law action in trespass to recover the costs of relocating its facilities during the original Broad Street subway construction. We denied recovery, holding inter alia, that the right of plaintiff to occupy the City’s streets as evidenced by the permits rested upon contract , subject only to the police power and could not be repudiated. It is true that our decision in Philadelphia Electric established that the “permits” in question are in fact contracts between the City and the utilities, but it does not follow that that case is controlling here on the question of whether the parties have “agreed upon” the proportions of cost to be respectively borne by them. There are two reasons why Philadelphia Electric does not control.

In the first place, §911 of the Public Utility Law, 66 P.S. §1351, directs that: “No contract or agreement between any public utility and any municipal corporation, shall be valid , unless filed with the Commission at least thirty days prior to its effective date: Provided, That upon notice to the municipal authorities, and the public utility concerned, the commission may, prior to the effective date of such contract or agreement, institute proceedings to determine the reasonableness, legality, or. any other matter affecting the validity thereof. Upon the institution of such proceedings, such contract or agreement shall not be effective until the commission grants its approval thereof: Provided further, That nothing in this section shall be construed to apply to contracts or agreements between any public utility and any municipal corporation which provide only for the furnishing of service at the regularly filed and published tariff rates.” When this section is read in conjunction with §411, it is readily apparent that any prior agreement must receive the imprimatur of the Commission before its jurisdiction relative to cost allocation will be ousted. Because §911 applies to all contracts between a municipality and a utility, not just to those involving some particular area of Commission concern such as crossings or rates, it is of no consequence that the permits in question did not relate particularly or expressly to crossings. When the Commission allocates costs for work done at a rail-highway crossing, it is exercising part of its delegated police power to insure that the work is performed compatibly with the public interest. To allow the parties to agree on the proportions of contribution without Commission approval or veto-power would frustrate this exercise of the police power. Such a view is consistent with our prior holdings that statutory requirements for the execution of contracts are mandatory, not merely directory. Carnegie Natural Gas Co. v. Allegheny County, 406 Pa. 134, 176 A. 2d 630 (1962). In Carnegie, failure of the gas company to file with the Public Service Commission a 1929 contract with the county under a similar provision of The Public Service Company Law⁵ foreclosed recovery based oh the contract some thirty years later. We discerned in §911 a substantial public policy consideration to protect the municipality and its residents from an improvident contract with a utility. In its role as wielder of the police power, the Commission also has a concern to insure that for their customers’ sake, utilities enter into contracts with municipalities which are not improvident as to the utilities. There is consequently no good reason to deny to utilities the right to enforce unfiled contracts, hut to allow, as the instant decision does, such enforcement by municipalities.

I recognize that two of the permits involved in Philadelphia Electric, supra, like all of those involved in the present case, were issued subsequent to enactment of The Public Service Company Law and were thus subject to the same filing requirement referred to in the Carnegie case.⁶ The question of filing, however, was not raised or considered in Philadelphia Electric, nor was the power of the Public Service Commission involved. That decision, therefore, cannot be binding on the appellant Commission or the intervening appellant utilities in the case at bar, and the majority’s reliance on stare decisis is in my view beside the point.

The second factor distinguishing Philadelphia Electric from the case at bar is that in Philadelphia Electric, no crossing was involved. The utility was ordered to relocate its facilities by the City Board of Highway Supervisors, which has jurisdiction over City-owned streets.6 ⁷ Here the case is concerned not with what the Board of Highway Supervisors has directed; for aught that appears, it has directed nothing. This entire case is concerned with crossings, and the Commission, by reason of its statutory jurisdiction over rail-highway crossings, has necessarily been injected as a third party to the proceedings. Unlike Philadelphia Electric, the case at bar does not involve the relocation of utility lines longitudinally laid under or in City streets where no rail-highway crossing is involved. In that situation, where the Commission is not concerned, there is no reason why the permits even today may not be enforced in accordance with their terms. Those terms do not, however, constitute “mutually agreed upon” proportions of crossing relocation costs under the terms of §411(a) of the Public Utility Law.

Even to hold, however, as the majority does, that the occupancy permits constituted “mutual agreement” within the meaning of §411 is not to end the matter, for “[to] deprive the commission of jurisdiction in allocating the cost, the proportions must be paid, as well as be agreed upon; that is, the agreement must be actually carried into effect, pursuant to its terms.” Penna. R.R. v. Public Service Commission, 127 Pa. Superior Ct. 544, 552, 193 Atl. 127, 130 (1937). The Commonwealth Court held, and the majority of this Court apparently agrees, that the proportions had been “paid by the interested parties” pursuant to the preliminary order of the Commission issued May 5, 1969, and that the final order of June 1, 1970 merely directed a 75 percent reimbursement by the City to the utility appellants. This conclusion is untenable because it results in the anomolous situation that when, without hearing or other detailed study, the Commission orders an initial allocation, it thereby divests itself of power 'to direct a permanent, different distribution of costs. This is not .to say, as the majority suggests, that the provision requiring payment is thereby rendering meaningless and the Commission is empowered to allocate costs in all cases as it sees fit. Bather, it interprets Section 411 (a) to cover those situations where payment is made nolitionally by the parties pursuant to their agreement, and not under mandate from the Commission. As that was not the case here, I would hold that the proportions had been neither “paid” nor “mutually agreed upon” within the meaning of the statute.

II.

Power of the Commission to Disregard the Permit Provisions

The court holds that even if the Commission’s jurisdiction to allocate the costs of the present relocations has not been prevented from attaching by the. street occupancy permits, the Commission’s power is circumscribed by the provisions of those permits and our previous decision in the Philadelphia Electric case, mpra, wherein we recognized their contractual nature; specifically, as I read the majority opinion, any allocation different from that contained in the street occupancy permits would constitute an abrogation of preexisting contract rights.

As previously indicated, it is a fair interpretation of the permits that they do not even cover the instant situation; i.e., they were meant to apply to situations where the City is in sole control of changes ordered by it as a public project, and not to situations where the State, acting through the Commission, has preempted the field. Assuming m-guendo, however, the applica: bility of the permits to the crossings which are involved in the case at bar, repeated pronouncements of this and other courts have long recognized the supremacy of the State’s police power over streets. As we said long ago in Scranton Gas Co. v. Scranton City, 214 Pa. 586, 590-91, 64 Atl. 84 (1906) : “Calling the legislative grant of privilege to use the streets a contract does not avoid the conditions on which the privilege is to be exercised. Whether such limitation or conditions be expressed in the grant or not is immaterial, for, as said in Butchers’ Union Slaughter House v. Crescent City Live Stock Landing Co., 111 U.S. 746, the power to control and regulate the streets so as to protect the public health, is one that cannot be bargained away by legislative or municipal grant. The power to control them for the protection of public safety, if not the same, stands on equally high ground. All authorities agree that such right is both paramount and inalienable.” See also, Trenton v. New Jersey, 262 U.S. 182 (1923); Worcester v. Worcester Consol. Street R. Co., 196 U.S. 539 (1905); Philadelphia Electric, supra. Sections 409 and 411 of the Public Utility Law and parallel provisions of the prior Public Service Company Law were enacted by virtue of the State’s police power. It follows that although a contract between a municipality and a utility may be valid when made, the parties will not necessarily and ipso facto be relieved of liability for a share of the costs imposed by the Public Utility Commission in a future crossing proceeding; the contract is considered to have been made subject to the implied condition that the future exercise of the police power may require a different allocation in the public interest. Swarthmore Borough v. Public Service Commission, 277 Pa. 472, 121 Atl. 488 (1923); Collingdale Boro. v. Phila. R.T. Co., 274 Pa. 124, 117 Atl. 909 (1922); Pittsburgh Rwys. v. PUC, 198 Pa. Superior Ct. 415, 182 A. 2d 80 (1962) ; Pa. R.R. v. PUC, 154 Pa. Superior Ct. 86, 35 A. 2d 588 (1944); Wilkes-Barre Railway Corp. v. P.S.C., 124 Pa. Superior Ct. 362, 188 Atl. 546 (1936) ; Vernon Twp. v. P.S.C., 75 Pa. Superior Ct. 54 (1920).

It cannot be doubted, and tbe appellees concede tbat tbe police power allows tbe Commission to order them to pay a proportion of tbe costs initially so tbat tbe crossing can be constructed safely. Tbe majority bolds, however, tbat once tbe project is completed, it is of no concern to tbe public or tbe Commission bow tbe parties previously have agreed among themselves to divide tbe expense; this remains a strictly private matter and is legally enforceable. In support, tbe court cites our decisions in Pgh. & Lake Erie R.R. v. McKees Rocks Boro., 287 Pa. 311, 135 Atl. 227 (1926) and Director General of Railroads v. West Penn Railways Co., 281 Pa. 309, 126 Atl. 767 (1924). In both of these cases, tbe Public Service Commission bad made an allocation of costs inconsistent with pre-1913 contracts and tbe aggrieved utility was later allowed recovery on tbe contract in a court of law.

In light of tbe important public interest involved in tbe ultimate costs to be borne by parties concerned with crossing construction work, it is my view tbat tbe cited cases, to tbe extent tbat they purport to limit tbe State’s police power in Commission proceedings to insuring safety at crossings and to reviewing rate schedules, should be considered no longer authoritative. Tbe reasoning of tbe Superior Court in Dept. of Highways v. PUC, 185 Pa. Superior Ct. 1, 7, 136 A. 2d 473 (1957), rev’d. on other ground, 394 Pa. 31, 145 A. 2d 538 (1958), appeals to me as persuasive: “Tbe cost of relocating tbe utilities enters into tbe rate structure of tbe public utility companies, and is paid for by tbe companies’ rate payers. It is error to intimate or suggest tbat such cost is borne by tbe officials or even tbe stockholders of tbe companies. Tbe question of whether tbe cost of tbe required relocation of telephone poles erected, upon the rights-of-way with authority of the Commonwealth, should be paid on the telephone bills or at the gasoline pumps has been a matter of governmental concern for some years.”

There can be no doubt that by §911 of the Public Utility Law the Commission has been given power to pass upon contracts between any public utility and any municipal corporation. Today’s decision limits the exercise of that power to contracts which “directly influence] rates or actual operations of the public utility”. (See the court’s opinion, supra, p. 410). In my judgment this limitation may seriously undermine effective utility regulation in Pennsylvania; what will not pass muster directly may now be attempted indirectly. To me, §911 itself is a clear indication that the legislature did not intend such a restrictive application of its delegation of the state’s police power to the Commission. As discussed above, by granting to the Commission power to review all contracts entered into between public utilities and municipalities, not just those involving rates and crossings, the legislature recognized the public interest inherent in all such public contracts and empowered the Commission, in cases where it has jurisdiction, to exercise the State’s police power over the entire contract field.⁸

What no doubt troubles the majority of the court is that the intervenor utilities have for many years received a free ride, so to speak, under South Broad Street, and now are ordered to shoulder only 25% of the cost of relocation at crossing sites to accommodate the new subway. This concern, however, is not properly directed to an attack on the power of the Commission in the first instance to make such an allocation; it should rather take the form of questioning whether the proportions decided upon represent a proper exercise of discretion. As this issue has not entered into the majority’s discussion, any extended treatment of it on my part would serve no useful purpose. I may say, however, that the 75:25 ratio adopted by the Commission seems to be justified under the evidence, and that no abuse of discretion or error of law by the Commission is apparent from the record.

For all the reasons stated above, I would reverse the order of the court below and reinstate the order of the Public Utility Commission.

Mr. Justice Roberts joins in this dissent.

1 A similar provision investing the predecessor Public Service Commission with similar power was contained in The Public Service Company Law of 1913. Act of July 26, 1913, P. L. 1374, art. V, §12.

2 The parallel provision in The Public Service Company Law was contained in §12 of the Act of 1913.

3 This common law rule received express recognition in Article V, Section 12 of The Public Service Company Law. No similar provision was contained in the successor Public Utility Law of 1937. This omission was interpreted by the PUC and the Superior Court to be an abrogation of the common law rule. Dept. of Highways v. PUC, 185 Pa. Superior Ct. 1, 136 A. 2d 473 (1957) ; Delaware River Port Authority v. PUC, 180 Pa. Superior Ct. 315, 119 A. 2d 855 (1956). We reversed in both cases, holding that to effect a change in the common law, the legislature must express itself in clear and unequivocal language. Section 411 could not be read as such an expression. Dept. of Highways v. PUC, 394 Pa. 31, 145 A. 2d 538 (1958) ; Delaware River Port Authority v. PUC, 393 Pa. 639, 145 A. 2d 172 (1958).

4 The permits in Philadelphia Electric, supra, were issued pursuant to applications made in 1901, 1914 and 1916.

5 “No contract or agreement between any public service company and any municipal corporation shall be valid unless approved by the commission. . . .” Act of July 26, 1913, P. L. 1374, art. Ill, §11.

6 At least one permit in Philadelphia Electric was issued prior to 1913. See footnote 6, page 7. In Collingdale Borough v. Philadelphia Rapid Transit Company, 274 Pa. 124, 117 Atl. 909 (1922), we held that the filing requirement of the Public Service Company Law was not retroactive.

7 The majority opinion omits, in its rendition of the clauses in the permits as quoted in footnote 3 thereof, what to me is an important reference to the Board of Highway Supervisors. The complete clause reads as follows: “If, in the laying of water or gas pipes, sewers, or any other municipal work, it shall become necessary to change the location of any of the conduits, manholes or other structures, they shall be shifted or altered at the cost or expense of the owners, to such places as shall he directed by the Board of Highway Supervisors.” (Emphasis added.)

8 Section 920 of the Public Utility Law of 1937, 66 P.S. §1360, is consistent with this interpretation of the reach of the Commission’s police powers. It provides in pertinent part: “The Commission shall have power and authority to vary, reform, or revise, upon a fair, reasonable, and equitable basis, any obligations, terms, or conditions of any contract heretofore or hereafter entered into between any public utility and any person, corporation, or municipal corporation, which embrace or concern a public right, benefit, privilege, duty, or franchise, or the grant thereof, or are otherwise affected or concerned with the public interest and the general well-being of the Commonwealth.”