Affirmative Public Benefit and Judicial Deference in Section 1329 Utility Acquisitions:
Commentary on Consumer Advocate v. PUC; Appeal of Aqua Pennsylvania Wastewater, Inc.

I. Introduction

This decision of the Supreme Court of Pennsylvania concerns the intersection of three core elements of Pennsylvania public utility law:

• the statutory framework for valuing municipal water and wastewater systems under 66 Pa.C.S. §1329,
• the requirement for a Certificate of Public Convenience (CPC) under §§1102–1103, and
• the “affirmative public benefits” test articulated in City of York and later refined in Popowsky.

The case arose from Aqua Pennsylvania Wastewater, Inc.’s attempt to purchase the East Whiteland Township wastewater system using the §1329 fair market value (FMV) process. An ALJ recommended denial of the CPC; the Public Utility Commission (PUC) overruled the ALJ and approved the acquisition; the Commonwealth Court reversed the PUC, effectively imposing a far more restrictive standard on §1329 acquisitions. The Supreme Court has now reversed the Commonwealth Court and reinstated the PUC’s legal framework, remanding only for a substantial-evidence review that the Commonwealth Court had not yet performed.

The opinion clarifies what counts as an “affirmative public benefit,” how rate impacts must be considered, and—critically—the limited role of appellate courts when reviewing PUC certification decisions in §1329 transactions. It sets a statewide precedent that will materially shape the future of municipal system privatization, consolidation, and consumer advocacy in Pennsylvania.

II. Case Overview and Procedural Background

A. The proposed transaction

• Buyer: Aqua Pennsylvania Wastewater, Inc. (an investor-owned public utility, already certificated and serving ~45,000 wastewater customers, including in Chester County).
• Seller: East Whiteland Township (owner of a wastewater collection system serving approximately 3,895 residents).
• Transaction: Aqua agreed to purchase the Township’s wastewater system (the “System”) for $54,930,000.
• Valuation: The parties invoked §1329, used two PUC-approved utility valuation experts, and obtained an FMV of approximately $56.7 million. By statute, the ratemaking base rate is the lower of (a) FMV and (b) purchase price, so Aqua sought a rate base of the negotiated price: $54.93 million.
• Rate commitments: Aqua agreed to maintain existing Township wastewater rates for at least three years after closing.
• Regulatory filings: Aqua filed a CPC application under §§1102–1103, and sought approval of the §1329 rate base.

B. PUC proceedings

• The Office of Consumer Advocate (OCA) and a Township customer protested the application, arguing the acquisition was contrary to the public interest.
• An ALJ:
  • Held public input hearings, where residents voiced concerns about:
    • anticipated rate increases,
    • the existing system’s good performance under Township ownership, and
    • alleged water service issues involving Aqua.
  • Conducted evidentiary hearings; Aqua, the Township, and OCA submitted testimony and exhibits.
  • Recommended denial of Aqua’s CPC application, despite acknowledging Aqua’s fitness as a certificated public utility.
• The ALJ credited:
  • Substantial public opposition,
  • Evidence that the Township provided safe and reliable wastewater service, and
  • OCA’s unrebutted analysis showing:
    • a $5.011 million annual revenue deficiency if Aqua acquired the System, and
    • projected rate increases of approx. 132% for Township customers if they alone covered that deficiency, or approx. 66% if shared with Aqua’s existing customers (with those existing customers also seeing increases).
• The ALJ concluded Aqua had not shown that its ownership would “affirmatively promote” public service in a “substantial” way, particularly given the System’s adequate operation and Township’s alleged ability to finance necessary capital improvements.

The PUC issued a 133-page opinion rejecting the ALJ’s recommendation, granting Aqua a CPC, and approving a slightly reduced rate base (~$54.4 million). It found:

• Aqua’s technical, managerial, and financial fitness and its existing operations (including ownership of the Township’s water system) provided significant public benefits;
• The transaction advanced PUC policy objectives of regionalization and consolidation;
• There would be specific, transaction-based benefits to both existing Aqua customers and Township customers (such as increased economies of scale, capital investment, regulatory expertise, and enhanced customer-service options); and
• Although some rate increase was expected, there would likely be rate increases even if the sale did not proceed, and regional cost-spreading would increase flexibility and mitigate impacts.

C. Commonwealth Court review

The OCA petitioned the Commonwealth Court for review. A panel (in a published opinion captioned Cicero v. PUC, 300 A.3d 1106 (Pa. Cmwlth. 2023)) reversed.

The Commonwealth Court:

• Formally acknowledged the deference owed to the PUC in certification matters, but
• Held that:
  • Benefits grounded in Aqua’s size, financial strength, and managerial/technical fitness were not “affirmative public benefits” of this transaction, because:
    • they flow from Aqua’s general characteristics, not from the specific acquisition;
    • they would be present in any Aqua acquisition; and
    • the Township’s System was already providing safe, reliable, and financially supported service.
  • The System was “already providing and is capable of providing the same or similar benefits without the acknowledged rate increase” from the acquisition; thus, there were effectively no net benefits.
  • Anticipated rate increases were “acknowledged or known harms” that outweighed the asserted benefits.
  • Nothing in §1329 altered the City of York/Popowsky standard; in every §1329 case the transaction’s affirmative benefits must outweigh harms.
• Reversed the grant of the CPC, holding that the PUC erred or abused its discretion.
• Did not reach the separate question whether the PUC’s factual findings were supported by substantial evidence.

D. Supreme Court proceedings

The PUC, East Whiteland Township, and Aqua each petitioned for allowance of appeal. The Supreme Court granted all petitions and consolidated the appeals.

The principal issues before the Court included:

• Whether §1329 altered the CPC standard under §§1102–1103;
• Whether the PUC may treat benefits deriving from an acquirer’s size and fitness—and from regionalization/consolidation policies—as cognizable “affirmative public benefits”;
• How anticipated rate impacts must be considered under the City of York/Popowsky “net benefits” test; and
• Whether the Commonwealth Court exceeded its proper scope of review by reweighing the evidence and substituting its policy judgments for the PUC’s.

III. Summary of the Supreme Court’s Opinion

Authored by Justice Mundy, the Supreme Court:

1. Confirmed that §1329 does not alter the CPC standard in §§1102–1103. The City of York and Popowsky “affirmative public benefit” framework remains fully applicable to §1329 acquisitions.
2. Reaffirmed the “affirmative public benefits” / net-benefits test. To grant a CPC, the PUC must find that the transaction “will affirmatively promote the service, accommodation, convenience, or safety of the public in some substantial way,” using a preponderance standard, and must consider rate effects “at least in a general fashion.”
3. Clarified that benefits derived from an acquirer’s size and fitness are legitimate public benefits. While fitness alone does not automatically satisfy the test, the effects of an acquirer’s size, capital access, and expertise (e.g., economies of scale, improved customer service, regulatory capacity) may properly count as affirmative public benefits.
4. Rejected the Commonwealth Court’s approach as improper reweighing of the evidence. The Court held that the Commonwealth Court:
   • improperly concluded that Aqua’s new services and capabilities could not legally be counted as benefits because the Township was allegedly “capable” of similar performance;
   • treated anticipated rate increases as “known harms” in a way inconsistent with City of York/Popowsky; and
   • substituted its own evaluation of the evidence for the PUC’s, contrary to established standards of deference.
5. Held that rate impacts are a factor, not a dispositive “known harm.” The PUC properly considered potential rate impacts in a general way, recognizing:
   • rate increases would likely occur regardless of the transaction due to needed capital investments, and
   • regional consolidation would increase flexibility to spread costs over a larger customer base.
6. Reversed the Commonwealth Court’s legal holding and remanded. The Supreme Court reversed the panel’s opinion and remanded solely for the Commonwealth Court to address the unresolved question: whether the PUC’s factual findings (about benefits, ability of the Township, rate impacts, etc.) are supported by substantial evidence.

In essence, the Court restored the PUC’s legal framework for evaluating §1329 CPC applications and sharply curtailed the Commonwealth Court’s attempt to narrow what counts as a public benefit and to elevate rate impacts to a near-dispositive “harm.”

IV. Precedents and Statutory Framework

A. Valuation and acquisition framework: §§1311, 1327, 1329

1. Section 1311(b)(1) – traditional “original cost minus depreciation” valuation
   Ordinarily, a utility’s rate base is:

   the original cost of the property when first devoted to the public service less the applicable accrued depreciation as such depreciation is determined by the [PUC].

   This methodology tends to keep rates lower by preventing utilities from earning a return on acquisition “premiums” above depreciated original cost.
2. Section 1327 – limited exception for distressed/small acquisitions
   Enacted in 1990, §1327 created a narrow exception allowing an acquiring water/sewer utility, in certain circumstances, to include in rate base a purchase price above original cost minus depreciation. However, this exception applied only if (among other conditions):
   • the acquired system had ≤3,300 customer connections or was “nonviable” without the acquisition, and
   • the acquired system was not furnishing adequate, efficient, safe, and reasonable service at the time of acquisition.
   Thus, prior to 2016, acquisition premiums could generally be included in rate base only when rescuing small, distressed, or substandard systems.
3. Section 1329 – 2016 fair market value (FMV) process for municipal systems
   Section 1329 substantially changed the landscape:
   • It created an optional FMV process for voluntary, arm’s-length transactions between:
     • an “acquiring public utility” (regulated water or wastewater utility) and
     • a “selling utility” (a municipally-owned or authority-owned water/wastewater system).
   • Each side hires a PUC-approved utility valuation expert; each expert performs a USPAP-compliant appraisal (cost, market, and income approaches).
   • The FMV is the average of the two appraisals.
   • The “ratemaking base rate” of the acquired utility (for post-acquisition purposes) is the lesser of:
     • the negotiated purchase price, or
     • the FMV.
   • That ratemaking base rate is then incorporated into:
     • the acquiring utility’s rate base in its next base rate case, or
     • the acquiring entity’s initial tariff filing.
   • Crucially, unlike §1327, §1329:
     • does not limit eligibility to small or nonviable systems; and
     • does not require a finding that the municipal system is providing inadequate service.
   The Supreme Court uses this contrast to highlight that the legislature did not intend §1329 to be confined to distressed systems; reading such a limitation into §1329 would effectively reintroduce §1327 constraints that the legislature chose not to include.

B. Certificates of Public Convenience: §§1102 and 1103

• Section 1102(a) requires a CPC before a utility can:
  • begin service in new territory, or
  • acquire property used to provide public utility service from a municipal corporation, among other transactions.
  Thus, an acquiring utility in a §1329 transaction must secure a new CPC to take over the municipal system, even if it already has a CPC in adjacent or overlapping areas.
• Section 1103(a) sets the standard:

  A certificate of public convenience shall be granted only if the [PUC] shall find or determine that the granting of such certificate is necessary or proper for the service, accommodation, convenience, or safety of the public.

Over time, case law has transformed this text into the familiar “affirmative public benefits” and “net-benefits” test, particularly in the merger/acquisition context.

C. City of York and Popowsky: the affirmative public benefits and net-benefits framework

1. City of York v. PUC, 295 A.2d 825 (Pa. 1972)
   City of York involved a merger of telephone companies and interpreted the predecessor to §1103, which used nearly identical “necessary or proper” language.
   • The Court overruled earlier precedent that had allowed mergers unless opponents proved substantial harm.
   • It held that a CPC:

     is not to be granted unless the Commission is able to find affirmatively that public benefit will result from the merger.

   • The proponent bears the burden to show that the merger will:

     affirmatively promote the service, accommodation, convenience, or safety of the public in some substantial way.

   • Rate impacts: The Court required the PUC to consider, “at least in a general fashion,” the probable effect on consumer rates as one aspect of the public-benefit inquiry, along with service quality.
2. Popowsky v. PUC, 937 A.2d 1040 (Pa. 2007)
   Popowsky concerned the Verizon–MCI telecom merger.
   • It reaffirmed the City of York standard:
     • The reviewing court must ask whether substantial evidence supports the PUC’s finding that a merger will affirmatively promote the public interest in some substantial way.
     • The PUC applies a preponderance of the evidence standard, including predictive judgments informed by expert opinion.
   • The Court emphasized that:
     • The PUC need not obtain legally binding commitments or quantify benefits precisely, where that would be impractical or impossible.
     • A transaction is not required to lower rates for consumers to be “beneficial.” Future rate impacts must be considered as one component of a net-benefits assessment, not as an all-or-nothing test.
     • “Aspirational statements” about future benefits, grounded in credible evidence, may be sufficient to support a finding of public benefit.

D. McCloskey v. PUC and §1329 in the Commonwealth Court

In McCloskey v. PUC, 195 A.3d 1055 (Pa. Cmwlth. 2018), the Commonwealth Court was the first appellate court to apply City of York/Popowsky to a §1329 municipal acquisition.

Key points from McCloskey:

• The affirmative public benefits test applies fully to §1329 transactions.
• The Court agreed that:
  • an acquiring utility’s large size, expertise, and capital-raising ability,
  • together with PUC policy favoring regionalization and consolidation,
  may support a finding of public benefit.
• However, it held the PUC must consider rate impacts in the CPC proceeding; the Commission cannot postpone rate-impact analysis entirely to a later rate case.
• In that case the Commonwealth Court faulted the PUC for inadequately addressing rate impacts, but did not decide whether the benefits, if properly weighed against rate harms, would satisfy the net-benefit standard.

The Supreme Court in the present decision embraces much of McCloskey’s structure but rejects the stricter gloss the Commonwealth Court later applied in Cicero.

E. Standards of judicial review and agency deference

Several precedents and statutory provisions underlie the Supreme Court’s insistence on deference to the PUC:

• 2 Pa.C.S. §704: appellate review is limited to:
  • constitutional violations,
  • errors of law,
  • procedural violations, and
  • whether findings are supported by “substantial evidence.”
• Substantial evidence is “the amount of relevant evidence which a reasonable person would accept as adequate to support a determination.”
• Abuse of discretion standard: As stated in Rohrbaugh and Slawek, appellate courts may overturn discretionary agency actions only if they:
  • are made in bad faith,
  • constitute a manifest or flagrant abuse of discretion, or
  • are purely arbitrary.
  Courts do not inquire into the wisdom of the agency’s policy choices if this threshold is not met.
• Elite Industries, 832 A.2d 428 (Pa. 2003): The “necessary or proper” language in §1103 means the PUC need not find “absolute public necessity.” The inclusion of “or proper” shows legislative intent to allow CPCs that are appropriate or beneficial even if not strictly necessary.
• Blumenschein, 109 A.2d 331 (Pa. 1954): Courts may not substitute their judgment for that of the agency; a different view of the evidence is not enough to justify reversal.

These principles form the backbone of the Supreme Court’s critique of the Commonwealth Court’s approach in this case.

V. The Court’s Legal Reasoning

A. Section 1329 did not alter the CPC standard

The Court first addresses whether §1329 changed the statutory standard for granting a CPC.

• Textual analysis:
  • Section 1329 does not mention §1103 at all.
  • It references §1102 only in narrow, procedural ways:
    • to specify the content of the CPC application, and
    • to help define “entity.”
• The Court holds that these limited references:
  • do not alter the underlying standard for when a CPC is required or what must be shown to obtain one; and
  • simply direct that §1329 deals with valuation and ratemaking in addition to, not in place of, the existing CPC regime.
• The “complete silence” of §1329 regarding §1103 indicates that the legislature intended to leave the City of York/Popowsky CPC framework intact for §1329 transactions.

Thus, acquiring utilities seeking to purchase municipal systems under §1329 are still required to satisfy the same “affirmative public benefits” test under §1103 as in other merger/acquisition contexts.

B. What counts as an “affirmative public benefit”? Size and fitness-derived benefits

The central legal dispute is whether benefits that stem from Aqua’s size and fitness can be treated as public benefits of this particular transaction.

The Supreme Court draws a critical distinction:

• Being fit (technically, financially, and managerially) is a threshold condition for any CPC and is presumed for existing certificated utilities. Fitness alone does not prove that a specific transaction provides affirmative public benefits.
• However, the concrete effects of that fitness on the acquired system and its customers—if established by evidence—can be counted as affirmative public benefits of the transaction.

The Commonwealth Court treated all benefits tied to Aqua’s size and capabilities as legally irrelevant because they would “be present in any acquisition by Aqua” and because the Township was allegedly capable of similar service. The Supreme Court rejects this categorical exclusion:

• The legislature gave no definition of the criteria for “necessary or proper,” deliberately leaving their formulation to the PUC (Elite Industries).
• Therefore, the Court holds, it is for the PUC, not the courts, to determine in the first instance what constitutes a “benefit” in the context of a given record.
• Following Popowsky, the Court analogizes:
  • Just as the PUC may treat nationwide benefits from federal settlements as state-level benefits if the record shows they apply in Pennsylvania,
  • so too may it treat system-level enhancements arising from a utility’s size and expertise as public benefits even if similar benefits arise in other acquisitions.

The Court explicitly “disapproves” of the notion that:

the Commission should be foreclosed from considering benefits of a transaction merely because those benefits also pertain to the acquiring utility’s fitness.

It emphasizes:

• Size and fitness are not themselves the benefits.
• The relevant benefits are the specific operational, financial, and service improvements expected to follow from the acquisition, demonstrated by evidence in the particular case.

Here, the PUC identified both general and transaction-specific benefits, including:

• Increased economies of scale and spreading of future infrastructure costs across a larger customer base;
• Reductions in System operating expenses;
• Capital improvements and mitigation of sanitary sewer overflows;
• Enhanced ability to comply with complex environmental regulations and to improve system efficiencies;
• Customer service improvements (24/7/365 support, online billing, in-house engineers and environmental experts); and
• The Township’s ability to exit the wastewater business and redirect resources to core governmental functions.

The Commonwealth Court effectively held these were not benefits at all, on the theory that the Township already provided “capable” service and had “funds on hand.” The Supreme Court views that approach as a classic reweighing of the evidence and an improper legal redefinition of “benefit.”

C. Treatment of rate impacts: factor in a net-benefits test, not a “known harm”

The Supreme Court reaffirms that rate impacts must be considered, but it rejects the Commonwealth Court’s characterization of rate increases as a “known harm” that dominated the analysis.

• What the law requires:
  • City of York requires the PUC to consider, “at least in a general fashion,” the probable effect of a transaction on future rates as part of the net-benefits assessment.
  • Popowsky clarifies that:
    • a transaction is not required to lower rates to be beneficial; and
    • precise quantification or binding rate commitments are not required where impractical.
  • McCloskey instructs that the PUC cannot ignore rate effects in §1329 acquisitions, even if exact rate design and cost allocations are reserved for future proceedings.
• What the PUC did here:
  • Explicitly acknowledged the OCA’s estimated revenue deficiency and the resulting rate increase scenarios.
  • Recognized that:
    • a certain level of rate increase was expected if the acquisition was approved, and
    • rate increases were also “reasonably expected” even if the transaction were rejected, due to necessary capital expenditures over the next decade.
  • Emphasized that the revenue-deficiency estimate was a non-binding, preliminary calculation used for customer notice in §1329 proceedings, not a fixed or “known” eventual rate impact.
  • Concluded that the acquisition would give the PUC and Aqua greater flexibility to spread costs over a larger customer base, potentially softening or restructuring rate impacts.
• Why the Supreme Court rejects the “known harm” framing:
  • Nothing in City of York or Popowsky labels rate increases as per se “harms”; rather, rate effects (positive or negative) are one component of the broader net-benefits calculus.
  • The PUC properly recognized the inherent uncertainty of future rate design and allocation, and the Court notes that:

    The more likely outcome is indeterminate; it will be found somewhere between possible extremes.

  • The Commission’s analysis fits squarely within the requirement to evaluate rate impacts “at least in a general fashion.”

In short, the rule emerging from this case is:

• Estimated rate increases in a §1329 acquisition are neither ignored nor treated as dispositive harms.
• They must be considered along with the full panoply of qualitative and quantitative benefits, with the PUC exercising expert judgment to decide whether, on balance, the transaction yields substantial affirmative public benefits.

D. Separation of roles: PUC fact-finding vs. appellate review

A major theme of the opinion is the Supreme Court’s insistence that appellate courts must not encroach on the PUC’s factfinding and policy-balancing role.

The Court underscores:

• The PUC is the primary factfinder and expert body in utility matters.
• Appellate courts:
  • may reverse if the PUC commits an error of law, violates constitutional or procedural rights, or lacks substantial evidence, or
  • if the decision reflects a manifest or flagrant abuse of discretion or is purely arbitrary.
• They may not:
  • reweigh the evidence,
  • second-guess the PUC’s assessment of the relative weight of harms and benefits, or
  • declare certain categories of benefits legally irrelevant simply because they are not deemed persuasive by the reviewing court.

The Commonwealth Court’s key errors, in the Supreme Court’s view, include:

• Treating the PUC’s identification of benefits—such as improved customer-service models, internal engineering expertise, regulatory compliance, and capital plans—as not benefits at all, rather than as benefits whose weight could be debated;
• Substituting its own view that the Township was “capable” of similar performance as a legal bar to recognizing those benefits; and
• Ignoring the PUC’s factual finding that rate increases were likely even without the acquisition (thus undermining its own premise that the Township could provide the same benefits “without” rate increases).

This, the Court concludes, is precisely the kind of reweighing and substitution of judgment that is forbidden under Pennsylvania administrative law precedents like Blumenschein and Popowsky (1997).

E. Rejection of a de facto “failing-system-only” rule for §1329

An important undercurrent in the Commonwealth Court’s opinion—and in OCA’s arguments—is the suggestion that, when a municipal system is already providing adequate, safe, and reliable service and has resources to finance needed upgrades, a sale to a private utility at a premium (with higher resulting rates) can almost never provide net public benefits.

While the Supreme Court does not explicitly label this a “failing-system-only” rule, it makes clear that such a standard would:

• Conflict with the text and structure of §1329, which:
  • does not restrict transactions to distressed or nonviable systems, and
  • stands in deliberate contrast to §1327, which does.
• Usurp legislative judgment by effectively rewriting §1329 to reinstate §1327-type thresholds.
• Prevent municipalities from exiting the water/wastewater business as a matter of public policy choice unless their systems were already in crisis.

By upholding the PUC’s ability to find affirmative public benefits in a transaction involving a functioning municipal system, the Court preserves §1329’s broader applicability and confirms that:

• System adequacy is relevant but not dispositive.
• A transaction can provide affirmative public benefits even if:
  • the municipal system is currently adequate, and
  • the municipality has some resources for capital improvements.

VI. Simplifying Key Concepts

A. Rate base, ratemaking base rate, and fair market value

• Rate base (66 Pa.C.S. §102):
  • Think of this as the “investment value” of the utility property—what regulators allow the utility to earn a return on.
  • Customer rates are set so the utility can recover:
    • operating expenses plus
    • a reasonable return on the rate base.
• Ratemaking base rate (for the acquired system under §1329):
  • This is the dollar value of the municipal system that will be folded into the acquiring utility’s overall rate base after the purchase.
  • Under §1329, it is the lesser of:
    • negotiated purchase price, and
    • FMV (average of the two expert appraisals).
• Fair Market Value (FMV) under §1329:
  • Not the historic book value, but an appraisal-based estimate of what a willing buyer would pay a willing seller in an arm’s-length transaction.
  • Calculated as the average of:
    • the buyer’s expert’s appraisal and
    • the seller’s expert’s appraisal,
    each using cost, market, and income approaches.
  • This often yields a rate base substantially higher than original cost minus depreciation, which is why §1329 transactions tend to increase revenue requirements and, ultimately, rates.

B. Certificates of Public Convenience and the “necessary or proper” test

• A Certificate of Public Convenience (CPC) is regulatory permission from the PUC allowing a utility to:
  • begin new services,
  • enter new territories, or
  • acquire government-owned utility assets.
• Under §1103(a), the PUC may grant a CPC only if the transaction is “necessary or proper” for the public’s service, accommodation, convenience, or safety.
• “Necessary” vs. “proper”:
  • “Necessary” implies that the transaction is needed to serve the public.
  • “Proper” is broader—it can include transactions that are suitable or appropriate, even if not strictly required.
  • The Supreme Court, citing Elite Industries, emphasizes that the PUC need not find “absolute public necessity”; “or proper” is a deliberate legislative widening of the standard.
• The “affirmative public benefits” test is how courts have operationalized this standard in the merger/acquisition context: the PUC must find that the transaction will affirmatively promote public service in some substantial way, considering both benefits and harms.

C. “Substantial evidence” and “abuse of discretion”

• Substantial evidence:
  • Not “beyond a reasonable doubt” or even “clear and convincing.”
  • It means enough relevant evidence that a reasonable person could accept it as sufficient to support the agency’s conclusion.
  • If the record contains such evidence, courts must uphold the PUC’s findings, even if other evidence points the other way.
• Abuse of discretion:
  • More than disagreement with the agency’s judgment.
  • It requires showing that the PUC’s decision was:
    • manifestly unreasonable,
    • the product of bias, prejudice, or ill will, or
    • a purely arbitrary execution of its duties.
  • Absent such a showing, courts must defer to the PUC’s balancing of competing policies and evidentiary inferences.

D. “Aspirational” benefits and public policy goals

• The Court uses “aspirational statements” to describe:
  • claims about anticipated future benefits (e.g., improved service, cost savings, regulatory compliance) that cannot be guaranteed in detail up front.
• Popowsky holds that such statements can be substantive evidence of public benefit if they are:
  • grounded in expert testimony,
  • consistent with the utility’s capabilities and track record, and
  • subject to PUC oversight in future rate cases.
• Similarly, broad PUC policy goals—like regionalization and consolidation—are:
  • legitimate considerations; and
  • may count as public benefits when linked to case-specific evidence (e.g., economies of scale, unified operations where the same utility already owns the local water system).
• But policy alone will not always suffice; the PUC still must build a transaction-specific evidentiary record showing that these policies will benefit the affected customers in some substantial way.

VII. Likely Impact and Future Implications

A. For the PUC

This decision significantly reinforces the PUC’s authority and discretion in evaluating §1329 acquisitions:

• Affirmation of methodology: The PUC’s long-standing approach—considering:
  • the acquirer’s expertise and capital,
  • system-level operational improvements,
  • policy goals of consolidation and regionalization, and
  • rate impacts in a general fashion—
  has been squarely endorsed as consistent with §§1102–1103 and City of York/Popowsky.
• Protection from aggressive judicial second-guessing: The Court warns against appellate reweighing of evidence, particularly where courts attempt to:
  • define categories of evidence (like size- and fitness-derived benefits) as legally irrelevant, or
  • treat estimated rate effects as dispositive “harms.”
• Freedom to apply a broad, policy-informed net-benefits test: The PUC remains free to:
  • treat consolidation, economies of scale, and expert management as legitimate benefits, and
  • balance them against rate impacts and local opposition in light of its broader regulatory mandate.

B. For municipalities and acquiring utilities

The decision sends a clear signal that §1329 remains a viable mechanism for the sale of functioning municipal systems:

• System need not be distressed: Municipalities may sell even well-functioning utilities if the PUC finds affirmative net benefits—such as:
  • enhanced long-term capital investment,
  • relief from operational burdens, and
  • integration into a larger regional system.
• Benefits need not be unique to the transaction: Utilities like Aqua may rely on their:
  • size, financial strength, and technical expertise
  as foundations for anticipated benefits, as long as they demonstrate concrete, transaction-specific advantages on the record.
• Strategic emphasis in future cases:
  • Acquirers should continue to document specific improvements (e.g., detailed capital plans, customer-service upgrades, regulatory compliance projects) and not rely solely on generic attributes.
  • Municipalities should build a record explaining why exiting the utility business is in the public interest (fiscal priorities, risk management, long-term infrastructure needs).

C. For consumer advocates and ratepayers

For the OCA and similar stakeholders, the decision both narrows and clarifies the most effective lines of attack:

• Rate impacts remain a potent but not decisive issue.
  • Advocates cannot characterize estimated rate increases as automatic “known harms” that legally bar approval.
  • However, they can:
    • challenge the reasonableness of the acquirer’s cost and capital projections,
    • question whether claimed benefits will actually materialize, and
    • argue that, on the whole record, the PUC’s net-benefits finding lacks substantial evidence.
• Focus shifts to evidentiary sufficiency.
  • Because the Supreme Court has validated the PUC’s legal framework, opponents will increasingly need to:
    • attack the factual foundation of claimed benefits (e.g., whether the municipality truly lacks capacity, whether promised capital work is necessary or superior), and
    • press the PUC to articulate, in detail, how qualitative benefits outweigh long-term rate burdens.
• Local opposition still matters, but as one factor.
  • Community testimony about satisfaction with municipal service and fear of higher bills remains relevant evidence, but it will be weighed alongside expert technical and financial evidence.

D. For the Commonwealth Court and appellate practice

On remand, the Commonwealth Court must for the first time address whether the PUC’s findings are supported by substantial evidence, now operating under a clarified legal standard.

More broadly, the decision:

• Constrains future panels from:
  • relabeling certain benefits as categorically non-benefits based on legal theory rather than record evidence; or
  • elevating one factor (rates, system condition, municipal capability) to a de facto controlling requirement inconsistent with statutes.
• Reinforces that the Commonwealth Court’s role is:
  • to ensure the PUC has applied the correct legal standards,
  • to verify substantial evidence exists, and
  • to guard against arbitrary or bad-faith decisions—not to conduct a de novo balancing of policy considerations.

VIII. Conclusion

This opinion is a pivotal clarification of Pennsylvania public utility law in the era of §1329 municipal acquisitions. The Supreme Court:

• Confirms that §1329 does not alter the CPC standard: acquiring utilities must still show substantial affirmative public benefits under §§1102–1103 and City of York/Popowsky.
• Holds that benefits arising from an acquirer’s size, capital access, and expertise are legally cognizable public benefits when they materialize as concrete service, operational, or financial advantages for customers.
• Clarifies that rate impacts are a mandatory but non-dispositive component of the net-benefits analysis, to be considered “in a general fashion” without requiring precise forecasts or treating estimated increases as automatic “known harms.”
• Reasserts the strong deference owed to the PUC in factfinding and policy balancing, condemning appellate reweighing of evidence and judicial attempts to narrow by fiat what counts as a public benefit.
• Rejects any implied requirement that §1329 sales be limited to distressed or failing municipal systems, preserving the statute’s broader role in facilitating voluntary, policy-driven exits by municipalities.

Going forward, this precedent will make it more difficult for challengers to overturn §1329 approvals on purely legal or doctrinal grounds. Instead, the central battleground will be the evidentiary record before the PUC: whether it robustly demonstrates that, despite potential rate increases, the acquisition will “affirmatively promote the service, accommodation, convenience, or safety of the public in some substantial way.” In anchoring §1329 transactions firmly within the established affirmative-benefits and deference framework, the Court has reshaped the terrain on which Pennsylvania’s debates over utility privatization and consolidation will be fought.