City of York v. Pennsylvania Public Utility Commission

In City of York v. Pennsylvania Public Utility Commission, 449 Pa. 136, 295 A.2d 825 (1972), our supreme court held that, in considering whether to approve the merger of utilities, the PUC must consider the effect that the proposed merger is likely to have on future rates to consumers. In addition to this holding, our supreme court addressed an argument made by the opponents of the merger that, as a result of refinancing necessitated by the merger, the surviving company would have interest costs on the merger debt that it would charge to consumers. On this matter, our supreme court held that a utility may not collect merger debt interest from its customers. Id. In City of York, our supreme court made clear that, where there is a merger, merger debt interest may not be collected from ratepayers. Although the Utilities characterize the PUC's refusal to allow them to collect their merger debt from ratepayers as a "penalty" and the refusal to remove merger debt interest from the consolidated tax savings calculation as an extension of that "penalty," disallowing the collection of merger debt interest from ratepayers is the law under City of York, not a "penalty." Thus, there is no equitable basis for an exception to the "actual taxes paid" doctrine based on a utility's inability to recover merger debt from ratepayers.