Funding Water Act Loan Repayments In Pennsylvania

In Masthope Rapids Property Owners Council v. Pennsylvania Public Utility Commission, 135 Pa.Cmwlth. 437, 581 A.2d 994 (Pa.Cmwlth.1990), a water utility sought to use a Section 1307(a) surcharge to recover expenses related to principal and interest payments on a loan financed under the Water Facilities Restoration Act (Water Act), 32 Pa. C.S. 7501-7518. This Court held that a surcharge was not available as the means for funding Water Act loan repayments. The Court held that rate increases required for repayment of Water Act loans had to be thoroughly reviewed prior to implementation, as is done in every base rate case. By contrast, a surcharge involves, at most, a "preliminary and cursory" review. Id. at 1000. The Court explained: 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 1000.