                IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Tanya J. McCloskey, Acting                          :
Consumer Advocate,                                  :
                       Petitioner                   :
                                                    :
                      v.                            :
                                                    :
Pennsylvania Public Utility Commission,             :      No. 697 C.D. 2018
                         Respondent                 :      Argued: June 6, 2019

BEFORE:       HONORABLE P. KEVIN BROBSON, Judge
              HONORABLE ANNE E. COVEY, Judge
              HONORABLE ELLEN CEISLER, Judge

OPINION NOT REPORTED

MEMORANDUM OPINION BY
JUDGE COVEY                                         FILED: July 11, 2019


              The Office of Consumer Advocate (OCA) petitions this Court for review
of the Pennsylvania Public Utility Commission’s (PUC) April 19, 2018 order (April
2018 Order) granting in part and denying in part the exceptions of Metropolitan
Edison Company (Met-Ed), Pennsylvania Electric Company (Penelec), Pennsylvania
Power Company (Penn Power), and West Penn Power Company (West Penn)
(collectively, the Companies);1 denying the OCA’s exceptions, adopting in part and
reversing in part the Administrative Law Judge’s (ALJ) Recommended Decision
(Recommended Decision); and further finding that Act 40 of 2016 (Act 40)2 does not

       1
         The Companies are subsidiaries of FirstEnergy Corporation, providing electric distribution
services to their customers. The Companies, as intervenors, filed a brief with this Court in support
of the PUC’s decision. Met-Ed Industrial Users Group, the Penelec Industrial Customer Alliance
and the West Penn Power Industrial Intervenors (parties below) collectively filed a notice of
intervention. Further, Energy Association of Pennsylvania submitted an amicus brief requesting
affirmance of the PUC’s decision.
       2
          Act 40 was added to the Public Utility Code by Section 1 of the Act of June 12, 2016, P.L.
332, and consists only of Section 1301.1 of the Code, 66 Pa.C.S. § 1301.1.
apply to Distribution System Improvement Charge (DSIC) calculations. The sole
issue before this Court is whether the PUC properly concluded that the language of
Act 40 is ambiguous and, based upon its interpretation thereof, the Companies are not
required to include accumulated deferred income taxes (ADIT) and state income
taxes in their DSIC calculations.3


                                     Background

             In order to address [concerns over aging infrastructure], the
             [PUC] encouraged utilities to plan and implement
             accelerated replacement of their aging infrastructure. At the
             same time, however, it was understood by utilities making
             infrastructure investment that they would be unable to
             adjust the rates they charged to their customers between
             traditional ratemaking cases to recover those specific
             infrastructure investment costs in a timely manner.
             Therefore, on February 14, 2012, Act 11 [of 2012, (Act 11),
             which amended Chapters 3, 13 and 33 of the Public Utility
             Code (Code), 66 Pa.C.S. § 101-3316] was signed into law.
             Among other things, Act 11 repealed the prior statute that
             permitted only water utilities to charge a DSIC (66 Pa.C.S.
             § 1307(g)), and authorized natural gas distribution, electric
             distribution, as well as water and wastewater utilities to
             charge a DSIC. Now, these utilities have access to an
             alternative ratemaking mechanism whereby the utilities may
             recover costs related to repair, improvement and
             replacement of eligible projects outside of a ratemaking
             case. See 66 Pa.C.S. §§ 1350-1360.
             Section 1353(a) of the Code, 66 Pa.C.S. § 1353(a)[,]
             states[,] in pertinent part []:
                   [A] utility may petition the [PUC], or the
                   [PUC] after notice and hearing, may approve
                   the establishment of a [DSIC] to provide for
                   the timely recovery of the reasonable and
                   prudent costs incurred to repair, improve or

      3
        This matter was argued seriately with McCloskey v. Pennsylvania Public Utility
Commission (Pa. Cmwlth. No. 1183 C.D. 2018, filed July 11, 2019).
                                           2
                    replace eligible property in order to ensure and
                    maintain adequate, efficient, safe, reliable and
                    reasonable service.
              66 Pa.C.S. § 1353(a).
              Section 1352 of the Code, 66 Pa.C.S. § 1352, states that, as
              a prerequisite to the implementation of a DSIC, a utility
              must file a long-term infrastructure improvement plan
              (LTIIP).

McCloskey v. Pa. Pub. Util. Comm’n (McCloskey I), 127 A.3d 860, 863 (Pa. Cmwlth.
2015) (footnotes omitted).     On August 2, 2012, the PUC entered its Order in
Implementation of Act 11 of 2012, Docket No. M-2012-2293611 (Final
Implementation Order), which established procedures and guidelines to implement
Act 11.
              By separate orders dated February 11, 2016, the PUC approved the
Companies’ LTIIP petitions and, on February 16, 2016, the Companies filed separate
DSIC petitions with attached draft tariff supplements to add DSIC Riders in their
respective tariffs with proposed effective dates of July 1, 2016. On February 26,
2016, the OCA filed Formal Complaints, Public Statements and Answers to the DSIC
petitions. Several other parties filed formal complaints or intervention petitions.
              Apart from the pending DSIC petitions, on April 28, 2016, the
Companies filed separate requests under Section 1308 of the Code, 66 Pa.C.S. §
1308, requesting increases to their base rates. The Companies’ base rate requests
were consolidated (Base Rate Proceedings) and, on May 3, 2016, the OCA filed
formal complaints challenging the proposed rates. On June 9, 2016, the PUC entered
an order in the Base Rate Proceedings initiating an investigation to determine the
lawfulness, justness and reasonableness of the Companies’ existing and proposed
base rates.
              Also on June 9, 2016, the PUC entered separate orders granting the
Companies’ four DSIC petitions (June 2016 DSIC Orders), therein concluding that
                                           3
the DSIC petitions complied with the requirements of Act 11 and the Final
Implementation Order.     The PUC ruled that the petitions were consistent with
applicable law and PUC policy, but referred certain issues pertaining to customer
exemptions and DSIC calculation to the ALJ for hearing. Thus, the PUC allowed the
tariffs to go into effect on July 1, 2016, subject to refund and recoupment, pending
the PUC’s final resolution of the matters referred to the ALJ. The DSIC matters were
consolidated (DSIC Proceedings).
            Thereafter, on June 12, 2016, Act 40 was signed into law and became
effective on August 11, 2016. Act 40 added Section 1301.1 to the Code which
requires:

            (a) Computation. -- If an expense or investment is allowed
            to be included in a public utility’s rates for ratemaking
            purposes, the related income tax deductions and credits
            shall also be included in the computation of current or
            deferred income tax expense to reduce rates. If an expense
            or investment is not allowed to be included in a public
            utility’s rates, the related income tax deductions and credits,
            including tax losses of the public utility’s parent or
            affiliated companies, shall not be included in the
            computation of income tax expense to reduce rates. The
            deferred income taxes used to determine the rate base of a
            public utility for ratemaking purposes shall be based solely
            on the tax deductions and credits received by the public
            utility and shall not include any deductions or credits
            generated by the expenses or investments of a public
            utility’s parent or any affiliated entity. The income tax
            expense shall be computed using the applicable statutory
            income tax rates.
            (b) Revenue use. -- If a differential accrues to a public
            utility resulting from applying the ratemaking methods
            employed by the [PUC] prior to the effective date of
            subsection (a) for ratemaking purposes, the differential shall
            be used as follows:
               (1) Fifty percent to support reliability or infrastructure
               related to the rate base eligible capital investment as
               determined by the [PUC]; and
                                          4
                (2) Fifty percent for general corporate purposes.
             (c) Application. - The following shall apply:
                (1) Subsection (b) shall no longer apply after December
                31, 2025.
                (2) This section shall apply to all cases where the final
                order is entered after the effective date of this section.

66 Pa.C.S. § 1301.1.
             On June 20, 2016, the Companies submitted tariff supplements reflecting
the approved DSIC mechanism, which supplements were included in the Base Rate
Proceedings investigations.
             On January 19, 2017, the PUC approved partial settlements among the
parties in the Base Rate Proceedings. The only issue that was not resolved in the
partial settlements was the inclusion of ADIT in the DSIC calculation. Accordingly,
the PUC referred that issue to the DSIC Proceedings before the ALJ and transferred
relevant parts of the record thereto.
             On August 31, 2017, the ALJ issued the Recommended Decision
concluding, in relevant part, that Act 40 requires the Companies to include federal
and state income tax deductions and credits in their DSIC calculations, and
recommending that the Companies be directed to account for such in their DSIC
rates. The parties filed exceptions and reply exceptions.
             On April 19, 2018, the PUC issued the April 2018 Order. Therein, it
explained, “there is one contested issue before us in this proceeding – whether Act 40
requires the Companies to include federal and state income tax deductions generated
by the DSIC investment in their DSIC calculation.” April 2018 Order at 15. The
PUC concluded:

             [W]e disagree with the ALJ’s conclusion that Section
             1301.1 [of the Code] requires the Companies’ DSICs to
             include federal and state income tax deductions and credits

                                           5
         generated by DSIC investment. We find that the language
         in Section 1301.1 [of the Code] is ambiguous regarding
         whether Act 40 applies to the DSIC. Statutory language is
         considered ambiguous when a pertinent provision is
         susceptible to more than one reasonable interpretation or
         when the language is vague, uncertain, or indefinite. In this
         case, based on the [p]arties’ positions and our reading of
         Section 1301.1 [of the Code], the statutory language is
         susceptible to more than one reasonable interpretation. The
         OCA argues that the language in the first sentence of
         Section 1301.1(a) [of the Code] clearly provides that Act 40
         applies to the DSIC because Act 40 applies to rates as
         broadly defined in Section 102 of the Code, [66 Pa.C.S. §
         102,] and the DSIC is a rate that recovers utility investment
         and income tax expense related to that investment.
         However, the OCA’s position does not account for the
         language in the third sentence of Section 1301.1(a) [of the
         Code], which provides as follows:
                The deferred income taxes used to determine
                the rate base of a public utility for ratemaking
                purposes shall be based solely on the tax
                deductions and credits received by the public
                utility and shall not include any deductions or
                credits generated by the expenses or
                investments of a public utility’s parent or any
                affiliated entity.
         66 Pa.C.S. § 1301.1(a). This provision explains how the
         deductions and credits in the first sentence of Section
         1301.1(a) [of the Code] should be calculated. It refers back
         to the first two sentences of Section 1301.1(a) [of the Code]
         and specifically uses the term ‘rate base’ and not the general
         term ‘rate.’ The term ‘rate base’ is a technical term that is
         used in general base rate cases. The use of both the terms
         ‘rate’ and ‘rate base’ creates an ambiguity in the meaning of
         Section 1301.1 [of the Code] and supports the Companies’
         position that the language in Section 1301.1 [of the Code] is
         ambiguous and, therefore, should be analyzed under Section
         1921(c) [of the Statutory Construction Act of 1972 (SCA),4]



4
    Section 1921(c) of the SCA provides:
                                           6
              1 Pa.C.S. § 1921(c), to ascertain the intention of the General
              Assembly.

April 2018 Order at 25-27 (citation and footnotes omitted). Commissioner David
Sweet (Commissioner Sweet) issued a dissenting statement, explaining, in relevant
part:

              I agree with the ALJ that the language of the statute is clear
              in its use of the word ‘rate,’ and is free from ambiguity.
              Chapter 13 of the . . . Code addresses ratemaking generally,
              and the definition of the term ‘rates’ is broad, and includes
              but is not limited to base rates. Further, rate base is not the
              same as base rates. The reference, therefore, to ‘rate base’
              within Section 1301.1 [of the Code] does not render that
              section ambiguous with regard to its applicability to a DSIC
              rate calculation, nor does it support the conclusion that the
              section is limited to base rate calculations only. If it was
              the intent of the General Assembly to limit this section to
              base rate calculations in base rate proceedings, they [sic]
              could have so specified.




              When the words of a statute are not explicit, the intention of the
              General Assembly may be ascertained by considering, among other
              matters:
                       (1) The occasion and necessity for the statute.
                       (2) The circumstances under which it was enacted.
                       (3) The mischief to be remedied.
                       (4) The object to be attained.
                       (5) The former law, if any, including other statutes upon the
                       same or similar subjects.
                       (6) The consequences of a particular interpretation.
                       (7) The contemporaneous legislative history.
                       (8) Legislative and administrative interpretations of such
                       statute.
1 Pa.C.S. § 1921(c).
                                                   7
Dissenting Statement, Commissioner Sweet (Apr. 19, 2018) (footnotes omitted). On
May 21, 2018, the OCA appealed to this Court seeking review of the April 2018
Order with respect to Act 40’s applicability to DSIC rates.5


                                             Discussion
                The OCA argues that the PUC erred when it concluded that Act 40 is
ambiguous and that the legislative intent was to limit its application to base rates.
The OCA contends that Act 40 is unambiguous and that the relevant statutory
definitions mandate Act 40’s application to DSIC calculations. It further claims that
Act 40’s enactment supercedes this Court’s McCloskey I decision.6 The OCA argues

       5
           This Court has explained:
                On a petition to review a decision of [the] PUC, our standard of
                review is limited to determining whether substantial evidence
                supports the necessary findings of fact, whether [the] PUC erred as a
                matter of law, and whether constitutional rights were violated. [Coal.
                for Affordable Util. Servs. & Energy Efficiency in Pa. v. Pa. Pub. Util.
                Comm’n,] 120 A.3d [1087,] 1094 [(Pa. Cmwlth. 2015)]. We defer to
                [the] PUC’s interpretation of the . . . Code and its own regulations
                unless [the] PUC’s interpretations are clearly erroneous. Id. at 1095.
                We may not substitute our judgment for that of [the] PUC ‘when
                substantial evidence supports the PUC’s decision on a matter within
                the [PUC’s] expertise.’ Id. (internal quotation marks and citation
                omitted). ‘Judicial deference is even more necessary when the
                statutory scheme is technically complex.’ Id. (internal quotation
                marks and citation omitted). On issues of law, ‘our standard of
                review is de novo and our scope of review is plenary.’ Id.
Retail Energy Supply Ass’n v. Pa. Pub. Util. Comm’n, 185 A.3d 1206, 1220 (Pa. Cmwlth. 2018)
(footnote omitted).
         6
           In McCloskey I, this Court considered whether the PUC erred when it concluded that a
utility was not required to include an ADIT adjustment in its DSIC calculation and permitted the
utility to include the state income tax gross-up in its DSIC calculation. In affirming the PUC, this
Court relied upon Section 1301 of the Code, which provides, in relevant part, that “[e]very rate
made, demanded, or received by any public utility, or by any two or more public utilities jointly,
shall be just and reasonable, and in conformity with regulations or orders of the [PUC].” 66 Pa.C.S.
§ 1301. This Court held that “there is no single way to arrive at just and reasonable rates and that
the [PUC] is ‘vested with discretion to decide what factors it will consider in setting or evaluating a
                                                   8
that, since it is undisputed that the DSIC is a statutorily defined rate, Section
1301.1(a) of the Code applies to DSIC calculations and, accordingly, the PUC and
this Court must accept the statutory definition and apply it to Section 1301.1(a) of the
Code.
               Specifically, the OCA argues:

               [T]he statute contains no language limiting its application to
               a specific type of ‘rate.’ Section 1301.1 [of the Code] does
               not mention ‘DSIC’ or ‘base rates.’ The statute does
               mention ‘rate base’ in the third sentence of 1301.1(a) [of the
               Code]; however, rate base and base rates are not the same.
               Rate base is another technical word that is defined by the
               [Code] as follows: [‘]The value of the whole or any part of
               the property of a public utility which is used and useful in
               the public service.[’] 66 Pa.C.S. § 102. The DSIC rate, like
               base rates, is calculated to recover the value (depreciation
               and pretax return) of a utility’s capital investment (property)
               which is used and useful in the public service. 66 Pa.C.S. §
               1357(a)(1), (3). Specifically, the DSIC rate recovers the
               value of utility property that has ‘been placed in service’ in
               the prior quarter and has ‘not previously been reflected in
               the utility’s rates or rate base.’ 66 Pa.C.S. § 1357(a)(1).
               Thus, rate base is not particular to base rates and its
               usage in Section 1301.1(a) [of the Code] creates no
               limitation on the application of the statute.

OCA Br. at 26 (emphasis added). The PUC rejoins:

               The initial inconsistency arises with use of the term ‘rates’
               contained in the first sentence of subsection (a) with the use
               of the [term] ‘rate base’ in the third sentence of subsection
               (a).
               The third sentence of the subsection specifically uses the
               term ‘rate base’ and not the general term ‘rate.’ The term
               ‘rate base’ is also a technical term defined by Section 102

utility’s rates.’” McCloskey I, 127 A.3d at 868 (quoting Popowsky v. Pa. Pub. Util. Comm’n (Pa.
Cable Television Ass’n), 669 A.2d 1029, 1040 (Pa. Cmwlth. 1995), rev’d on other grounds, 706
A.2d 1197 (Pa. 1997)). “The bottom line is that the appropriate inquiry is whether the total effect of
the surcharge results in unjust and unreasonable rates.” Id. at 869.


                                                  9
            of the Code and is primarily used in general base rate cases
            under Section 1308 of the Code[, 66 Pa.C.S. § 1308].
            Confusion occurs, however, when attempting to reconcile
            the third sentence of subsection (a) with the first two
            sentences of the subsection. The third sentence refers back
            to the first two sentences and explains to what rates the
            computation of the related income tax deductions and
            credits in the first two sentences of subsection (a) should
            apply.
PUC Br. at 21-22 (footnote omitted).
            Initially,
            [w]hen reviewing agency interpretations of statutes they are
            charged to enforce, our Supreme Court, in Pennsylvania
            Human Relations Commission v. Uniontown Area School
            District, . . . 313 A.2d 156 ([Pa.] 1973) (as well as the
            United States Supreme Court in Chevron v. Natural
            Resources Defense Council, 467 U.S. 837. . . (1984)), has
            adopted a ‘strong deference’ standard for reviewing agency
            interpretations of statutes they are charged to enforce.
            Under the ‘strong deference’ standard, if we determine
            that the intent of the legislature is clear, that is the end
            of the matter and we, as well as the agency, must give
            effect to the unambiguously expressed intent of the
            legislature. If, however, we determine that the precise
            question at issue has not been addressed by the legislature,
            we are not to impose our own construction on the statute as
            would be necessary in the absence of an administrative
            interpretation, but review the agency’s construction of the
            statute to determine whether that construction is
            permissible.      We must give deference to the
            interpretation of the legislative intent of a statute made
            by an administrative agency only where the language of
            that statute is not explicit or ambiguous. A statute is
            ambiguous or unclear if its language is subject to two or
            more reasonable interpretations.

Bethenergy Mines, Inc. v. Dep’t of Envtl. Prot., 676 A.2d 711, 715 (Pa. Cmwlth.
1996) (citations omitted; emphasis added).     Thus, resorting to legislative intent
through statutory construction principles to determine whether Section 1301.1(a) of



                                        10
the Code applies to DSIC calculations is only necessary if the term “rates” as used in
Section 1301.1(a) of the Code is ambiguous.
              The Pennsylvania Supreme Court explained:
                   Whether a statute is ambiguous cannot be
                   determined in a vacuum.
                   A statute is ambiguous when there are at least
                   two reasonable interpretations of the text. In
                   construing and giving effect to the text, ‘we
                   should not interpret statutory words in
                   isolation, but must read them with reference to
                   the context in which they appear.’ Roethlein v.
                   Portnoff Law Assoc[s]., . . . 81 A.3d 816, 822
                   (Pa. 2013) (citing Mishoe v. Erie Ins. Co., . . .
                   824 A.2d 1153, 1155 (Pa. 2003)); accord
                   Commonwealth v. Office of Open Records, . . .
                   103 A.3d 1276, 1285 (Pa. 2014) (party’s
                   argument that statutory language is ambiguous
                   ‘depends upon improperly viewing it in
                   isolation;’ when language is properly read
                   together and in conjunction with rest of statute,
                   legislative intent is plain). The United States
                   Supreme Court also takes a contextual
                   approach in assessing statutes and in
                   determining predicate ambiguity.             See
                   generally King v. Burwell, __ U.S. __, 135
                   S.Ct. 2480, 2489, 192 L. Ed. 2d 483 ([] 2015)
                   (‘If the statutory language is plain, we must
                   enforce it according to its terms.           But
                   oftentimes the meaning - or ambiguity - of
                   certain words or phrases may only become
                   evident when placed in context. So when
                   deciding whether the language is plain, we
                   must read the words in their context and with a
                   view to their place in the overall statutory
                   scheme.’ ([I]nternal quotation marks and
                   citations omitted)); Yates v. U[.]S[.], __ U.S.
                   __, 135 S.Ct. 1074, 1081-82, 191 L. Ed. 2d 64
                   ([] 2015) (‘Whether a statutory term is
                   unambiguous, however, does not turn solely on
                   dictionary definitions of its component words.
                   Rather, ‘[t]he plainness or ambiguity of
                   statutory language is determined [not only] by
                                          11
                  reference to the language itself, [but as well
                  by] the specific context in which that language
                  is used, and the broader context of the statute
                  as a whole.’ Ordinarily, a word’s usage
                  accords with its dictionary definition. In law
                  as in life, however, the same words, placed in
                  different contexts, sometimes mean different
                  things.’ ([I]nternal citations omitted)).
            A.S. v. Pa. State Police, . . . 143 A.3d 896, 905-906 ([Pa.]
            2016) (some citations omitted, others modified).

In re Tr. Under Deed of Kulig, 175 A.3d 222, 231-32 (Pa. 2017).
            Section 102 of the Code defines “rate” as:

            Every individual, or joint fare, toll, charge, rental, or other
            compensation whatsoever of any public utility, or
            contract carrier by motor vehicle, made, demanded, or
            received for any service within this part, offered, rendered,
            or furnished by such public utility, or contract carrier by
            motor vehicle, whether in currency, legal tender, or
            evidence thereof, in kind, in services or in any other
            medium or manner whatsoever, and whether received
            directly or indirectly, and any rules, regulations,
            practices, classifications or contracts affecting any such
            compensation, charge, fare, toll, or rental.

66 Pa.C.S. § 102 (emphasis added).
            The Pennsylvania Supreme Court has held that “if the General
Assembly defines words that are used in a statute, those definitions are binding.”
Pa. Associated Builders & Contractors, Inc. v. Dep’t of Gen. Servs., 932 A.2d 1271,
1278 (Pa. 2007) (emphasis added); see also Lower Swatara Twp. v. Pa. Labor
Relations Bd., __ A.3d __ (Pa. Cmwlth. No. 1276 C.D. 2018, filed May 2, 2019).
“When the [General Assembly] defines the words it uses in a statute, neither the
jury nor the court may define them otherwise.” Commonwealth v. Massini, 188
A.2d 816, 817 (Pa. Super. 1963) (emphasis added). “When [the General Assembly]
does define the words used in a statute, the courts need not refer to the technical
meaning and deviation of those words as given in dictionaries, but must accept the
                                          12
statutory definitions.” Id. (emphasis added); see also Commonwealth v. Lobiondo,
462 A.2d 662 (Pa. 1983). Thus, according to the OCA, the term, “rate,” used in
Section 1301.1(a) of the Code is the broadly inclusive term defined in Section 102 of
the Code, and it is not limited to “base rate.”7
              This Court notes that Section 1353 of the Code authorizes the PUC to
grant or approve the establishment of a DSIC and sets forth the process to petition the
PUC for DSIC approval. See 66 Pa.C.S. § 1353. Section 1357 of the Code details
the method for calculating a DSIC, see 66 Pa.C.S. § 1357, and Section 1358 of the
Code, entitled “[c]ustomer protections[,]” inter alia, imposes a permissible DSIC cap.
66 Pa.C.S. § 1358. Significantly, Sections 1353, 1357 and 1358 of the Code refer to
the DSIC as a “charge” rather than a “rate.” 66 Pa.C.S. §§ 1353, 1357, 1358.
Regardless, as a charge, the DSIC falls within Section 102 of the Code’s definition of
“rate.” 66 Pa.C.S. § 102.
              “A statute is ambiguous when there are at least two reasonable
interpretations of the text under review.” Warrantech Consumer Prods. Servs., Inc.,
v. Reliance Ins. Co. in Liquidation, 96 A.3d 346, 354-55 (Pa. 2014) (emphasis
added). Nonetheless, an interpretation that disregards and/or contradicts an
explicitly stated statutorily defined meaning cannot be reasonable. By claiming
and concluding that the term “rates” as used in Section 1301.1(a) of the Code is
ambiguous and does not include DSIC, the PUC and the Companies simply disregard
the binding statutory definition under the guise of pursuing statutory intent. Sections
1353(b)(4),(5), 1357(b),(c), and 1358(b)(1) of the Code include the term “base rate.”
See 66 Pa.C.S. §§ 1353(b)(4),(5), 1357(b),(c), 1358(b)(1).              It is clear from the
General Assembly’s use of the term “base rate” in those Code sections that the


       7
         Notably, the Code does not define the term “base rate,” and Section 1308(d) of the Code
provides a detailed process for base rate proceedings using the defined term “rate” therein. 66
Pa.C.S. § 1308(d).
                                              13
General Assembly knew how to differentiate between “base rates” and “rates” and
did so in drafting the legislation. In Section 1301.1(a) of the Code, it used the
defined term, “rate[s].” 66 Pa.C.S. § 102. That term in the first two sentences of
Section 1301.1(a) of the Code is not ambiguous because it is defined to include
“[e]very . . . charge . . . whatsoever of any public utility[.]” 66 Pa.C.S. § 102
(emphasis added). In order for this Court to conclude that Section 1301.1(a) of the
Code is ambiguous, it would have to assign a meaning to the word “rates,” different
from the General Assembly’s explicit definition, which this Court may not do.8 See
Pa. Associated Builders; Lobiondo; Lower Swatara; Massini.
               As the ALJ in his Recommended Decision clearly explained:

               The plain language of Section 1301.1 [of the Code] requires
               that the impact of any tax deductions and credits related to
               an expense or investment that is allowed to be included in a
               public utility’s rates for ratemaking purposes shall be
               included in the computation of current or deferred income
               tax expense to reduce rates. It is well accepted that ‘shall’
               as used in statutes is generally imperative or mandatory and
               must be given a compulsory meaning as denoting
               obligation.
               The OCA, therefore, is correct that the [C]ompanies must
               modify their DSIC calculation to include federal and state
               income tax deductions generated by DSIC investment.
               Doing so is what the General Assembly directed when
               enacting Act 40, regardless of McCloskey [I]. No further
               analysis is required. The discretion previously afforded to
               the [PUC] in McCloskey [I] is no longer present in light of
               the enactment of Act 40. The [C]ompanies’ arguments to
               the contrary are without merit and should be rejected.
               First, the [C]ompanies argued that Act 40 was enacted for
               the express purpose of eliminating the use of consolidated
       8
         Nor may this Court insert or read into Section 1301.1(a) of the Code the word “base”
before the word “rates.” “This Court has consistently held that courts may not supply words
omitted by the legislature as a means of interpreting a statute. This Court’s duty to interpret statutes
does not include the right to add words or provisions that the legislature has left out.” Rogele, Inc.
v. Workers’ Comp. Appeal Bd.(Mattson), 969 A.2d 634, 637 (Pa. Cmwlth. 2009) (citations omitted).
                                                  14
tax adjustments in calculating utility base rate and that
nothing within the four corners of Act 40, or in the
legislative history, suggests it would alter the elements of
the DSIC formula or deprive the [PUC] of its discretion in
designing the DSIC tariff. Yet, there is nothing in the plain
language of Section 1301.1 [of the Code] that suggests as
such. Rather, Subsection (a) of Section 1301.1 [of the
Code] says if an expense or investment is allowed to be
included in a utility’s rates for ratemaking purposes so too
should the related income tax deductions and credits be
included. 66 Pa.C.S. § 1301.1. Subsection (a) then
articulates the inverse: if the expense or investment is not
allowed to be included in a utility’s rates for ratemaking
purposes, any related income tax deductions and credits
cannot be included. Id. The third and fourth sentences in
subsection (a) then articulate how those deductions and
credits should be calculated. Id. This language is clear and
unambiguous.
The rules of statutory construction require that ‘when
the words of a statute are clear and free from all
ambiguity, the letter of it is not to be disregarded under
the pretext of pursuing its spirit.’ 1 Pa.C.S. § 1921(b).
In this case, the language of Section 1301.1 [of the Code]
is clear and free from all ambiguity and therefore the
letter of the statute cannot be disregarded.
The [C]ompanies’ reliance on legislative history as a
reason to adopt its position in this proceeding is
misplaced. Where the plain language of the statute is
discernible, as is the case here, there is no need to look to
the legislative history.        As the rules of statutory
construction further require, ‘when the words of the statute
are not explicit, the intention of the General Assembly may
be ascertained by considering, among other matters: . . . .
(7) the contemporaneous legislative history.’ 1 Pa.C.S. §
1921(c)(7)[.] In this case, however, the words of Section
1301.1 [of the Code] are explicit and, therefore, there is
no need to look to the contemporaneous legislative
history to ascertain the intention of the General
Assembly, as the [C]ompanies argue. Certainly, the
argument of the sponsoring representative during the
legislative debates, or the testimony of witnesses during a
committee hearing, do not outweigh the clear and explicit
terms of the language approved by the majority of the

                             15
             members of the General Assembly and signed by the
             Governor.

Recommended Decision at 25-26 (citations omitted; emphasis added). This Court
discerns no error in the ALJ’s analysis.
             For all of the above reasons, the PUC’s April 2018 Order is reversed,
and this matter is remanded to the PUC to require the Companies to revise their
tariffs and DSIC calculations in accordance with Section 1301.1(a) of the Code.



                                       ___________________________
                                       ANNE E. COVEY, Judge



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




                                           16
            IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Tanya J. McCloskey, Acting                  :
Consumer Advocate,                          :
                       Petitioner           :
                                            :
                   v.                       :
                                            :
Pennsylvania Public Utility Commission,     :     No. 697 C.D. 2018
                         Respondent         :


                                      ORDER

            AND NOW, this 11th day of July, 2019, the Pennsylvania Public Utility
Commission’s (PUC) April 19, 2018 order is reversed and the matter is remanded to
the PUC for the purpose of requiring Metropolitan Edison Company, Pennsylvania
Electric Company, Pennsylvania Power Company, and West Penn Power Company
to revise their tariffs and Distribution System Improvement Charge calculations in
accordance with Section 1301.1(a) of the Public Utility Code, 66 Pa.C.S. § 1301.1.
            Jurisdiction is relinquished.



                                       ___________________________
                                       ANNE E. COVEY, Judge
