Consum Adv v. PUC; Apl of: Aqua PA Wastewater Inc

• Court: Supreme Court of Pennsylvania
• Decided: December 16, 2025
• Docket: 49 MAP 2024
• Status: Published

Opinion

[J-39A-2025, J-39B-2025 and J-39C-2025] IN THE SUPREME COURT OF PENNSYLVANIA MIDDLE DISTRICT

TODD, C.J., DONOHUE, DOUGHERTY, WECHT, MUNDY, BROBSON, McCAFFERY, JJ.

DARRYL A. LAWRENCE, ACTING : No. 47 MAP 2024 CONSUMER ADVOCATE, : : Appeal from the Order of the Appellee : Commonwealth Court at No. 910 CD : 2022 entered on July 31, 2023, : reversing the Decision of the Public v. : Utility Commission at No. A-2021- : 3026132 entered on July 29, 2022 : PENNSYLVANIA PUBLIC UTILITY : ARGUED: May 14, 2025 COMMISSION, : : Appellant :

DARRYL A. LAWRENCE, ACTING : No. 48 MAP 2024 CONSUMER ADVOCATE : : Appeal from the Order of the : Commonwealth Court at No. 910 CD v. : 2022 entered on July 31, 2023, : reversing the Decision of the Public : Utility Commission at No. A-2021- PENNSYLVANIA PUBLIC UTILITY : 3026132 entered on July 29, 2022 COMMISSION : : ARGUED: May 14, 2025 : APPEAL OF: EAST WHITELAND : TOWNSHIP :

DARRYL A. LAWRENCE, ACTING : No. 49 MAP 2024 CONSUMER ADVOCATE : : Appeal from the Order of the : Commonwealth Court at No. 910 CD v. : 2022 entered on July 31, 2023, : reversing the Decision of the Public : Utility Commission at No. A-2021- PENNSYLVANIA PUBLIC UTILITY : 3026132 entered on July 29, 2022 COMMISSION : : ARGUED: May 14, 2025 : APPEAL OF: AQUA PENNSYLVANIA : WASTEWATER, INC. :

OPINION

JUSTICE MUNDY DECIDED: December 16, 2025 Aqua Pennsylvania Wastewater, Inc. (“A qua”) entered into an agreement with

East Whiteland Township (the “Township”) to purchase the assets of the Township’s

wastewater collection system (the “System”). Aqua and the Township engaged in the

process set forth in Section 1329 of the Public Utility Code (the “Code”), 66 Pa.C.S. §

1329, to determine the fair market value of the System’s assets. As part of that process

Aqua was required to apply for a Certificate of Public Convenience (“CPC”) from the

Pennsylvania Public Utility Commission (“PUC”) in compliance with Section 1102 of the

Code, 66 Pa.C.S. § 1102. Applying the requirements to obtain a CPC pursuant to Section

1103 of the Code, 66 Pa.C.S. § 1103, and caselaw interpreting those requirements, the

PUC granted Aqua’s application. The Commonwealth Court, however, found the PUC

erred and that Aqua was not entitled to the CPC. We determine the Commonwealth Court

misapplied the Code and our precedent in coming to that conclusion and, therefore,

reverse its decision and remand for further proceedings consistent with this opinion.

I. Background

A. Legal Background

Pursuant to the Code, the standard method of valuing the property included in a

public utility’s rate base 1 is the “original cost of the property when first devoted to the

public service less the applicable accrued depreciation as such depreciation is

1 “Rate base” is defined under the Code as “[t]he 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 (Definitions).

[J-39A-2025, J-39B-2025 and J-39C-2025] - 2 determined by the [C]ommission.” 66 Pa.C.S. § 1311(b)(1). In 1990, the General

Assembly created a narrow exception to this cost minus depreciation valuation method

for the acquisition of water and sewer utilities, stating “[i]f a public utility acquires property

from another public utility, a municipal corporation or a person at a cost which is in excess

of the original cost of the property when first devoted to public service less the applicable

accrued depreciation, it shall be a rebuttable presumption that the excess is reasonable

and that excess shall be included in the rate base of the acquiring public utility[.]” 66

Pa.C.S. § 1327(a). That exception, however, only applies if, inter alia, the acquired utility

“had 3,300 or fewer customer connections or which was nonviable in the absence of the

acquisition” and “was not, at the time of the acquisition, furnishing and maintaining

adequate, efficient, safe and reasonable service and facilities[.]” Id. at § 1327(a)(2), (3).

Therefore, under the exception created by Section 1327 of the Code, a public utility

acquiring another water or sewer public utility was still required to use the cost minus

depreciation valuation method unless (1) the acquired utility had 3,300 or fewer customer

connections or was nonviable in the absence of the acquisition and (2) was not providing

adequate, efficient, safe, and reasonable services at the time of the acquisition.

That was the situation until 2016, when the General Assembly created an

exception to the cost minus depreciation valuation method for the valuation of acquired

water and wastewater systems which is not limited to the acquisition of small or nonviable

systems that are not providing adequate services. Section 1329 of the Code created a

process where, upon agreement of the acquiring and selling utilities 2 engaged in a

2 Section 1329 defines an “acquiring public utility” as “[a] water or wastewater public utility

subject to regulation under this title that is acquiring a selling utility as the result of a voluntary arm’s-length transaction between the buyer and seller.” 66 Pa.C.S. § 1329(g). A “selling utility” is defined by the statute as “[a] water or wastewater company located in this Commonwealth, owned by a municipal corporation or authority that is being purchased by an acquiring public utility or entity as the result of a voluntary arm’s-length transaction between the buyer and seller.” Id.

[J-39A-2025, J-39B-2025 and J-39C-2025] - 3 transaction for the purchase of the selling utility, the parties can engage in a procedure to

determine the fair market value (the “FMV”) of the selling utility. 66 Pa.C.S. § 1329(a). If

the parties opt for this procedure, the ratemaking base rate 3 of the selling utility “shall be

the lesser of the purchase price negotiated by the acquiring public utility or entity and

selling utility or the fair market value of the selling utility.” Id. at § 1329(c)(2). 4 The selling

utility’s ratemaking rate base shall then be incorporated into the rate base of (1) the

acquiring public utility during its next base rate case or (2) the entity in its initial tariff filing.

Id. at § 1329(c)(1)(i), (ii). Unlike Section 1327, Section 1329 does not limit the availability

of the fair market valuation method to small, nonviable selling utilities that are not

providing adequate service. See id. at § 1329(g) (definitions of acquiring and selling

utilities).

When the parties proceed with Section 1329’s fair market valuation process, the

acquiring utility or entity must obtain a CPC from the Commission in accordance with

Section 1102 of the Code. See id. § 1329(d)(1), (e). Pursuant to Section 1102, a CPC

is required before a public utility may (1) provide services in a different territory than it is

currently providing those services or (2) acquire from, inter alia, a municipal corporation

title to property used to provide public services. See 66 Pa.C.S. § 1102(a)(1), (3). Hence,

an acquiring utility is required to obtain a new CPC prior to purchasing the property of a

3 The “[r]atemaking base rate” is “[t]he dollar value of a selling utility which, for postacquisition ratemaking purposes, is incorporated into the rate base of the acquiring public utility or entity.” Id. at § 1329(g). 4 Pursuant to Section 1329, in order to determine the FMV of the selling authority, the

acquiring authority or entity and the selling authority each choose a utility valuation expert from a list of experts maintained by the Commission. See 66 Pa.C.S. § 1329(a)(1). Each utility evaluation expert will perform a separate appraisal of the selling utility in compliance with the Uniform Standards of Professional Appraisal Practice, employing the cost, market, and income approaches. See id. at § 1329(a)(2), (3). The FMV is then the “average of the two utility valuation expert appraisals[.]” Id. at § 1329(g).

[J-39A-2025, J-39B-2025 and J-39C-2025] - 4 selling utility or providing services to that selling utility’s customers, even when the

acquiring utility already holds a CPC to provide those services in a different territory.

The procedure to obtain a CPC is set forth in Section 1103 of the Code, 66 Pa.C.S.

§ 1103. Pursuant to Section 1103, in order to obtain a CPC, a public utility must file an

application with the Commission. The application shall be granted “only if the

[C]ommission shall find or determine that the granting of such certificate is necessary or

proper for the service, accommodation, convenience, or safety of the public.” Id. at §

1103(a). Moreover, to obtain the CPC, an applicant has the burden, by a preponderance

of evidence, to establish that it is technically, legally, and financially fit to provide the

proposed service. McCloskey v. Pa. Pub. Util. Comm’n., 195 A.3d 1055, 1058 (Pa.

Cmwlth. 2018) (citing Seaboard Tank Lines, Inc. v. Pa. Pub. Util. Comm’n., 502 A.2d 762,

763 n.1 (Pa. Cmwlth. 1985)). A certified public utility enjoys a presumption that it is fit.

Id. Furthermore, in granting a CPC, the Commission “may impose such conditions as it

may deem to be just and reasonable.” 66 Pa.C.S. § 1103(a).

In City of York v. Pennsylvania Public Utility Commission, 295 A.2d 825 (Pa. 1972),

we interpreted Section 1103’s predecessor, which contained the same requirement that

the Commission was not to grant a CPC unless it was “necessary or proper for the

service, accommodation, convenience, or safety of the public[.]” Id. at 828 (quoting

former 66 P.S. § 1123). There, the City of York and York County appealed the PUC’s

grant of a CPC approving the merger of three telecommunications companies operating

in the City of York. Id. at 827. On appeal, this Court overruled our prior precedent holding

that a “utility subject to the jurisdiction of the [PUC] has the right to sell its property and

thereby effect a merger with another utility ‘unless it is established, by competent

evidence, that the sale will adversely affect the public in some substantial way.’” Id. at

828 (quoting N. Pa. Power Co. v. Pa. Pub. Util. Comm’n, 5 A.2d 133, 134 (Pa. 1929)).

[J-39A-2025, J-39B-2025 and J-39C-2025] - 5 Instead, we held that the statute was “clear that a [CPC] approving a merger is not to be

granted unless the Commission is able to find affirmatively that public benefit will result

from the merger.” Id. In determining if a merger would have a public benefit, this Court

directed that the Commission “should consider, at least in a general fashion, the effect

that a proposed merger is likely to have on future rates to consumers.” Id. at 829. In that

regard, we stated that “[a]long with the likely effect of a proposed merger upon the service

that will be rendered to consumers, the probable general effect of the merger upon rates

is certainly a relevant criteria of whether the merger will benefit the public.” Id.

We again addressed the Commission’s grant of a CPC in the merger context in

Popowsky v. Pennsylvania Public Utility Commission, 937 A.2d 1040 (Pa. 2007), where

we reviewed the Commission’s grant of a CPC in connection with a proposed merger of

telecommunications companies Verizon and MCI. There, we stated: [A]s indicated in City of York, the appropriate legal framework requires a reviewing court to determine whether substantial evidence supports the Commission’s finding that a merger will affirmatively promote the service, accommodation, convenience, or safety of the public in some substantial way. In conducting the underlying inquiry, the Commission is not required to secure legally binding commitments or to quantify benefits where this may be impractical, burdensome, or impossible; rather, the PUC properly applies a preponderance of the evidence standard to make factually-based determinations (including predictive ones informed by expert judgment) concerning certification matters. 931 A.2d at 1057 (footnote removed). This affirmative public benefits standard does not

require that all “types of customers receive unique, affirmative, and direct benefits from

the transaction[.]” Id. at 1061. Consequently, as to the Commission’s consideration of

the merger’s impact on rates, the Popowsky Court stated that City of York “does not hold

that a merger benefits the public only if the PUC can demonstrate that the merger savings

will lower prices to consumers.” Id. at 1056 (emphasis in original). Rather, the Court

reiterated that the Commission must consider the impact on future rates charged to

consumers “‘at least in a general fashion,’ or the ‘probable general effect of the merger

[J-39A-2025, J-39B-2025 and J-39C-2025] - 6 upon rates,’ … as a component of a net benefits assessment.” Id. (quoting City of York,

295 A.2d at 829).

Both City of York and Popowsky were decided prior to the General Assembly’s

enactment of Section 1329, and we have yet to address the grant of a CPC in the context

of a 1329 transaction. The Commonwealth Court, however, addressed such a situation

in McCloskey, where it applied the substantial affirmative benefits test as set out in City

of York and Popowsky. The court found that the acquiring utility’s size, expertise, and

ability to raise capital along with the Commission’s policy supporting regionalization and

consolidation in the wastewater business could support the notion that there is a public

benefit to the transaction so as to satisfy the substantial affirmative public benefits test.

Id. at 1065. As to the consideration of the transaction’s impact on rates, the court rejected

the Commission’s contention that “a Section 1329 acquisition proceeding is not the

appropriate context for addressing ratemaking issues because without cost studies,

potential cost allocation or possible rate designs, the Commission would be asked to

determine the impact on rates without sufficient or substantial evidence.” Id. at 1066.

Instead, the court held that because City of York requires rate impact to be considered

as part of a CPC request, “the Commission must address that impact when deciding

whether there is substantial public benefit.” Id.

B. Factual and Procedural Background

Aqua is an investor-owned, certified public utility that holds a CPC to provide

wastewater service to approximately 45,000 customers in various counties within

Pennsylvania, including Chester County, wherein the Township is located. The Township

owns the System, which provides sanitary wastewater services to approximately 3,895 of

its residents. Aqua currently owns and operates the Township’s water system as

compared to its wastewater system. The Township and Aqua entered into an agreement

[J-39A-2025, J-39B-2025 and J-39C-2025] - 7 for Aqua to purchase the System’s assets from the Township for $54,930,000.00. The

parties opted to utilize the process set forth in Section 1329 for the transaction, through

which they ascertained an FMV of the System’s assets of $56,724,729.00. As part of the

agreement, Aqua agreed to continue the Township’s existing rates for at least three years

after closing and filed an application with the Commission, seeking, inter alia, a CPC to

offer service to the Township’s customers, and a ratemaking rate base of

$54,930,000.00. 5

The application was assigned to an Administrative Law Judge (“ALJ”) within the

Commission. The Office of Consumer Advocate (“OCA”), 6 along with a Township

customer, filed a protest to the application. The OCA argued that Aqua’s acquisition of

the System was not in the public’s interest. The ALJ first held a telephone public input

hearing, where several individuals presented statements raising concerns with Aqua’s

acquisition, including that customer rates would increase, the System operated without

issue for decades, and Aqua had not provided safe water services at times. The ALJ

then held an evidentiary hearing where the OCA, Aqua, and the Township all submitted

testimony and exhibits into the record. After the hearing, the ALJ issued a recommended

decision to deny Aqua’s application for a CPC.

In so recommending, the ALJ credited the evidence of the public opposition to the

purchase, including that the Township’s service was safe and reliable without being

acquired by Aqua. As to the transaction’s impact on rates, the ALJ credited the OCA’s

5 Aqua sought to establish a ratemaking rate base of $54,930,000.00 for the System’s

assets based on the negotiated purchase price because the purchase price was less than the average of the FMV appraisals of the assets, which was $56,724,729.00. See 66 Pa.C.S. § 1329(c)(2) (“The ratemaking rate base of the selling utility shall be the lesser of the purchase price negotiated by the acquiring public utility or entity and selling utility of the fair market value of the selling utility.”). 6 The OCA was established to represent the interest of consumers before the Commission. 71 P.S. § 309-2(a).

[J-39A-2025, J-39B-2025 and J-39C-2025] - 8 unrebutted evidence that the transaction would result in a $5,011,000.00 yearly revenue

deficiency and the Township’s customer’s rates would increase by approximately 132%

if they were required to cover the entire deficiency. If, on the other hand, the deficiency

was split between the Township’s customers and Aqua’s current customers, the

Township customers would face an approximate rate increase of 66% while Aqua’s

current customers would also face a rate increase.

Furthermore, though there was no dispute that Aqua was fit to provide the

proposed service, 7 the ALJ determined Aqua’s evidence identifying the alleged

substantial affirmative public benefits of its acquisition were not proved with specificity or

were not improvements for the System’s customers. In support of this latter conclusion,

the ALJ observed the Township was already providing reliable and safe wastewater

services and had the financial capabilities to make the needed capital improvements to

the System. Thus, the ALJ found “Aqua [had] failed to establish that the sewer system

under Aqua’s ownership [would] affirmatively promote the service, accommodation,

convenience, or safety of the public[]” and “the evidence did not establish that any benefit

to be realized from the proposed transaction would outweigh the harms to current Aqua

water and wastewater customers or existing [ ] Township wastewater customers.” ALJ

Recommended Decision at 59. As a result, the ALJ determined that Aqua failed to meet

its burden under Sections 1102 and 1103 of the Code and that the acquisition would not

result in an affirmative public benefit.

Aqua and the Township filed exceptions to the ALJ’s recommended decision with

the Commission. Relative to the issues currently before this Court, Aqua challenged the

ALJ’s determination that it failed to establish its acquisition of the System would result in

7 As a certified public utility, Aqua enjoys a presumption that it is fit to provide the services

to the Township’s customers. See McCloskey, 195 A.3d at 1058. The opponents to Aqua’s acquisition of the System did not, and do not, challenge this presumption.

[J-39A-2025, J-39B-2025 and J-39C-2025] - 9 an affirmative public benefit and that adverse impacts to Aqua’s existing customers and

Township customers outweighed the transaction’s benefits. For its part, the Township

echoed Aqua’s challenges and additionally argued that the standard set out by the ALJ

would require a municipal wastewater system to be nonviable before it could be sold

under the Code.

In a 133-page decision, the Commission disagreed with the ALJ’s recommendation

and granted the exceptions filed by Aqua and the Township relative to Aqua’s application

for a CPC. In so doing, the Commission found there was no credible dispute that Aqua

was financially and technically fit to be the certificated provider for the System. Moreover,

it determined Aqua’s evidence established numerous public benefits, including, inter alia,

Aqua’s financial, technical, and managerial expertise in the water and wastewater

industry and the fact that Aqua already owned the Township’s water authority.

Furthermore, the Commission added that the transaction furthered its public policy goals

of promoting the consolidation and regionalization of wastewater systems through the

purchase of smaller systems by larger, more viable systems, which, according to the

Commission, is consistent with the General Assembly’s intent in enacting Section 1329.

In addition to these general benefits, the Commission also found the transaction would

create specific benefits for the Township’s current customers, such as enhanced

customer service options, reduction in System expenses, capital investments, and Aqua’s

ability to mitigate sanitary sewer overflows and deal with complex regulations resulting in

improved system efficiencies. Commission Op. at 38-42. The Commission also

questioned the Township’s ability to accomplish the necessary improvements and

upgrades to the System that Aqua intended to undertake due to the multitude of other

services to which the Township must allocate funds to address other needs of its citizens.

Id. at 40.

[J-39A-2025, J-39B-2025 and J-39C-2025] - 10 In accordance with City of York, the Commission also addressed the acquisition’s

impact on rates. It discussed the revenue deficiency that would result from the transaction

and the impact that deficiency would have on the Township’s customers. Ultimately,

however, the Commission found the revenue deficiency was only a preliminary calculation

that was unlikely to be allocated one hundred percent to the Township’s customers. Id.

at 43. The Commission did acknowledge that some level of rate increase was expected

upon approval of the transaction, but it also observed that a rate increase was likely even

if it denied the acquisition due to the level of capital expenditures considered to be

necessary over the next ten years. Id. at 44. Altogether, the Commission concluded that

“if the transaction is approved, there will be more flexibility to address rate impact and to

allocate costs over a much larger customer base.” Id.

Based on its analysis, the Commission concluded: When considering all the factors, including the impact on rates, we find that the benefits of Aqua’s ownership outweigh the purported harms outlined by the OCA. Aqua’s expertise and ability to raise and deploy capital and to spread costs over a larger customer base, the Township’s decision to exit the wastewater business, and the transaction’s furtherance of the policy objectives of the General Assembly in enacting Section 1329, as well as the additional factors discussed above, are all substantial affirmative benefits weighing in favor of granting the [CPC]. Id. The Commission thus approved the application and granted Aqua a CPC, reducing

the ratemaking base rate to $54,413,635.00. The OCA petitioned the Commonwealth

Court for review, arguing the Commission erred as a matter of law and abused its

discretion when it approved Aqua’s application.

C. Commonwealth Court Opinion

In a published opinion, a panel of the Commonwealth Court reversed the

Commission’s decision. Cicero v. Pa. Pub. Util. Comm’n, 300 A.3d 1106 (Pa. Cmwlth.

2023). The panel began its analysis by acknowledging that in reviewing a decision of the

Commission to grant a CPC, it “bear[s] in mind that, on account of the Commission’s

[J-39A-2025, J-39B-2025 and J-39C-2025] - 11 expertise in the utility arena, reviewing courts accord considerable deference to the

agency concerning the certification process.” Id. at 1118 (quoting Popowsky, 937 A.2d

at 1054). Accordingly, the panel continued, the issuance of a CPC “falls squarely within

the Commission’s area of expertise and is best left to the Commission’s discretion.” Id.

(brackets removed) (quoting Elite Industries, Inc. v. Pa. Pub. Util. Comm’n, 832 A.2d 428,

432 (Pa. 2003)). The panel observed, however, that “such discretion is not absolute, and

‘where the judgment is manifestly unreasonable or where the law is not applied’ that

discretion is abused.” Id. (emphasis removed) (quoting Commonwealth v. King, 839 A.2d

237, 240 (Pa. 2003)).

With that standard of review in mind, the panel first considered the OCA’s

argument that the Commission erred by limiting its affirmative public benefits analysis to

Aqua’s technical, managerial, and financial fitness and the Commission’s policy

promoting consolidation and regionalization. The court rejected the argument from the

Commission, the Township, and Aqua that the Commission cited additional benefits of

the transaction beyond Aqua’s fitness to provide services and the Commission’s

regionalization policy. According to the court, all the cited additional benefits “derive [ ]

from Aqua’s size and associated technical, managerial, and financial fitness, and will be

present in any acquisition by Aqua (or similarly large utility) of a smaller utility, and not

from Aqua’s acquisition of the System specifically.” Id. In the court’s view, a public utility’s

fitness to provide services is distinct from whether a transaction will result in affirmative

public benefits.

The court continued that “[t]he financial, technical, and managerial ‘benefits’ the

Commission concluded could result from this transaction relate to and/or are not benefits

that ‘affirmatively promote the service, accommodation, convenience, or safety of the

public in some substantial way[ ]” because “the System is already providing and is capable

[J-39A-2025, J-39B-2025 and J-39C-2025] - 12 of providing the same or similar benefits without the acknowledged rate increase that will

occur as a result of the acquisition.” Id. at 1119 (emphasis removed) (quoting City of

York, 295 A.2d at 828). In support of this conclusion, the panel explained: Aqua’s ability to provide enhanced customer service, such as a toll-free line that is available 24/7/365, and in-house engineers, experts, and a laboratory, is because it is a large, technically fit utility. Moreover, the System already provides customer service, 24/7/365, even if part of that service requires calls to the police after hours, and there is no evidence the System lacks the ability to provide safe and reliable service due to its lack of in-house capabilities. While Aqua has committed to spend $16.92 million for capital improvements, which it can guarantee due to its size and financial fitness, [the] Township is likewise capable, and has the funds on hand, to complete the needed improvements and upgrades, without the financial burden of funding Aqua’s purchase. Finally, although [the] Township would receive funds from the sale, which could be used for other governmental purposes, those funds are available because the System’s customers, and potentially Aqua’s current customers, will bear the burden of the costs of that acquisition. Id. According to the panel, “[h]olding that these services and upgrades that are the result

of the acquiring utility’s size and fitness are substantial affirmative public benefits is not

consistent with City of York and its progeny.” Id.

The panel further held that an acquiring utility’s ability to provide the same services

already provided by the selling utility does not constitute a benefit at all, let alone a

substantial affirmative public one as required by the caselaw. Id. In the panel’s view, this

is especially true where, as here, the selling utility is already operating safely and reliably.

Citing Popowsky, the panel explained that the affirmative public benefit test is a “net

benefit assessment.” Id. (quoting Popowsky, 937 A.2d at 1056). Accordingly, it explained

that “[w]here, as here, there are no benefits that differ substantially from the benefits

already being provided by the existing system operator, those alleged benefits arise as a

result of the acquiring utility’s fitness, rather than from the actual transaction, and where

there are acknowledged or known harms that will result from the transaction, there are

insufficient net benefits to support approving the transaction and granting the CPC under

[J-39A-2025, J-39B-2025 and J-39C-2025] - 13 Section 1103(a).” Id. (emphasis removed). The “acknowledged or known harms” refers

to the potential rate increases that would result from the transaction.

Continuing, the panel recognized that this Court has held that the Commission is

not required to obtain legally binding commitments from acquiring utilities and that

“aspirational statements” are substantive evidence of an affirmative public benefit. Id.

(citing Popowsky, 937 A.2d at 1055-57 and n.18; City of York, 295 A.2d at 829-30; and

McCloskey, 195 A.3d at 1065-66). Moreover, it recognized that while McCloskey held

that “aspirational statements regarding the expertise and the ability to raise capital of an

acquiring utility could constitute substantial evidence of a public benefit of a merger, [the

court] did not reach the issue of whether such benefits would outweigh the known harms

of increased rates to the customers because the Commission did not consider the

evidence of that harm.” Id. at 1120 (emphasis removed) (citing McCloskey, 195 A.3d at

1065-66). The court insisted, however, that those aspirational statements must be

considered in the context of the particular facts of the case and the public benefit arising

from aspirational statements will not always constitute affirmative public benefits that will

be substantial enough to outweigh known harms, such as anticipated rate increases.

Lastly, the panel concluded that nothing in Section 1329 or its decision in

McCloskey altered the requirements to obtain a CPC set forth in Sections 1102 and 1103.

Therefore, according to the panel, in every Section 1329 transaction, it must be shown

that the affirmative public benefits of the transaction outweigh the harms of the transaction

“such that approval of the transaction will ‘affirmatively promote the service,

accommodation, convenience, or safety of the public in some substantial way.’” Id.

(emphasis removed) (quoting City of York, 295 A.2d at 828). In the panel’s view, Aqua

failed to meet this burden and the Commission “erred and/or abused its discretion” in

concluding otherwise. Id. As such, the court reversed the Commission’s grant of a CPC

[J-39A-2025, J-39B-2025 and J-39C-2025] - 14 to Aqua. Based on its resolution of that issue, the panel did not address the OCA’s

additional argument that the Commission’s findings of fact were not supported by

substantial evidence.

The Commission, the Township, and Aqua (collectively “Appellants”) separately

filed individual applications for reargument, which the court denied. Subsequently,

Appellants each individually filed separate petitions for allowance of appeal with this

Court. We granted Appellants’ respective petitions and consolidated the appeals. Cicero

v. Pa. Pub. Util. Comm’n, 320 A.3d 667 (per curiam).

II. Arguments of the Parties

A. The Commission’s Argument

The Commission begins by arguing the Commonwealth Court failed to give proper

deference to the Commission’s interpretation of Sections 1102, 1103, and 1329.

According to the Commission, its expert interpretation of utility law is entitled to great

deference in administering the statute for which it has enforcement responsibility, and its

determinations should not be reversed unless those determinations are clearly erroneous.

Commission’s Brief at 16 (citing Popowsky v. Pa. Pub. Util. Comm’n., 706 A.2d 1197 (Pa.

1997)). Further, the Commission insists an appellate court should not substitute its

discretion for that properly exercised by the Commission. Id. at 15-17, n.45 (citing

Rohrbaugh v. Pa. Pub. Util. Comm’n., 727 A.2d 1080, 1085 (Pa. 1999)). In the

Commission’s view, that is exactly what occurred in the Commonwealth Court below.

The Commission avers that, guided by the statutory requirements of the Code

and the clarifying caselaw, it thoroughly evaluated all factors for and against the

transaction, including evidence of potential rate impacts, Aqua’s technical and financial

fitness to provide service to the System’s customers, and public policy interests of

regionalization and consolidation. As to rate impacts, the Commission insists it explicitly

[J-39A-2025, J-39B-2025 and J-39C-2025] - 15 reiterated its obligation to consider the rate impacts of the transaction. It further noted

that rate increases are typical with capital expenditures and, due to the System’s need

for capital improvements, that rate increases were likely whether it approved the

transaction or not. The Commission argues McCloskey supports its position that an

acquiring utility’s technical and financial fitness can be considered in determining if a

transaction satisfies the affirmative public benefits test to grant a CPC. Id. at 20 (citing

McCloskey, 195 A.3d at 1065). McCloskey also supports, according to the Commission,

the proposition that its public policy of consolidation and regionalization are sufficient to

meet Section 1103’s affirmative benefits standard. Id. (citing McCloskey, 195 A.3d at

1065). That being the case, the Commission insists it did not merely rely on the public

policy of consolidation and regionalization, but cited the benefits of that public policy,

including lower operating costs, significant System upgrades, dedicated customer

services, enhanced billing practices, increased maintenance upgrades, and expansion of

public water and sewer facilities.

According to the Commission, by disregarding its interpretation of the applicable

law, the Commonwealth Court erroneously determined that any potential rate increase

should factor more heavily into the balancing tests of Sections 1102 and 1103. The

Commission further contends the Commonwealth Court ignored the record evidence cited

by the Commission and independently created the court’s own standard for approval of

Section 1329 transactions, which contradicts the plain language of the Code. In the

Commission’s view, the court’s focus on the condition of the System was misplaced

because Section 1329 does not contain any express or specific language regarding the

condition of a selling utility. Additionally, the court’s elevation of the potential rate impact

above all other considerations also contravenes the statute, as Section 1329 by its very

nature of setting an acquiring utility’s rate base at the FMV contemplates the possibility

[J-39A-2025, J-39B-2025 and J-39C-2025] - 16 of rate increases. In total, the Commission argues that by substituting its discretion for

that of the Commission and altering the plain language of Section 1329, the

Commonwealth Court created a new standard that deters Section 1329 transactions at a

detriment to the public.

Next, the Commission argues it is required to weigh all the factors for and against

a transaction, including the impact on rates, to determine if there is a substantial public

benefit. In the Commission’s view, it satisfied this requirement by weighing the factors,

including evidence of the potential impact on rates, Aqua’s technical and financial fitness

to provide service, and the public policy interest of regionalization and consolidation. It

then concluded that the transaction resulted in substantial affirmative public benefits that

outweighed the purported harms. The Commission contends the Commonwealth Court

committed an error of law by rejecting the Commission’s evidentiary findings and instead

reweighing the evidence in order to incorrectly hold that no affirmative public benefits

existed as a result of Aqua’s acquisition of the System.

The Commission next asserts that, in explicitly stating that there are no benefits

that differ substantially from the benefits already being provided by the Township, the

Commonwealth Court mistakenly established a new legal standard that disregards

established precedent and signaled that, unless a municipally owned utility is nonviable

or the FMV transaction will improbably not negatively impact rates, the Commission is no

longer permitted to find that a Section 1329 transaction provides a substantial public

benefit. As such, the Commission argues that by ignoring its evidentiary findings, the

lower court has usurped the Commission’s fact-finding role and precluded certain

municipalities from exiting the service market by choice. Further, the Commission argues

[J-39A-2025, J-39B-2025 and J-39C-2025] - 17 that, by framing the transaction’s potential impact on rates as a “known harm”8 and

determining the characteristics relating to Aqua’s fitness to provide service could not be

considered benefits of the transaction, the Commonwealth Court ignored the settled

precedent of City of York, Popowsky, and McCloskey, and created a new “net benefits”

test. In so doing, the Commission asserts that the lower court contravened the clear

intent of the General Assembly in enacting Section 1329, which the Commission posits

was to further the public policy goals of regionalization and consolidation by encouraging

the sale of municipally owned water and wastewater systems to investor-owned public

utilities.

B. The Township’s Arguments

For its part, the Township first argues the Commonwealth Court erred in holding

that the Commission wrongly granted Aqua a CPC because the Township was providing

adequate services and Aqua would not provide anything the Township was not already

providing. The Township insists this holding contravenes the unambiguous language of

Section 1103 because it essentially bars the grant of a CPC unless the transaction is

necessary, rendering meaningless the statute’s directive that the Commission can grant

a CPC if such action would serve a “proper” purpose. According to the Township, a public

utility is entitled to a CPC if it proves by a preponderance of the evidence that the

transaction is “necessary or proper for the service, accommodation, convenience, or

safety of the public.” Township’s Brief at 38 (quoting 66 Pa.C.S. § 1103(a)). In its view,

a reasonable interpretation of that language requires the Court to give separate meaning

8 The Commission rejects the description of a potential rate increase as a “known harm”

and instead frames it as “a non-binding estimate of the incremental rate effect [that] is used as part of the notice procedure to customers in Section 1329 proceedings.” Commission’s Brief at 37 (quoting PUC Order, 7/29/22, at 43). Further, the Commission argues rate increases should not be considered known harms, as all Section 1329 transactions will result in rate increases because the statute permits the acquiring utility to include the costs of the transaction in its base rate.

[J-39A-2025, J-39B-2025 and J-39C-2025] - 18 to the terms “necessary” and “proper,” and neither City of York nor its progeny altered

that statutory language. Citing definitions from Merriam-Webster’s and Black’s Law

dictionaries, the Township defines “proper” in the context of Section 1103 to mean

suitable, right, or appropriate but not necessary. Id. at 43-44. The Township insists its

interpretation is in line with our decision in Elite Industries, where the Township contends,

we held that the General Assembly’s use of the phrase “or proper” evidenced its intent to

allow expanded service even where such service was not necessary for the public. Id. at

39 (citing Elite Industries, 832 A.2d at 431). Additionally, the Township argues the fact

the legislature left the phrase undefined signaled its desire to leave the formulation of the

criteria to satisfy the “necessary or proper” requirement in the discretion of the

Commission. Id. (citing Elite Industries, 832 A.2d at 431). Further, according to the

Township, this interpretation harmonizes Section 1329, which does not contain a

necessity requirement, with Section 1327, which does contain such a requirement.

As to the transaction’s propriety, the Township contends there were at least three

proper purposes: (1) for the Township to dedicate more time and resources to its core

governmental functions by exiting the wastewater business before the System began

deteriorating or falling into crisis; (2) for the Township to use the potential sale proceeds

to address other equally critical Township purposes; and (3) to promote regionalization

and consolidation of wastewater utilities, given that Aqua already owned and operated

the Township’s water system as well as other water systems within a close geographical

proximity to the System. Consequently, the Commission correctly granted Aqua a CPC

pursuant to Section 1103’s “or proper” language.

The Township further insists the Commonwealth Court erred by holding that the

Commission could not consider benefits related to Aqua’s size and fitness as legal

benefits in its affirmative public benefits analysis. According to the Township, and

[J-39A-2025, J-39B-2025 and J-39C-2025] - 19 contrary to the lower court’s holding, the question of whether something is an affirmative

public benefit is a question of fact to be reviewed by an appellate court for support by

substantial record evidence, rather than a question of law to be reviewed de novo. Id. at

51 (citing Popowsky, 937 A.2d at 1048-50 (characterizing “public benefits” as a “finding”

rather than a “holding” or “legal conclusion”)). Despite this clear standard, the Township

maintains the lower court treated the Commission’s affirmative public benefits factual

findings as legal conclusions when it stated that the benefits the Commission found and

credited could not constitute benefits as a matter of law.

To the extent the court was required to review the Commission’s factual findings

of the transaction’s benefits, the Township contends that that review was limited to

determining if those findings were supported by substantial record evidence. To this end,

the Township further argues that not only were the Commission’s findings supported by

substantial evidence, but each of the benefits credited by the Commission is a benefit

that differs from those already offered by the Township, contrary to the lower court’s

assertion. Additionally, and again contrary to the Commonwealth Court’s conclusion, the

Township insists that the Commission found benefits related to the transaction itself rather

than merely related to Aqua’s size and fitness, including that the transaction (1) supported

regionalization and consolidation by allowing Aqua to consolidate its operations of the

Township’s water and wastewater systems in a manner that could enhance operational

efficiency, (2) could achieve economies of scale, and (3) would allow the Township to exit

the sanitary sewer business so as to focus its resources on other core government

functions while ensuring safe, reliable services at affordable rates to its residents. See

id. at 57-58. The Township insists none of these benefits relate at all to Aqua’s size or

fitness, let alone do so exclusively. Importantly, the Township argues the fact that some

[J-39A-2025, J-39B-2025 and J-39C-2025] - 20 of the benefits are a byproduct of Aqua’s size and fitness does not diminish the fact that

they are still benefits of the specific transaction.

Lastly, the Township avers the Commission properly considered the potential rate

impact of the transaction. In the Township’s view, appellate courts are permitted to review

the record only to determine if the Commission considered the impact on rates in a

“general manner,” in accordance with City of York. Here, the Township insists the record

clearly supports the conclusion that the Commission did, in fact, consider the transaction’s

rate impact. The Commonwealth Court, however, overstepped its limited role by finding

the Commission failed to give enough weight to the transaction’s potential rate impact, a

fact the Township forcefully contends violates this Court’s directives in City of York and

Popowsky.

C. Aqua’s Arguments

Aqua first contends the lower court’s decision violates established judicial

standards of review and nullifies the careful legislative policy and terms of Section 1329.

In its view, the court’s order effectively prevents the Commission from approving

transactions that are in the public interest by holding that a utility purchaser of municipal

utility assets is not entitled to a CPC under Section 1103 and a rate base determination

under and in accordance with Section 1329, even though the utility has proven – as found

by the Commission – that the request was necessary or proper for the service,

accommodation, convenience or safety of the public. According to Aqua, the

Commission’s evidentiary standard in granting a CPC is a preponderance of the

evidence, which only requires that one party has presented evidence that is more

convincing, by even the smallest amount, than the evidence presented by the other party.

Aqua’s Brief at 32 (citing Energy Conservation Council of Pa. v. Pa. Pub. Util. Comm’n,

995 A.2d 465, 478 (Pa. Cmwlth. 2010)). Utilizing this standard, Aqua insists the

[J-39A-2025, J-39B-2025 and J-39C-2025] - 21 Commission properly found that Aqua had met its burden in support of a CPC under

Section 1103 and the requested base rate determination under Section 1329. Moreover,

Aqua contends the Commonwealth Court’s scope of review in these types of matters is

limited to determining: (1) whether a constitutional violation or error in procedure has

occurred; (2) whether the decision is in accordance with the law; and (3) whether the

necessary findings are supported by substantial evidence. Id. at 31 (citing PECO Energy

Co. v. Pa. Pub. Util. Comm’n, 791 A.2d 1155, 1160 (Pa. 2002)). Aqua insists the

Commonwealth Court violated its scope of review by second guessing the Commission

and reweighing the evidence the Commission found in support of the CPC, removing

certain facts (i.e., benefits associated with Aqua’s size and the Commission’s policy

supporting consolidation and regionalization), and unlawfully finding that the potential rate

increase associated with the FMV rate base determination under Section 1329

constituted a known harm that must be weighed against a slate of benefits the court

unilaterally limited.

Aqua acknowledges that the Commonwealth Court may also review the

Commission’s decisions for an abuse of discretion but asserts that standard is extremely

difficult to meet. Under Aqua’s interpretation, the Commission only abuses its discretion

“where a judgment is manifestly unreasonable or is the result of partiality, prejudice, bias

or ill-will as shown by the record.” Id. at 33 (quoting S. River Power Partners, L.P. v. Pa.

Pub. Util. Comm’n, 696 A.2d 926, 932 n.8 (Pa. Cmwlth. 1997)). According to Aqua, the

Commonwealth Court’s opinion in no way satisfies the substantial and heavy burden

imposed on it to support a finding that the Commission abused its discretion in the grant

of the CPC to Aqua here, especially in light of the fact that the Commission followed and

applied existing and settled law applicable to Section 1103. Further, Aqua insists the

court was required to defer to the Commission since the Commission is the agency

[J-39A-2025, J-39B-2025 and J-39C-2025] - 22 charged with the administration of the scheme of public utility regulation with specialized

expertise in this arena. As such, the Commission’s judgments concerning weight and

balancing of associated policy considerations connected with utility certification are also

entitled to the court’s considerable deference. Id. at 35 (citing Popowsky, 937 A.2d at

1059).

In its review of the Commission’s determination, Aqua contends the

Commonwealth Court is prohibited from reweighing the evidence considered by the

Commission, including both the weight given to individual benefits of the transaction as

well as the weight of the benefits and harms of the transaction in the aggregate. In its

view, rather than examining if the record before the Commission contained the substantial

evidence the Commission relied on, the court instead removed evidence of affirmative

benefits from one side of the evidentiary scale and added what it called “known harms,”

i.e., potential rate increases, to the other side of the scale. In removing the benefits that

derive from Aqua’s size and associated technical, managerial, and financial fitness, Aqua

asserts the Commonwealth Court established a new legal standard not previously

recognized by any court or known to the Commission. Aqua stresses that there is no

basis in fact or law for the Commonwealth Court unilaterally declaring that certain kinds

of benefits should be ignored or are less of a benefit than other benefits associated with

the transaction. Aqua continues that in so doing the court completely disregarded specific

benefits of the transaction noted by the Commission that were expected to improve the

quality of services provided by the System, such as better emergency coverage and

availability of certified system operators; commitment to capital expenditures; pursuit of

safety and infiltration and inflow services; reduction of system expense levels; along with

benefits to the Township, including the influx of funds to be used on other core

government services.

[J-39A-2025, J-39B-2025 and J-39C-2025] - 23 Additionally, Aqua argues the lower court erred by characterizing the potential rate

increases resulting from the transaction as a “known harm.” In this regard, Aqua believes

potential rate impacts are the expected result of Section 1329 transactions. Moreover,

Aqua observes that no rate increases were set during the CPC process, and it agreed to

continue the rates currently used by the System. Further, while under our caselaw the

general impacts of a transaction on rates can and should be considered in the affirmative

benefits test, it is inappropriate to characterize the estimated rate impact as a known

harm, especially when Section 1329 specifically establishes a process where the assets

to be acquired are included in the rate base of a FMV higher than original depreciated

costs and used for rate setting purposes.

Altogether, Aqua insists that the Commonwealth Court’s opinion contravenes City

of York, Popowski, and McCloskey; violates the precepts of statutory construction;

disincentivizes Section 1329 transactions; and will result in such transactions not

occurring until municipal-owned water and wastewater utilities are no longer capable of

providing adequate services to their customers. 9

D. OCA Argument

The OCA counters that the Commonwealth Court correctly determined that the

Commission erred as a matter of law and abused its discretion in its failure to apply the

proper legal standard under Sections 1102 and 1103 to the specific facts of this case.

According to the OCA, the Commission conflated Aqua’s fitness to own and operate the

System with a net benefit of the transaction despite the fact that the Commission found

9 The National Association of Water Companies and the National Association of Water

Companies – Pennsylvania Chapter filed a joint amicus curiae brief on behalf of Appellants. The Pennsylvania Chamber of Business and Industry and the Chester County Chamber of Commerce filed a joint amicus curiae brief in support of the Township and Aqua. The Pennsylvania State Association of Township Supervisors and the International Municipal Lawyers Association filed a joint amicus curiae brief in support of the Township.

[J-39A-2025, J-39B-2025 and J-39C-2025] - 24 that the Township was also fit to provide the same or similar services without the

acknowledged rate harm. In light of this error, the OCA insists the Commonwealth Court

correctly determined that none of the asserted benefits related to fitness and services as

articulated by Aqua and the Township were actual benefits. Rather, those asserted

benefits amounted to nothing other than the status quo for customers. Despite this status

quo, the OCA argues that Aqua’s acquisition of the System would come at a steep

financial cost in the form of future rate increases for consumers. The OCA argues this

outcome could only lead to the legal conclusion that there were no substantial affirmative

public benefits resulting from the transaction.

Further, the OCA insists the Commission’s decision was not entitled to any

deference because it abused its discretion by failing to apply the proper legal standard to

the facts. OCA’s Brief at 13 (citing King, 839 A.2d at 240). In this regard, the OCA argues

that, in determining whether any benefits existed, the Commonwealth Court properly

examined the facts as presented, including the status quo of Aqua and the Township as

potential and existing operators of the System, and the acknowledged rate increase that

would occur as a result of Aqua’s acquisition. According to the OCA, by applying the

proper net benefits standard, the lower court correctly concluded that where there are no

benefits that differ substantially from the benefits already being provided by the existing

system operator, any alleged benefits arising as a result of the acquiring utility’s fitness,

rather than from the specific transaction, are insufficient to support a finding that the

transaction provides substantial affirmative public benefits and thus, are insufficient to

grant a CPC.

Contrary to Appellants’ arguments, the OCA insists the Commonwealth Court did

not reweigh the evidence because the court relied on the Commission’s factual findings.

However, in the OCA’s view, the Commonwealth Court, unlike the Commission, correctly

[J-39A-2025, J-39B-2025 and J-39C-2025] - 25 applied those facts to the existing legal standard to determine what legally constitutes

substantial affirmative public benefits. In so doing, the OCA contends the court relied on

the weight given to the evidence by the Commission regarding the condition of the

System, existing service quality, and the fitness of both the existing and potential

operators and determined that the benefits pointed to by the Commission legally could

not be considered benefits because they amounted to nothing more than a perpetuation

of the status quo. Per the OCA, this is not reweighing the evidence but, rather, it is an

application of controlling law to the facts as found by the Commission. As such, the OCA

contends that the Commonwealth Court, in effect, made clear that the Commission’s

analysis under Sections 1102 and 1103 cannot end with the determination of the buyer’s

fitness because that will not fully address the necessary question of whether there are

substantial affirmative benefits from the proposed transaction. Under the Commission’s

approach, the OCA argues, a utility’s fitness would subsume the affirmative public

benefits test.

Additionally, the OCA contends that the Commission mistakenly relied on its own

policy statement on regionalization and consolidation to find affirmative public benefits.

The OCA maintains caselaw is clear that Commission policy cannot substitute for

evidence. Id. at 22 (citing Aizen v. Pa. Pub. Util. Comm’n, 60 A.2d 443, 449 (Pa. Super.

1948)). The OCA further argues that the Commission’s finding that regionalization and

consolidation are a policy objective of the General Assembly in enacting Section 1329 is

not due any deference because the finding is not a reasonable interpretation of the

statute. In the OCA’s view, Section 1329 does not identify any policy objective but instead

merely creates a valuation procedure for municipal water and wastewater acquisitions.

As to the rate impact of the transaction, contrary to Appellants’ characterizations,

the OCA asserts that an increase in rates is more than probable as it is instead a known

[J-39A-2025, J-39B-2025 and J-39C-2025] - 26 and measurable certainty as fully supported by the record. Specifically, the OCA insists

it is undisputed that there will be a $5.011 million annual shortfall between current rates

and what Aqua would need to charge in order to pay its full cost of service after

acquisition. Likewise, that revenue requirement will be higher in rate cases going forward

due to normal capital expenditures that Aqua committed to spend over the next ten years.

While the OCA acknowledges there may be future rate increases even if the Township

retains ownership of the System, it argues the increases under Aqua will be higher due

to higher debt costs, the return on Aqua’s investment (i.e., Aqua’s profit), and taxes that

are present for investor-owned utilities. It is true that how those increases will be allocated

among Aqua’s customers may be unknown, but the OCA insists that not knowing which

customers will bear the burden of the harm does not negate the existence of that harm.

The OCA also rejects the argument that rate increases cannot be a harm because they

are contemplated by Section 1329, which was enacted by the legislature. If this argument

was correct, the OCA contends that rate impact could never be considered a harm in a

Section 1102 and 1103 analysis so long as the utility property is valued as permitted by

the Code, which it asserts would be a sea change in a CPC analysis not contemplated

by Section 1329.

Altogether, the OCA argues that the Commonwealth Court’s decision is in line with

existing precedent, including City of York, Popowsky, and McCloskey, and the plain

language of Section 1329. The OCA further argues Appellants’ hyperbole regarding the

impact of the decision should be disregarded because it is an extension of their failed

statutory construction arguments. Thus, the OCA asks the Court to affirm the

Commonwealth Court’s holding. 10

10 The Coalition for Affordable Utility Services and Energy Efficiency in Pennsylvania and

Pennsylvania Municipal Authorities Association filed separate amicus curiae briefs in support of the OCA.

[J-39A-2025, J-39B-2025 and J-39C-2025] - 27 III. Discussion

Initially, as observed above, we have not previously reviewed a CPC determination

by the Commission as part of a Section 1329 transaction. As such, we must first address

the Commonwealth Court’s determination that nothing in Section 1329 altered the

requirements to obtain a CPC set forth in Sections 1102 and 1103 and that our holdings

in City of York and Popowsky are applicable to Section 1329 transactions. See Cicero,

300 A.3d at 1120; see also McCloskey, 195 A.3d at 1064-67 (applying City of York and

Popowsky to a 1329 transaction).

A review of Section 1329’s plain language reveals that the provision does not

mention Section 1103 at all. It also only references Section 1102 to address what

information must be contained in an 1102 application, see 66 Pa.C.S. § 1329(d)(1) and

(e), and who qualifies as an “entity.” See id. at § 1329(g) (defining “Entity”). These minor

references to Section 1102 cannot reasonably be read as the General Assembly making

any substantive changes to Section 1102’s requirements of when a CPC is required.

Rather, these references are consistent with the proposition that the legislature was

merely directing that Section 1329 transactions are required to comply with existing

Section 1102 procedures and requirements. Further, Section 1329’s complete silence as

to Section 1103, which sets out the procedures for obtaining a CPC, indicates the General

Assembly’s intent to apply Section 1103’s existing requirements, including our precedent

interpreting the section, to Section 1329 transactions. We, therefore, concur with the

Commonwealth Court that Section 1329 did not alter the requirements of Sections 1102

and 1103 and our precedent interpreting those requirements is applicable to Section 1329

transactions.

Pursuant to Section 1103(a), the Commission shall grant a CPC “only if [it] shall

find or determine that the granting of such certificate is necessary or proper for the

[J-39A-2025, J-39B-2025 and J-39C-2025] - 28 service, accommodation, convenience, or safety of the public.” 66 Pa.C.S. § 1103(a). In

City of York, addressing Section 1103’s predecessor and reversing prior precedent, we

held that the statute’s “unequivocal command” was that a “utility merger is not to be

approved unless the Commission is able to find that the merger will affirmatively benefit

the public[.]” City of York, 295 A.2d at 828. Therefore, in order to obtain a CPC,

proponents of the merger had to “demonstrate that the merger will affirmatively promote

the service, accommodation, convenience, or safety of the public in some substantial

way.” Id. (internal quotation marks removed). In conducting this inquiry, the Commission

“is not required to secure legally binding commitments or to quantify benefits where this

may be impractical, burdensome, or impossible; rather the [Commission] properly applies

a preponderance of the evidence standard to make factually-based determinations

(including predictive ones informed by expert judgment) concerning certification matters.”

Popowsky, 937 A.2d at 1057. Moreover, the Commission is not required to find an

absolute public necessity in order to grant a CPC, as that would ignore the General

Assembly’s inclusion of the phrase “or proper” in the statute. Elite Industries, 832 A.2d

at 431.

In engaging in this affirmative public benefit analysis, the Commission is required

to consider the impact that granting the CPC would have on rates. In City of York, we

stated “the Commission should consider, at least in a general fashion, the effect that a

proposed merger is likely to have on future rates to customers. Along with the likely effect

of a proposed merger upon the service that will be rendered to consumers, the probable

general effect of the merger upon rates is certainly relevant criteria of whether the merger

will benefit the public.” City of York, 295 A.2d at 829. As such, the Commission cannot

postpone considering the impact on rates until a future rate base case but, rather, must

consider the impact on rates as part of its affirmative public benefits analysis. McCloskey,

[J-39A-2025, J-39B-2025 and J-39C-2025] - 29 195 A.3d at 1066. This consideration may include the rate impact on both existing and

new consumers. Id. at 1067. However, the grant of a CPC does not benefit the public

“only if the [Commission] demonstrate[s] that the [transaction’s] savings will lower prices

to consumers.” Popowsky, 937 A.2d at 1056 (emphasis in original).

As to the review of the Commission’s decision to grant or deny a CPC, appellate

review of the Commission’s determination is generally limited to determining whether a constitutional violation, an error of law, or a violation of procedure has occurred and whether the necessary findings of fact are supported by substantial evidence. … Substantial evidence has been defined as the amount of relevant evidence which a reasonable person would accept as adequate to support a determination. We also bear in mind that, on account of the Commission’s experience in the utility arena, reviewing courts accord considerable deference to the agency concerning the certification process. Popowsky, 937 A.2d at 1054 (citations and footnote removed); see also 2 Pa.C.S. § 704.

Additionally, when “evaluating the ‘reasonableness’ of any discretionary agency action,

appellate courts accord deference to agencies and reverse agency determinations only if

they were made in bad faith or if they constituted a manifest or flagrant abuse of discretion

or a purely arbitrary execution of the agency’s duties or functions.” Rohrbaugh, 727 A.2d

at 1085 (citing Slawek v. State Bd. of Med. Educ. & Licensure, 586 A.2d 362, 365 (Pa.

1991)). Moreover, in the absence of this type of abuse of discretion, appellate courts “will

not inquire into the wisdom of such action or into the details of the manner adopted to

carry them into execution.” Slawek, 586 A.2d at 365.

Here, the Commission determined Aqua demonstrated that the transaction

provided “substantial affirmative public benefits that outweigh[ed] the purported harms

asserted by the OCA.” Commission Op. at 29. In support of this determination, the

Commission cited Aqua’s financial, technical, and managerial expertise to be the

certificated provider of the System and that the transaction would further the

Commission’s policy of regionalization and consolidation as benefits of the transaction.

[J-39A-2025, J-39B-2025 and J-39C-2025] - 30 In addition to these more general benefits, the Commission also found that the transaction

would result in specific benefits arising out of Aqua’s acquisition of the System. The

Commission found the transaction would benefit Aqua’s existing customers in multiple

ways, including by increasing the company’s customer base, resulting in future

infrastructure projects being shared at a lower incremental cost per customer. Id. at 36-

37.

The Commission also identified numerous benefits to the System’s current

customers, including (1) a reduction in the System’s operating expenses; (2) investment

in capital improvements; (3) mitigation of sanitary sewer overflows; (4) Aqua’s ability to

deal with complex environmental regulations and improve system efficiencies; and (5) a

variety of customer service and customer billing and payment protection enhancements.

Id. at 38-42. Moreover, the Commission determined the record was unclear whether the

Township would be able to make the necessary improvements and upgrades to the

System that Aqua proposed due to the multitude of other services the Township must

allocate funds to in order to address the needs of its citizens. Id. at 40. An additional

public benefit was the Township’s desire to sell the System and exit the wastewater

business. Id. at 42-43.

In addition to the above identified benefits, the Commission also considered the

impact of the transaction on customer rates: All of the [p]arties acknowledge that some level of rate increase is expected as a result of the transaction. Indeed, there is a reasonable expectation that rates for the Township’s customers will increase even if the Commission were to reject the [a]pplication given the level of capital expenditures considered to be necessary over the next ten years. However, we agree with Aqua and the Township that, if the transaction is approved, there will be more flexibility to address rate impact and to allocate costs over a much larger customer base. Id. at 44 (citations removed). In light of all these findings, the Commission concluded:

[J-39A-2025, J-39B-2025 and J-39C-2025] - 31 When considering all the factors, including the impact on rates, . . . the benefits of Aqua’s ownership outweigh the purported harms outlined by the OCA. Aqua’s expertise and ability to raise and deploy capital and to spread costs over a large customer base, the Township’s decision to exit the wastewater business, and the transaction’s furtherance of the policy objectives of the General Assembly in enacting Section 1329 . . . are all substantial affirmative benefits weighing in favor of granting the [a]pplication. Id.

Upon review, however, the Commonwealth Court agreed with the OCA that the

Commission erred by considering characteristics related to Aqua’s size along with its

technical, managerial, and financial fitness in the Commission’s affirmative benefits

analysis. Cicero, 300 A.3d at 1118. According to the court, “a determination that a utility

is fit to provide the proposed service is separate from the determination that the

transaction will result in affirmative public benefits that outweigh the harm thereof.” Id.

Additionally, the court found that to hold benefits “that are the result of the acquiring

utility’s size and fitness are substantial affirmative public benefits is not consistent with

City of York and its progeny.” Id. at 1119. The court is correct that a transaction does

not satisfy the affirmative public benefits test merely because the acquiring utility is

legally, technically, and financially fit to provide the proposed services. That indisputable

position, however, does not necessarily lead to the conclusion that the Commission is

barred from considering benefits emanating from that fitness in its affirmative public

benefits analysis.

Neither Sections 1102 and 1103 of the Code nor City of York and its progeny

support the Commonwealth Court’s conclusion that the Commission’s affirmative benefits

analysis is limited in this manner. To the contrary, as we have previously stated, the

General Assembly has “provided no definition of specifically what the criteria were to be

in determining the propriety of granting a [CPC], leaving the formulation of such criteria

to the [Commission].” Elite Industries, 832 A.2d at 432; see also Seaboard Tank Lines,

[J-39A-2025, J-39B-2025 and J-39C-2025] - 32 602 A.2d at 764-65 (Pa. Cmwlth. 1985) (same). As such, it is for the Commission in the

first instance, and not the courts, to determine what constitutes a benefit. Merely because

certain benefits of a transaction derive from the acquiring utility’s fitness to provide the

proposed service does not automatically bar the Commission from considering those

benefits in its affirmative benefits analysis. This position is in line with our reasoning in

Popowsky addressing the Commission’s consideration of the results of federal

investigations and accords in its affirmative benefits analysis. In that instance, we

“disapprove[d] the notion that the Commission should be foreclosed from accepting the

noted advantages as benefits pertaining in the Commonwealth on a developed

Pennsylvania-specific record merely because they also pertain nationally.” Popowsky,

937 A.2d at 1061. We likewise disapprove of the notion that the Commission is foreclosed

from considering benefits of a transaction merely because those benefits also pertain to

the acquiring utility’s fitness. We emphasize that an acquiring utility’s size and fitness are

not benefits in and of themselves but, rather, simply hold that the Commission can

properly consider benefits deriving from that size and fitness in its affirmative benefits

analysis.

Moreover, the Commonwealth Court found the benefits identified by the

Commission could not actually constitute benefits because the System was “already

providing and [was] capable of providing the same or similar benefits without the

acknowledged rate increase that will occur as a result of the acquisition.” Cicero, 300

A.3d at 1119. The Commission, however, determined that Aqua would, in fact, be able

to provide services the Township was not providing, including twenty-four-hour customer

service, online bill payment options, and in-house engineers and environmental

compliance experts. Commission Op. at 40-41. Instead of reviewing the record to

determine if the Commission’s factual findings related to these benefits were supported

[J-39A-2025, J-39B-2025 and J-39C-2025] - 33 by substantial evidence, the Commonwealth Court instead merely found that, in its view,

“the System already provides customer service 24/7/365, even if part of that service

requires calls to the police after hours, and there is no evidence the System lacks the

ability to provide safe and reliable service due to its lack of in-house capabilities.”

Cicero,300 A.3d at 1119. The court, while acknowledging the differences between the

services currently provided by the Township and what would be provided by Aqua,

essentially held that the benefits found by the Commission were insufficient to satisfy the

substantial affirmative benefits test. The extent to which the services Aqua could provide

would be an improvement over the services the Township currently provides goes to the

weight accorded to those particular benefits rather than whether or not the services qualify

as benefits at all. The court’s disagreement with the Commission’s determination that

Aqua’s services constituted benefits was, therefore, a reweighing of the evidence. By

reweighing the evidence in that manner, the court replaced the Commission’s

consideration of the evidence of record with its own. That reweighing violated the

considerable deference reviewing courts are to accord to the Commission concerning its

certification decisions. See Popowsky, 937 A.2d at 1054. 11

That the court would have come to a different conclusion regarding the value of

these benefits is of no moment, as “a different opinion or judgment in regard to the action

11 The Commission also found the transaction provided affirmative public benefits because it furthered the Commission’s policy of regionalization and consolidation of wastewater systems. In McCloskey, the Commonwealth Court held the Commission’s policy of regionalization and consolidation of water and wastewater systems is “of the type that [this Court] in [Popowsky] held were sufficient to meet the Section 1103 public benefit standard.” 195 A.3d at 1065. Here, the court held that such “aspirational statements” or benefits will not always satisfy the affirmative benefits test. Cicero, 300 A.3d at 1119. We agree with the court on both accounts. The Commission’s policy on regionalization and consolidation is the type of “aspirational statement” that can be considered a benefit of a transaction under Popowsky. However, that policy may not always, alone, be sufficient to satisfy the necessary net benefits test for granting a CPC.

[J-39A-2025, J-39B-2025 and J-39C-2025] - 34 of the agency is not a sufficient ground for interference; judicial discretion may not be

substituted for administrative discretion.” Blumenschein v. Hous. Auth. of Pittsburgh, 109

A.2d 331, 335 (Pa. 1954) (emphasis removed). It is further irrelevant whether the record

includes evidence that would support the Commonwealth Court’s conclusion that Aqua

failed to satisfy the affirmative public benefits test. The question is not how the

Commonwealth Court would have ruled in the first instance but only whether there is

substantial evidence in the record to support the Commission’s findings. See Wise v.

Unemployment Comp. Bd. of Rev., 111 A.3d 1256, 1262 (Pa. Cmwlth. 2015). The

Commonwealth Court has recognized these principles when it comes to reviewing

decisions by the Commission, previously stating “[o]ur duty is to determine only whether

or not the PUC’s findings are supported by substantial evidence; we may not substitute

our judgment for that of the PUC, nor may we indulge in the processes of weighing

evidence and resolving conflicting testimony.” Popowsky, 706 A.2d at 1201 (quoting

Phila. Elec. Co. v. Pa. Pub. Util. Comm’n, 433 A.2d 620, 624, (Pa. Cmwlth. 1981) (internal

quotations and citations omitted)). By holding the transaction would result in zero net

benefits simply because it disagreed with the value the Commission assigned to the

services Aqua would provide the Township’s customers, the Commonwealth Court

violated these longstanding precepts. 12

12 The Commonwealth Court also stated that the “System is already providing and capable of providing the same or similar benefits without the acknowledged rate increase that will occur as a result of the acquisition.” Cicero, 300 A.3d at 1119 (emphasis removed). The Commission, however, found “there is a reasonable expectation that rates for the Township’s customers will increase even if the Commission were to reject the [a]pplication given the level of capital expenditures considered to be necessary over the next ten years.” Commission Op. at 44. This finding, which the Commonwealth Court neither acknowledged nor addressed, appears to call into question the court’s determination that the Township could provide the same services as Aqua without the rate increase.

[J-39A-2025, J-39B-2025 and J-39C-2025] - 35 Additionally, the Commonwealth Court erred in categorizing the potential rate

increase that would result from the transaction as a “known harm.” Cicero, 300 A.3d at

1119. We have never characterized a transaction’s impact on rates as a “known harm”

and decline to do so today. Our precedent is clear that a transaction does not only satisfy

the affirmative public benefits test if it results in lower rates for consumers. See

Popowsky, 937 A.2d at 1056 (“[W]e agree [ ] that City of York does not hold that a merger

benefits the public only if the PUC can demonstrate that the merger savings will lower

prices to consumers.” (emphasis in original)). Rather, a transaction’s impact on rates is

just one of many factors the Commission is to consider in determining whether a

transaction will result in affirmative public benefits. See id. (stating a potential rate impact

of a transaction is only “a component of a net benefits assessment.”). As such, here the

Commission was charged with determining whether any negative impact on rates caused

by the transaction was outweighed by the positive impacts of Aqua’s acquisition so that

Aqua’s acquisition of the System serves a substantial public benefit. McCloskey, 195

A.3d at 1067.

In line with that net benefit assessment requirement, we have not directed the

Commission to consider a transaction’s impact on rates as a “known harm,” but have

instead instructed it to consider a transaction’s impact on future rates “at least in a general

fashion” and that “[a]long with the likely effect of a [transaction] upon the service that will

be rendered to consumers, the probable general effect of the [transaction] upon rates is

certainly a relevant criteria of whether the [transaction] will benefit the public.” City of

York, 295 A.2d at 829. The Commission complied with that directive here when it

considered the transaction’s potential impact on the rates paid by both the Township’s

and Aqua’s current customers. The Commission discussed the revenue deficiency that

would result from the transaction and the impact that deficiency would have on the

[J-39A-2025, J-39B-2025 and J-39C-2025] - 36 Township’s customers if one hundred percent or even fifty percent of the deficiency were

to be allocated to them, along with the impact on Aqua’s current customers if the rate

deficiency was divided between the two groups of customers. Commission Op. at 43.

The Commission, however, found that that calculation was only a preliminary analysis of

the potential rate impact on the Township’s customers and was a non-binding estimate

used for the purpose of Section 1329 proceedings. Id. In the Commission’s analysis,

“the Section 1329 valuation could have a highly unlikely rate effect of $0. Equally unlikely

is the full allocation of all costs – acquisition and perhaps others – to a rate division

consisting of only the customers of the acquired municipal system. The more likely

outcome is indeterminate; it will be found somewhere between possible extremes.” Id. at

43-44 (quotation marks and citation removed).

In addition to considering the likely rate impact if it approved the transaction, the

Commission also acknowledged that a rate increase would likely be required even if the

transaction was not completed. Id. at 44. After this analysis, the Commission concluded

that “if the transaction is approved, there will be more flexibility to address rate impact

and to allocate costs over a much larger customer base.” Id. As the Commission’s

preceding examination clearly indicates, it properly considered the transaction’s impact

on rates “at least in a general fashion” and as a component of its net substantial

affirmative benefits analysis. This is an appropriate rate impact analysis of a Section

1329 transaction. See McCloskey, 195 A.3d at 1066-67 (explaining how the Commission

could consider a 1329 transaction’s impact on rates). The Commission’s

acknowledgment that it was unable to determine the exact impact the transaction would

have on rates does not negate this conclusion. See Popowsky, 937 A.2d at 1057 (“In

conducting the underlying inquiry, the Commission is not required to secure legally

binding commitments or to quantify benefits where this may be impractical, burdensome,

[J-39A-2025, J-39B-2025 and J-39C-2025] - 37 or impossible[.]”). Simply because the Commission came to a different conclusion

regarding the transaction’s potential impact on rates than the Commonwealth Court and

the OCA does not require a conclusion that the Commission failed to properly consider

the rate impact in accordance with City of York and Popowsky.

In the end, the Commission determined substantial affirmative public benefits of

the transaction outweighed any of the transaction’s potential harms. A thorough review

of the Commission’s analysis evidences its consideration of the matter comported with

the Code and City of York and its progeny. Its determination to grant Aqua a CPC should

have been affirmed by the Commonwealth Court, even if the court would have decided

differently had it considered the issue in the first instance.

IV. Conclusion

The holding of the Commonwealth Court is reversed. As the lower court failed to

address the OCA’s contention that the Commission’s factual findings were not supported

by substantial evidence of record, the case is remanded for consideration of that issue.

Chief Justice Todd and Justices Donohue, Dougherty, Wecht, Brobson and McCaffery join the opinion.

[J-39A-2025, J-39B-2025 and J-39C-2025] - 38