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The Commonwealth Court of Pennsylvania Rejects City of Lancaster's Attempt to Regulate Public Utilities

October 18, 2015

On October 15, 2015, the Commonwealth Court of Pennsylvania reaffirmed the uniform, statewide regulation of public utility facilities by the Pennsylvania Public Utility Commission (Pa. PUC). In two companion cases,1 the Court held that several provisions of a local ordinance enacted by the City of Lancaster would improperly regulate public utility facilities located within public rights-of-way and therefore were preempted by the Pennsylvania Public Utility Code. Additionally, the Court held that the imposition of fees for maintenance of public rights-of-way were not preempted, but must be reasonable and cannot constitute a tax.

On December 17, 2013, the City of Lancaster enacted Administrative Ordinance No. 16-2013 (the Ordinance), which implemented a comprehensive program for management of the City’s public rights-of-way, including management of public utilities and public utility facilities located within these public rights-of-way. According to the Ordinance, the management and maintenance of the public rights-of-way imposed significant costs on the City which were being passed on to local taxpayers.

PPL Electric Utilities Corporation (PPL)2 and UGI Utilities, Inc. (UGI), two public utilities regulated by the Pa. PUC, separately challenged several provisions of the Ordinance in the Commonwealth Court’s original jurisdiction, asserting that they infringed upon the exclusive jurisdiction of the Pa. PUC to regulate public utilities and violated their rights as public utilities. The sections of the Ordinance challenged by PPL and UGI include the following: 

  • Section 263B-3 of the Ordinance. Purports to authorize the City of Lancaster to inspect public utility facilities to ensure that such facilities do not constitute a public safety hazard and remain in compliance with Pa.PUC standards.
  • Section 263B-4(6) of the Ordinance. Purports to grant the City of Lancaster the power to order a public utility to remove, relocate, change, or alter the position of any facilities within the right-of-way whenever the City determines that it is “reasonably necessary” to do so “or such shorter period in the case of an Emergency.”
  • Sections 263B-2 and 263B-4(9) of the Ordinance. Require a public utility to submit and/or update maps and engineering specifications depicting and certifying the location of all existing facilities within the City of Lancaster’s rights-of-way.
  • Section 263D-1(a) of the Ordinance. Purports to permit the City of Lancaster to:  (i) bring a complaint against a public utility for violation of a Pa.PUC regulation, standard, or order; (ii) notify a public utility of the existence of any suspected violation of Pa.PUC standards, regulations or orders; (iii) impose fines, attorneys’ fees, and possible imprisonment for violation of any provision of the Ordinance that is not within the Pa.PUC’s exclusive jurisdiction. Further, this section deems each day a violation continues to occur as a separate and distinct violation.
  • Section 263B-5. Seeks to impose an annual maintenance fee on any public utility with facilities in the City’s rights-of-way.

The Commonwealth Court agreed with PPL and UGI that the Pennsylvania Public Utility Code preempted Sections 263B-3 (inspection of public utility facilities), 263B-4(6) (location of public utility facilities), 263D-1(a) (enforcement and penalties for violations), and 263B-2 and 263B-4(9) (submit utility maps). However, the Court concluded that the imposition of an annual maintenance fee pursuant to Section 263B-5 of the Ordinance was not preempted by the Pennsylvania Public Utility Code.

In reaching its conclusion, the Court found that these sections, if approved, would “essentially make the City a regulator” of public utilities and public utility facilities. The Court concluded that such action was preempted by the Pennsylvania Public Utility Code and regulations of the Pa. PUC. In doing so, the Commonwealth Court reaffirmed a century of case law3 concluding that the General Assembly’s intent in enacting the Pennsylvania Public Utility Code was to provide for the uniform, statewide regulation of public utilities and public utility facilities, and that public utilities should “not be subject to the varied regulation of the many cities, townships, and boroughs throughout the Commonwealth.”

As to maintenance fees, the Court found that maintenance of public rights-of-way is a traditional exercise of municipal police powers and that the assessment of a reasonable fee to recover the maintenance costs does not constitute the local regulation of public utilities and is not preempted by the Pennsylvania Public Utility Code.4  Therefore, the majority concluded that the City of Lancaster may impose an annual right-of-way maintenance fee provided the “fee is reasonable and not a tax.”5

Through its decision, the Commonwealth Court reaffirms longstanding case law that the Pa. PUC has exclusive jurisdiction to regulate public utilities and public utility facilities. The Court has drawn a clear line between traditional municipal police powers and the regulation of public utilities. Although municipalities have broad governing authority, they clearly are preempted from taking action that “essentially makes the City a regulator” of public utilities and public utility facilities. The Court also sends a clear message that municipalities may impose fees on public utilities only if such fees are reasonable, not a tax, and not preempted by statewide legislation.

 

1 PPL Electric Utilities Corporation v. City of Lancaster, No. 462 M.D. 2013, __ A.3d __ (Pa. Cmwlth. Oct. 15, 2015); UGI Utilities, Inc. v. City of Lancaster, No. 464 M.D. 2013, __ A.3d __ (Pa. Cmwlth. Oct. 15, 2015).

2 PPL was represented by Post & Schell, P.C.

3 Citing York Water Company v. York, 95 A. 396, 396 (Pa. 1915); Duquesne Light Company v. Upper St. Clair Township, 105 A.2d 287 (Pa. 1954); County of Chester v. Philadelphia Electric Company, 218 A.2d 331 (Pa. 1966); West Penn Power Company v. Pennsylvania Public Utility Commission, 578 A.2d 75, 77 (Pa. Cmwlth. 1990), appeal denied, 593 A.2d 429 (Pa. 1991);.PECO Energy Company v. Township of Upper Dublin, 922 A.2d 996 (Pa. Cmwlth. 2007); and Pennsylvania Power Company v. Township of Pine, 926 A.2d 1241 (Pa. Cmwlth. 2007).

4 In reaching its conclusion, the majority rejected as speculative the arguments that the imposition of an annual maintenance fee will ultimately be passed on to utility customers, and that the impact to utility customers could be significant if other municipalities imposed their own annual maintenance fees.

5 The Court found that any such determination required further factual development and, therefore, denied summary relief on the maintenance fee but retained jurisdiction to determine the reasonableness of the maintenance fee.