Regulation of Natural Gas Meters Location in Historic Districts; Unconstitutional Delegation
City of Lancaster v. Pa. Pub. Util. Comm’n, 284 A.3d 522 (Pa. Cmwlth. 2022), direct appeal, appeal docket 107 MAP 2022
The City of Lancaster, the Borough of Carlisle, and the Borough of Columbia (the Municipalities) filed a petition for review in Commonwealth Court challenging the constitutionality of a regulation promulgated by the PUC that mandated outdoor gas meter locations but permitted natural gas distribution companies (NGDCs) to consider indoor gas meter locations when the meter was within a building in a locally designated historical district.
The regulation at issue, 52 Pa. Code § 59.18, provides in relevant part:
(a) General requirements for meter and regulator location.
(1) Unless otherwise allowed or required in this section, meters and regulators must be located outside and aboveground.
(2) Except in the case of an emergency, a utility shall provide written notice to a utility customer by first class mail or by personal delivery at least 30 days prior to relocating and subsequently installing a meter or regulator outside the customer’s building….
(3) The written notice must inform the customer and building owner of the equipment that the utility proposes to relocate, the planned new location and how to contact the utility to provide supplemental information that the utility may not have, such as the building’s historic status. The written notice must include contact information for the [PUC’s] Bureau of Consumer Services.
….
(5) When selecting a meter or service regulator location, a utility shall consider potential damage by outside forces.
(6) The meter location must accommodate access for meter reading, inspection, repairs, testing, changing and operation of the gas shut-off valve.
(7) When feasible and practical to do so, the meter location must accommodate the installation of the service line in a straight line perpendicular to the main.
(8) Meters and service regulators may not be installed in the following locations:
(i) Beneath or in front of windows or other building openings that may directly obstruct emergency fire exits.
(ii) Under interior stairways.
(iii) Under exterior stairways, unless an alternate means of egress exists and the meter and service regulator are installed in a well-vented location under stairs constructed of noncombustible material.
(iv) A crawl space.
(v) Near building air intakes under local or [s]tate building codes.
(vi) In contact with soil or other potentially corrosive materials.
(9) Unless caused by a customer’s or building owner’s violation of applicable gas safety or tariff rules, a utility shall pay the costs of relocating a meter or regulator when the relocation is performed to meet utility or [PUC] safety requirements.
(10) Unless caused by a customer’s or building owner’s violation of applicable gas safety or tariff rules, a utility shall pay the cost of extending customer-owned facilities to the new meter or regulator location when the relocation is performed to meet utility or [PUC] safety requirements.
(11) A customer or building owner requesting that a meter or regulator be moved shall pay the costs associated with relocation when the meter and regulator are currently situated in a suitable location under [s]tate and [f]ederal regulations.
(12) Utilities shall address meter, regulator and service line location regulations in their tariffs.
….
(d) Inside meter locations.
(1) Inside meter locations shall be considered only when:
(i) The service line pressure is less than 10 [pounds per square inch gauge (]psig[)].
(ii) A meter is located in a building that meets one of the following criteria:
(A) A building is listed in the National Register of Historic Places or the customer or building owner notifies the utility that the building is eligible to be listed in the National Register of Historic Places and the eligibility can be readily confirmed by the utility.
(B) A building is located within a historic district that is listed in the National Register of Historic Places or the customer or building owner notifies the utility that the historic district is eligible to be listed in the National Register of Historic Places and the eligibility can be readily confirmed by the utility.
(C) A building has been designated as historic under the [A]ct of June 13, 1961 (P.L. 282, No. 167[, as amended,]) (53 P.S. §§ 8001-[ ]8006), known as the Pennsylvania Historic District Act, the Pennsylvania Municipalities Planning Code ([Act of July 31, 1968, P.L. 805, as amended,] 53 P.S. §§ 10101-[ ]11202), or a municipal home rule charter.
(D) A building is located within a locally designated historic district or is eligible for the listing, or a building is individually designated under a local ordinance as a historic landmark or is eligible for the listing.
(iii) Protection from ambient temperatures is necessary to avoid meter freeze-ups.
(iv) A utility determines that a meter is subject to a high risk of vandalism based on the utility’s prior experience.
(v) A utility determines that an outside meter location is neither feasible nor practical.
(2) Except for low pressure systems with service line pressure less than 10 psig, regulators must be located outside when a meter is located inside.
(3) Installed inside meters must be attached to an operable outside shut off valve.
(4) Meters installed within a building must be located in a ventilated place not less than 3 feet (914 millimeters) from a source of ignition or source of heat which may damage the meter.
Slip op. at 5-8, quoting 52 Pa. Code § 59.18 (a)(1)-(3), (5)-(12), (d) (bold emphasis added by Commonwealth Court).
The Municipalities’ petition for review alleged two counts: (1) that the regulation violated the state constitution’s natural resource provision and (2) that the regulation constituted an improper delegation of the PUC’s authority to private parties. The PUC filed preliminary objections to both counts. Commonwealth Court sustained the PUC’s preliminary objection as to the first count, but overruled the PUC’s preliminary objection as to the unconstitutional delegation claim. In its February 2020 opinion denying the PUC’s preliminary objection, Commonwealth Court observed:
[A]s correctly noted by the Municipalities in their brief [in opposition to the Preliminary Objections], [Section] 59.18(d) “contains no procedures whatsoever with respect to the placement of meters on historic properties. To the contrary, the decision of where to place a meter on a historic property is left entirely to the discretion of the utility.” (Municipalities’ Br. [in Opp’n to Prelim. Objs.] at 24.) Although … it is possible that the owners of the historic buildings may discuss the location of the meter with the NGDC as part of the notice process, [Section] 59.18(d) does not appear to have a formal, adjudicative process. Most notably, contrary to that argued by the PUC, there is no formal application procedure embedded within [Section] 59.18. Further, in light of the plain language of [Section] 59.18(d), an NGDC is not required to set forth the basis or reasons for its determination as to whether a meter should be located inside or outside a structure.
Slip op. at 3, quoting February 2020 Op. at 24-25 (emphasis added in slip op.). The February 2020 opinion further noted that:
[T]he Final Rulemaking Order states that “the utility will continue to retain discretion in applying this [R]egulation,” [Petition, Ex. G, Final Rulemaking Order] at 1, admits that “the [R]egulation does contain provisions that delegate discretion to the utility in making a determination with respect to locating an outside meter,” id. at 26, and confirms that “due to [a utility’s] public safety obligations,” “it is necessary that … the utility be allowed to make the final decision.” Id.
Slip op. at 8, quoting February 2020 Op. at 26 (bold and underline emphasis added in slip op.).
Following the PUC’s answer to the petition for review, the Municipalities filed an application for summary relief as to the unconstitutional delegation claim. Commonwealth Court summarized the Municipalities arguments as follows:
The Municipalities first contend that since no material facts are in dispute, this Court may grant summary relief in a facial challenge to Section 59.18. Specifically, the Municipalities assert that “this Court need only consider the wording of Section 59.18,” Municipalities Br. at 12, to determine “whether the PUC did so in a way that constitutes an improper delegation to NGDCs[, which] is the only question that remains before this Court.” Municipalities Reply Br. at 4. Because the Municipalities challenge whether Section 59.18 itself is an improper delegation of authority, which raises a legal rather than factual question, the Municipalities’ Application is appropriate.
The Municipalities next argue that they are entitled to judgment as a matter of law because Section 59.18 improperly delegates authority to NGDCs in contravention of article II, section 1 of the Pennsylvania Constitution, which provides: “The legislative power of this Commonwealth shall be vested in a General Assembly, which shall consist of a Senate and a House of Representatives.” PA. CONST. art. II, § 1. Specifically, the Municipalities contend that Section 59.18 lacks adequate standards and/or procedures to guide NGDCs in determining where to place a meter at a property located in a historic district, and to prevent arbitrary NGDC decisions mandating meter relocations.
Slip op. at 4. The PUC countered that Section 59.18 does not vest absolute discretion in NGDCs with respect to the location of natural gas meters because, in acting pursuant to Section 59.18, the NGDCs are restricted by the Pennsylvania Public Utility Code and associated regulations applicable to public utilities. Additionally, the PUC argued that an aggrieved party can ultimately seek PUC review of an NGDC’s determination pursuant to the Code, therefore providing the PUC with ultimate discretion over meter placement in a historic district such that the NGDCs’ decision was ultimately subject to PUC oversight.
Commonwealth Court, en banc, granted the Municipalities’ request for summary relief. The court held that Section 59.18 was an unconstitutional delegation because the regulation improperly vested absolute discretion in the NGDCs, reasoning that:
The PUC interprets Section 59.18 as imposing an affirmative duty on an NGDC to attempt to accommodate an indoor meter. However, Section 59.18(d)(1) provides: “Inside meter locations shall be considered only when[,]” inter alia, the meter is in a building in a historic district. 52 Pa. Code § 59.18(d)(1). Section 59.18 does not guide the NGDC, and certainly does not create a presumption that a meter must remain inside a building unless the NGDC “cannot accommodate” it. PUC Br. at 18.
Similarly, the PUC interprets Section 59.18 as imposing a fictional burden on the NGDCs, which in no manner is supported by the Regulation, to consider the interior placement of natural gas meters in historic districts. However, Section 59.18 imposes no burden on the NGDC, no presumption of an indoor meter location, and no requirement that an NGDC attempt to maintain an indoor meter location unless it “cannot safely” do so. PUC Br. at 22.
Rather, a decision regarding whether a meter in a building located in a historic district is to be moved to an outdoor location is at the NGDC’s complete discretion, with absolutely no guidance in Section 59.18 and no “safeguards to protect against arbitrary, ad hoc decision making[.]” 425 Prop. Ass’n, 223 A.3d at 313 n.9. Like the statutory section at issue in Gambling Expansion Fund, Section 59.18 “does not provide [NGDCs] with definite standards, policies[,] and limitations to guide its decision[ ]making with regard to [meter locations at buildings in historic districts].” Gambling Expansion Fund, 877 A.2d at 418.
Absent an actual burden and/or any “safeguards to protect against arbitrary, ad hoc decision making,” NGDCs have free, unconstrained authority to order meter relocations in historic districts. 425 Prop. Ass’n, 223 A.3d at 313 n.9. The delegation of such authority absent basic policy choices and adequate standards cannot be sustained. See also Pennsylvania AFL-CIO v. Commonwealth, 219 A.3d 306, 314 (Pa. Cmwlth. 2019) (“[A] law must include ‘procedural mechanisms that serve to limit or prevent the arbitrary and capricious exercise of the delegated power.’ ”) (quoting Protz, 161 A.3d at 834).
Slip op. at 16-17 (emphasis in original). Commonwealth Court rejected the PUC’s argument that the Public Utility Code provides an adequate review process to overcome a delegation issue, concluding that:
Notably, Section 701 of the Code permits any person, corporation, or municipal corporation to challenge a public utility’s actions. Similarly, Section 5.21(a) of the PUC’s Regulations permits a complainant to file a formal complaint with the PUC objecting to violations of law by a person under the PUC’s jurisdiction.
To find purported standards under Section 59.18 for PUC consideration in such hearings, the PUC relies on Section 1501 of the Code, which sets forth the conditions under which a utility provides its service. Specifically, Section 1501 of the Code provides:
Every public utility shall furnish and maintain adequate, efficient, safe, and reasonable service and facilities, and shall make all such repairs, changes, alterations, substitutions, extensions, and improvements in or to such service and facilities as shall be necessary or proper for the accommodation, convenience, and safety of its patrons, employees, and the public. Such service also shall be reasonably continuous and without unreasonable interruptions or delay. Such service and facilities shall be in conformity with the regulations and orders of the [PUC]. Subject to the provisions of this part and the [R]egulations or orders of the [PUC], every public utility may have reasonable rules and regulations governing the conditions under which it shall be required to render service. Any public utility service being furnished or rendered by a municipal corporation beyond its corporate limits shall be subject to regulation and control by the [PUC] as to service and extensions, with the same force and in like manner as if such service were rendered by a public utility. The [PUC] shall have sole and exclusive jurisdiction to promulgate rules and regulations for the allocation of natural or artificial gas supply by a public utility.
66 Pa.C.S. § 1501 (emphasis added). According to the PUC, Section 1501 of the Code “provides the governing standard for all [PUC] determinations concerning the conditions under which a utility provides its service.” PUC Br. at 23.
The PUC explains:
Once before the [PUC] for review, the [PUC] reviews the NGDC’s meter location decision pursuant to [S]ection 1501 of the Code … to determine whether the NGDC’s natural gas meter location decision furnishes and maintains adequate, efficient, safe, and reasonable service and facilities that are necessary and proper for the accommodation, convenience, and safety of the NGDC’s patrons, employees, and the public.
PUC Br. at 18. However, Section 1501 of the Code’s general statement simply describes a public utility’s duty to the public. It does not prescribe the manner in which an NGDC must exercise the unfettered, PUC-granted discretion regarding whether to order an existing interior gas meter in a historic district be moved to an exterior location, nor does it provide “concrete measures to channel the delegatee’s discretion and safeguards to protect against arbitrary, ad hoc decision making[.]” 425 Prop. Ass’n, 223 A.3d at 313 n.9.
Notwithstanding a right to appeal under Sections 701 and 2205 of the Code, and Section 5.21(a) of the PUC’s Regulations, absent any standards in Section 59.18 for the NGDCs to follow, this Court cannot discern how the PUC is able to review an NGDC’s decision regarding whether an interior gas meter in a historic building must be relocated to the exterior simply based on a public utility’s general duties to the public under Section 1501 of the Code. Section 59.18 does not prescribe the manner in which an NGDC must exercise PUC-granted discretion regarding whether to order an existing interior gas meter in a historic district be relocated to an exterior location, and cannot serve as the PUC’s standard to prevent “arbitrary, ad hoc decision making.” 425 Prop. Ass’n, 223 A.3d at 313 n.9.
Further, given “the utilit[ies’] … continue[d] … retain[ed] discretion in applying [Section 59.18],” Petition, Ex. G, Title 52 Executive Summary, at 1 (emphasis added), and the PUC’s declaration in the Final Rulemaking Order that “it is necessary that … the utility be allowed to make the final decision[,]” Petition, Ex. G, Final Rulemaking Order, at 26 (emphasis added), it is unclear what standards the PUC would apply in deciding an appeal, other than deferring to the NGDC. Petition, Ex. G. Under such circumstances, an appeal to the PUC under Section 701 of the Code and Section 5.21 of the PUC’s Regulations for an impartial review of an NGDC’s decision would be meaningless.
Slip op. at 20-23.
In dissent, Judge McCullough, joined by President Judge Cohn Jubelirer, disagreed that Section 59.18 amounts to an unconstitutional delegation of the Commission’s administrative rulemaking authority. Emphasizing the PUC’s safety concerns, Judge McCullough opined that the regulation provided NGDC’s with “clear guidelines and sufficiently defined boundaries to enable the NGDCs to make an informed decision as to whether a gas meter can safely be placed indoors,” and the PUC “actually retains the final and absolute discretion over a NGDC’s decision in the placement of natural gas meters” to overcome the Municipalities delegation challenge. Slip op. at PAM-2 (emphasis in original). While acknowledging that the regulation lacks “specific guidelines pertaining only to historic buildings,” Judge McCullough noted that Section 59.18 nevertheless provides “exactly when and how meters can safely be placed inside – for historic and non-historic buildings.” Slip op. at PAM-13 (emphasis in original). Moreover, even if not “very clear and specific,” the dissent observed that the nondelegation doctrine “‘does not require that all of the details needed to administer a law be precisely or separately enumerated in the statute.’” Slip op. at PAM-15, quoting Pennsylvania Builders Association v. Department of Labor & Industry, 4 A.3d 215, 225 (Pa. Cmwlth. 2010); Matter of Revocation of Restaurant Liquor License No. R-12122, 467 A.2d 85, 87 (Pa. Cmwlth. 1983). The dissent further disagreed with the Majority’s Opinion suggestion that Commonwealth Court’s statement in its February 2020 opinion on preliminary objections that there are no specific additional guidelines pertaining only to historic districts in Regulation 59.18 was binding for purposes of deciding the Municipalities request for summary relief because the court’s consideration of summary relief and preliminary objections are subject to different standards. Nonetheless, Judge McCullough concluded that reaching an alternative conclusion by denying the Municipalities summary relief was “entirely consistent and not contradictory” with the court’s prior decision on preliminary objections:
Due to NGDCs’ public safety obligations and the fact that it is impossible for the Commission to envision every individual circumstance regarding every building situated in the Commonwealth of Pennsylvania, it is necessary that the utilities be allowed to make the final decision as to whether a meter should be located inside or outside a historic structure on a case-by-case basis to ensure the safety of the public and their personnel, guided by the specific guidelines for placement of all meters and those being considered for indoor placement. The Municipalities have raised no other basis on which the placement of these meters can be determined. The decision is then subject to appeal to the Commission for further review.
Slip op. at PAM-20 – PAM-21.
Responding to the issues raised by the dissent, the majority countered in its opinion that:
The Dissent has erroneously combined Section 59.18(a) and (d), and mischaracterized the Regulation’s clear language. First, Section 59.18(a) states the general rule that all meters are to be located outside, unless this section allows otherwise. See 52 Pa. Code § 59.18(a)(1). It also provides that meters must be accessible and lists six locations where meters may not be installed. See 52 Pa. Code § 59.18(a)(6) and (8). Section 59.18(a) contains no language as to whether an existing meter in a historic building must be relocated. Second, Section 59.18(d) is entitled “Inside meter locations” and provides that “[i]nside meter locations shall be considered only when” and lists five independent criteria that may permit a meter to be located inside a building. 52 Pa. Code § 59.18(d). Each one of the criteria is, in and of itself, a sufficient justification for an NGDC to consider an inside meter location.
The Dissent confuses the relevant regulatory language in Section 59.18(a) governing installation of meters as guiding an NGDC’s decision over whether an existing meter in a historic building must be relocated. Section 59.18(a) mandates that, absent an exception (as set forth in Section 59.18(d)), a meter must be located outside. Section 59.18(a) addresses outdoor meter installation, not considerations governing whether an existing meter, subject to an exception to the outdoor requirement, must be relocated.
Further, the Dissent misinterprets Section 59.18(d)(1)(i) as supporting its declaration that Section 59.18 provides “exactly when and how meters can safely be placed inside – for historic and non-historic buildings.” City of Lancaster, 284 A.3d at 543 (emphasis omitted). Section 59.18(d)(1)(i) is one independent criterion permitting consideration of an indoor meter location – nonetheless, the Dissent misconstrues Section 59.18(d)(1)(i) as its converse – prohibiting “[a]n NGDC [from] plac[ing] or leav[ing] a gas meter inside if the service line pressure is greater than 10 psig.” City of Lancaster, 284 A.3d at 543 (italic emphasis added; bold emphasis omitted). Section 59.18(d)(1)(i) does not provide “exactly when and how meters can safely be placed inside” a historic building since a meter location in a historic building is simply one of the other four, independent bases under Section 59.18(d)(1) for permitting a meter to remain indoors. City of Lancaster, 284 A.3d at 542–43 (emphasis omitted).
The Dissent suggests that “specific guidelines that restrict the NGDCs’ decision making process when ‘considering’ whether to place a gas meter inside a building[,]” City of Lancaster, 284 A.3d at 543 (emphasis added), are “very clear and specific[,]” and govern an NGDC’s decision on whether to relocate a historic building’s existing meter. Id. at 535. However, the Dissent also contends that “even if [the purported guidelines] were not [clear and specific], Pennsylvania’s non[-]delegation doctrine ‘does not require that all of the details needed to administer a law be precisely or separately enumerated in the statute.’ ” Id. (quoting Pa. Builders Ass’n v. Dep’t of Lab. & Indus., 4 A.3d 215, 225 (Pa. Cmwlth. 2010)). Contrary to the Dissent’s characterization, the instant matter does not involve unclear or nonspecific guidelines. Simply put, there are no standards guiding an NGDC’s decision regarding whether to relocate a historic building’s indoor meter to an outdoor location, where Section 59.18 provides historic buildings a specific exception to the general requirement that meters must be located outside.
Slip op. at 15-16 n. 11. In responding to the dissent’s arguments, the majority additionally noted that “an NGDC should make the final decision on meter location is a separate question from whether the PUC was required to have included standards and guidelines in Section 59.18 to prevent the NGDCs’ “arbitrary, ad hoc decision making[.]” Slip op. at 17 n.12, quoting 425 Prop. Ass’n, 223 A.3d at 313 n.9.
The PUC appealed to the Pennsylvania Supreme Court.
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