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Pennsylvania Court Rules PUC Lacks Authority To Order Retail Suppliers To Issue Refunds To Customers For Violations Of PUC Regulations
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Pennsylvania's Commonwealth Court issued a decision in an appeal filed by Blue Pilot Energy, LLC in which the Court found that the Pennsylvania PUC lacks authority to order electric generation suppliers (EGSs) to provide refunds to customers for violations of PUC regulations, as the Court reversed the PUC's order with respect to refunds
As previously reported, the PUC had ordered Blue Pilot Energy to refund to customers approximately $2.5 million (via refund pool) for alleged violations of PUC regulations, while also imposing a fine of nearly $1.1 million
See our prior story here for background on the specific violations
Blue Pilot appealed the PUC's decision, arguing, among other things, that the PUC acted beyond its authority when it determined that Blue Pilot had failed to adhere to the terms of its disclosure statement. As summarized by the Court, Blue Pilot argued that, in the PUC's order, the PUC essentially determined that Blue Pilot breached its
contracts with its customers. Citing the Pennsylvania Superior Court decision in
Allport Water Authority v. Winburne Water Company, 393 A.2d 673
(Pa. Super. 1978) (en banc), Blue Pilot contended that the PUC lacks jurisdiction to
rule on private party contract disputes.
However, the Court disagreed, finding that, "this case does not simply involve a breach of contract."
"While the PUC has
no obvious authority to vindicate private contractual rights in this area, it has
unquestionable authority to ensure that Blue Pilot meets its obligation to comply
with PUC regulations. That the two may be interrelated does not diminish the PUC's
jurisdiction to enforce its own regulations through the formal complaint procedures
in its regulations," the Court said
Citing a similar finding in ARIPPA v. Pa. Pub. Util. Comm 'n, 966 A.2d 1204, 1211 (Pa. Cmwlth. 2009) (en banc), the Court said, "we first note that the
Competition Act requires all EGSs wishing to do business in the Commonwealth to
be licensed by the PUC. 66 Pa. C.S. § 2809(a). The Competition Act further
requires all licensed EGSs to abide by the PUC's regulations. Id. § 2809(b). Blue
Pilot does not challenge the validity of the PUC's regulations that require EGSs to
bill in accordance with the terms of their disclosure statements. 52 Pa. Code
§§ 54.4(a), 54.5(a). The PUC possesses the statutory authority to enforce its
regulations. 66 Pa. C.S. § 502 ... The ability of customers to shop for electric
generation service is a result of legislative action, the Competition Act, which
created a regulated marketplace under which EGSs may offer their services to
consumers provided they follow certain rules. Whether an EGS breaks the rules of
that marketplace by violating a regulation of the PUC 'is not a matter of ordinary
contract interpretation.' Id. Enforcement of those rules falls squarely within the
jurisdiction of the PUC."
Blue Pilot, which was represented by Eckert Seamans Cherin & Mellott, LLC, also argued that the PUC exceeded its authority by
creating the customer refund pool
Here, in discussing the parties arguments on appeal, the Court stated, "In response, the PUC tacitly concedes that there is no express authority in the
Public Utility Code generally, or the Competition Act specifically, that authorizes
the PUC to order the refund remedy in this case. Moreover, the PUC expressly
concedes that it lacks 'the authority to order across-the-board relief to all affected
customers pursuant to its plenary authority under Section 501 of the [Public Utility]
Code.' (PUC Br. at 38.)"
The PUC, however, claimed plenary authority under
Section 501 to direct an EGS to issue a credit or refund for an over bill, with the PUC arguing that refund authority is an implied power necessarily implicit in the Public Utility Code
The Court disagreed with the PUC, and found that the PUC lacks authority to order an EGS to provide refunds for violations of PUC regulations
The Court said, "All parties agree that there is no express grant in the Public Utility Code
generally and the Competition Act specifically of authority to the PUC to order
across-the-board refund relief to all of Blue Pilot's customers as a remedy for Blue
Pilot's adjudicated violation of the PUC's regulations relating to EGS disclosure
statements. The only way, then, the PUC can exercise this authority is if the
authority is grounded in 'a strong and necessary implication from' the statutory text."
The Court found that, "There is no dispute that Section 501(a) of the Public Utility Code grants
general authority to the PUC 'to enforce, execute and carry out, by its regulations,
orders, or otherwise, all and singular, the provisions' of the Public Utility Code 'and
the full intent thereof.' Moreover, Section 501(b) of the Public Utility Code vests
within the PUC the 'general administrative power and authority to supervise and
regulate all public utilities doing business within this Commonwealth,' and for
purposes of Sections 2809 and 2810 of the Competition Act, EGSs are public
utilities. Section 2809(b) of the Competition Act requires EGSs to comply with the
PUC's regulations. Section 2809(e) of the Competition Act commands the PUC 'to
impose requirements [on EGSs] necessary to ensure that the present quality of
service provided by electric utilities does not deteriorate.' None of these sections
however, expressly empower the PUC to order an EGS, which is found to be in
violation of PUC regulations, to fund a refund pool for customers as a penalty for
that violation."
"The PUC, the OAG, and the OCA argue that such authority must be found
from the above express statutory provisions. We are unpersuaded. Absent from any
of their briefs in this matter is any argument that such refund authority is necessary
to carry out the PUC's statutory duties under the Public Utility Code. Looking at
the IDT Opinion, on which the PUC principally relies, we see only the PUC's view
that a refund remedy 'carries out ... statutorily[ ]prescribed consumer protections,'
'helps' to ensure compliance with the PUC's regulations, and is 'consistent with'
and 'furthers' the policy objectives of the Public Utility Code. IDT Opinion
at 17-18. All of this may very well be true, but it does not establish the requisite
necessity to relax the general rule that limits an agency's authority to only that which
is expressly conferred by the General Assembly," the Court said. [emphasis in original]
"Critically, in making this argument, the PUC, the OAG, and the OCA offer
no reason upon which we could conclude that the violation and penalty provisions
found within Chapter 33 of the Public Utility Code and the license suspension and
revocation authority found in the PUC regulations are inadequate to protect the
public and ensure EGS compliance with the PUC's regulations. In this case, the
PUC relied on its express authority in Section 3301 to assess a civil penalty of over
$1 million on account of Blue Pilot's violation of the PUC's regulations governing
EGSs. Neither the PUC, the OAG, nor the OCA explains how the power to levy
such a civil penalty, alone or in concert with the authority to suspend or revoke a
license, is inadequate to protect consumers or curb misconduct by EGSs. In addition
to the authority to assess a civil penalty and to suspend or revoke an EGS license,
Section 3302 of the Public Utility Code, 66 Pa. C.S. § 3302, imposes criminal
penalties on EGSs that 'knowingly fail, omit, neglect or refuse to obey, observe, and
comply with any regulation' of the PUC," the Court said
The Court further observed that Chapter 33 of the Public Utility Code explicitly preserves a private right of action
to pursue damages in the appropriate court of law, "perhaps even premised upon a
PUC administrative determination that a public utility or EGS acted contrary to PUC
regulations."
"[N]either the PUC, the OAG, nor the OCA claims that this
express provision, and the related civil remedies available to consumers, whether at
common law or by statute, are inadequate to make consumers whole and
discourage misconduct by EGSs, such that we must imply refund authority by
necessity," the Court said
"Section 1312 of the Public Utility Code also counsels against implying refund
authority in this case. The PUC, the OAG, and the OCA concede, as they must, that
Section 1312 of the Public Utility Code expressly grants the PUC the authority to
direct the type of refund relief the PUC imposed in this case, but only with respect
to public utilities and their patrons. They concede that this section does not apply to
EGSs. Yet, they ask this Court to imply by necessity the very authority to order that
which the PUC cannot order under the express refund authority conferred by the
General Assembly. This is the exact opposite of implying authority necessary to
carry out the General Assembly's intent. To do what the PUC, the OAG, and the
OCA ask in this case would require us to confer on the PUC authority that the
General Assembly withheld," the Court said
"For all of these reasons, we conclude that the PUC acted within its jurisdiction
in adjudicating the Formal Complaint's allegations that Blue Pilot violated
applicable PUC regulations governing Blue Pilot's pricing and disclosure statement.
Nonetheless, we will reverse the portion of the PUC's Orders that establish a refund
pool for Blue Pilot's customers, as the PUC lacks the requisite express authority or
necessary implied authority to grant that relief," the Court said
Note that the issue here is refunds for violations of PUC regulations. The PUC does have express statutory authority to order refunds in cases of slamming, under the specific terms of 52 Pa. Code§ 57. 177(b) [which generally limits refunds to two months]
Finally, Blue Pilot appealed the amount of the $1.1 million fine as excessive. The Court denied Blue Pilot's appeal on this issue
Addressing various arguments raised by Blue Pilot, the Court said in part that, "Blue Pilot does not address the threshold
proportionality question of whether the fine imposed in this case is proportionate to
the gravity of Blue Pilot's adjudicated offenses."
Summarizing the entire matter, the Court said, "For the reasons set forth above, the PUC acted within its jurisdiction in
adjudicating issues surrounding Blue Pilot's lack of compliance with PUC
regulations governing EGSs in the Commonwealth, particularly with respect to the
question of consistency between pricing and disclosure statements to customers and
the contents of those disclosure statements. Blue Pilot has not persuaded us in this
appeal that the nearly $1.1 million civil penalty that the PUC imposed in this matter
is unconstitutionally excessive or that the assessment of the penalty violated Blue
Pilot's procedural or substantive due process rights. As Blue Pilot did not timely
raise any issue concerning its ability to pay the civil penalty in this case, we do not
address that issue on appeal. Finally, the PUC lacks the authority, either expressly
or by necessary implication, to order the creation of a refund pool for all affected
customers of Blue Pilot. We will, accordingly, affirm in part and reverse in part the
PUC's Merits Order and Reconsideration Order."
Case: No. 1054 C.D. 2019
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October 28, 2020
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Copyright 2010-20 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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