Consumer Advocate v. PUC (East Whiteland): Reaffirming PUC Discretion and the “Affirmative Public Benefits” Test for Fair Market Value Utility Acquisitions

I. Introduction

This consolidated decision of the Supreme Court of Pennsylvania addresses a central tension in modern public utility law: how far an administrative commission may go in approving fair-market-value acquisitions of municipal water and wastewater systems when those acquisitions are likely to increase customer rates, but also promise operational efficiencies, capital investment, and regulatory expertise.

The case arises from Aqua Pennsylvania Wastewater, Inc.’s acquisition of East Whiteland Township’s sanitary wastewater system under the “fair market value” procedure in Section 1329 of the Public Utility Code, 66 Pa.C.S. § 1329. That procedure is designed to facilitate the purchase of municipal water and wastewater assets by regulated utilities at appraised fair market value, rather than at depreciated original cost.

The Pennsylvania Public Utility Commission (PUC) approved Aqua’s application for a Certificate of Public Convenience (CPC) under Sections 1102 and 1103 of the Code to acquire and operate the East Whiteland system, setting a ratemaking rate base equal to the negotiated purchase price. The Office of Consumer Advocate (OCA) challenged the approval, arguing that the acquisition failed to produce “substantial affirmative public benefits” and would significantly increase rates.

The Commonwealth Court reversed, holding that the PUC had improperly relied on generalized benefits related to Aqua’s size and fitness, and had failed to show that this particular transaction produced net benefits when balanced against “known harms” in the form of rate increases. The Supreme Court, in an opinion by Justice Mundy, reverses the Commonwealth Court, reinstates the PUC’s legal framework, and remands only for a limited substantial-evidence review.

At its core, the decision:

• Confirms that Section 1329 does not change the longstanding CPC standard under Sections 1102 and 1103.
• Reaffirms the City of York / Popowsky “substantial affirmative public benefits” test, including a general consideration of rate impacts.
• Holds that the PUC may consider benefits that flow from a utility’s size, expertise, and regionalization policy as part of the public-benefit calculus.
• Rejects the Commonwealth Court’s effort to treat projected rate increases as “known harms” that effectively dominate the analysis.
• Emphasizes the strict limits on judicial review of PUC certification decisions: appellate courts may not reweigh evidence or substitute their policy judgments for the Commission’s.

The opinion thus marks a significant precedent for Section 1329 acquisitions and, more broadly, for administrative deference in Pennsylvania utility regulation.

II. Summary of the Opinion

A. Disposition

• The Supreme Court reverses the Commonwealth Court’s decision that had vacated the PUC’s grant of a CPC to Aqua for the East Whiteland acquisition.
• The case is remanded to the Commonwealth Court to address an issue that court did not reach: whether the PUC’s factual findings are supported by substantial evidence.

B. Core Holdings

1. Section 1329 does not alter CPC standards.
   Section 1329, which provides a fair market value (FMV) valuation procedure for municipal water/wastewater acquisitions, does not change:
   • When a CPC is required under Section 1102, or
   • The substantive standard for granting a CPC under Section 1103, including the “affirmative public benefit” requirement established in City of York and clarified in Popowsky.
2. Affirmative public benefits may include advantages derived from the acquiring utility’s size and fitness.
   While a utility’s fitness (technical, legal, financial) is a distinct threshold concept, the PUC may consider transaction-specific benefits that derive from that fitness, such as:
   • 24/7 customer service centers,
   • In-house engineering and regulatory expertise,
   • Ability to fund capital improvements and spread costs across a broader base,
   • Benefits from regionalization and consolidation policies.
   These are not excluded from the “benefits” side of the ledger as a matter of law.
3. Projected rate impacts are a factor, not dispositive “known harms.”
   The PUC must consider rate effects of a transaction “at least in a general fashion,” but:
   • Rate increases are not automatically “known harms” that negate other benefits.
   • A transaction can satisfy the public-benefit test even if it is likely to increase rates.
   • In Section 1329 cases, any rate analysis at the CPC stage will be preliminary and non-binding.
4. Strict deference and limited judicial review apply.
   The Commonwealth Court erred by:
   • Reweighing evidence and rejecting the PUC’s characterization of specific benefits, and
   • Substituting its own assessment of “net benefits” for the Commission’s.
   Appellate courts may only:
   • Check for constitutional or procedural error,
   • Ensure the decision is “in accordance with law,” and
   • Confirm that necessary findings are supported by substantial evidence, and that there has been no manifest or flagrant abuse of discretion.

III. Legal and Factual Background

A. Statutory Framework

1. Traditional rate base valuation: Section 1311

Under 66 Pa.C.S. § 1311(b)(1), a utility’s property is generally valued for ratemaking at its:

This “original cost less depreciation” approach tends to keep rate base (and thus rates) relatively conservative, especially for older assets.

2. Early exception for distressed water/sewer systems: Section 1327

In 1990, the General Assembly created a narrow exception in Section 1327 for certain water and sewer acquisitions. A utility acquiring assets from another utility, a municipality, or a person at a cost above depreciated original cost could include the excess in rate base, subject to a rebuttable presumption of reasonableness, but only if:

• The acquired system had 3,300 or fewer connections or was otherwise nonviable; and
• The system was not providing adequate, efficient, safe, and reasonable service at the time of acquisition.

Section 1327 thus targeted small or failing systems and did not broadly authorize fair market value ratemaking for functioning municipal utilities.

3. The fair market value regime: Section 1329

Section 1329, adopted in 2016, significantly broadened this framework by:

• Allowing a municipal “selling utility” and a regulated “acquiring public utility” to elect an FMV process,
• Requiring each side to hire an approved “utility valuation expert” to independently appraise the system using cost, market, and income approaches,
• Defining the fair market value as the average of those two appraisals, and
• Setting the ratemaking rate base as the lesser of:
  • The negotiated purchase price, or
  • The FMV determined by the valuation experts.

Crucially, Section 1329:

• Is not limited to small, nonviable, or inadequately performing systems.
• Is available for functioning municipal systems, like East Whiteland’s, that currently provide safe and adequate service.

4. CPC requirement: Sections 1102 and 1103

Under Section 1102(a), a CPC is required when a utility seeks, among other things:

• To begin service in a new territory, or
• To acquire title to property used to provide a public utility service from a municipal corporation.

Section 1103(a) governs the standard for granting a CPC:

Caselaw has layered onto this text the City of York “affirmative public benefit” requirement discussed below.

B. Key Precedents: City of York, Popowsky, McCloskey

• City of York v. Pa. PUC, 295 A.2d 825 (Pa. 1972) – interpreting Section 1103’s predecessor:
  • Overruled older precedent that allowed mergers unless opponents proved substantial harm.
  • Held that a merger cannot be approved unless the PUC can affirmatively find a public benefit:
    “the proponents of a merger bear the burden of proving that the merger will affirmatively promote the service, accommodation, convenience, or safety of the public in some substantial way.”
  • Required the PUC to consider, “at least in a general fashion,” the effect on future rates as one factor in assessing public benefit.
• Popowsky v. Pa. PUC, 937 A.2d 1040 (Pa. 2007) – Verizon/MCI merger:
  • Reaffirmed City of York’s affirmative public benefits test.
  • Clarified that:
    • The PUC may rely on predictive, expert-informed judgment under a preponderance standard.
    • Legally binding commitments or precise quantification of benefits are not always required.
    • The PUC need only consider rate impacts “in a general fashion” as part of a “net benefits” assessment; there is no requirement that a merger lower rates.
    • “Aspirational” commitments may count as benefits if supported by record evidence.
• McCloskey v. Pa. PUC, 195 A.3d 1055 (Pa. Cmwlth. 2018) – first major Commonwealth Court decision applying City of York/Popowsky in a Section 1329 context:
  • Held that the PUC must still conduct a CPC “affirmative public benefit” analysis for Section 1329 acquisitions.
  • Recognized that:
    • The acquiring utility’s size, expertise, and access to capital can support a finding of public benefit.
    • PUC policy favoring regionalization and consolidation may also support that conclusion.
    • The PUC must consider rate impacts at the CPC stage and cannot defer them entirely to future rate cases.

C. Facts and Procedural History

1. The transaction

• Aqua is a large, investor-owned wastewater utility serving about 45,000 customers in multiple counties, including Chester County, and already owns East Whiteland’s water system.
• East Whiteland Township owns and operates its wastewater system, serving about 3,895 customers; service quality is not disputed.
• Aqua agreed to purchase the Township’s wastewater assets for $54.93 million; the FMV appraisals averaged $56.724 million, so the negotiated price (lower of the two) became the proposed ratemaking rate base under Section 1329(c)(2).
• Aqua committed to maintain existing Township wastewater rates for at least three years post-closing.

2. PUC proceedings

• Aqua filed for:
  • A CPC under Sections 1102 and 1103 to serve Township wastewater customers; and
  • Approval of a Section 1329 ratemaking rate base of $54.93 million.
• The Office of Consumer Advocate (OCA) and a customer protested, raising:
  • Concerns about rate increases,
  • Alleged service issues by Aqua elsewhere, and
  • The adequacy and reliability of the existing Township system.
• The Administrative Law Judge (ALJ) recommended denying the application, reasoning that:
  • The Township already provided safe and reliable service and had financial capacity to fund needed capital improvements.
  • OCA’s unrebutted evidence showed a $5.011 million annual revenue deficiency if Aqua paid its full cost of service based on the Section 1329 rate base.
  • Rates could rise approximately:
    • 132% for Township customers if they bore the full deficiency, or
    • 66% for Township customers plus increases for Aqua’s existing customers if costs were shared.
  • Aqua’s claimed benefits were either vague or not meaningfully better than the status quo.
  • The net effect did not “affirmatively promote” the public interest.
• The PUC, in a detailed 133-page opinion, reversed the ALJ and approved the CPC (with a minor downward adjustment of the rate base to $54.4 million), finding:
  • Aqua is technically, legally, and financially fit (a presumption for existing public utilities).
  • Affirmative public benefits included:
    • Aqua’s expertise and capital access,
    • Consolidation of wastewater service with Aqua’s existing water service in the Township,
    • Alignment with PUC policy and legislative intent favoring regionalization and consolidation,
    • Operational and customer-service enhancements for Township customers, and
    • Benefits to Aqua’s existing customers from economies of scale.
  • Regarding rates, some increase was likely whether or not Aqua acquired the system, due to necessary capital upgrades. Under Aqua’s ownership, cost allocation could be spread over a larger customer base, offering greater flexibility to mitigate impacts.

3. Commonwealth Court decision

In Cicero v. PUC, 300 A.3d 1106 (Pa. Cmwlth. 2023), the court reversed:

• It recognized general deference to the PUC but held:
  • The PUC improperly conflated Aqua’s fitness with affirmative public benefits.
  • Benefits deriving from Aqua’s size and general capabilities would appear in “any” Aqua acquisition and were not transaction-specific benefits.
  • Because the Township already provided safe, reliable service and could finance improvements itself, Aqua’s promises did not reflect genuine improvements in service.
  • Projected rate increases were “known harms” that outweighed any such benefits, resulting in insufficient “net benefits” to satisfy City of York.
• The court concluded the PUC “erred and/or abused its discretion” and failed to apply the correct legal standard.
• It did not reach the separate issue of whether the PUC’s fact findings were supported by substantial evidence.

IV. Detailed Analysis of the Supreme Court’s Opinion

A. Precedents Cited and How They Were Used

1. City of York and Popowsky: public-benefit framework reaffirmed

The Supreme Court unequivocally reaffirms City of York and Popowsky as the governing standards for CPC determinations, including Section 1329 transactions:

• City of York supplies the “affirmative public benefits in some substantial way” test and the requirement to consider rate impacts “in a general fashion.”
• Popowsky underscores:
  • The preponderance standard for PUC findings.
  • The permissibility of predictive, judgment-based determinations.
  • That the PUC need not show rate reductions for a transaction to be beneficial.
  • That aspirational or non-binding commitments can still count as benefits if supported by evidence.

The Court uses these precedents to:

• Reject the Commonwealth Court’s characterization of rate increases as dispositive “known harms.”
• Confirm that benefits need not uniquely or directly benefit each customer class so long as there are net system-wide benefits.

2. McCloskey: Section 1329 and rate-impact analysis

McCloskey is cited to:

• Confirm that Section 1329 did not displace Sections 1102/1103.
• Support the view that a utility’s size, expertise, and capital-raising ability, plus PUC policies favoring consolidation, are legitimate public benefits.
• Reiterate the requirement that rate impacts must be considered in CPC proceedings, not deferred to later rate cases.

The Supreme Court agrees with McCloskey that these factors may support public-benefit findings, but also agrees with the Commonwealth Court’s caution that such aspirational benefits will not always suffice to outweigh harms; they must be evaluated in context as part of a net-benefit assessment.

3. Elite Industries and the meaning of “necessary or proper”

In Elite Industries, Inc. v. PUC, 832 A.2d 428 (Pa. 2003), the Court recognized the significance of the statutory phrase “necessary or proper” in Section 1103:

• The PUC is not confined to approving only those services that are indispensable (“necessary”).
• “Proper” has independent meaning, indicating that services beneficial, suitable or appropriate for the public interest may suffice.

The present decision revisits this concept to reject any suggestion that the public-benefit test requires a showing of absolute necessity, and to emphasize the PUC’s broad discretion in defining what is “proper” for public service under the statute.

4. Deference and standard of review: Popowsky (1997), Rohrbaugh, Slawek, Blumenschein

The Court heavily emphasizes administrative deference, drawing on several cases:

• Popowsky v. PUC, 706 A.2d 1197 (Pa. 1997) – for the principle that appellate courts must give “considerable deference” to the PUC, especially in certification matters.
• Rohrbaugh v. PUC, 727 A.2d 1080 (Pa. 1999) – stating that discretionary agency action may be reversed only for bad faith, manifest abuse of discretion, or arbitrary execution of duties.
• Slawek v. State Bd. of Med. Educ. & Licensure, 586 A.2d 362 (Pa. 1991) – cautioning courts not to review the “wisdom” of administrative actions absent such abuse.
• Blumenschein v. Housing Auth. of Pittsburgh, 109 A.2d 331 (Pa. 1954) – famously warning that courts may not substitute their judgment for that of an agency just because they would have decided differently.

These cases are used to condemn the Commonwealth Court’s reweighing of the evidence and its effective substitution of its own view of the net benefits for that of the PUC.

B. The Court’s Legal Reasoning

1. Section 1329 did not alter Sections 1102/1103 or City of York

The Court begins by addressing the threshold question: did Section 1329 change the CPC standard?

• Section 1329:
  • Does not mention Section 1103 at all.
  • Mentions Section 1102 only in a limited, procedural way (what must accompany an 1102 application and who qualifies as an “entity”).
• From this silence, the Court infers that the legislature intended:
  • To require Section 1329 transactions to comply with existing CPC procedures; and
  • To leave untouched the substantive public-benefit standard articulated in City of York and Popowsky.

Thus, acquiring utilities in FMV deals must still:

• Obtain a CPC whenever Section 1102 so requires (e.g., new territory or acquisition from a municipality), and
• Demonstrate substantial affirmative public benefits under Section 1103(a).

2. The structure of the affirmative public benefits analysis

The Court restates the governing framework:

• The applicant bears the burden, by a preponderance of evidence, to prove:
  • Its technical, legal, and financial fitness; and
  • That the proposed transaction “will affirmatively promote the service, accommodation, convenience, or safety of the public in some substantial way.”
• In performing this analysis, the PUC must:
  • Consider likely effects on service quality,
  • Consider likely effects on rates “in a general fashion,” and
  • Assess whether the benefits, viewed in aggregate, outweigh the harms (a “net benefits” assessment).

Crucially, the Court rejects the notion that:

• Benefits must be unique to this transaction or unavailable under the status quo, or
• Benefits that flow from Aqua’s size/fitness are categorically irrelevant.

3. Benefits derived from the acquirer’s fitness may count

The Commonwealth Court had drawn a sharp line:

• “Fitness” is one requirement.
• “Benefits” must be considered separately and cannot consist of services or capabilities that merely reflect Aqua’s general size and competence.

The Supreme Court partially agrees (fitness and benefits are distinct issues) but rejects the Commonwealth Court’s categorical exclusion:

• The Code and prior caselaw do not define or limit what may count as a “benefit.”
• The General Assembly left the cost-benefit framework and specific criteria largely to the PUC’s expertise.
• Therefore, the PUC may count as benefits those improvements that result from the acquirer’s fitness, so long as they are substantiated by record evidence and tied to the transaction.

The Court analogizes to Popowsky, where it rejected the idea that the PUC could not consider certain national-level merger benefits just because they were not Pennsylvania-specific. Similarly, here the PUC is not barred from treating Aqua’s size- and expertise-driven capabilities as benefits merely because they would also exist in other acquisitions:

The Court does, however, emphasize:

• Fitness itself is not a “benefit”; rather, the PUC may consider benefits that derive from that fitness (e.g., 24/7 call centers, in-house engineers, regulatory compliance expertise, capital funding capacity, customer-service enhancements).

4. The Commonwealth Court’s reweighing of evidence was improper

The Supreme Court identifies two core errors in the Commonwealth Court’s approach:

1. Substituting judgment on what counts as a benefit.
   The PUC found that Aqua can provide:
   • 24/7 customer service via a toll-free line, rather than the Township’s more limited arrangement requiring calls to the police after hours.
   • Online payment options, enhanced billing and customer-care systems.
   • In-house engineering and environmental experts that the Township lacks.
   • Capital intensive upgrades and operational efficiencies.
   The Commonwealth Court dismissed these as non-benefits, calling them essentially equivalent to the Township’s service. The Supreme Court holds that:
   • Whether these are meaningful improvements is a factual and policy judgment for the PUC, not the courts.
   • The Commonwealth Court’s conclusion that there were “no benefits that differ substantially” from the status quo was, in effect, a reweighing of evidence.
2. Failing to apply the substantial-evidence standard.
   Appellate courts may only ask whether there is “such relevant evidence as a reasonable mind might accept as adequate” to support the PUC’s findings. The Supreme Court notes:
   • There may be evidence in the record supporting the Commonwealth Court’s view, but that is irrelevant if substantial evidence also supports the PUC’s findings.
   • The Commonwealth Court never properly asked whether reasonable minds could accept the PUC’s findings as supported by the record.
   • Instead, it imposed its own view of what was sufficient for “substantial” benefit—contrary to the deference required by Blumenschein, Popowsky, and others.

Because of these errors, the Supreme Court restores the PUC’s net-benefit determination as legally sound, leaving only the substantial-evidence question for the Commonwealth Court on remand.

5. Treatment of rate impacts: not “known harms,” but part of a general assessment

The Commonwealth Court described rate increases as “known harms” and treated them as effectively dispositive. The Supreme Court rejects this framing:

• City of York requires the PUC to consider probable rate effects as one factor, but does not characterize them as “harms” per se.
• The PUC must weigh:
  • The likely general effect on rates, including for new and existing customers, and
  • Other benefits and costs (e.g., service quality, reliability, compliance, capital investments, economies of scale).
• A utility acquisition can still be in the public interest even if:
  • Rates are likely to increase (for example, to fund necessary capital improvements), and
  • The increase is at least partly due to Section 1329’s FMV rate base.

The Supreme Court emphasizes that, here, the PUC did what City of York demands:

• It acknowledged a calculated $5.011 million annual revenue deficiency at current rates under the Section 1329 rate base.
• It recognized that:
  • That deficiency could not realistically be allocated 100% to Township customers, and
  • The ultimate allocation and design of rates would be resolved only in a future rate case.
• It noted that rates were likely to increase even if the acquisition were denied, due to needed capital expenditures in the Township system.
• It concluded that with Aqua’s broader customer base, there would be “more flexibility” to soften or apportion rate impacts.

The Court holds that this “general fashion” analysis satisfies City of York and Popowsky, and that the Commonwealth Court erred in treating the projections as fixed “harms” that negated other benefits.

6. PUC policy on regionalization and consolidation

The PUC also justified the transaction as advancing a policy favoring:

• Consolidation and regionalization of wastewater systems, and
• Acquisition of smaller systems by larger, more viable utilities.

The Supreme Court:

• Accepts that such policies, like those recognized in Popowsky, can contribute to the public-benefit analysis.
• Notes that the transaction specifically:
  • Allows Aqua to integrate the Township’s wastewater system with its already-owned water system in the same municipality.
  • Potentially yields economies of scale and operational efficiencies that flow from joint management.
• Cautions, however, that:
  • Policy goals alone do not automatically satisfy the public-benefit test in every case; they remain part of an overall net-benefit assessment.

The Court rejects the OCA’s argument that PUC policy goals are categorically irrelevant or cannot serve as evidence of benefits, provided they are linked to record facts about how the transaction promotes those goals.

C. Impact and Implications

1. For Section 1329 acquisitions and municipal privatizations

This decision significantly clarifies the legal landscape for FMV acquisitions of municipal water and wastewater systems:

• CPC standard remains, but is applied with deference. Utilities must still show substantial affirmative public benefits, but courts will be very reluctant to overturn PUC approvals that are:
  • Based on a plausible net-benefit analysis, and
  • Supported by substantial evidence.
• Benefits can include size- and expertise-related advantages. Acquiring utilities may confidently present:
  • Enhanced customer-service capabilities,
  • Professionalized operations and compliance functions,
  • Capital spending plans, and
  • Economies of scale and regionalization
  as legitimate public benefits of the transaction, even if the municipal provider currently offers adequate service.
• Rate increases do not preclude approval. For Section 1329 deals in particular, where FMV-based rate base often exceeds original cost, some near-term rate pressure is expected. This decision indicates:
  • PUC approval is not barred merely because rates will likely rise,
  • What matters is whether increased costs are outweighed by improvements in service, reliability, long-term system integrity, and the ability to spread costs sensibly over a larger base.
• Municipalities can exit the utility business before crisis. The Commonwealth Court’s approach would have effectively confined Section 1329 to distressed or nonviable systems. The Supreme Court’s decision:
  • Rejects that de facto limitation,
  • Allows municipalities to sell well-functioning systems for FMV, and
  • Permits them to redeploy sale proceeds to core governmental services, subject to PUC’s net-benefit analysis.

2. For consumer advocates and ratepayers

The decision is less favorable to consumer advocates than the Commonwealth Court’s approach, but it does not leave consumers without tools:

• OCA and others can still:
  • Challenge the factual basis and magnitude of alleged benefits,
  • Develop a record on likely rate impacts and cost allocations, and
  • Argue in rate cases that actual rate design and cost recovery be moderated or phased in.
• However, their ability to have PUC approvals overturned on appeal is significantly constrained:
  • Courts will not recalcitrantly reinterpret benefits as “status quo” or treat FMV-driven revenue needs as per se excessive.
  • The focus shifts to substantial-evidence challenges and demonstrable legal error or abuse of discretion.

3. For appellate courts: a strong reminder of deference

The Supreme Court delivers a clear message to the Commonwealth Court (and, by extension, other reviewing courts):

• They may not:
  • Reweigh evidence,
  • Recharacterize PUC-recognized benefits as non-benefits purely as a matter of view, or
  • Refashion the public-benefit test into a quasi-necessity or anti-rate-increase rule.
• The proper role is:
  • To ensure the PUC asked the right legal question (e.g., applied City of York / Popowsky properly), and
  • To confirm that its answers have substantial evidentiary support and are not arbitrary or in bad faith.

4. Unresolved issue on remand: substantial evidence

The Supreme Court did not decide whether the PUC’s factual findings about benefits and harms were supported by substantial evidence. Instead, it remanded for the Commonwealth Court to address that question for the first time.

Thus, while the legal framework is settled:

• There remains an opportunity for OCA to argue that the record does not adequately support key PUC findings (e.g., about the Township’s inability to fund improvements, the scope of customer-service enhancements, or the magnitude and likelihood of certain claimed efficiencies).
• The ultimate survival of the specific East Whiteland transaction still depends on that evidentiary analysis.

V. Complex Concepts Simplified

1. Certificate of Public Convenience (CPC)

A CPC is essentially a license issued by the PUC that authorizes a utility to:

• Provide a specific type of service (e.g., wastewater) in a defined geographic area, and/or
• Acquire or transfer utility assets that affect who serves which customers.

Without a CPC, a company cannot legally operate as a public utility in Pennsylvania.

2. Rate base and ratemaking rate base

• Rate base is the book value of the property used to provide utility service (pipes, plants, etc.), on which the utility is allowed to earn a regulated return (profit plus recovery of depreciation).
• Ratemaking rate base is the specific dollar figure the PUC approves for use in setting rates.
  • Higher rate base typically means higher revenue requirements and, all else equal, higher customer rates.

3. Fair market value (FMV) under Section 1329

FMV under Section 1329 is:

• Determined by two licensed “utility valuation experts,” one engaged by the seller and one by the buyer,
• Each expert must use three standard appraisal approaches:
  • Cost approach: what it would cost to replace or reproduce the assets.
  • Market approach: sale prices of comparable utilities/assets.
  • Income approach: present value of expected future cash flows.
• The FMV is the average of those two appraisals.

Section 1329 then sets the ratemaking rate base as the lesser of:

• The negotiated purchase price, or
• The FMV.

4. Affirmative public benefits and “net benefits”

“Affirmative public benefits” means that a transaction must:

• Make the public better off in some substantial way, not just avoid harm.
• Produce real, positive changes in service, reliability, safety, efficiency, customer service, or broader policy objectives.

“Net benefits” means that:

• The PUC must weigh positive and negative effects together:
  • Better service, more reliable infrastructure, regulatory compliance, etc.,
  • Against things like potential rate increases, transaction costs, and any loss of local control.
• The transaction passes if the net effect is substantially positive for the public as a whole.

5. Substantial evidence and judicial deference

• Substantial evidence means:
  • Not a preponderance, and not “beyond a reasonable doubt,”
  • Just enough relevant evidence that a reasonable mind could accept as adequate to support a conclusion.
• Judicial deference means:
  • Courts respect the expertise and judgment of the PUC in technical policy matters.
  • Courts do not redo the PUC’s balancing of evidence, unless it is manifestly unreasonable, arbitrary, or contrary to law.

6. “Necessary or proper for the service, accommodation, convenience, or safety of the public”

This statutory phrase in Section 1103:

• Does not mean the utility must prove that the new service or acquisition is indispensable (“necessary” in an absolute sense).
• Also includes services or changes that are “proper” – appropriate, suitable, beneficial, or supportive of public convenience and safety.

The affirmative public benefits test is essentially the PUC’s and courts’ way of operationalizing this phrase in CPC cases.

VI. Conclusion

The Supreme Court’s decision in Consumer Advocate v. PUC; Appeal of East Whiteland Township & Aqua Pennsylvania Wastewater re-centers Pennsylvania utility law on a deferential model of administrative decision-making while preserving the substantive demands of the City of York public-benefit standard.

Key takeaways include:

• Section 1329’s fair market value regime coexists with, rather than displaces, the longstanding CPC requirements of Sections 1102 and 1103.
• The PUC retains broad discretion to define and weigh “benefits,” including those stemming from an acquirer’s size, expertise, and regionalization policies, provided they are grounded in the evidentiary record.
• Projected rate increases are an important component of the analysis but are not dispositive “harms” that trump other benefits; the PUC’s role is to assess net benefits, not to guarantee rate decreases.
• Appellate courts must respect the PUC’s institutional role, confining themselves to correcting legal error, procedural faults, and unsupported findings, and must avoid reweighing evidence or substituting their own policy judgments.

For municipalities, regulated utilities, and consumer advocates, the opinion provides a clearer, more predictable framework for evaluating Section 1329 acquisitions. It signals that such acquisitions will generally be sustainable on appeal when the PUC:

• Applies the correct legal test,
• Engages in a reasoned, record-based net-benefits analysis, and
• Considers rate impacts in the balanced, general fashion contemplated by City of York and Popowsky.

At the same time, the remand for substantial-evidence review preserves an important check: the PUC’s factual determinations must still be grounded in a robust evidentiary record, demonstrating that the promised benefits are real and not merely aspirational rhetoric. The case thus marks an important doctrinal consolidation at the intersection of administrative deference, public-utility mergers and acquisitions, and consumer protection in Pennsylvania.