BEFORE THE

PENNSYLVANIA PUBLIC UTILITY COMMISSION

Application of the City of Bethlehem for : A-2009-2086451

approval to offer, render, furnish or supply domestic :

water service to the public in additional territory :

in portions of Allen and Bethlehem Townships :

located in Northampton County, Pennsylvania :

INITIAL DECISION

Before

Angela T. Jones

Administrative Law Judge

HISTORY OF THE PROCEEDINGS

On January 16, 2009, the City of Bethlehem (“City” or “Applicant”) filed an application with the Pennsylvania Public Utility Commission (“PUC” or “Commission”) requesting the Commission to approve the City’s Application to offer, render, furnish or supply water service to the public in the additional territory in portions of Allen and Bethlehem Townships located in Northampton County, Pennsylvania. The City through this Application desired to expand its certificated service territory through the extension of its distribution mains in Allen and Bethlehem Townships. The City averred that a need existed for public water service in the additional territory by request to supply public water from Omega Homes located in Allen Township. Moreover, the City stated that St. Luke Hospital and the Ashley Development Corporation located in Bethlehem Township also requested the Applicant to supply water service.

On February 23, 2009, the Office of Consumer Advocate (“OCA”) filed a Protest to the Application. The OCA averred that supportive information regarding the reasonableness of the cost, scope and funding of the proposed project for the extended territory was absent from the application.

Also on February 23, 2009, the Northampton Borough Municipal Authority (“NBMA”) filed a petition to intervene in the proceeding and protested this application. Through its protest, NBMA stated that it supplies water service to customers within Allen Township and holds a water allocation permit from the Pennsylvania Department of Environmental Protection to do so. NBMA has water mains in close proximity to portions of the proposed service area and questioned whether the City has shown it is capable of providing water service to the proposed area in Allen Township without significant environmental impacts.

Again on February 23, 2009, the Easton Suburban Water Authority (“ESWA”) protested this application. ESWA provides water service as a municipal authority constituted under the Municipal Authorities Act of 1945.[1] ESWA serves customers in the boroughs of Glendon, West Easton and Wilson and in the Townships of Bethlehem, Forks, Palmer, Lower Nazareth and Williams, and in the City of Easton, Northampton County, Pennsylvania. ESWA serves approximately 3,400 customers in Bethlehem Township and challenged the legal and financial fitness of the City. ESWA also questioned whether there was a need for the proposed service in Bethlehem Township.

On March 11, 2009, the Omega Homes (“OH”) filed a late petition to intervene and stated that the City did not object to its intervention. OH averred that it will be directly affected by the Commission’s decision regarding the application. OH also stated that it supported the application to expand the City’s water service territory so as to provide water to the High Meadows Estates located in Allen Township.

By Notice dated March 30, 2009, a prehearing conference was scheduled for June5, 2009. By Order dated March 31, 2009, Administrative Law Judge (“ALJ”) Angela T. Jones provided procedure and a plan for the prehearing conference. On March 31, 2009, NBMA filed an Answer to OH’s petition to intervene opposing said petition as no good cause was offered for its lateness.[2]

On April 6, 2009, OH requested the prehearing conference be changed to another date. No party opposed this request. By Order on April 14, 2009, the request to reschedule the prehearing conference was granted. By Notice dated April 15, 2009, the prehearing conference was scheduled for June 18, 2009.

The prehearing conference convened as scheduled and a procedural schedule was established. NBMA withdrew its objection to the intervention of OH and thus, OH’s petition to intervene was granted. By Notice dated June 22, 2009, evidentiary hearings were scheduled for September 24th and 25th, 2009.

By letter dated July 22, 2009, counsel for the City requested a 30-day suspension of the litigation schedule to permit the parties to pursue settlement negotiations. By Order dated July 23, 2009, the requested suspension of the litigation schedule was granted. By Notice dated July 24, 2009, a further prehearing conference was scheduled for September 16, 2009. By Notice dated August 4, 2009, the evidentiary hearings were cancelled.

On September 16, 2009, the parties convened as scheduled. The ALJ was informed of the progress of the settlement negotiations and the anticipated time that the settlement would be filed with the Commission. The parties continued to work toward the goal of submitting a settlement for review. On or about November 13, 2009, the undersigned ALJ received by electronic mail the proposed Joint Petition for Settlement (“Joint Settlement”). The signatory parties to the Joint Settlement are: (1) the City; (2) ESWA; (3) NBMA; and (4) OH; collectively “the Joint Parties.” By letter dated November 13, 2009, counsel for the OCA stated that it does not have an objection to the Joint Settlement or the underlying application to serve water to additional territory as modified by the terms of the Joint Settlement.

This matter is now ready for decision.

TERMS AND CONDITIONS OF THE SETTLEMENT PETITION

Joint Parties agree to the following terms and conditions for settlement:

A.  The City agrees to exclude from its requested territory portions in Allen Township, Northampton County, including, but not limited to, the OH development area known as High Meadow Estates.

B.  The City agrees to limit the requested territory located in Bethlehem Township to the area described as Ashley development with said description of the area attached to the Joint Settlement at Appendix A.

C.  The City agrees to provide the parties to this proceeding with information in support of the territory expansion regarding Ashley development. This information will include the number and location of mains to be used by the City to provide service, together with verification by the City’s Engineer that the mains provide adequate fire flows to serve Ashley development. The requested information is attached to the Joint Settlement at Appendix B.

D.  Nothing in the Joint Settlement is intended to preclude the City from seeking authority from the Commission to serve Allen and Bethlehem Townships in the future. Furthermore, nothing in the Joint Settlement is intended to preclude the Joint Parties from intervening in any future proceeding dealing with a City application seeking authority to serve Allen or Bethlehem Townships.

E.  The Joint Parties agree that the City’s original application, including all exhibits and supporting information, shall be admitted into the record as originally filed with the Secretary of the Commission. 52 Pa.Code §§ 53.52, 53.53.

F.  The Joint Parties agree that the amended application, which is attached to the Joint Settlement at Exhibit C, reflects the agreement of the Joint Parties and should be approved by the Commission as uncontested.

G.  The Joint Parties agree that adoption and approval of the Joint Settlement by the ALJ and the Commission is in the public interest because:

1.  The Joint Settlement provides a sound and reasonable resolution of all issues raised in the application proceeding;

2.  The Joint Settlement appropriately balances the interests and concerns of the City, ESWA, NBMA and OH; and

3.  The adoption and approval of the Joint Settlement will avoid the need for the filing of direct testimony by any of the parties, briefing and continued litigation costs, thus eliminating substantial costs.

H.  The Joint Settlement is made without any admission against, or prejudice to, any positions which any signatory party might adopt during any subsequent litigation of this proceeding (should the Joint Settlement be rejected or modified), or in any other proceeding.

I.  If the Commission withholds approval of the Joint Settlement as to any of the terms and conditions, or alters any of the terms and conditions, any signatory party may withdraw from this settlement upon written notice of its intent to the Commission and the remaining parties within three (3) business days of the date of the Commission’s Order and may resume litigation of this proceeding within (10) days of the entry of the Order making any such modifications.

J.  The Joint Parties agree that the Joint Settlement has the same effect as full litigation of the instant proceeding resulting in the approval of the City’s application for extension of its service territory as amended by the Joint Settlement.

K.  In the event that the Commission does not approve the Joint Settlement, the signatory parties reserve their respective rights to resume litigation. If the ALJ in her Initial Decision approves the Joint Settlement as proposed, the Joint Parties agree to waive the right to file Exceptions. However, the Joint Parties do not waive their rights to file Exceptions with respect to any additional matter dealt with, or any modifications to the terms and condition of the Joint Settlement approved by the ALJ in her Initial Decision.

L.  The Joint Parties recognize that any party that did not join the Joint Settlement is not bound by it. All parties participating in this proceeding have been given an opportunity to sign the Joint Settlement or offer comment to the same.[3]

M.  Each signatory party’s reasons to support the Joint Settlement are attached to it at Appendix D.

N.  The Joint Parties agree that the Joint Settlement shall not constitute or be cited as controlling precedent in this or any other jurisdiction.

DISCUSSION

If the application as amended by the terms and conditions of the Joint Settlement is approved, it would grant authority to City to:

(a)  Expand its certificated water service territory through its distribution mains in Bethlehem Township to the boundaries described in Exhibit C attached to the Joint Settlement referred to here as “Additional Territory”;

(b)  Provide water service to Ashley development in Bethlehem Township;

(c)  Implement the same rates for water service in the Additional Territory as listed in the City’s current tariff (City of Bethlehem’s Tariff Water No. Pa.P.U.C. No. 6).

The issue is whether the proposed expansion of service territory for water service in Bethlehem Township is necessary or proper for the service, accommodation, convenience, or safety of the public as provided by Section 1103(a) of the Public Utility Code. 66 Pa.C.S. §1103(a). Fundamental in the analysis is whether the settlement is in the public interest.

A certificate of public convenience to the City to provide water service in Bethlehem Township as proposed by the Joint Settlement is to be granted only if the Commission should find that the proposed service is necessary or proper for the service, accommodation, convenience or safety of the public. 66 Pa.C.S. §1103(a). Whether to grant the application as “necessary or proper,” the Commission has determined that the central consideration based upon the facts in evidence of the case is to protect the public interest. Sayre v. Pa. Pub. Util. Comm’n, 54 A.2d 95, 96 (Pa. Super. 1947) (“‛The primary object of the public service laws is not to establish a monopoly or to guarantee the security of investment in public service corporations, but first and at all times to serve the interests of the public.’ . . . Whether there shall be competition in any given field and to what extent is largely a matter of policy and an administrative question that has wisely been committed by the legislature to the sound judgment and discretion of the Public Utility Commission.”) (internal citation omitted). See also, Application of South Penn Gas Company et al., Docket Nos. A-122900F0003 and A-123100F0016, Opinion and Order, entered May 22, 1995 (“South Penn”); Re Apollo Gas Company, 72 Pa. P.U.C. 208 (1990) (“Apollo”). A grant of a certificate of public convenience confirms that the Commission found that the public interest is protected by the proposed application.

The Joint Parties contend that the settlement should be approved as proposed and is in the best interest of all parties involved because it provides a reasonable resolution to all the issues raised in the application proceeding and appropriately balances the interests and concerns of the City, ESWA, NBMA and OH. Moreover, the Joint Settlement eliminates time and avoids substantial costs that would result from further litigation.

Additional benefits inured if the settlement is approved are: (1) the existence of at least one provider of public water in the Ashley development of Bethlehem Township; and (2) the parties have complied with the Commission’s rules and practices at 52 Pa.Code §§5.231 and 5.232.

The City states that it is fit to provide the water service at issue and is a certificated public utility operating in the Commonwealth of Pennsylvania. The City has been requested by Ashley Development Corporation to provide water service in Bethlehem Township; and thus, states there exists a need for public water service in the expanded territory identified in Exhibit C attached to the Joint Petition. Neither the issue of fitness nor need remains questioned on the record and thus, no inquisition is conducted here.

The memoranda in support provided by the Joint Parties declare that the Commission and the Joint Parties have avoided incurring additional time, expense and uncertainty that are inherent in further litigation. The settlement negates the need for cross-examination of witnesses, the preparation of main briefs, reply briefs, exceptions and reply exceptions, and potential appeals. Thus, the settlement as a resolution yields conservation of resources of this Commission and Joint Parties in avoiding a fully litigated proceeding while reaching a just and reasonable result. Additionally, the memoranda of NBMA and OH state that the Joint Settlement will avoid unnecessary and potentially costly competition in water service for Allen Township and allows the existing water provided to provide safe, reliable and affordable water service in Allen Township pursuant to the Pennsylvania Municipality Authorities Act. Consequently, the Joint Parties assert that the Joint Settlement is in the public interest and meets the Commission’s policies promoting such resolutions.