Can a Water Utility Recover the Principal and Interest of a Loan ?
In Masthope Rapids Prop. Owners Council v. Pennsylvania Pub. Util. Comm'n (Masthope), 135 Pa. Commw. 437, 581 A.2d 994 (Pa. Cmwlth. 1990), a case dealing primarily with a general rate increase, the Court mentioned a water utility could not recover the principal and interest of a loan received under the Water Facilities Restoration Act through a surcharge because Section 1307 did not provide the necessary prior review required by that statute.
In doing so the Court discussed the nature of the Pennsylvania Public Utility Commission's (PUC) review of surcharge applications:
The automatic adjustment of public utility rates may only occur in certain limited instances .... Section 1307 has been customarily employed, for example, as the statutory predicate for the implementation of electric cost rates by certain electric utilities ... and is also employed for recovery of natural gas costs by natural gas utilities.
Further, in all such proceedings the Commission's review is appropriately characterized as preliminary and cursory.
Indeed, the very function of the typical automatic adjustment clause is to permit rapid recovery of a specific identifiable expense item, with a more comprehensive analysis upon reconciliation of actual costs with previously projected costs used to establish the effective rate.
The initial process is essentially a mathematical review of the projections provided by the public utility.
Therefore, there is no initial review to determine the appropriateness or necessity of the rate request. Masthope, 581 A.2d at 999-1000.