Respond Power, LLC v. PA PUC ( 2021 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Respond Power, LLC, :
Petitioner :
: No. 260 C.D. 2020
v. :
: Argued: December 7, 2020
Pennsylvania Public Utility :
Commission, :
Respondent :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge1
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE McCULLOUGH FILED: February 9, 2021
Respond Power, LLC (Respond Power) petitions for review of the June
13, 2019, and February 6, 2020 orders of the Pennsylvania Public Utility Commission
(Commission) dismissing its formal complaints against the Electric Generation
Supplier Coordination Tariffs (Supplier Tariffs) that were approved by the
Commission and filed by two electric distribution companies, Pennsylvania Electric
Company (Penelec) and West Penn Power Company (West Penn) (collectively, the
Companies), on October 28, 2016, with an effective date of August 1, 2016.2 The
1
This case was assigned to the opinion writer before January 4, 2021, when Judge Leavitt
completed her term as President Judge.
2
On April 2, 2020, the Companies filed a notice of intervention pursuant to Rule 1531 of the
Pennsylvania Rules of Appellate Procedure. Notices of intervention were also filed by the Penelec
(Footnote continued on next page…)
Companies’ Supplier Tariffs contain modifications to the Companies’ Purchase of
Receivables (“POR”) Program to include the implementation of a “Clawback Charge.”
Respond Power filed the underlying formal complaints pursuant to section
701 of the Public Utility Code (Code), 66 Pa.C.S. §701,3 and 52 Pa. Code §5.21(a),4
after it received invoices from the Companies totaling $484,797.69, representing a
charge or fee assessed against Respond Power in connection with its uncollectible
accounts receivable expenses (referred to by the Commission as a “Clawback
Charge”). In this appeal, Respond Power argues that the Commission’s orders
dismissing its complaints unlawfully permit retroactive ratemaking, and violated its
fundamental right to due process. For the reasons that follow, we affirm.
Industrial Customer Alliance, the West Penn Power Industrial Intervenors, Met-Ed Industrial Users
Group, and the Office of Consumer Advocate (OCA).
3
Section 701 of the Code states:
The commission, or any person, corporation, or municipal corporation
having an interest in the subject matter, or any public utility concerned,
may complain in writing, setting forth any act or thing done or omitted
to be done by any public utility in violation, or claimed violation, of
any law which the commission has jurisdiction to administer, or of any
regulation or order of the commission. Any public utility, or other
person, or corporation likewise may complain of any regulation or
order of the commission, which the complainant is or has been required
by the commission to observe or carry into effect. The Commonwealth
through the Attorney General may be a complainant before the
commission in any matter solely as an advocate for the Commonwealth
as a consumer of public utility services. The commission may prescribe
the form of complaints filed under this section.
66 Pa.C.S. §701.
4
52 Pa. Code §5.21(a) states: “A person complaining of an act done or omitted to be done by
a person subject to the jurisdiction of the Commission, in violation, or claimed violation of a statute
which the Commission has jurisdiction to administer, or of a regulation or order of the Commission,
may file a formal complaint with the Commission.”
2
Factual and Procedural History
The Parties
Respond Power is a licensed electric generation supplier (“EGS”) under
the Electricity Generation Customer Choice and Competition Act (Competition Act).5
An EGS is defined in the Code as:
A person or corporation . . . brokers and marketers,
aggregators or any other entities, that sells to end-use
customers electricity or related services utilizing the
jurisdictional transmission or distribution facilities of an
electric distribution company or that purchases, brokers,
arranges or markets electricity or related services for sale to
end-use customers utilizing the jurisdictional transmission
and distribution facilities of an electric distribution company.
66 Pa.C.S. §2803 (Definitions).
As an EGS, Respond Power sells electric supply to residential and small
retail customers in the service territories of the Companies. (Reproduced Record (R.R.)
at 166a.)
The Companies are electric distribution companies (EDCs). Under
Section 2803 of the Code, EDCs, such as the Companies, are “default service”
providers for their distribution customers and, as such, are required to obtain electric
generation on behalf of “retail electric customers who: (1) contract for electric power,
including energy and capacity, and the chosen electric generation supplier does not
supply the service; or (2) do not choose an alternative electric generation supplier.” 66
Pa.C.S. §2803 (Definitions).
5
66 Pa.C.S. §§2801-2815.
3
The Companies’ Purchase of Receivables (POR) Program
In 2007, in order to facilitate retail competition, the Commission
encouraged EDCs to provide various services to EGSs. One such service is the EDCs’
purchase of EGSs’ accounts receivable, otherwise known as “Purchase of Receivables”
or POR programs. See 52 Pa. Code §69.1814 (The public interest would be served by
the consideration of an EGS receivables purchase program in each service territory.).
Generally, under POR programs, EDCs agree to pay the EGSs the face
value of their account receivables without recourse to the EGSs regardless of what the
Companies were actually able to collect from the end-use customer. (R.R. at 167a.)
The specific terms and conditions of each EDC’s POR program are usually established
during default service plan proceedings, and then they are included in the EDC’s
Supplier Tariffs. (R.R. at 169a-70a, 174a-75a, 180a.)
The Companies’ Default Service Proceeding (DSP) III Petitions
During the default service proceedings (DSP) for approval of their third
respective default service programs, the Companies voluntarily proposed to establish
POR programs for their EGSs. The Companies’ POR programs offered EGSs the
opportunity to have the Companies fully purchase their account receivables from
customers “without recourse.”6 In other words, the POR programs relieved EGSs of
the risk that their customers would not pay their bills for electric generation service.
EGSs that chose to participate in the POR programs received 100 cents on the dollar
for their accounts receivable, and the Companies had no claim against the EGSs if the
EGSs’ customers did not pay their bills. This program covered the period from June
1, 2015, through May 31, 2017. (R.R. at 170a-72a.) The Commission approved the
6
“Without recourse” is a commercial term meaning that once a receivable is sold, the
purchaser of the receivable has no recourse with the seller to collect on any amounts the purchaser is
unable to successfully recover through customer collection efforts. (R.R. at 170a-72a.)
4
Companies’ proposed “no recourse” POR programs and they were made part of the
Companies’ Supplier Tariffs.
The Companies’ Joint DSP IV Petition
After the “no recourse” POR programs were in effect for approximately
six (Penelec) and four (West Penn) years, the Companies sought to impose an
administrative charge or fee upon EGSs for participating in the POR programs, i.e., the
Clawback Charge. According to the Companies, the proposed change was necessary
because they were incurring higher uncollectible expenses than expected, due to
excessive EGS write-offs. (R.R. at 172a.)
On November 3, 2015, the Companies filed a joint petition requesting that
the Commission approve each Company’s proposed fourth default service program for
the period June 1, 2017, through May 31, 2019 (DSP IV Petition), proposed rates for
default generation service, continuation of its competition-enhancing customer-referral
programs, and a revision to its POR programs to add the Clawback Charge provision.
Specifically, and as initially proposed, a charge would be imposed if an EGS’s average
accounts receivable write-off percentage (write-offs for non-payment as a percentage
of revenues) for the preceding annual period exceeded 150% of the average write-off
percentage for all POR-participating EGSs. If that threshold was crossed, an EGS that
wished to remain in the POR program would have to pay a fee equal to the difference
between its actual write-offs and what its write-offs would have been at 150% of the
average write-off percentage for all participating EGSs.
On November 3, 2015, the DSP IV Petition was served upon, inter alia,
all EGSs licensed to sell electric generation in the service areas of the Companies.
(R.R. at 249a.) Respond Power was included on the certificate of service. (R.R. at
249a.) In addition, the Commission caused a notice of the DSP IV proceedings to be
5
published in the November 14, 2015 edition of the Pennsylvania Bulletin explaining
that any interested party could intervene in the proceeding initiated by the DSP IV
Petition. See 45 Pa. B. 6654-6655 (2015). (R.R. at 250a.) The notice also stated that
a prehearing conference was scheduled for December 1, 2015, before an
Administrative Law Judge (ALJ). Id. In addition, the Commission issued a notice of
such prehearing conference, and the ALJ issued his prehearing conference order, both
of which were served on all the same parties that received the DSP IV Petition,
including Respond Power. (R.R. at 249a-50a, 386a, 392a, 494a.)
Additionally, the second paragraph of the DSP IV Petition, which begins
on page 2 and carries over to page 3, sets forth in 12 separately numbered items, each
of the specific approvals that the Companies were requesting the Commission to grant,
including approving proposed revisions to respective Supplier tariffs related to their
POR programs. Furthermore, Statement 3 of the DSP IV Petition, in over eight pages
in question-and-answer form, explained the terms of the proposed Clawback Charge
provisions, why they were being proposed, how they would be calculated, and how the
proceeds would be applied. Exhibits KLB-4 through KLB-7 to the DSP IV Petition
consisted of proposed supplements to the Companies’ Supplier Tariffs. These exhibits
included the terms of the proposed Clawback Charge provisions.
Various parties intervened in the DSP IV proceeding, including the Retail
Energy Supply Association (RESA)7 and two EGSs that market generation services in
the Companies’ service areas. The parties to the Companies’ DSP IV proceeding
subsequently achieved a settlement of all issues related to the DSP IV Petition.
Specifically, the write-off threshold was raised from 150% to 200% of the average
write-off percentage of all EGSs. Second, another screening feature was added such
7
RESA is a trade association of EGSs of which Respond Power, through its parent company,
is a member.
6
that, even if an EGS crossed the 200% threshold, it would not incur a Clawback Charge
unless, during the review period, the average price it charged for generation was more
than 150% of the applicable Companies’ average Price-to-Compare (PTC) for the same
period. The Clawback Charge as adopted in the settlement was to be in effect for two
annual periods, concluding on August 31, 2016, and 2017, and would expose EGSs to
a Clawback Charge in 2016 and 2017. In its Final Order approving the DSP IV
Petition, as modified by the settlement, the Commission found the settlement terms to
be in the public interest, including implementation of a Clawback Charge on a pilot
basis for two years (DSP IV Final Order). The Commission ordered the Companies to
file tariff supplements to effectuate the terms of the settlement, and on October 28,
2016, the Companies filed their Supplier Tariffs containing the Clawback Charge, with
an effective date of August 1, 2016. By Secretarial Letter dated November 10, 2016,
the Commission approved the Supplier Tariffs, noting they were filed in compliance
with the DSP IV settlement.
Pursuant to the settlement terms, the Companies conducted an analysis of
the accounts receivable write-offs and prices charged to customers for all EGSs that
participated in their POR programs during the 12-month period ending August 31,
2016. Based on those analyses, the Companies identified Respond Power and one other
EGS as subject to the Clawback Charges.8 On September 27, 2016, Penelec and West
8
According to the Companies, Respond Power’s write-off percentage was 14.79% and
14.42% for Penelec and West Penn, respectively, in 2016, and 8.87% and 9.51% for Penelec and
West Penn, respectively, in 2017. (R.R. at 254a-55a, 267a-68a.) The Companies averred that these
write-off percentages were three to seven times 200% of the average write-offs of over 65 other EGSs.
Id. Further, the Companies indicated that in 2016, Respond Power had the highest write-off
percentage of any EGS serving residential and small commercial customers in West Penn’s service
territory and the second highest in Penelec’s territory. Id. The Companies further alleged that
Respond Power charged some of the highest prices for generation in the market, which were, on
average, more than 250% of the applicable PTC. Id.7
Penn issued invoices to Respond Power via email for POR administrative charges, i.e.,
the Clawback Charge, of $305,890.63 and $178,907.06, respectively. The invoices
were based on written-off charges that the Companies had been unsuccessful in
collecting from Respond Power’s supply customers from September 1, 2015, through
August 31, 2016. (R.R. at 197a-198a.) Referencing the DSP IV Final Order as
providing additional information about the Clawback Charge, the emails indicated that
failure to remit payment by the due date of October 27, 2016, would result in the
Companies withholding POR payments. Respond Power refused to pay the invoices.
Respond Power’s Complaints
On November 17, 2016, Respond Power filed the complaints that are the
subject of this appeal, challenging the validity of the Clawback Charge and seeking to
nullify the Companies’ Supplier Tariff provisions back to the date of the DSP IV Final
Order. (R.R. at 1a-39a.) According to the complaints, the Clawback Charge
constituted improper retroactive ratemaking because it was computed and based on
billing determinants and conditions that were not resolved and/or established until after
the period of time in which the conditions giving rise to the liability arose. The
complaints also asserted that it was denied constitutional due process because it was
denied notice and an opportunity to be heard. The complaints conceded that it was
served with the proposed DSP IV Petition, but alleged that due to their nature, default
service plans are usually “forward-looking”; the description of the filing as establishing
the Companies’ 2017-2019 Default Service Program and the fact that the Clawback
Charge proposal was “buried” within the massive filing, “Respond Power was not
placed on notice of the inclusion of a proposed retroactive modifications to the POR
program. As a result, Respond Power did not intervene in the proceeding.” In addition,
the complaints alleged that Respond Power had not received a breakdown of the
8
charges from the Companies and, because it had not received this information, Respond
Power was unable to verify the accuracy of the amounts requested by the Companies.
The Companies filed answers and new matter on December 8, 2016.9
(R.R. at 40a-106a.) At the same time, the Companies filed motions for judgment on
the pleadings. The motions contended that Respond Power’s complaints were
collateral attacks on the DSP IV Final Order barred by section 316 of the Code, which
provides that “[w]henever the commission shall make any rule, regulation, finding,
determination or order, the same shall be conclusive upon all parties affected thereby,
unless set aside, annulled or modified on judicial review.” 66 Pa.C.S. §316. The
motions argued that the DSP IV Final Order precluded affected parties from
challenging that order if those parties were provided due process prior to the entry of
the order.10
The Companies pointed out that Respond Power was served with the DSP
IV Petition but failed to participate in the proceedings or settlement negotiations. They
noted that other EGSs intervened in the DSP IV proceedings and participated actively
in the proceedings and settlement. The Companies further asserted that there was no
basis for Respond Power’s claim that the Clawback Charge provisions violated the
prohibition against retroactive ratemaking, as the prohibition only applies to rates for
utility service. They reasoned that Respond Power’s participation in their POR
9
The OCA filed a notice of intervention and public statements, alleging that the OCA was a
signatory to the settlement that resulted in the DSP IV Final Order. The public statements stated that
the OCA intervened in the proceedings to ensure that the provisions in the settlement were
appropriately implemented, including the 2016 Clawback Charge provisions. (R.R. at 128a.)
10
The Motion for Judgment on the Pleadings is not part of the Reproduced Record. But see
R.R. at 125a-38a (ALJ Decision, January 23, 2017, granting the motion, in part, at pages 4-6,
summarizing the Companies’ arguments).
9
programs was voluntary; therefore, the purchase of EGS receivables was not a “rate”
under the Code.
Respond Power filed replies to the new matter, and answers to the
motions. (R.R. at 107a-24a.) Respond Power asserted that the complaints did not
constitute a collateral attack on the DSP IV Final Order. Rather, it argued that because
the Clawback Charge was contained in the Companies’ tariffs, they constituted rates
that are subject to section 1301 of the Code, 66 Pa.C.S. §1301, which requires them to
be just and reasonable. Respond Power contended that, even though it did not
participate in the DSP IV proceedings, it was entitled to file a complaint against an
existing tariff at any time under section 701 of the Code, 66 Pa.C.S. §701.
By interim order dated January 23, 2017, the ALJ granted the Companies’
motions for judgment on the pleadings, in part. (R.R. at 125a-38a.) The ALJ ordered
that the issues concerning the validity and reasonableness of the Clawback Charge
provisions in Respond Power’s complaints be denied, but referred Respond Power’s
issue concerning the computation of the Clawback Charge for hearing.
On January 26, 2017, Respond Power filed a Petition for Interlocutory
Review with the Commission, seeking review of the ALJ’s Interim Order. By Order
entered July 13, 2017, the Commission granted Respond Power’s Petition for
Interlocutory Review because it determined Respond Power was entitled to be heard
on its complaints. (R.R. at 140a-61a.) Subsequently, the parties exchanged written pre-
served testimony.
Respond Power presented the written testimony of one witness, Adam
Small, who is Respond Power’s General Counsel. Mr. Small testified that Respond
Power received actual service of the Companies’ DSP IV filing and conceded that the
Clawback Charge provision was discussed in several portions of that legal pleading
10
and in supporting testimony and exhibits accompanying the pleading. (R.R. at 214a-
15a.) He testified, however, that he “did not realize that the Companies were proposing
to modify the POR programs [that had been previously] approved during the DSP III
proceedings.” (R.R. at 215a.) He stated that neither the Notice published in the
Pennsylvania Bulletin nor the Notice of Prehearing Conference “contained any
information about the proposal to modify the 2015-2017 POR Programs as part of the
DSP IV proceeding.” (R.R. at 216a.)
Mr. Small opined that applying the Clawback Charge provision to
Respond Power would be “unjust and unreasonable” because (1) the use of historical
data in the charge’s screening measures constitutes unlawful retroactive ratemaking;
and (2) the “structure” of the charge, including the service periods to which the written-
off amounts relate, allegedly made it inequitable as applied to Respond Power. (R.R.
at 179a-92a.)
The Companies, in turn, submitted testimony by their witness, Kimberlie
Bortz, responding to Mr. Small’s “unjust and unreasonable” arguments. Ms. Bortz
explained that the Clawback Charge provision is an administrative charge or fee for
POR participation applied to EGSs which, based on objective criteria, exhibit
characteristics that correlate with the risk of generating accounts receivable having
much higher write-off ratios than the general EGS population. (R.R. at 256a-70a.) Ms.
Bortz also testified that Respond Power was identified based on applicable data as one
of the EGSs whose mode of operation, product mix, and pricing policies correlated
with the risk of extremely high uncollectible accounts expense. (R.R. at 253a-54a.)
An evidentiary hearing was held on February 1, 2018, at which the parties’ witnesses
were presented for cross-examination.
11
On April 20, 2018, the ALJ issued an Initial Decision, recommending the
dismissal of Respond Power’s complaints. (ALJ Decision, 4/20/18, R.R. at 372a-409a.)
The ALJ found that section 316 of the Code, 66 Pa.C.S. §316, barred Respond Power
from litigating issues related to the reasonableness of the Clawback Charge provision
that Respond Power had the opportunity to litigate in the Companies’ DSP IV
proceeding. (ALJ 4/20/18 Decision at 24, R.R. at 396a-98a.) Citing Shenango
Township Board of Supervisors v. Pennsylvania Public Utility Commission, 686 A.2d
910, 914 (Pa. Cmwlth. 1996), the ALJ noted that tariff provisions submitted to and
approved by the Commission are prima facie reasonable. (ALJ 4/20/18 Decision at 25,
R.R. at 396a.) Employing the heavy burden of proof applicable to challenges pursuant
to 66 Pa. C.S. §701, the ALJ concluded that Respond Power failed to demonstrate, by
a preponderance of the evidence, that facts and circumstances had changed so
drastically since issuance of the DSP IV Final Order, so as to render application of the
Clawback Charge provision unreasonable. The ALJ explained that to permit Respond
Power to relitigate issues already litigated by the parties in the DSP IV proceedings,
without demonstrating that a change in facts or circumstances has occurred since the
Commission approved the provisions, would be to permit a collateral attack on the DSP
IV Final Order. (ALJ 4/20/18 Decision at 26, 28-29, R.R. at 397a, 399a-400a.)
Addressing next Respond Power’s due process argument that the
Companies’ conversion of its POR program from “without recourse” to “with
recourse” occurred without adequate notice to Respond Power, the ALJ concluded the
argument was also without merit. (ALJ 4/20/18 Decision at 31, R.R. at 402a.) The
ALJ found that Respond Power had notice of the DSP IV proceedings and the
Clawback Charge provisions and opportunity to be heard, but made the decision not to
intervene. The ALJ found that the DSP IV petitions provided adequate information to
12
allow Respond Power to answer and challenge their specificity. For these reasons, the
ALJ concluded that Respond Power had notice and opportunity to be heard, and its due
process rights were adequately protected. (ALJ 4/20/18 Decision at 31-32, R.R. at
402a-03a.)
Turning to Respond Power’s assertion that the imposition of the Clawback
Charge constituted impermissible retroactive ratemaking, the ALJ found that the
Clawback Charge was not a rate, and that using historic data to identify EGSs which
will most likely impose higher costs did not make the Clawback Charge retroactive.
(ALJ 4/20/18 Decision at 34, R.R. at 405a.) Lastly, the ALJ found that Respond Power
failed to identify any computational errors in the calculation of the 2016 and 2017
Clawback Charge.
Respond Power filed exceptions on May 10, 2018, asking the Commission
to reverse the ALJ’s decision and sustain its complaints. (R.R. at 411a-51a.) The
Companies filed replies to exceptions on May 21, 2018. (R.R. at 453a-80a.)
The Commission’s Decision
By order entered on June 13, 2019, the Commission concurred in the
Initial Decision and dismissed the complaints. The Commission held that Respond
Power was attempting “a collateral attack on findings and determinations reached in
prior Commission orders” that were “embodied in a tariff” that became “binding upon
the parties.” (Commission Decision, 6/13/19 at 56.) Therefore, “the preclusive effect
of Section 316 [of the Code, 66 Pa.C.S. §316,]” was “properly applied in this case.”
Id.
Although the Commission found that section 316 of the Code foreclosed
Respond Power’s complaints, the Commission nonetheless addressed the substance of
13
Respond Power’s argument that the Clawback Charge allegedly violated the
prohibition against retroactive ratemaking. The Commission initially expressed that it
did not need to address, in depth, whether the administrative charge represented by the
Clawback Charge was a “rate,” per se, under the Code. Id. at 46. It was more germane,
in the Commission’s view, that the participation of an EGS in a POR program “is
voluntary and as such, the EGS has implicitly assented to modifications of the program,
assuming such modifications are reviewed and approved by the Commission according
to procedural due process.” Id. The Commission further found that the Clawback
Charge applied prospectively; the use of historical data to identify the characteristics
of EGSs posing a greater risk of generating excessive uncollectible accounts receivable
does not make it “retroactive”; and, therefore, Respond Power’s retroactive ratemaking
argument had “no merit” even if the prohibition against retroactive ratemaking was
applicable. Id. at 47.
Regarding Respond Power’s argument that its due process rights were
violated, the Commission found that Respond Power was given adequate notice and an
opportunity to be heard in the proceeding where the Clawback Charge was litigated
and approved, but Respond Power decided not to participate, unlike other EGSs and
RESA, the trade association for EGSs, which intervened and addressed the Companies’
proposal. Id. at 41. Summarizing the evidence on this issue, the Commission found
that “[a]s acknowledged by Respond [Power], it was served by the DSP IV Joint
Petition and the accompanying testimonies initiating the DSP IV proceedings which
contained an explanation of the proposed [C]lawback [Charge] mechanism.” Id. at 40.
On June 28, 2019, Respond Power filed a petition for reconsideration of
the Commission’s June 13, 2019 order, which the Commission denied on February 6,
2020. (R.R. at 547a-65a.) Respond Power now appeals, raising the following issues:
14
1. Did the Commission err when it found that Respond
Power was precluded by section 316 of the Code from
challenging the application of the Companies’ tariff
provision because the Commission had approved the
Clawback Charge mechanism in May 2016?
2. Did the Commission err as a matter of law by permitting
two electric utilities to engage in retroactive ratemaking?
3. Did the Commission err as a matter of law and violate
fundamental principles of due process by allowing two
electric utilities to retroactively, and without notice,
modify the terms of their purchase of receivables
programs?
Standard and Scope of Review
The Commonwealth Court’s scope of review of a Commission order is
limited. 2 Pa.C.S. §704. The Court may reverse a Commission decision only if the
petitioner demonstrates that the Commission made findings not supported by
substantial evidence, made a clear error in law, or violated a petitioner’s constitutional
rights. Chester Water Authority v. Pennsylvania Public Utility Commission, 868 A.2d
384, 389 (Pa. 2005); Retail Energy Supply Association v. Pennsylvania Public Utility
Commission, 185 A.3d 1206, 1220 (Pa. Cmwlth. 2018); see also Popowsky v.
Pennsylvania Public Utility Commission, 910 A.2d 38, 48 (Pa. 2006); Bethlehem Steel
Corp. v. Pennsylvania Public Utility Commission, 713 A.2d 1110, 1113-14 (Pa. 1998).
As to issues of law, this Court’s review is de novo. In conducting that
review, the Commission’s “interpretations of the Code … and its own regulations are
entitled to great deference and should not be reversed unless clearly erroneous.” NRG
Energy, Inc. v. Pennsylvania Public Utility Commission (Pa. Cmwlth., No. 58 C.D.
15
2019, filed June 2, 2020) (unreported) 2020 WL 2843488, at *9 (internal quotations
and citations omitted); accord Popowsky v. Pennsylvania Public Utility Commission,
706 A.2d 1197, 1203 (Pa. 1997).
As to issues of fact, this Court’s standard of review is limited to
determining if there is “substantial evidence” to support the Commission’s findings.
Retail Energy Supply, 185 A.3d at 1220. This Court has held repeatedly that it will not
substitute its judgment for the Commission’s judgment “when substantial evidence
supports the PUC’s decision on a matter within the [C]ommission’s expertise” and that
“[j]udicial deference is even more necessary when the statutory scheme is technically
complex.” Id. (internal citations and quotations omitted); see also Popowsky, 706 A.2d
at 1203; McCloskey v. Pennsylvania Public Utility Commission, 127 A.3d 860, 871
(Pa. Cmwlth. 2015); City of Lancaster (Water) v. Pennsylvania Public Utility
Commission, 769 A.2d 567 (Pa. Cmwlth. 2001).
Substantial evidence is “such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion.” Retail Energy Supply, 185 A.3d at
1228 n.34. This Court has held that its review must focus on “whether there is rational
support in the record, when viewed as a whole, for the agency action” and, in order to
reverse, it must find that the agency’s findings are “totally without support in the
record.” Emporium Water Co. v. Pennsylvania Public Utility Commission, 955 A.2d
456, 463 (Pa. Cmwlth. 2008).
Section 316 of the Code
We address first Respond Power’s contention that the Commission
erroneously held that it was precluded under section 316 of the Code from collaterally
attacking the DSP IV Final Order.
16
Final orders of the Commission have legal significance. As noted, section
316 provides in relevant part as follows:
Effect of [C]ommission action. Whenever the [C]ommission
shall make any rule, regulation, finding, determination or
order, the same shall be prima facie evidence of the facts
found and shall remain conclusive upon all parties affected
thereby, unless set aside, annulled or modified on judicial
review.
66 Pa.C.S. §316.
We find the Commission correctly dismissed Respond Power’s
complaints against the Companies in part because the complaints constituted an
unlawful collateral attack on the DSP IV Final Order in violation of 66 Pa.C.S. §316.
The Commission approved the Clawback Charge provisions as part of the
DSP IV proceedings, and subsequently approved the Companies’ tariff filings
implementing the Clawback Charge provision. (R.R. at 126a, 136a-37a.) The
Commission-approved tariff provisions are presumed to be reasonable, have the full
force of law, and are binding on the utilities and their customers. Pennsylvania Electric
Co. v. Pennsylvania Public Utility Commission, 663 A.2d 281(Pa. Cmwlth. 1995);
Brockway Glass Co. v. Pennsylvania Public Utility Commission, 437 A.2d 1067 (Pa.
Cmwlth. 1981); State Farm Fire & Casualty Co. v. PECO Energy Co., 54 A.3d 921(Pa. Super. 2012); Stiteler v. Bell Telephone Co. of Pennsylvania, 379 A.2d 339 (Pa.
Cmwlth. 1977).
“A complainant seeking to evade the effect of an existing tariff provision”
must “prove that facts and circumstances have changed so drastically as to render the
application of the tariff provision unreasonable.” Shenango Township Board of
Supervisors, 686 A.2d at 914. Respond Power was required to meet this burden by a
preponderance of the evidence. Samuel J. Lansberry, Inc. v. Pennsylvania Public
17
Utility Commission, 578 A.2d 600 (Pa. Cmwlth. 1990), appeal denied, 602 A.2d 863(Pa. 1992). To establish a preponderance of the evidence, Respond Power had to
present evidence more convincing, by even the smallest amount, than that presented by
the Companies, which it failed to do. Se-Ling Hosiery v. Margulies, 70 A.2d 854 (Pa.
1950). The burden is a heavy one because tariff provisions submitted to and approved
by the Commission are considered prima facie reasonable. Zucker v. Pennsylvania
Public Utility Commission, 401 A.2d 1377, 1380 (Pa. Cmwlth. 1979) (Commission-
approved tariffs are prima facie reasonable).
The Commission correctly concluded that Respond Power failed to meet
this burden. Respond Power presented no evidence that a change in facts or
circumstances had occurred, since the Commission had approved the Clawback Charge
provision as prima facie reasonable.
Further, decisions of Commonwealth administrative agencies, such as the
Commission, are entitled to res judicata and collateral estoppel effect where the agency
is acting in a judicial capacity and resolves disputed issues of fact properly before it,
which parties had an opportunity to litigate. See Kentucky-West Virginia Gas v.
Pennsylvania Public Utility Commission, 721 F. Supp. 710 (M.D. Pa. 1989), aff’d, 899
F.2d 1217 (3d Cir. 1990). In the DSP IV Final Order, the Commission acted in a
judicial capacity and resolved the issues that Respond Power had the opportunity to
litigate, and numerous parties did in fact litigate, concerning the reasonableness of the
Clawback Charge provision. Section 316 of the Code barred Respond Power from
relitigating the issues raised and resolved in the DSP IV proceedings, and restricted
Respond Power to litigating only new and novel issues that arose since the Commission
approved the Clawback Charge, of which Respond Power presented none. As the
Commission correctly concluded, since Respond Power failed to take advantage of its
18
opportunity to litigate the Clawback Charge issue at the first opportunity, section 316
of the Code applied to its complaints and barred it from relitigating that issue before
the Commission.
Due Process
In an apparent effort to circumvent the preclusive effect of section 316 of
the Code, Respond Power argues that its due process rights were violated because it
was not provided with adequate notice that the DSP IV Petition included a proposed
Clawback Charge provision that uses historical data and that the first charge would be
assessed in September 2016. It argues that, had it received sufficient notice of such,
it would have intervened and participated.
Although Respond Power does not dispute that it received actual service
of the Companies’ DSP IV filing, it nevertheless argues that service of the Petition and
the publication notice in the Pennsylvania Bulletin were inadequate for two reasons:
(1) the proposed changes to the DSP III POR program, which included the Clawback
Charge, were buried in the massive filing, and (2) the title of the DSP IV Petition and
the notice published in the Pennsylvania Bulletin described the DSP IV Petition as
seeking approval of a default service program for the future period beginning June 1,
2017, through May 31, 2019.
Like the Commission, we conclude Respond Power’s decision not to read
the DSP IV Petition does not mean that it was deprived of due process.
To satisfy due process, notice must be reasonably calculated to apprise
interested parties of the proposal and afford them an opportunity to present their
objection. Snyder Brothers, Inc. v. Pennsylvania Public Utility Commission, 224 A.3d
450 (Pa. Cmwlth. 2020).
19
Here, the DSP IV Petition, supporting testimony, and accompanying
Supplier Tariff supplements clearly apprised Respond Power of the terms of the
proposed Clawback Charge provision, why it was being proposed and how it would be
calculated. The Commission credited the testimony of Ms. Bortz, who explained that
Respond Power had to read no further than the second paragraph of the DSP IV Petition
(pages 2-3) to see that the Companies and their affiliates were proposing revisions to
their POR programs. The nature of those changes was provided in three pages of text
under the bolded and capitalized heading of “Section V (“PURCHASE OF
RECEIVABLES”) Subsection A (“EGS-Related Write-Offs”)” of the DSP IV Petition.
(R.R. at 240a-41a, 250a-51a.) The Clawback Charge provision was also discussed at
length in the written testimony of Ms. Bortz attached to the DSP IV Petition and in the
summary of Ms. Bortz’s testimony at page 5 of the DSP IV Petition. (R.R. at 387a.)
Relatedly, Respond Power argues that it was deprived of statutory notice
pursuant to section 703 of the Code, which authorizes the Commission to rescind or
amend any order made by it at any time, only after notice and opportunity to be heard
by affected parties. 66 Pa.C.S. §703(g). Respond Power argues that nothing in the
Commission’s notice in the Pennsylvania Bulletin suggested that the filing could result
in the “mid-course modification” of an existing program previously approved by the
Commission. Respond Power contends that the Commission, therefore, had a legal
obligation to provide Respond Power with notice that it was modifying its DSP III
Order, and to give Respond Power an opportunity to be heard. It submits that because
this step was not taken, its due process rights were violated and the Clawback Charge
should be rendered null and void.
20
We reject this argument as well. Respond Power has provided no
authority, and we are aware of none, which required the statutory notices to apprise
Respond Power, beyond what was provided.
In summary, the evidence refutes the central premise of Respond Power’s
appeal. Respond Power failed to raise its objections to the Clawback Charge when it
had the opportunity to do so in the DSP IV proceedings. Respond Power’s due process
rights were fully protected by its actual receipt of service of all the documents that
initiated the proceeding culminating in the Commission’s approval of the Clawback
Charge. Therefore, as required by section 316 of the Code, the Commission did not
err when it rejected Respond Power’s unlawful attempt to collaterally attack the DSP
IV Final Order.
Retroactive Ratemaking
Lastly, we find that the Commission’s approval of the Clawback Charge
provision in the DSP IV Final Order did not constitute retroactive ratemaking.
Respond Power argues that the Clawback Charge results in compensation being paid
by Respond Power to the Companies. As such, it is a rate and it may not be
retroactively assessed. Respond Power reasons that under the Code, “rate” is very
broadly defined to include “[e]very individual, or joint fare, toll, charge, rental or other
compensation whatsoever of any public utility . . . made, demanded, or received for
any service.” 66 Pa.C.S. §102 (relating to definitions). It contends that the Companies’
purchase of Respond Power’s receivables, in full and without recourse, is the “service”
provided by the Companies, and an invoice for $484,797.69 for the Clawback Charge,
based on the write-offs of uncollectible supply charges from September 1, 2015,
through August 31, 2016, constituted a demand by the Companies for “compensation.”
Respond Power further differs with the Commission’s position that Respond Power’s
21
voluntary participation negates a finding that the Clawback Charge is a rate. Respond
Power maintains that the distinction is without a difference. It argues that, contrary to
the rule against retroactive ratemaking, the Commission allowed the Companies to
make after-the-fact changes to the terms of their voluntary POR programs, by
converting them from “nonrecourse” to “with recourse,” which resulted in an
unexpected charge being assessed against Respond Power.
We agree with the Commission’s assessment that imposition of the
Clawback Charge did not constitute retroactive ratemaking. Respond Power has
erroneously interpreted the retroactive ratemaking prohibition.
First, the Commission-approved Clawback Charge in the DSP IV Petition
is not a rate. It therefore follows that the rule against retroactive ratemaking does not
apply. The Code at section 102 (Definitions) defines rate as follows:
“Rate.” Every individual, or joint fare, toll, charge, rental, or
other compensation whatsoever of any public utility, or
contract carrier by motor vehicle, made, demanded, or
received for any service within this part, offered, rendered,
or furnished by such public utility, or contract carrier by
motor vehicle, whether in currency, legal tender, or evidence
thereof, in kind, in services or in any other medium or manner
whatsoever, and whether received directly or indirectly, and
any rules, regulations, practices, classifications or contracts
affecting any such compensation, charge, fare, toll, or rental.
66 Pa.C.S. §102.
A rate embraces all compensation received by a public utility for service
it renders to a customer. Penn-Harris Hotel Co. v. Pennsylvania Public Utility
Commission, 71 A.2d 853 (Pa. Super. 1950). In Penn Harris, the Superior Court held
that the definition of rate contained in the Public Utility Law, Act of May 28, 1937,
P.L. No. 1053, did not cover services rendered to the public utility for which the public
22
utility expends money.11 Here, the Clawback Charge is not compensation received by
the Companies for service they render to Respond Power and, therefore, it is not a rate.
Since the Clawback Charge provision is not a rate, any prohibition concerning
retroactive ratemaking is not applicable to the clawback provisions.
Conclusion
In sum, we find that the Commission committed no error of law, nor did
it abuse its discretion by dismissing Respond Power’s collateral attack on the
Commission’s Order approving the Companies’ DSP IV Petition and the included
Clawback Charge provision. Respond Power was not denied any constitutional due
process, as it was given more than adequate notice and opportunity to participate in the
DSP IV proceedings, as other EGSs did, but by its own admission, chose not to do so.
Any prohibition against retroactive ratemaking is not applicable in this circumstance.
Accordingly, the final orders of the Commission are affirmed.
________________________________
PATRICIA A. McCULLOUGH, Judge
Judge Fizzano Cannon did not participate in this decision.
11
In 1978, the General Assembly repealed the Act of May 28, 1937, P.L. No. 1053, formerly
66 P.S. §§1101-1562, and enacted the Act of July 1, 1978, P.L. 598, No. 116, the existing Public
Utility Code. The current Public Utility Code at 66 Pa.C.S. §102, defining rate, contains almost
identical language as that found in the former section 2 of the Public Utility Law, formerly 66 P.S.
§102. Since the provision at 66 Pa.C.S. §102 is a reenactment of the provisions of the prior Public
Utility Law, decisions interpreting the provisions that existed prior to 1978 continue to be applicable.
County of Chester v. Pennsylvania Public Utility Commission, 408 A. 2d 552 (Pa. Cmwlth. 1979);
Pittsburgh & Shawmut R.R. Co. v. Pennsylvania Public Utility Commission, 14 A.2d 903 (Pa. Super.
1940).
23
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Respond Power, LLC, :
Petitioner :
: No. 260 C.D. 2020
v. :
:
Pennsylvania Public Utility :
Commission , :
Respondent :
ORDER
AND NOW, this 9th day of February, 2021, the June 13, 2019, and
February 6, 2020 Orders of the Pennsylvania Public Utility Commission are hereby
AFFIRMED.
________________________________
PATRICIA A. McCULLOUGH, Judge