PUC Cannot Impose FCC-Style Presumptive “New Telecom Rate” for ILECs Without Pennsylvania Statutory Authority; Complainant Retains Burden Under 66 Pa.C.S. § 332(a)

FirstEnergy Pennsylvania Electric Company v. Pennsylvania Public Utility Commission; Cross Appeal of: Verizon Pennsylvania LLC and Verizon North LLC, Supreme Court of Pennsylvania (Jan. 8, 2026) (McCaffery, J.).

I. Introduction

This consolidated appeal sits at the intersection of legacy utility infrastructure and modern communications competition. The parties are: FirstEnergy, an electric distribution company and utility pole owner, and Verizon, an incumbent local exchange carrier (“ILEC”) that attaches communications facilities to FirstEnergy’s poles under longstanding, reciprocal Joint Use Agreements (“JUAs”).

After Pennsylvania’s Public Utility Commission (“PUC”) “reverse preempted” federal pole-attachment regulation in 2020, it adopted substantial portions of the FCC’s pole-attachment rules—including an FCC-created presumption that ILECs should pay the “New Telecom Rate.” Verizon then sought a reduction of JUA rates and refunds, and the PUC granted relief. The Commonwealth Court affirmed.

The Pennsylvania Supreme Court took allocatur on multiple questions but resolved the case on a threshold issue of administrative authority: whether the PUC could, consistent with the Pennsylvania Public Utility Code, adopt and apply an FCC-style presumptive maximum rate that effectively shifts the burden to the pole owner to justify existing rates.

Key issues framed by the Court

• Burden of proof: In a complaint challenging an existing rate, does the complainant (Verizon) bear the burden under 66 Pa.C.S. § 332(a), or may PUC regulations effectively shift that burden to the utility (FirstEnergy)?
• Statutory authority for presumptions: Does Pennsylvania law grant the PUC authority to create a presumptive maximum “just and reasonable” pole-attachment rate for ILECs akin to the FCC’s scheme under 47 U.S.C. § 224?
• Reverse preemption consequences: Once the PUC reverse preempts, is it bound to implement federal regulatory choices, or must it remain within state statutory constraints?

II. Summary of the Opinion

The Court vacated the Commonwealth Court’s order (which had affirmed the PUC) and remanded for further proceedings. The dispositive holding is that the PUC lacked statutory authority to enact an FCC-style presumption that effectively establishes a presumptive maximum “just and reasonable” pole-attachment rate in favor of ILECs and shifts the burden of proof away from the complainant in an existing-rate challenge.

III. Analysis

A. Precedents Cited

1. Agency power is limited to legislative grant

• Feingold v. Bell of Pa., 383 A.2d 791 (Pa. 1977): The Court invoked Feingold for the foundational principle that an administrative agency has only those powers the Legislature grants (expressly or by necessary implication). This principle frames the entire dispute: reverse preemption and rulemaking cannot enlarge the PUC’s powers beyond the Public Utility Code.

2. The validity test for legislative regulations

• Tire Jockey Serv., Inc. v. Com., Dep't. of Env't Prot., 915 A.2d 1165 (Pa. 2007): The Court applied Tire Jockey’s three-part test for legislative rules—(1) within granted power, (2) proper procedure, (3) reasonable—and decided the case at step (1). Even if procedurally proper and “reasonable,” a regulation fails if it lacks a statutory anchor. The Opinion treats the absence of a Pennsylvania analogue to 47 U.S.C. § 224 as fatal to the presumption-based framework.

3. Presumption of reasonableness and burdens in rate challenges

• Duquesne Light Co. v. Pub. Serv. Comm'n, 117 A. 63 (Pa. 1922) (Duquesne Light I): Cited for the proposition that existing rates carry a presumption of being just and reasonable. The Opinion uses this tradition to reinforce the Code’s default allocation of proof burdens for challenges to existing rates.
• Shenango Twp. Bd. of Sup'rs v. Pa. Pub. Util. Comm'n, 686 A.2d 910 (Pa. Cmwlth. 1996): Quoted for the “very heavy burden” a complainant bears when seeking to evade the effect of an existing tariff provision, underscoring the judiciary’s reluctance to disturb established rates absent a strong evidentiary showing.
• Duquesne Light Co. v. Pa. Pub. Util. Comm'n, 715 A.2d 540 (Pa. Cmwlth. 1998) (Duquesne Light II): Reinforces that the customer/complainant bears the burden to establish an existing rate is no longer reasonable; absent such a showing, the prior determination stands as prima facie evidence.

4. Discrimination claims and their proof structure

• Welch v. Pa. Pub. Util. Comm'n, 464 A.2d 568 (Pa. Cmwlth. 1983) (citing Park Towne v. Pa. Publ. Util. Comm'n, 433 A.2d 610 (Pa. Cmwlth. 1981)): These cases supply the Commonwealth Court’s articulation of what constitutes unreasonable discrimination under 66 Pa.C.S. § 1304—not merely difference, but a deficiency-subsidy dynamic. While the Supreme Court did not decide the discrimination issue, it relied on the broader framework that Pennsylvania law assigns burdens to the complainant and demands substantive proof, not regulatory shortcuts.

5. “Polestar” cost-of-service and ratemaking priorities

• Lloyd v. Pa. Pub. Utility Comm'n, 904 A.2d 1010 (Pa. Cmwlth 2006): Cited for the proposition that cost of service is the “polestar” of Pennsylvania ratemaking and for criticism of analyses that allow other policies to “trump” cost of service. Although the Supreme Court disposed of the appeal on burden-of-proof/statutory-authority grounds, it explicitly aligned with the Commonwealth Court dissent’s concern that the PUC’s adopted framework risked displacing traditional Code-centered ratemaking constraints.

6. Federalism, preemption, and anti-commandeering principles

• Dooner v. DiDonato, 971 A.2d 1187 (Pa. 2006): Used to frame preemption doctrine (field and conflict) and the presumption against preemption. Its relevance here is structural: because Congress created an explicit “reverse preemption” option in 47 U.S.C. § 224(c), federal law does not compel a state commission to adopt federal policy choices once the state elects to regulate.
• Gustafson v. Springfield, Inc., 333 A.3d 651 (Pa. 2025): Cited for the anti-commandeering principle that the Federal Government cannot direct states to enforce a federal regulatory program where preemption does not apply. This supports the Court’s rejection of any argument that reverse preemption implicitly requires importing FCC presumptions into Pennsylvania law.

7. Background authorities (industry structure and federal pole-attachment policy)

• AT&T Corp. v. Iowa Util. Bd., 525 U.S. 366 (1999): Cited for the “natural monopoly” context of wire transmission/distribution, explaining why pole infrastructure is economically non-duplicative and therefore regulation-heavy.
• Ameren Corp. v. F.C.C., 865 F.3d 1009 (8thCir. 2017): Cited for the historical purpose of the Pole Attachment Act (avoiding unreasonable obstacles by incumbent utilities), providing context for why federal law uses rate constraints and presumptions.
• Re Pittsburgh TeleCommunications, Inc., Re Pittsburgh TeleCommunications, Inc., 64 Pa.P.U.C. 257 (1987): The Opinion uses this administrative precedent to show that the PUC historically viewed its jurisdiction over pole attachments as dependent on “then[-]effective law,” underscoring the Court’s insistence on a clear statutory basis for major ratemaking tools like presumptions.

B. Legal Reasoning

1. The decisive statutory conflict: burden of proof under the Public Utility Code

The Court’s analysis begins with the Code’s burden provisions:

• 66 Pa.C.S. § 332(a) sets the default: “the proponent of a rule or order has the burden of proof.” In an existing-rate complaint, the complainant is the proponent of the order changing the rate.
• 66 Pa.C.S. § 315(a) is an explicit exception: in proceedings “involving any proposed increase in rates,” the burden to show the rate is just and reasonable is on the utility. The Court reads this as confirming that outside the proposed-increase context, the burden remains with the challenger under § 332(a).

The PUC and Verizon conceded Verizon bore an initial burden, but argued the burden was satisfied merely by proving the JUAs were renewed after March 11, 2019 (the effective date tied to the FCC regulation), which then triggered a presumption capping Verizon’s rate at the New Telecom Rate unless FirstEnergy rebutted with “clear and convincing evidence.”

The Court rejected that structure as incompatible with the Code: in Pennsylvania, an existing-rate challenger must prove the rate is unjust or unreasonable; the Commission cannot, by regulation, convert that substantive showing into a “date-of-renewal” trigger that functionally forces the utility to prove the rate is just and reasonable.

2. Why reverse preemption did not supply missing state authority

The Opinion stresses an important consequence of reverse preemption: once the PUC elects to regulate pole attachments, it is not compelled to adopt federal policy choices, and it is not “bound by FCC precedent” (a position the PUC itself had taken). Reverse preemption therefore cannot be used as a backdoor method to import federal presumptions that Pennsylvania’s Legislature has not authorized.

3. The missing statutory analogue to 47 U.S.C. § 224(d)

The FCC’s presumptive maximum rate is anchored in federal statute (47 U.S.C. § 224(d)), which contemplates formula-based caps. The Court found “no analog in Pennsylvania statutory law” authorizing the PUC to create and apply a presumptive maximum just-and-reasonable pole-attachment rate for ILECs.

The PUC attempted to proceed under its general ratemaking authority, particularly 66 Pa.C.S. § 1301(a). The Court acknowledged § 1301(a)’s requirement that rates be just and reasonable and conform to PUC regulations, but held that this general authority does not itself authorize a presumption-and-burden-shift regime of the kind used here.

4. The Court’s treatment of “competitive neutrality” and § 1304

The Opinion flags tension with 66 Pa.C.S. § 1304, which prohibits “unreasonable preference or advantage.” The FCC’s New Telecom Rate is explicitly rooted in federal policies (Pole Attachment Act; Telecommunications Act of 1996) designed to lower costs for communications attachers to promote competition and broadband deployment. The Court treated the absence of Pennsylvania statutory authorization to “shift cost burdens from telecoms to electric utilities” as reinforcing the conclusion that the PUC could not adopt the federal preference structure as a binding presumption.

5. What the Court did—and did not—decide

• Decided: The PUC’s presumption-based framework (as applied) lacked statutory authority because it contravened the Code’s burden-of-proof allocation for existing-rate challenges; therefore, the PUC erred in finding Verizon met its burden simply by proving post-March-11-2019 renewal.
• Not decided: The Court did not reach: (a) whether the PUC failed to consider electric customer interests under 47 U.S.C. § 224(c)(2)(B) and 52 Pa. Code § 77.3(b); (b) the scope of refund authority or retroactive modification issues; or (c) Verizon’s cross-appeal issue about aligning refund periods with statutes of limitation. Those issues were left for further proceedings after remand, under the correct burden framework.

C. Impact

1. Immediate procedural impact: pole-attachment complaints become evidence-driven again

The ruling re-centers Pennsylvania pole-attachment adjudications on Code-based burdens. A complainant (including an ILEC) challenging an existing attachment rate must now prove “unjust or unreasonable” under Pennsylvania law, rather than relying on an automatic presumption triggered by the date of contract entry/renewal.

2. Substantive impact: FCC formulas are “evidence,” not “presumptions”

The Court’s compromise is subtle but significant: the FCC’s New Telecom Rate methodology may inform whether a rate is unreasonable, but it cannot function as a controlling presumption absent legislative authorization. This preserves room for the PUC to consider federal methodologies while rejecting automatic burden-shifting.

3. Administrative-law impact: limits on “wholesale adoption” of federal regimes

The decision serves as a caution for state agencies that adopt federal regulations wholesale after assuming jurisdiction: even when a federal regime is “well-established,” a state agency must still identify a Pennsylvania statutory grant sufficient to support any major structural choices—especially evidentiary presumptions that effectively rewrite burdens of proof.

4. Utility finance and consumer implications

The Opinion endorses concerns raised in dissent below about the distribution of costs between attachers, utilities, and ratepayers. While not deciding customer-impact questions, it makes clear that policy aspirations (e.g., broadband expansion) do not substitute for statutory authorization to reallocate costs through presumptions.

IV. Complex Concepts Simplified

• Reverse preemption: Federal law lets a state “take back” pole-attachment regulation from the FCC by certifying it regulates attachments itself. Once it does, the state isn’t forced to copy federal choices; it must act within state-law limits.
• Joint Use Agreements (JUAs): Long-term contracts between utilities that share poles; here, they set reciprocal rates and net payments across each party’s pole ownership.
• ILEC/CLEC: ILECs are legacy local telephone incumbents; CLECs are competitors who seek access. Federal law historically gave CLECs favorable attachment rates to promote competition; the FCC later extended similar rate protections to ILECs via presumptions.
• “Presumptive maximum rate”: A rule that treats a particular formula result as the default lawful ceiling unless the utility proves otherwise. The Court held Pennsylvania law did not authorize the PUC to impose that kind of presumption for ILECs.
• Burden of proof: Who must prove what. In Pennsylvania, when someone challenges an existing utility rate, that challenger generally must prove the rate is unjust or unreasonable (66 Pa.C.S. § 332(a)). The PUC cannot flip that burden through regulation unless the Code says so.
• “Cost of service” as the “polestar”: A traditional ratemaking principle that rates should track the cost of providing the service. The Court did not fully resolve how cost-of-service must be applied to pole attachment rates, but it treated Code-based burdens and evidence as non-negotiable.

V. Conclusion

The Pennsylvania Supreme Court’s decision resets the legal architecture for pole-attachment disputes after reverse preemption. The headline holding is not that the New Telecom Rate is forbidden, but that Pennsylvania’s PUC cannot make it operate as a presumption that shifts the burden to utilities without a clear legislative grant. In existing-rate complaints, 66 Pa.C.S. § 332(a) controls: the complainant must prove the rate is unjust or unreasonable. Federal formulas may guide the evidentiary inquiry, but they cannot displace Pennsylvania’s statutory burdens and limits on agency power.