Statement of Policy; Sunset of Chapter 30, Title 66 of the Public Utility Code [34 Pa.B. 810] Public Meeting held
January 16, 2004Commissioners Present: Terrance J. Fitzpatrick, Chairperson; Robert K. Bloom, Vice Chairperson; Glen R. Thomas; Kim Pizzingrilli; Wendell F. Holland; statements follow
Sunset of Chapter 30, Title 66 of the Public Utility Code; M-00041786
Statement of Policy In light of the sunset of Chapter 30 of Title 66 of the Public Utility Code on December 31, 2003,1 the Public Utility Commission (Commission) is issuing this statement of policy to clarify the duties and obligations of telecommunications carriers in regard to the final Commission orders issued under the provisions of Chapter 30.2 These final orders approved Chapter 30 plans consisting of alternative forms of economic regulation for an incumbent local exchange carrier's (ILEC) competitive and non-competitive services, in conjunction with certain network modernization commitments.
For the reasons that follow, the Commission believes that the current Public Utility Code provides sufficient authority for ILECs to remain under their present alternative forms of regulation as approved by this Commission in previous final orders. The Commission also believes that the Public Utility Code provides sufficient authority to require that ILECs continue their network modernization plans (NMPs) to deploy a universally available state-of-the-art broadband network in Pennsylvania.
Chapter 30 was enacted in 1993 in order to achieve early deployment of a universally available state-of-the-art broadband network in Pennsylvania. In order to accomplish that fundamental objective, Chapter 30 encouraged the Commission to grant petitions by ILECs for an alternative form of rate regulation, such as price cap regulation for non-competitive services, provided that the ILEC also committed to a NMP that provided broadband service to 100% of its customers by 2015. At this time, all 37 ILECs in Pennsylvania have filed, and the Commission has approved, Chapter 30 plans that (1) authorize alternative forms of rate regulation for non-competitive services, (2) declare certain services to be competitive and free from rate regulation, and (3) obligate the ILECs to accelerate their deployment of broadband services in accordance with the implementation schedule set forth in each NMP.3
Based upon our analysis of the Public Utility Code at Title 66 and the nature of the orders4 that approved the Chapter 30 alternative plans of regulation for all ILECs operating in Pennsylvania, the Commission presently concludes that those final orders, and the Chapter 30 plans approved by those final orders, remain in effect and are fully enforceable in all respects upon the ILECs after the sunset date of December 31, 2003. This conclusion has several bases.
First, although Chapter 30 encourages the Commission to approve a ''price cap'' form of regulation for ILECs to ensure that rates are just and reasonable, 66 Pa.C.S. § 3004(d)(2), there is nothing in Chapter 13 of the Public Utility Code, the general ratemaking section, that presently requires rate base/rate of return regulation or that prohibits price cap regulation as a means to maintain ''just and reasonable'' rates. Rather, the price cap form of rate regulation is just one of several lawful means to achieve just and reasonable rates.5
Second, under Chapter 15 of the Public Utility Code, the Commission has statutory authority to require ILECs to furnish and maintain adequate, safe, and reasonable service, and, further to require ILECs to make repairs, changes and improvements to its service and facilities as may be deemed necessary or proper for the benefit of the public. 66 Pa.C.S. § 1501. The NMPs fall within the scope of this type of authority and, in any event, were bona fide commitments made in conjunction with each ILEC's request for an alternative, and generally lesser, form of economic regulation as approved by Commission orders.
Third, an agency's final orders are presumed to remain in effect unless reversed on appeal or amended by the agency after notice and opportunity to be heard.6 A determination that all Chapter 30 orders are now void and that all ILEC services are again subject to rate base/rate of return regulation may have a substantial negative retroactive effect on these companies' investment decisions which were induced, in part, by a lesser degree of economic regulation.
Finally, it should be noted that the Legislative Budget and Finance Committee report on Chapter 30 reached the same basic conclusions regarding the effect of sunset.7
Accordingly, the Commission finds that the price cap form of regulation, streamlined form of rate regulation, and price stability mechanisms remain in effect for all ILECs that have Commission-approved alternative forms of regulation and are a lawful means to insure just and reasonable rates in accordance with section 1301 of the Public Utility Code. The Commission also determines that the ILECs' network deployment and other obligations under their currently approved Chapter 30 plans, including the filing of biennial updates, continue for the future. In addition, the Commission further finds that those services declared competitive through final orders8 continue to be deemed competitive at this time, and that the Commission may add or subtract to the list of services which are competitive. Finally, the Commission determines that it will not impose active price regulation over interexchange carriers' rates at this time given the competitive nature of these services.9
Under the Public Utility Code, the Commission has both the duty and obligation to enforce its orders. 66 Pa.C.S. §§ 501, 502, 503 and 3301. Moreover, sections 703(e) and (g) of the Public Utility Code provide that final orders are presumed to remain in effect unless reversed on appeal or amended after notice and opportunity to be heard. Thus, it is the Commission's present view and statement of policy herein that all final orders issued pursuant to Chapter 30 remain in effect and are enforceable by the Commission. The Commission will apply this statement of policy in all current Chapter 30 related proceedings and in any future adjudication, as they may arise, and reach a final determination based on the specific issues raised and arguments made in those adjudications. Therefore,
It Is Ordered That:
1. A copy of this statement of policy be served on all ILECs with Commission-approved Chapter 30 plans.
2. A copy of this statement of policy be served on the Pennsylvania Telephone Association, the Office of Consumer Advocate, the Office of Small Business Advocate, and the Office of Trial Staff.
3. A copy of this statement of policy be published in the Pennsylvania Bulletin.
JAMES J. MCNULTY,
SecretaryStatement of Chairperson Terrance J. Fitzpatrick Sunset of Chapter 30, Title 66 of the Public Utility Code Public Meeting January 16, 2004
JAN-2004-L-0011*
Docket No. M-00041786The Commission today adopts a Statement of Policy regarding the expiration of Chapter 30 of the Public Utility Code, concluding that despite the expiration of the law, the Commission has authority to pursue the same policies as when the law was in effect. I join in this Policy Statement as an initial declaration of the Commission's intentions. However, I do so with the reservations set forth below.
First, despite the issuance of this Statement of Policy, there continues to be legal uncertainty regarding the scope of the Commission's authority. A statement of policy does not have the force of law,10 and if a question of the Commission's authority (following expiration of Chapter 30) is raised in a Commission proceeding, it may be resolved in the appellate courts of Pennsylvania. It appears to me that the Commission's position that it may continue to apply the policies of Chapter 30 is strongest where the Commission has previously issued final orders. This means that existing network modernization plans should remain in effect, incumbent local exchange carriers (''ILECs'') should continue to be subject to alternative rate regulation, and services previously declared competitive should remain deregulated.
Conversely, the Commission's authority appears to be most in doubt where the Commission would attempt to apply a Chapter 30 policy to a new situation--for example, where an ILEC seeks to have additional services deregulated on the basis that they are competitive.11 Without Chapter 30, there is no explicit authority in the Public Utility Code for such deregulation.12 The current state of the law in Pennsylvania supports the Commission's authority to adapt its form of regulation to accommodate competition, but does not authorize the Commission to deregulate services. See, Elite Industries, Inc. v. PA PUC, 2003 Pa. Lexis 1745, 832 A.2d 428 (2003). The federal courts have reversed attempts by federal agencies to deregulate without explicit statutory authorization. MCI Telecommunications Corporation v. FCC, 765 F.2d 1186 (DC Circuit 1985).
My second point is related to the first. In light of the legal uncertainty regarding the scope of the Commission's authority, I would have preferred to solicit comments from interested parties prior to issuing this Statement of Policy. The fact that the Commission is not legally compelled to seek comments prior to issuing a Statement of Policy does not answer the question whether it would have been a good idea to do so. Obtaining the views of interested parties would have given the Commission a clearer, more realistic, picture of the legal landscape, and would have enabled the Commission to develop a better-informed opinion on the legal issues.
In summary, while I support the issuance of this Statement of Policy, I must recognize that it does not eliminate all legal uncertainty over the scope of the Commission's authority to continue to pursue the policies set forth in Chapter 30, which has now expired. Only time will tell whether parties will contest the Commission's authority, and, if they do, how that legal question will be finally resolved.
Terrance J. Fitzpatrick,
ChairpersonJoint Statement of Commissioner Glen R. Thomas, Vice Chairperson Robert K. Bloom, Commissioner Kim Pizzingrilli and Commissioner Wendell F. Holland
Sunset of Chapter 30, Title 66 of The Public Utility Code Public Meeting January 16, 2004
JAN-2004-L-0011*
Docket Number: M-00041786Today the Commission is issuing a Statement of Policy regarding the sunset of Chapter 30 of Title 66 of the Public Utility Code on December 31, 2003 to clarify the duties and obligations of telecommunications carriers with regard to the final Commission Orders issued under the provisions of Chapter 30. The final Orders pertain to the incumbent local exchange carrier's (ILEC) competitive and non-competitive services, in conjunction with certain network modernization commitments as well as some of the final Orders which made various determinations with regard to the regulation of interexchange carriers (IXCs) and their services.
The Statement of Policy sets forth that the Commission presently concludes that those final Orders remain in effect and fully enforceable in all respects. We wholeheartedly agree. The Commission's conclusion is based on several grounds. First, there is nothing in Chapter 13 of the Public Utility Code, the general ratemaking section that currently either requires rate base/rate of return regulation or that prohibits price cap regulation to maintain ''just and reasonable'' rates. 66 Pa.C.S. §§ 1301, et seq. Second, the companies' network modernization plans are within the scope of the Commission's authority under Chapter 15 to require the companies to make repairs, changes and improvements to their service and facilities as may be deemed necessary or proper for the benefit of the public. 66 Pa.C.S. §§ 1501, et seq. Third, under Section 703(e) and (g) an agency's final orders are presumed to remain in effect unless reversed on appeal or amended by the agency after notice and opportunity to be heard. 66 Pa.C.S. § 703(e) and (g). Finally, the Commission has both the duty and obligation to enforce its orders under Sections 501, 502, 503 and 3301. 66 Pa.C.S. §§ 501, 502, 503 and 3301. In fact, this Commission has recently stated that it has a ''clear, unambiguous duty to enforce its orders. 66 Pa.C.S. § 501(a). Public Utilities have a clear, unambiguous duty to comply with Commission orders. 66 Pa.C.S. § 501(c).'' Verizon Pennsylvania Inc. Petition and Plan for Alternative Form of Regulation Under Chapter 30 2000 Biennial Update to Network Modernization Plan, Docket No. P-00930715, May 15, 2002.
For the reasons stated above, it is the Commission's view in this Statement of Policy that all final Orders issued pursuant to Chapter 30 remain in effect and are enforceable by this agency unless and until deemed otherwise. The Statement of Policy provides clarity to not only the telecommunications industry operating in Pennsylvania, but also the consumers of the Commonwealth that the Commission will continue to enforce its Orders regarding this very important issue.
Glen R. Thomas,
CommissionerRobert K. Bloom,
Vice ChairpersonKim Pizzingrilli,
CommissionerWendell F. Holland,
Commissioner______
1 Section 4 of Act 67 of 1993 provided that Chapter 30 shall expire on December 31, 2003, unless sooner reenacted by the General Assembly. Sec. 4, HB84, No. 1993-67.
2 A ''statement of policy'' is a document that interprets or implements any act of the legislature enforced or administered by that agency. 45 P. S. § 1102. Unlike a regulation that establishes a binding norm, a statement of policy represents an announcement of the policy the agency intends to implement in future adjudications. Pa. Human Relations Com. v. Norristown School Dist., 374 A2d 671 (Pa. 1977).
3 Minor exceptions exist for Hancock Telephone Company, Citizens Communications Services Company, West Side Telephone Company and Deposit Telephone Company located on the borders of Pennsylvania and who operate primarily in neighboring states and serve only a small number of Pennsylvania residents.
4 All Chapter 30 Plans were approved by final order, after notice and opportunity to be heard. Moreover, none of those orders are on appeal.
5 For example, in Popowsky v. Pa. PUC, 674 A.2d 1149 (Pa. Cmwlth. 1996), the Commonwealth Court approved a ratemaking method known as ''operating ratio'' for determining just and reasonable rates, holding that the Public Utility Code did not limit the Commission's discretion only to the use of a rate base/rate of return methodology.
6 66 Pa.C.S. § 703(e) and (g).
7 Legislative Budget and Finance Committee, Pennsylvania Public Utility Commission's Implementation of Chapter 30 (June 2003), at S-18 and S-19 (''We could identify no significant impact that would necessarily occur should Chapter 30 sunset on December 31, 2003. If Chapter 30 sunsets, the PUC-approved petitions for alternative regulation and the network modernization plans would remain in effect. . . . While some may argue that the PUC would have to revert back to rate base/rate of return regulation if Chapter 30 sunset, the PUC has authority even without Chapter 30 to implement alternative rate regulation . . . .'').
8 The Commission has designated certain telecommunications services competitive through final orders approving Chapter 30 plans as well as other final adjudications. For example, see Bell Atlantic-Pennsylvania, Inc., Docket Nos. P-00930715, et al., 82 Pa. P.U.C. 194 (1994); vacated in part on other grounds, Popowsky v. Pa. PUC, 669 A.2d 1029 (Pa. Cmwlth. 1995); Cmwlth Ct. order rev'd in part and Comm'n order reinstated in part, Popowsky v. Pa. PUC, 550 Pa. 449, 706 A.2d 1197 (1997). See also Bell Atlantic-PA v. Pa. PUC, 763 A.2d 440 (1999) (Global Order).
9 In the proceeding Re Interexchange Carrier Regulation Under Chapter 30 of the Public Utility Code, at M-00930496 (Order entered December 28, 1993) (Interim Guidelines Order), the Commission established interim guidelines for the regulation of IXCs under Chapter 30. By Final Order entered April 29, 1997, the Commission promulgated final regulations to implement IXC regulations. 27 Pa.B. 3217.
10 PA Human Relations Commission v. Norristown Area School District, 374 A.2d 671 (Pa. 1977).
11 See, 66 Pa.C.S. § 3005 (expired). This concern also applies to the ability to continue to treat interexchange services as deregulated. See 66 Pa.C.S. § 3008 (expired).
12 Both the Commission and the Supreme Court of Pennsylvania have used the terms ''deregulation'' or ''deregulated'' to describe the approach to competitive services under 66 Pa.C.S. § 3005 (expired). Bell Atlantic-PA Inc.'s Petition and Plan for Alternative Regulation, Dkt. No. P-00930715, 1994 Pa. PUC Lexis 142 (June 28, 1994), Slip Opinion at p. 49, Popowsky v. PA PUC, 550 Pa. 449, 706 A.2d 1197, 1200 (1997).
[Pa.B. Doc. No. 04-226. Filed for public inspection February 6, 2004, 9:00 a.m.]
