R.C. Culbertson v. PA PUC

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Richard C. Culbertson, :

Petitioner :

:

v. : No. 152 C.D. 2022

: Submitted: March 3, 2023

Pennsylvania Public Utility :

Commission, :

Respondent :

BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge

HONORABLE ANNE E. COVEY, Judge

HONORABLE STACY WALLACE, Judge

OPINION NOT REPORTED

MEMORANDUM OPINION

BY JUDGE WALLACE FILED: August 17, 2023

Richard C. Culbertson (Culbertson), pro se, petitions for review of the

Pennsylvania Public Utility Commission’s (Commission) December 16, 2021 order,

which (a) adopted the Recommended Decision of Administrative Law Judge Mark

A. Hoyer (ALJ Hoyer), (b) denied, in large part, and granted, in limited part,

Culbertson’s exceptions, (c) approved in its entirety and without modification a Joint

Petition for Settlement (Joint Petition) filed on September 7, 2021, by Columbia Gas

of Pennsylvania, Inc. (Columbia), the Bureau of Investigation and Enforcement of

the Commission (I&E),1 and every interested party except Culbertson and Ronald

1

I&E “serves as the prosecutory bureau for purposes of representing the public interest in

ratemaking . . . matters before the Office of Administrative law Judge.” Pennsylvania Public

Utility Commission, Offices and Staff Directory, https://www.puc.pa.gov/about-the-puc/offices-

and-staff-directory/ (last visited August 16, 2023).

Lamb (Lamb), (d) reduced Columbia’s proposed annual increase in base rate

operating revenues from approximately $98.3 million to $58.5 million, and (e)

dismissed Culbertson’s and Lamb’s Complaints. Upon review, we affirm.

I. Background

“Columbia provides natural gas distribution, sales, transportation, and/or

supplier of last resort services to approximately 436,000 retail customers in portions

of 26 counties of Pennsylvania.” Reproduced Record (R.R.) at 181. Columbia

qualifies as a “public utility” and a “natural gas distribution company” under

Pennsylvania’s Public Utility Code (Code).2 Id. at 181, 323; see also 66 Pa.C.S. §§

102, 2202. On March 30, 2021, Columbia filed Supplement No. 325 to its tariff to

be effective for services rendered on and after May 29, 2021. R.R. at 181, 320.

Supplement No. 325 proposed changes to Columbia’s rates that were designed to

provide an approximately $98.3 million increase in Columbia’s annual revenue. Id.

at 181, 320-21.

The following parties filed Complaints or Petitions to Intervene opposing

Columbia’s Supplement No. 325: the Office of Consumer Advocate (OCA),3 the

Office of Small Business Advocate (OSBA),4 Columbia Industrial Intervenors,

2

66 Pa.C.S. §§ 101-3316.

3

Section 902-A(a) of The Administrative Code of 1929, Act of April 9, 1929, P.L. 177, as

amended, added by the Act of July 9, 1976, P.L. 903 (The Administrative Code), authorizes the OCA,

as a position within the Office of Attorney General, to represent the interest of consumers before the

Commission. 71 P.S. § 309-2(a). Section 905-A of The Administrative Code requires the

Commission to notify the OCA when a public utility proposes to change its rates or take any

actions which may substantially affect the interest of consumers. 71 P.S. § 309-5. Sections 904-A

and 905-A of The Administrative Code permit the OCA to intervene and “represent the interest of

consumers as a party . . . in any matter properly before the [C]ommission, and before any court or

agency.” 71 P.S. §§ 309-4, 309-5.

4

Section 3 of the Small Business Advocate Act, Act of December 21, 1988, P.L. 1871, 73 P.S.

§§ 399.41-399.50b (SBAA), authorizes the OSBA, as an office within the Department of

(Footnote continued on next page…)

2

Shipley Choice, LLC d/b/a Shipley Energy Company (Shipley) and the Retail

Energy Supply Association (RESA),5 the Coalition for Affordable Utility Services

and Energy Efficiency in Pennsylvania (CAUSE-PA), the Pennsylvania State

University, the Pennsylvania Weatherization Providers Task Force, Culbertson, and

Lamb. R.R. at 180-81, 321.

On May 6, 2021, the Commission entered an order suspending Columbia’s

Supplement No. 325 until December 29, 2021.6 R.R. at 182, 321. The

Commission’s order also “instituted an investigation to determine the lawfulness,

justness, and reasonableness of the rates, rules, and regulations contained in

[Supplement No. 325] and assigned the case to the Office of the Administrative Law

Judge for the prompt scheduling of such hearings as may be necessary culminating

in the issuance of a Recommended Decision.” Id. at 321. The parties then

“conducted substantial formal and informal discovery.” Id. at 183.

ALJ Hoyer held two public input hearings in June 2021. R.R. at 322. On

August 4, 2021, ALJ Hoyer conducted an evidentiary hearing, “for the purpose of

admitting evidence into the record and allowing [pro se] Complainant Mr.

Culbertson to conduct cross-examination of Columbia’s [President], Mark Kempic.”

Community and Economic Development, to represent the interest of small business consumers

before the Commission. 73 P.S. § 399.43. Section 7 of the SBAA requires the Commission to

notify OSBA when a public utility proposes to change its rates or take any actions which may

substantially affect the interest of small business consumers. 77 P.S. § 399.47. Sections 5 and 7

of the SBAA permit the OSBA to intervene and “represent the interest of small business consumers

as a party . . . in any matter properly before the Commission, and before any court, or agency.” 77

P.S. §§ 399.45, 399.47.

5

Shipley and RESA filed an amended petition to intervene to substitute RESA for Interstate Gas

Supply, Inc. (IGS) in Shipley and IGS’s previously filed petition to intervene. R.R. at 321.

6

Section 1308(b) of the Code permits the Commission to suspend a public utility’s proposed rate

increase for up to six months while a hearing and decision are pending. See 66 Pa.C.S. § 1308(b).

3

Id. After the hearing, Columbia and Culbertson filed briefs in support of their

positions.7 Id.

On September 7, 2021, Columbia, I&E, each complainant except Culbertson

and Lamb, and each intervenor (collectively, Joint Petitioners), filed the Joint

Petition and individual statements in support of a proposed settlement. R.R. at 322.

In Supplement No. 325, “Columbia proposed rates designed to result in an increase

in annual distribution operating revenues of approximately $98.3 million, an

increase of approximately 19.9%.” Id. at 324. This would increase the average

monthly bill for a residential customer using 70 therms8 of gas per month from

$100.77 to $115.37. Id. Under the settlement terms the parties proposed in the Joint

Petition, Columbia’s rates would only increase annual distribution operating

revenues by approximately $58.5 million, which is an increase of approximately

11.9% over existing rates and would only increase the average monthly bill for a

residential customer using 70 therms of gas per month from $100.77 to $109.10. Id.

The Joint Petition proposed a total resolution of all issues raised by Joint Petitioners,

but it reserved Culbertson’s issues for litigation.9 Id. at 327.

7

ALJ Hoyer ultimately struck approximately nine pages from Culbertson’s brief due to its

reference to confidential settlement discussions. R.R. at 322.

8

A “therm” is “the industry standard used by almost all natural gas providers across the country”

to “measure the energy output of a unit of gas.” Natural Gas Plans, What is the Difference Between

a CCF, MCF, and Therm?, https://naturalgasplans.com/difference-between-ccf-mcf-therm/ (last

visited August 16, 2023). “It is generally accepted that 100 cubic feet of natural gas . . . is the

energy equivalent of burning one therm of gas. But the true conversion . . . [is] that 100 cubic feet

. . . of natural gas equals . . . 1.037 therms.” Id. (emphasis omitted).

9

On September 8, 2021, ALJ Hoyer entered an order (the “Eleventh Interim Order”) “directing

that any objections or comments to the Settlement be filed and served by September 17, 2021.”

R.R. at 323. On September 24, 2021, Culbertson filed a “Motion to Properly Respond to the Black

Box Settlement Agreement Among the Participants (excluding Culbertson) Rate Case.” Id. On

September 29, 2021, ALJ Hoyer entered an order denying Culbertson’s motion and closing the

record. Id.

4

On October 12, 2021, ALJ Hoyer issued his Recommended Decision, in

which he recommended approving the Joint Petition, without modification, finding

Joint Petitioners’ proposed settlement “is in the public interest, consistent with the

Code, and is supported by substantial evidence.” Id. at 340. ALJ Hoyer “reasoned

that Joint Petitioners represent many interests,” including “the public interest, the

interests of residential customers, and the interest of small business customers,” and

that “to reach a settlement of all issues with the Joint Petitioners in a base rate case

is unusual, and the resulting Settlement represents hours of negotiation and a great

deal of cooperation.” Id. at 341. Thus, ALJ Hoyer “concluded that the Settlement

addresses every contested issue in this proceeding, and since all of the diverse

interests represented by the Joint Petitioners have been satisfied, the Settlement

benefits Columbia’s customers and saves the parties and the Commission the time

and expense[10] of fully litigating this matter.” Id.

ALJ Hoyer also expressly considered and rejected Culbertson’s arguments.

Culbertson first argued the Commission did not investigate Columbia’s requested

rate increase to determine its reasonableness. R.R. at 341. Noting the extensive

discovery conducted by Columbia and Joint Petitioners,11 ALJ Hoyer rejected this

argument. Id. at 341-42. Culbertson’s second argument was the Settlement

provided no reasonable assurance that the agreed upon rates were just, reasonable,

and lawful. Id. at 342. Culbertson’s third argument was Columbia’s audits, internal

controls, rates, rate base, and safety records were inadequate. ALJ Hoyer determined

Culbertson failed to support his second and third arguments with substantial

10

The expense of litigating a rate case is “an expense ultimately recovered through rates paid by

customers.” R.R. at 361.

11

In its Statement in Support of the Joint Petition, Columbia asserted that it responded to over 800

formal discovery requests. R.R. at 339.

5

evidence.12 Finally, ALJ Hoyer rejected the remainder of Culbertson’s arguments

and determined Culbertson “failed to prove with substantial evidence that Columbia

violated the Code, the Commission’s Regulations or Orders, or Columbia’s

Commission-approved tariff.” Id. at 343.

On October 20, 2021, Culbertson filed six exceptions to ALJ Hoyer’s

Recommended Decision. R.R. at 344-70. On December 16, 2021, the Commission

issued a final order in this matter, denying Culbertson’s first five exceptions. The

Commission granted Culbertson’s sixth exception, wherein Culbertson objected to

ALJ Hoyer’s statement that “[t]he primary issue underlying Mr. Culbertson’s

Complaint in this proceeding is his belief that Columbia improperly disconnected an

inactive service line at [his property] and subsequently required Mr. Culbertson to

replace the customer-owned portion of the service line before restoring service.” Id.

at 370-71. In granting Culbertson’s sixth exception, the Commission noted

Culbertson’s rate complaint was separate from his inactive service line complaint.

Id. at 372. The Commission, however, viewed ALJ Hoyer’s statement as dicta, “as

it does not form a basis for [his] decision to dismiss Mr. Culbertson’s Rate

Complaint.” Id. As a result, the Commission determined it did not need to further

modify ALJ Hoyer’s Recommended Decision. Id.

The Commission noted the proposed settlement terms represented a nearly

40% reduction in revenue increases from the amount Columbia originally requested

in Supplement No. 325. R.R. at 372. In addition, the Commission noted many of

the settlement terms “take[] rate affordability into account to better match

12

Culbertson, as the proponent of an order from the Commission, bore the burden of proof, which

required him to prove entitlement to relief by a preponderance of the evidence. See 66 Pa.C.S. §

332(a); Samuel J. Lansberry, Inc. v. Pa. Pub. Util. Comm’n, 578 A.2d 600, 602 (Pa. Cmwlth.

1990).

6

households in need with available assistance,” and “are beneficial to [Columbia’s]

customers and the public.” Id. at 373. Finally, the Commission determined the

proposed settlement “will result in significant savings of time and expenses for all

Parties involved” by avoiding protracted litigation and will provide “regulatory

certainty with respect to the disposition of the issues.” Id. at 374. Accordingly, the

Commission concluded that the proposed settlement “balances the concerns of all

Parties involved, is in the public interest, and should be approved without

modification.” Id. at 372.

The Commission ultimately entered an order approving the Joint Petition in

its entirety, adopting ALJ Hoyer’s Recommended Decision, and dismissing

Culbertson’s and Lamb’s Complaints. Culbertson filed a Petition for Review in this

Court. Culbertson’s arguments on appeal revolve around three main areas of

perceived misconduct.13 First, Culbertson asserts the Commission should have

conducted an audit of Columbia in accordance with various auditing and accounting

standards. Second, Culbertson asserts the Commission violated his constitutional

due process rights. Third, Culbertson asserts the Commission’s approval of a “black

box” settlement was illegal. As a result of these three main alleged errors,

Culbertson asserts Columbia’s rates are not just and reasonable.

13

Culbertson included 17 numbered paragraphs alleging errors, which spanned 8 pages, in his

Petition for Review. See Petition for Review. Culbertson’s “Statement of Questions Involved”

section of his Brief, however, only included four questions. See Petitioner’s Br., at 7. Although

the Argument section of Culbertson’s Brief purports to be divided into four sections to correspond

with his Statement of Questions Involved, Culbertson’s Argument section is repetitive and

disorganized. See generally Petitioner’s Br. It is not our position, nor function, to advance the

arguments of a party before us. Keeping in mind that Culbertson is a pro se petitioner, however,

we have attempted to consider the substantive merits of each argument he developed in his Brief.

See Muretic v. Workers’ Comp. Appeal Bd. (Dep’t of Lab. & Indus.), 934 A.2d 752, 758 (Pa.

Cmwlth. 2007) (issues that are not addressed either in the statement of questions involved or

argument section of the petitioner’s brief are waived).

7

II. Analysis

In reviewing an order of the Commission, we are limited to determining

whether substantial evidence supports the Commission’s findings of fact or whether

the Commission committed an error of law, violated a party’s constitutional rights,

or violated its own procedures. Popowsky v. Pa. Pub. Util. Comm’n, 910 A.2d 38,

48 (Pa. 2006) (Popowsky II); see also 2 Pa.C.S. § 704. We defer to the

Commission’s interpretation of the Code and its own regulations unless the

Commission’s interpretation is clearly erroneous. Popowsky v. Pa. Pub. Util.

Comm’n, 706 A.2d 1197, 1203 (Pa. 1997) (Popowsky I). In addition, we may not

substitute our judgment for the Commission’s judgment “when substantial evidence

supports the [Commission’s] decision on a matter within the [C]ommission’s

expertise.” Id. at 1201. Substantial evidence is “such relevant evidence that a

reasonable mind might accept as adequate to support a conclusion.” Phila. Gas

Works v. Pa. Pub. Util. Comm’n, 898 A.2d 671, 675 n.9 (Pa. Cmwlth. 2006) (citation

omitted).

The Code requires that “[e]very rate made, demanded, or received by any

public utility . . . shall be just and reasonable, and in conformity with regulations or

orders of the [C]ommission.” 66 Pa.C.S. § 1301(a). If a public utility desires to

increase its rates, it must first provide the Commission with 60 days’ notice of the

proposed changes. See 66 Pa.C.S. § 1308(a). The Commission may then, upon the

filing of a third-party complaint or upon its own motion, conduct a hearing to

determine “the lawfulness of such rate.” 66 Pa.C.S. § 1308(b). When a public utility

requests a general rate increase, the Commission must also “promptly enter into an

investigation and analysis” of the proposed rates. 66 Pa.C.S. § 1308(d). While the

Commission proceeds with an investigation and a hearing, it may suspend the

8

proposed rate increase for six months, plus an additional period of three months,

while a decision is pending. 66 Pa.C.S. § 1308(b).

If the Commission determines the proposed rates are “unjust or unreasonable,

or in anywise in violation of the law,” the Commission must “determine the just and

reasonable rate to be charged or applied by the public utility for the service in

question, and shall fix the same by order to be served upon the public utility.” 66

Pa.C.S. § 1308(c). In general rate cases, following an investigation and hearing, the

Commission must enter “a final decision and order, setting forth its reasons therefor,

granting or denying, in whole or in part, the general rate increase requested.” Id.

At a hearing before the Commission, the proponent of an order carries the

burden of proof. 66 Pa.C.S. § 332(a). That party “must prove its case by a

preponderance of the evidence, which is evidence more convincing than that offered

by the other parties.” Transource Pa., LLC v. Pa. Pub. Util. Comm’n, 278 A.3d 942,

955 (Pa. Cmwlth. 2022) (citing Se-Ling Hosiery, Inc. v. Margulies, 70 A.2d 854,

855-56 (Pa. 1950)). The proponent’s burden of proof includes a burden of

production and a burden of persuasion. Transource Pa., 278 A.3d at 955 (citation

omitted). “[T]he burden of persuasion never leaves the party on whom it is originally

cast, but the burden of production may shift during the course of the proceedings.”

Riedel v. Cnty. of Allegheny, 633 A.2d 1325, 1328 n.11 (Pa. Cmwlth. 1993).

A. Auditing

Culbertson first argues the Commission failed to investigate this matter and

assure Columbia’s rates were just and reasonable because it did not conduct an audit

of Columbia in accordance with various accounting principles. See Petitioner’s Br.

at 31-34. Specifically, Culbertson takes issue with Columbia’s inclusion of costs for

its accelerated pipeline replacement program in its rate base filing. See id. at 36.

9

Culbertson asserts that “[i]ncluding accelerated costs pad the rate base” and violate

the “GAO Yellow Book.”14 Id. Culbertson also argues the Commission should have

audited Columbia in accordance with article VIII, section 10 of the Pennsylvania

Constitution, Pa. Const. art. VIII, § 10.15

Culbertson did not provide any authority for his belief the Commission is

required to conduct audits in accordance with the GAO Yellow Book. The

Commission’s auditing responsibilities are set forth in Section 516 of the Code. See

66 Pa.C.S. § 516. Notably, neither Section 516 nor any other provision of the Code

requires the Commission to conduct audits in accordance with the GAO Yellow

Book. Id. Because Culbertson did not provide any authority, beyond reference to

the GAO Yellow Book, to support his belief that inclusion of accelerated pipeline

replacement costs was improper, we agree with the Commission’s determination that

Culbertson did not support his argument. See Commonwealth v. Brown, 196 A.3d

130, 185 n.21 (Pa. 2018) (“appellate courts are ‘neither obligated, nor even

particularly equipped, to develop an argument for a party. To do so places the Court

in the conflicting roles of advocate and neutral arbiter.’”).

14

United States Government Accountability Office, Comptroller General of the United States,

Government Auditing Standards, 2021.

15

Article VIII, section 10 of the Pennsylvania Constitution provides:

The financial affairs of any entity funded or financially aided by the

Commonwealth, and all departments, boards, commissions, agencies,

instrumentalities, authorities and institutions of the Commonwealth, shall be

subject to audits made in accordance with generally accepted auditing standards.

Any Commonwealth officer whose approval is necessary for any transaction

relative to the financial affairs of the Commonwealth shall not be charged with the

function of auditing that transaction after its occurrence.

Pa. Const. art. VIII, § 10 (emphasis added).

10

Additionally, Columbia is a corporation whose affairs are regulated by the

Commission. As the Commission properly noted, “[w]hile the Commission

determines just and reasonable rates pursuant to Chapter 13 of the Code, rates are

paid by ratepayers, the consumers of the utility services, not the Commission,

rendering a constitutional provision calling for audits of entities funded or aided by

the Commonwealth inapplicable.” R.R. at 358 n.14. We agree with the Commission

that the auditing requirements of article VIII, section 10 of the Pennsylvania

Constitution do not apply to Columbia. Accordingly, we conclude the Commission

did not err in determining Culbertson failed to show the Commission did not

properly investigate or audit Columbia.

B. Due Process

Culbertson next argues the Commission violated his constitutional due

process rights. To support this argument, Culbertson asserts the Commission’s

administrative law judges are not impartial decision makers and the Commission is

corrupt because it can receive increased revenue when utility rates increase.16 See

Petitioner’s Br. at 35. Culbertson also asserts ALJ Hoyer should not have been

responsible for investigating Columbia’s proposed rate increase and for determining

if Columbia’s proposed rates were just and reasonable. See Petitioner’s Br. at 31.

We begin by dispelling Culbertson’s belief that ALJ Hoyer was responsible

for investigating Columbia’s proposed rate increase. After the Commission issued

its May 6, 2021 order instituting an investigation, I&E entered its appearance in this

16

“The [Commission] is funded by assessment of the regulated public utilities throughout the

state. Subject to budget approval, the [Commission] assesses utilities up to three-tenths of one

percent of gross intrastate revenue to cover the cost of regulation. All assessments are paid into

the General Fund of the State Treasury through the Department of Revenue for use solely by the

Commission.” Pennsylvania Public Utility Commission, About the PUC, https://

www.puc.pa.gov/about-the-puc/ (last visited August 16, 2023).

11

matter. I&E, as a party to the proceedings before ALJ Hoyer, was the Commission’s

entity charged with investigating Columbia’s proposed rate increase. Contrary to

Culbertson’s assertion, ALJ Hoyer was not “ordered or expected to do an

investigation of the proposed and existing rates.” See Petitioner’s Br. at 31. Instead,

ALJ Hoyer presided over this matter, received evidence, and issued a Recommended

Decision.

Regarding Culbertson’s assertion the Commission violated his due process

rights because ALJ Hoyer was not an independent decision maker, we note that the

essential elements of due process are notice and an opportunity to be heard in a full

and fair hearing before an impartial decision maker. See Abramovich v. Pa. Liquor

Control Bd., 416 A.2d 474, 476 (Pa. 1980). The Pennsylvania Supreme Court

considered the independence, or lack thereof, of an agency’s adjudicatory body in

Lyness v. State Board of Medicine, 605 A.2d 1204 (Pa. 1992). In Lyness, the State

Board of Medical Education and Licensure (Board of Medicine), acting on

information its own prosecuting attorney provided, determined sufficient evidence

existed to initiate disciplinary action against a doctor. Id. at 1205. Following a

formal hearing, a neutral hearing examiner suspended the doctor’s license for a

period of five years. Id. at 1205-06. After the doctor and the Board of Medicine’s

prosecuting attorney appealed, the Board of Medicine conducted a de novo review

and ordered the permanent revocation of the doctor’s license to practice medicine

and surgery in the Commonwealth. Id. at 1206. The Court held that the Board of

Medicine’s actions were “an unconstitutional intermingling of the prosecutorial and

adjudicatory functions,” noting due process requires that “if more than one function

is reposed in a single administrative entity, walls of division [must] be constructed

which eliminate the threat or appearance of bias.” Id. at 1209-10.

12

In Office of Disciplinary Counsel v. Duffield, 644 A.2d 1186, 1188 (Pa. 1994),

an attorney, relying on Lyness, argued that the Disciplinary Board violated his due

process rights because it controlled the entire prosecution and adjudication of his

charges. Id. In Duffield, the Court noted that although a member of the Disciplinary

Board reviews and approves the Office of Disciplinary Counsel’s decision to file

formal charges, that board member has no further involvement in the case. Id. The

Secretary of the Disciplinary Board assigns cases to a Hearing Committee, on a

rotating basis, which acts as a trial court, and the Disciplinary Board then reviews

the Hearing Committee’s actions on a de novo basis. Id. The Supreme Court

determined this procedure did not violate the attorney’s due process rights because

the Disciplinary Board did not commingle prosecutorial and adjudicative functions.

Id.

In Quigley v. Unemployment Compensation Board of Review, 263 A.3d 574,

585-86, 588 (Pa. 2021), a claimant argued that the Unemployment Compensation

Board of Review (UC Board) violated her due process rights by raising legal issues

sua sponte, thereby assuming a prosecutorial role. In rejecting this argument, the

Court noted the UC Board “was not involved at all in the administrative

decision-making process involving [the claimant] until she lodged her appeal from

the referee’s decision.” Id. at 594 n.13.

In this matter, the Commission responded to numerous parties’ petitions

opposing Columbia’s proposed rate increase by instituting an investigation and

assigning this case to its Office of the Administrative Law Judge to hear evidence

and propose a resolution. I&E, which is a separate bureau within the Commission,

investigated Columbia’s proposed rates, intervened as a party in opposition to

Columbia’s original proposal, and ultimately joined in seeking a settlement. The

13

Commission issued its decision after reviewing the evidence and ALJ Hoyer’s

proposed resolution. Neither ALJ Hoyer nor the Commission participated in

instituting or prosecuting this matter. Thus, like the Disciplinary Board in Duffield

and the UC Board in Quigley, the Commission did not violate Culbertson’s due

process rights by commingling prosecutorial and adjudicative functions.

With regard to Culbertson’s argument the Commission is corrupt because its

revenue can increase when utility rates increase, we conclude Culbertson has failed

to produce any evidence that would show the Commission’s decision-making was

the product of bias or partiality in this matter. The Commission’s regulations

provide that “[i]t is the policy of the Commission to encourage settlements.” 52 Pa.

Code § 5.231. The Commission’s regulations also state “[i]n the Commission’s

judgment, the results achieved from a negotiated settlement or stipulation, or both,

in which the interested parties have had an opportunity to participate are often

preferable to those achieved at the conclusion of a fully litigated proceeding.” 52

Pa. Code § 69.401. For this reason, the Commission established “guidelines and

procedures designed to encourage full and partial settlements as well as stipulations

in major section 1308(d) general rate increase cases.” Id.; see also 52 Pa. Code §§

69.402 – 69.406.

The record reflects that the Commission did not consider its own revenue

when it decided to accept the parties’ proposed settlement. Joint Petitioners, some

of whom are statutorily required to represent the interests of residential and small

business customers, presented a proposed settlement to the Commission after

conducting an extensive investigation into Columbia’s proposed rate increases. In

reviewing and recommending approval of the proposed settlement, ALJ Hoyer noted

that it was rare for the parties to a rate case to reach a settlement on all issues. See

14

R.R. at 341. In deciding to accept ALJ Hoyer’s recommendation and approve the

proposed settlement, the Commission noted

the Settlement referred to the Parties’ substantial collective

investigation through formal and informal discovery and the resulting

evidentiary record consisting of multiple statements of direct, rebuttal,

surrebuttal, and rejoinder testimony, and the conduct of multiple

settlement discussions that culminated in an agreement to an overall

rate increase, an allocation of the increase among the rate classes, and

a rate design among and within the rate classes. . . . The Joint Petition

was signed by all Parties to the litigation except two individual

Complainants, one of whom, Mr. Culbertson, continued his litigation.

The Settlement was also supported by nine Statements in Support

representing ten parties, each of which addressed multiple issues and

justified the settlement resolution.

R.R. at 359-60. Accordingly, we reject Culbertson’s assertion the Commission’s

approval of the Settlement in this matter was a product of corruption.

C. Black Box Settlements

Culbertson’s final argument is that the Commission’s approval of a “black

box” settlement was illegal. Culbertson referred to “black box” settlements as

settlements where “documents that should or could have been relied upon are in a

black box,” and asserted they are “not subject to reason nor transparent.” See

Petitioner’s Br. at 18, 37. Thus, Culbertson asserts approving a black box settlement

circumvents the Commission’s responsibility to conduct comprehensive audits. See

id. at 36. Culbertson also asserts black box settlements violate Section 335(d) of the

Code in that materials relied upon by the Commission in entering into the settlements

are required to be publicly available. See 66 Pa.C.S. § 335(d).

As ALJ Hoyer and the Commission explained, a “black box” settlement is not

a settlement where the supporting documentation is not released to the public. See

R.R. at 213, 328. Instead, most of the evidence in this case, including the Joint

15

Petition, is publicly available. Id. at 366. As ALJ Hoyer explained, a “black box”

settlement is a settlement where the “parties do not specifically identify revenues,

expenses and return[s] that are allowed or disallowed.” Id. at 213. The Commission

explained Joint Petitioners’ proposed settlement qualifies as a “black box”

settlement because “the parties were not able to agree on each and every element of

the revenue requirement calculation.” Id. at 328. The Commission also explained

it

has recognized that “black box” settlements can serve an important

purpose in reaching consensus in rate cases:

We have historically permitted the use of “black box”

settlements as a means of promoting settlement among the

parties in contentious base rate proceedings. Settlement of

rate cases saves a significant amount of time and expense

for customers, companies, and the Commission and often

results in alternatives that may not have been realized

during the litigation process. Determining a company’s

revenue requirement is a calculation involving many

complex and interrelated adjustments that affect expenses,

depreciation, rate base, taxes and the company’s cost of

capital. Reaching an agreement between various parties

on each component of a rate increase can be difficult and

impractical in many cases

Pa. [Pub. Util. Comm’n] v. Peoples TWP LLC, Docket No. R-2013-

2355886 (Order entered December 19, 2013) . . . at 28 (citations

omitted).

R.R. at 328-29.

The Commission further supported its practice of accepting “black box”

settlements as follows:

[A] “black box” settlement is generally not dissimilar to settlements in

general. Each party to a litigated matter ultimately finds reasons to

agree to a settled conclusion of its issues and thereby to procure a

16

resolution it deems satisfies its needs, even if it is not the fully litigated

position on all issues the party initially advocated. If settlements were

rejected, particularly on the basis of a challenge to their descriptive

name, settlements in general would become impractical because parties

would not be able to agree on the specific path any settlement takes to

achieve resolution.

R.R. at 363.

Regarding the “black box” settlement in this case, the Commission concluded,

“based on [its] review of the record, the Joint Petition and attached supporting

statements, and the ALJ’s recommendation,” that the proposed “black box”

settlement “is in the public interest and results in just and reasonable rates, including

a substantially lower rate increase than originally proposed by Columbia.” R.R. at

362. “The fact that the settlement is described as a ‘black box,’ meaning the parties

did not stipulate precisely how each arrived at its conclusion, ‘does not diminish the

effectiveness of the examination conducted by numerous parties having various, and

in some cases antithetical, goals.’” Id. (citation omitted). The Commission further

reasoned:

There is no single path to just and reasonable rates. Many paths can lead

to the same destination. Except for insular issues that require a specific

finding, many alternative paths can lead to a finding that the Settlement

produces just and reasonable rates that are in the public interest.

However, it is characterized as a “black box” because unless an issue is

resolved in a manner specifically prescribed in the settlement, how each

party gets to its resolution is of no matter to the ultimate conclusion if

it is supported by the record. We find that to be the case here. As

Columbia aptly describes in its Statement in Support, the Joint

Petitioners, their counsel, and experts, “have considerable experience

in rate proceedings. Their knowledge, experience, and ability to

evaluate the strengths and weaknesses of their litigation positions

provided a strong foundation upon which to build a consensus on the

settled issues. . . . The Settlement reflects a carefully balanced

compromise” of each Party’s interests.

17

R.R. at 362-63 (citing Columbia’s Statement in Support, at 2-3).

Upon review of the record in this matter, we discern no error on the

Commission’s part in approving the “black box” settlement the parties proposed in

the Joint Petition.

III. Conclusion

Upon review, we reject Culbertson’s arguments that the Commission violated

his constitutional rights or its own procedures, committed errors of law, or reached

findings that were not supported by substantial evidence. Accordingly, we affirm

the Commission’s order.

______________________________

STACY WALLACE, Judge

Judge Fizzano Cannon did not participate in the decision of this case.

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IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Richard C. Culbertson, :

Petitioner :

:

v. : No. 152 C.D. 2022

:

Pennsylvania Public Utility :

Commission, :

Respondent :

ORDER

AND NOW, this 17th day of August 2023, the December 16, 2021 order of

the Pennsylvania Public Utility Commission is AFFIRMED.

______________________________

STACY WALLACE, Judge