keystone connection in pennsylvania utility news

A newsletter published by the Pennsylvania Public Utility Commission regarding utilitynews in the telecommunications, energy, transportation and water markets. Summer 2007

ON THE INSIDE

Connection Utility Newsin Pennsylvania

Keystone

2-5

6-9

10-11

12-15

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17-19

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21-22

Electric

Water & Wastewater

Telecommunications

Natural Gas

Transportation

Federal News

Consumer News

Commission News

Connectingin Pennsylvania

Welcome to the seventh issueof Keystone Connection, apublication of the PennsylvaniaPublic Utility Commission (PUC)that gives a “snapshot” view ofthe utility markets under thejurisdiction of the Commission:electric, natural gas, transporta-tion, telecommunications, waterand the major issues that affecteach industry.

The publication contains cover-age of all utilities, including newson consumer issues and generalinformation on PUC happenings.

The PUC balances the needsof consumers and utilities toensure safe and reliable utilityservice at reasonable rates; pro-tect the public interest; educateconsumers to make independentand informed utility choices;further economic development;and foster new technologies andcompetitive markets in anenvironmentally sound manner.

Commissioners Christy and PizzingrilliBegin Terms

At the July 11th public meeting, Chairman Wendell F. Holland congratulatedand welcomed Commissioner Kim Pizzingrilli and Tyrone Christy on theirrecent confirmations.

Commissioner Pizzingrilli, a native of Corry, Erie County, starts her secondfull term, which expires in 2012, while Commissioner Christy, of Renfrew, ButlerCounty, begins his first term, which expires in 2011.

They were nominated by Gov. Rendell on June 1 and confirmed unanimouslyby the Senate on June 27.

“The PUC’s decisions have a direct impact on the lives and householdbudgets of millions of Pennsylvanians, as well as the continued economicsuccess of our state,” said Governor Rendell following the Commissioners’Senate confirmation on June 27. “I know Commissioners Christy andPizzingrilli will work to ensure the fair regulation of public utilities and otherbusinesses that are governed by the commission.”

Commissioner Pizzingrilli has appointed Shane Rooney, formerly of theCommission’s Law Bureau, as her counsel and energy adviser; AmandaRumsey, from the PUC’s Office of Administrative Law Judge, as her telecom-munications adviser; and Kim Beemer as her administrative officer. They joinSheryl Delozier, who handles transportation, water and consumer issues.

Commissioner Christy has appointed Billie Ramsey, formerly of theCommission’s Office of Special Assistants, as his chief of staff; Bob Carran ashis executive policy manager; and Carrie Sheriff of the Bureau of Conservation,Economics and Energy Planning, as his administrative officer.

Commissioner Kim Pizzingrilli Commissioner Tyrone J. Christy

Keystone Connection2

Keystone Connection - Electric

Electric Companies’ Providerof Last Resort (POLR) Plans

Default Service Regulationsand Policy Statement

www.puc.state.pa.us

The Commission issued a final form default servicerulemaking and separate default service policystatement at the public meeting of May 10, 2007.These rules will govern the provision of generationservice to customers by their incumbent electricdistribution company (EDC) after the expiration ofgeneration rate caps. The Commission initiated thisrulemaking proceeding in late 2004, and hadreleased a proposed and advance notice of final formrulemaking for public comment.

The Commission was required to promulgate theserules by the Electricity Generation Customer Choiceand Competition Act. The Competition Act requiresEDCs to serve those customers unable or unwillingto obtain generation service from an alternativeprovider. Energy must be acquired at prevailingmarket prices, and the EDC shall fully recover itsreasonable costs of service.

The Commission chose to issue a separate defaultpolicy statement to address certain issues thatrequire greater flexibility. The Commissionrecognized that an all encompassing regulatoryapproach could be rendered obsolete by changes inmarkets, law or technology. Accordingly, theCommission adopted this separate policy statementthat will provide guidance to market participants.

The default service regulations address theobligations of the default service provider, programterms and conditions of service, the process forreplacing the default service provider, rate design andcost-recovery. The default service policy statementprovides additional guidance on various issues,including energy procurement, rate changemitigation, and retail market safeguards.

The default service rules were submitted to thePennsylvania General Assembly and theIndependent Regulatory Review Commission (IRRC)on May 24, 2007. Commissioner Tyrone J. Christysubmitted a letter to IRRC on July 18, 2007, statinghis personal view that the regulations should be moreconducive to the procurement of competitively pricedpower under long-term contracts, which he believesare critical to ensuring reasonable and stable pricesfor customers after the expiration of the rate caps.

IRRC approved the rules 4-0, on July 19, 2007, andthey are currently under review by the AttorneyGeneral. They will be legally effective uponpublication in the Pennsylvania Bulletin.

Pike County POLR PlanOn June 8, 2007, a PUC administrative law judge (ALJ)

issued a recommended decision granting, in part, anddenying, in part, Pike County’s Petition for ExpeditedApproval of its Default Service Implementation Plan.

The ALJ rejected Pike County’s primary proposal toconduct an auction to buy financial hedges for its defaultservice needs for all of 2008 and percentages of theprovider of last resort (POLR) power needed for 2009 and2010, determining that the company failed to provideadequate justification for a three-year “laddered” or“layered” plan. Instead, the ALJ adopted an alternativeproposal for a 17 month default service plan utilizing spotmarket purchases from the New York Independent SystemOperator, Hudson Valley Zone.

Several parties filed exceptions to the ALJ’s Decision. At its July 25, 2007, public meeting, the Commissionconducted a binding poll of the issues raised onexceptions and substantially adopted the recommendeddecision via a 3-2 vote of the Commissioners.

Commissioner Tyrone J. Christy submitted a statementon the polling expressing his disagreement with the ALJ’srecommendation to reject Pike’s proposed auction for athree-year laddered hedging default service purchasingplan. The majority of the Commissioners adopted therecommendation for Pike to procure default servicerequirements with monthly spot market power purchases.

.Duquesne Light CountyPOLR IV Plan

At its June 21, 2007, public meeting, the PUC approvedDuquesne Light Company’s default service plan for theperiod from Jan. 1, 2008, through Dec. 31, 2010. TheCommission adopted the recommended decision of a PUCadministrative law judge (ALJ) approving the settlementreached by the parties which set forth the rates to becharged to each individual rate class during the applicabletime period.

The ALJ concluded that the settlement reached by theparties was in the public interest since it ensures thatDuquesne’s distribution customers have a stable andreliable source of supply through the year 2010. Thesettlement agreement sets out default service rates to becharged to residential and commercial and industrialcustomers and eliminates declining energy blocks forresidential customers.

Duquesne Light Company provides electric distributionand transmission service to approximately 580,000customers in Allegheny and Beaver Counties.

Keystone Connection 3


On June 5, 2007, the Senate Environmental Resourcesand Energy Committee and Senate Consumer Protectionand Professional Licensure Committee held a joint publichearing on energy policy for Pennsylvanians. TheChairman and Commissioners individually offeredtestimony at this hearing.

Chairman Wendell F. Holland described the variousenergy issues facing the PUC, including the AlternativeEnergy Portfolio Standards Act and the electric andnatural gas restructuring acts. He stated that given thesevarious initiatives that impact energy markets, policiesand rates, PA needs a comprehensive energy policy thatwill provide additional direction for state agencies taskedwith ensuring Pennsylvanians have safe, yet affordable,energy available for years to come. The Chairmanstated the PUC will soon be acting on recommendationsbased on the PUC’s Demand Side Response (DSR)Working Group, which he believes will be in line withproposed legislation.

Vice Chairman James H. Cawley stated that we mustmake every effort to empower customers to make vitalenergy choices about how much energy they use andhow much they are willing to pay for it and encouragemarket entry by competitors. He explained that on thedemand side, the PUC has taken steps that includedistributed generation, efficient pricing signals, demandside management and efficiency/conservation programs,and consumer education. On the supply side, the PUCrecently implemented default service regulations, isdeveloping polices that encourage market entry or removebarriers to entry to new retail and wholesale suppliers,and is participating in the formulation of wholesale marketrules and market structure before Federal EnergyRegulatory Commission (FERC).

Commissioner Kim Pizzingrilli opined that it isimportant to continue to establish policies and programsto reduce consumer energy costs and to expand theavailability and use of alternative energy. She offered thatthe impact of any energy policy has different costs andbenefits for various classes of customers, and the needsof consumers and utilities also vary among the serviceterritories. She explained that the Commission activelyrepresents the Commonwealth’s interests before theFERC and actively participates in the Mid-AtlanticDistributed Resources Initiative (MADRI). She stated thatthe Commission recently took action on an overallstrategy for preparing consumers for potential increasesin generation costs; the centerpiece is a potential $5million consumer-education campaign.

Commissioner Terrance J. Fitzpatrick testified thatgeneration rate caps had two drawbacks: the lack of

www.puc.state.pa.us

Commissioners Testify atSenate Energy Hearing

PPL’s CompetitiveBridge Plan (CBP)

On Aug. 2, 2006, PPL petitioned the PUC forapproval of a plan for acquisition of Provider of LastResort (POLR) supply service as a one-year “bridge”between the expiration of its POLR rate caps on Dec.31, 2009, and a fully competitive, statewide marketbeginning Jan. 1, 2011. In addition to its generationrate caps, PPL’s contract with PPL Energy Plus LLC,its current POLR supplier, expires on Dec. 31, 2009.

Under the competitive bridge plan, PPL proposed athree-year competitive procurement program beginningin 2007 for POLR supply in 2010, enhancement ofdemand side response (DSR) programs, expandedconsumer education, and increased assistance forlow-income customers beginning Jan. 1, 2010. PPLrequested a 2007 effective date for the CBP. ThePUC’s final order was entered on May 17, 2007.

The basic structure for residential and small com-mercial POLR service is that PPL will undertake aseries of six solicitations over three years to developthe POLR price separately for the residential andsmall commercial and industrial (C&I) classes.Through its automated meter reading system, PPL willbegin to collect and organize customer data in 2007 toprovide customers, wholesale bidders and electricgeneration suppliers, within the limits of the PUC’srules, with relevant volume and load profile informationto provide more useful data and to encourage innova-tive products.

Large C&I customers will be required to merelyexpress an interest in the fixed rate option, through asign-up process, prior to the solicitation. PPL thenwill conduct a single solicitation for fixed price servicefor the large C&I customers in October 2009. Thoselarge C&I customers who expressed an interest in theoption would be advised of the price and would begiven 30 days to “opt-in” to the fixed price for 2010.Otherwise, large C&I customers will receive real-timehourly service for 2010 as their POLR default service.

On July 26, 2007, the PUC approved suppliers’contracts for 850 megawatts of generation PPL willneed for 2010. The average generation supply pricefor residential customers is $96.30 per megawatt-hour(9.63¢ per kWh) and $99.46 per megawatt-hour(9.946¢ per kWh) for small commercial and industrialcustomers. If these prices remain the same for thefollowing five purchases, the average residentialcustomer’s monthly bill would increase by about 29percent while small commercial and industrial billswould increase on the order of 18 percent to 37percent. The winning suppliers from this first bidprocess were selected from seven competitive bidders.

Senate Hearing Continued on Page 22.

Keystone Connection


4

Electric Supplier Licensing Activity from April 1, 2007 to July 31, 2007.

Number of Licensed EGSs

3 license canceled 0 licenses approved 0 applications pending

40 Active Licenses

www.puc.state.pa.us

Macquarie ConsortiumFinalizes Acquisition ofDuquesne Light Holdings

At a public meeting on April 24, 2007, theCommission approved a settlement agreementauthorizing the transfer of control of Duquesne LightHoldings (DLH), the parent company of DuquesneLight Company and DQE Communications NetworkServices LLC, to the Macquarie Consortium. DLHand the Macquarie Consortium finalized the mergeragreement on May 30, 2007, whereby shareholdersreceived $20 per share in cash.

Under the settlement agreement Duquesne LightCompany will:

• Provide corporate contributions andcommunity support in southwesternPennsylvania for a period of five years atlevels substantially comparable to thelevels provided by the company in 2006.(For 2006, that is approximately $2.9million);

• Continue to match customer contributionsto the Dollar Energy Fund with shareholderdollars up to $375,000;

• Maintain operating locations and fieldoffices in its territory, and staffing levels, asappropriate, to provide safe and reliableservice, consistent with good utilitypractices;

• Establish a competitively neutral EconomicDevelopment Program to attract andsupport expanding Pennsylvania industrialemployers; and

• Report annually to the Commission thestatus of all commitments under thesettlement.

Duquesne Light Company, the principal sub-sidiary of DLH, is a jurisdictional utility that pro-vides electric distribution and transmission servicesto approximately 580,000 customers in Alleghenyand Beaver Counties.

0

54

87 83

98

7361

48 43 41 4354

87 83

98

7361

48 43 41 43 43

0

20

40

60

80

100

120

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

EGSs - Start of Year EGSs - End of Year/Current

At the public meeting held on March 1, the Commissionapproved “Best Practices” for the regional SustainableEnergy Funds (SEFs). This was the culmination of astakeholder process through which the PennsylvaniaSustainable Energy Board (PASEB) developed uniformguidelines for the application and reconsiderationprocesses, as well as a code of conduct for regional funddirectors. These guidelines promote greater publicparticipation and enhance transparency in the SEFs’processes and mitigate potential conflicts of interests byregional fund directors and staff.

Various restructuring and merger settlements fromelectric competition allocated nearly $80 million ofratepayer and shareholder funds to the SEFs over about a10-year period for regional projects. The PASEB wascreated by the PUC in 1999 provide oversight guidance andtechnical assistance to the SEFs. In 2003, the PUCcharged PASEB with developing Best Practices for theSEFs.

PASEB Best Practices

Keystone Connection

Keystone Connection - Electric News

Commission IdentifiesStrategies for MitigatingElectric Price Increases

On May 10, 2007, the Commission issued a finalorder concluding its investigation into policies tomitigate electric price increases. The Commissionhad commenced this proceeding in April 2006 inresponse to recent, significant increases in electricrates in Maryland, Delaware and some portions ofPennsylvania. The Commission’s objective was todevelop strategies to mitigate the harm that customersmay experience in the context of expiring generationrate caps.

The Commission identified several issues at theoutset of the investigation for examination, includingconsumer education, energy efficiency andconservation, demand side response, assistance tolow-income customers, the deferral of rate increases,and the relationship between retail and wholesalemarkets. The Commission requested stakeholdercomment on these issues, and presided over an EnBanc Meeting on June 22, 2006, at which it receivedtestimony from interested parties.

Subsequent to this hearing, the Commissioninitiated a separate investigation to develop newenergy efficiency, conservation, and demand sideresponse policies in October 2006. The Commissionthen announced tentative findings on the other issuessubject to this investigation on Feb. 9, 2007. Afterreviewing public comments to these tentative findings,the Commission prepared the final order that wasissued on May 10, 2007.

Consumer EducationPursuant to this final order, the Commission directed

the Office of Communications, with the assistance ofstakeholders, to develop a new consumer educationinitiative to inform customers about the expiration ofrate caps and steps they can take to better managetheir energy costs. This initiative will includeseparate, but complementary, electric distributioncompany and Commission led efforts. TheCommission will seek at least $5 million in funding forthe statewide component, subject to approval by theGeneral Assembly. Additionally, the Commissionidentified new steps it would take to secure additionalLow-Income Home Energy Assistance Program(LIHEAP) funding, committed to completing the defaultservice rulemaking and aggressively representingPennsylvania’s interests before the Federal EnergyRegulatory Commission (FERC) and PJM.

The PUC’s Office of Communications was directedto hold an initial meeting of interested stakeholders

within 60 days of the issuance of the order. The goal ofstakeholder meetings is to plan the statewide consumereducation campaign.

The first stakeholders meeting was held on June 19, 2007.More than 50 people attended this meeting, representingapproximately 28 utilities, organizations and governmentagencies. Commissioner Terrance Fitzpatrick greeted thegroup, offered opening remarks regarding the importance ofthe campaign, and noted the support of the otherCommissioners for the campaign. Issues discussed at themeeting included the goals of the campaign, funding, scope,appropriate message and audience.

The next stakeholders meeting will be held on Aug. 29, andmay include a presentation on potential costs for componentsof the campaign.

Demand Side ResponseWorking Group (DSR WG)Completes Investigation,Recommendations to beReleased

On June 6, 2007, the Demand Side Response (DSR)Working Group delivered its investigation report to theCommission. The Commission charged the DSR WGwith this task when it initiated an investigation of DSR,energy efficiency, conservation and advanced meteringinfrastructure on Oct. 11, 2006. The DSR WG was todevelop a list of issues to investigate, solicit commentsfrom interested parties, and provide specificrecommendations to the Commission where consensuswas obtained.

The DSR WG was convened by the Director ofOperations in November 2006, and met periodicallythrough March 2007. Staff participants conductedresearch and drafted reports and position papers on DSR,energy efficiency and conservation programs, advancedmetering technologies, and revenue decoupling. TheCommission also hosted a panel of expert witnesses atan all day session on Jan. 19, 2007.

Commission staff surveyed the DSR WG participantsfor areas of policy consensus in February and March2007. Staff then distributed a draft investigation report inApril for comment. A revised draft was distributed in Mayfor a second round of comments. As consensus was notachieved, staff will be preparing specific policyrecommendations for Commission review. Theserecommendations may be released in the form of atentative order for public comment.

5www.puc.state.pa.us


Keystone Connection - Water/Wastewater

www.puc.state.pa.us

Water and Wastewater Company Applications Approved

Applications ApprovedApril 1, 2007 through July 31, 2007

Utility

Action

Territory

Approval Date

Pennsylvania-American Water Company

Additional Territory Plymouth Township, Montgomery County

04/13/07

Jackson Sewer Corporation Abandonment Jackson Township, York County

05/10/07

Pennsylvania-American Water Company

Additional Territory Boggs Township & Wallaceton Borough Clearfield County

05/10/07

The York Water Company Additional Territory Hamilton, Reading, Berwick, Oxford & Mount Pleasant Townships, Adams County

06/21/07

Lee E. Mummau d/b/a School House Village (Water)

New Company Licking Creek Township, Fulton County

06/21/07

Lee E. Mummau d/b/a School House Village (Wastewater)

New Company Licking Creek Township, Fulton County

06/21/07

Little Washington Wastewater Company

Additional Territory Worcester Township, Montgomery County

06/21/07

Aqua Pennsylvania Inc. Acquisition and Additional Territory

Sadsbury Township, Crawford County

07/11/07

Little Washington Wastewater Company

Additional Territory Thornbury Township, Chester County

07/11/07

Aqua Pennsylvania Inc. Additional Territory Dallas Township, Luzerne County

07/11/07

Regal Oaks Inc. Abandonment Upper Pottsgrove Township, Montgomery County

07/11/2007

Superior Water Company Inc.

Additional Territory Washington & Colebrookdale Townships, Berks County

07/25/07

Sand Springs Water Company Inc.

New Company Butler Township, Luzerne County

07/25/2007

Columbia Water Company Additional Territory Rapho Township, Lancaster County

07/25/2007

Keystone Connection


Water Mergers & Acquisitions

On May 5, 2006, Pennsylvania-American Water Company(PAWC) filed an application docketed at A-212285F0136 forapproval of a change in control through a public offering of thecommon stock of its parent company, American Water Works Inc.Protests and/or notices of intervention were filed by several parties.

On Dec. 22, 2006, a joint petition for non-unanimous settlementwas submitted by PAWC, the PUC’s Office of Trial Staff and theOffice of Consumer Advocate (OCA).

At a public meeting on July 25, 2007, the Commission voted 3 to2, to tentatively approve a joint motion that grants exceptions filedby PAWC and the OCA. The Commission adopted the settlementthat has a number of conditions that benefit the public, including:• Commitment to Pennsylvania by maintaining PAWC’s

corporate offices in the Commonwealth;• Community involvement levels will be maintained, including

funding for PAWC’s low-income program to assist low-incomeresidential customers with their water bills; and

• Capital improvement commitments in order to adequately fundand maintain treatment, transmission and distribution systems.

The motion modified the administrative law judges decision byapproving PAWC’s request to install without customer contribu-tions, the facilities necssary to provide service to about 800 custo-mers in Washington and Allegeny Counties. Upon sale of thestock, American Water Works will no longer be owned by RWE,and will become an independent, publicly traded company. Partiesin the case have 20 days to file comments or the tentative orderbecomes final.

PAWC DSIC CapAt public meeting on July 11, 2007, the

Commission voted unanimously to grantPennsylvania-American Water Company’s(PAWC) request to increase its allowedDistribution System Improvement Charge(DSIC) investment recovery to 7.5 percent.

The DSIC, which is employed by PAWC,was capped at 5 percent of other-wisebilled revenues, is a surcharge that PAWCadds to each customer’s monthly bill. Thissurcharge, which was first implemented in1997, represents timely recovery of itsinvestment in DSIC eligible projects,between base rate cases. DSICs allowcompanies to accelerate infrastructureremedies in a timeframe that more closelymatches actual service lines.

PAWC is now investing more than it ispermitted to recover from ratepayers andas a result the company asked the PUCto increase the allowable DSIC Cap to 7.5percent of otherwise billed revenues.

PAWC’s customers’ rates now includean average DSIC charge of $1.75 a month,at the 5 percent cap. With the increasefrom 5 percent to 7.5 percent, that averagerate will increase by approximately $1.00to $2.75 per month.

Important safeguards within the DSICrequires that it be set to zero followingeach base rate case (or at any time thecompany is over-earning) and it takes anumber of billing cycles of progressiveincreases over a few years to raise theallowed recovery amount above the currentcap of 5 percent. Before any of PAWC’sinfrastructure investment may qualify forDSIC recovery, it must be placed intoservice and meet the used and useful test,which means that is in use and providingservice to customers.

www.puc.state.pa.us

Pennsylvania-American Water Company InitialPublic Offering (IPO)

United Water PennsylvaniaOn Nov. 1, 2006, United Water Pennsylvania Inc. (UWPA) filed

an application seeking approval of the proposed merger of itsultimate parent company, Suez, with Gaz de France. The applica-tion was assigned to the Office of Administrative Law Judge onDec. 8, 2006. Suez is a French-based multinational corporationwith primary operations that include water, electricity and naturalgas supply, and waste management.

There have been a number of issues that have arisen to blockthe proposed merger. The merger has not been approved by thegovernment of France and the terms of the merger may have to berevised as Suez’s market valuation has increased significantlysince the merger was announced.

The French government is also seeking to hold a one-thirdownership position in the new company and the increase inSuez’s market value and the potential for increased compensationfor Suez shareholders is affecting how the government can affordthat one-third position. The French government would be thelargest single shareholder if the merger is approved. On July 18,a French government official announced that the governmentwould take all the time necessary to consider the future of theproposed merger.

Water Week

In May, the PUC celebrated National Drink-ing Water Week with displays in the Atriumand a press conference that was attended byHome Depot, Sen. Mary Jo White, Rep.Carole A. Rubley, industry representativesand PUC Commissioners.

7

Keystone Connection


Water and Wastewater Rate IncreasesRate Increase Request Summary

April through July 2007

8 www.puc.state.pa.us

W.P. WaterEmergency Order

On June 6, 2007, the Office ofConsumer Advocate (OCA) filed aPetition for Emergency Orderrequesting that the Commissiondirect W.P. Water Company Inc. toprovide immediate relief to itscustomers who were experiencingfrequent water outages and lowpressure. By Emergency Orderissued June 15, 2007, ViceChairman Cawley ordered W.P. totake immediate steps to provideadequate water service to itscustomers and to provide theCommission with periodic writtenprogress reports. At the June 21,2007, public meeting of the PUC,this Emergency Order was ratified. W.P. is a jurisdictional water utilityincorporated in Pennsylvania on July17, 1970. The Commission grantedW.P. a certificate of public conveni-ence on Oct. 1, 1975. W.P.’sprincipal place of business is 1199Laurel Run Road, Wilkes-Barre, andit provides service to approximately150 customers in the developmentof Washington Park in WyomingCounty. On June 14, 2007, W.P. had filedits answer to OCA’s Petition forEmergency Order agreeing thatW.P. needed to install a new deepwell, a new storage tank andmeters. Specifically, the Emerg-ency Order ordered W.P. toimmediately locate a new well site,submit applications to the Depart-ment of Environmental Protection(DEP) and the Susquehanna RiverBasin Commission and drill the well,apply to DEP for permission toprovide a finished water storage tankwith a volume of approximately50,000 gallons, take all stepsnecessary to assure that customershave alternative supplies of potablewater during all periods of lowpressure or outage; and installmeters pursuant to the

W.P. Water Continued on Page 9.

* The Commission had approved an increase of $238,639 - 37.63 percent on Dec. 21, 2006.** Two-step increase.

Utility NameAmt ($)

RequestedAmt ($) Granted

% of Increase Action Action Date

CAN Do, Inc. (Water) 202,062 202,062 25.00 Approved as filed 4/13/2007

Imperial Point Water Service Co. 80,679 40,000 22.80 Settlement 4/13/2007

Emporium Water Co.* 316,144 254,741 40.16Petition for Reconsideration 4/24/2007

Audubon Water Co. 477,975 Litigation 4/24/2007

Borough of Ambler 454,798 Mediation 5/10/2007

Reynolds Disposal Co. 278,969 90,000 28.31 Settlement 5/10/2007

Borough of Pheonixville (WW) 72,575 65,000 88.62 Settlement 5/30/2007

Village Water Co. 42,575 Investigation 6/21/2007

Glendale Yearound Sewer Co. 142,655 Investigation 6/21/2007

Pennsylvania-American Water Co. 59,236,366 Investigation 6/21/2007

Allied Utility Services 183,902 115,000 81.00 Settlement 6/21/2007

Little Washington Wastewater Co. Peddlers View Div.** 59,165 56,012 42.48 Settlement 6/21/2007 Little Washington Div.** 168,407 118,386 53.46 Settlement 6/21/2007 Chesterdale/Willistown Woods Div.** 62,175 54,362 12.40 Settlement 6/21/2007 Media Div. 64,969 64,695 9.50 Settlement 6/21/2007

Eaton Sewer and Water Co., Inc (WW)** 69,641 32,973 49.95 Settlement 6/21/2007

Eaton Sewer and Water Co., Inc (Water)** 71,113 41,080 71.60 Settlement 6/21/2007

Little Washington Wastewater Co. Twin Hills Div. 67,479 Investigation 7/11/2007 Rivercrest Div. 63,573 Investigation 7/11/2007



W.P. WaterPA American Water CompanyOutages in the Pittsburgh Area

On Dec. 10, 2006, approximately 1,000 Pennsylvania AmericanWater Company (PAWC) customers in the Pittsburgh area and twonearby schools experienced extended water outages. These out-ages in the Pittsburgh area continued for several days. Similar ex-tended outages arose in November 2006 when 2,000 PAWC custo-mers in portions of Lackawanna County lost their water service. As a result of these events, the Commission, at its public meetingof Dec. 15, 2006, approved a motion that called for an investigationof theses outages to examine the utility’s compliance with thePublic Utility Code and the PUC’s regulations regarding safe andreliable water service. To this end, it was noted in the PUC’s order,entered on Jan. 5, 2007, at Docket No. I-00060112, that “theCommission has a fundamental duty to ensure that public utilitiesprovide safe, adequate and continuous service to their customerswithout unreasonable interruptions or delay in accordance with ourregulations and orders.” The Commission’s investigation included, but was not limited to, adetermination as to whether: 1. PAWC responded to the outages in an effective and timely manner with adequate resources available; 2. The public and emergency response officials received adequate notice and were kept informed in a timely manner; 3. Adequate supplies of drinking water were provided and/or available at convenient locations; and 4. Additional steps can be taken to mitigate main breaks and to respond to future outages in a timely and effective manner. The PUC’s Law Bureau, in conjunction with with the Bureau ofFixed Utility Services, prepared a report relating to the Pittsburghoutages that was submitted to the Commission in April 2007. OnJune 21, 2007, the report, which contained 15 directives for PAWCto implement, was released to the public. The report and order areon the Commission’s Web site. Among other things, the Commission’s order tentatively directedthe company to:

• Reevaluate its staff complement in the Pittsburgh district officeon an annual basis;• Directly contact its customers through bill inserts and directmail to ensure the company has updated customer information;• Develop an effective process for providing updates tocustomers, local officials, emergency services and the media asto the status of main breaks and service interruptions;• Meet with affected municipalities and emergency managementagencies in the Pittsburgh district within six months to furtherdiscuss the appropriate notification requirements;• Establish direct communication with all critical care customersin the Pittsburgh district;• Complete the reduction of the various pressure zones in thePittsburgh district; and• Continue efforts to minimize the occurrence of pressure surgesoriginated from the Hay Mine production plant.

A second report relating to the extended outages in LackawannaCounty and other portions of PAWC’s service territory will besubmitted to the Commission later in the year.

www.puc.state.pa.us

Continued from Page 8.

Commission’s April 26, 1991, order. In a related matter, also on June 6,2007, the OCA filed a companion petitionrequesting that the Commission initiate amandatory takeover proceeding underSection 529 of the Public Utility Code torequire a capable public utility to acquireW.P. and to serve W.P.’s customers.That petition was granted in part anddenied in part at the public meeting ofJuly 11, 2007, and this matter is nowpending before the Office of AdministrativeLaw Judge.

PUC Staff ToursAqua Pennsylvania

Vice Chairman James H. Cawley inspects acorroded section of water pipe during the PUC’sstaff tour of Aqua Pennsylvania. The first stop of thetrip was to view a work site, where workers flushedout existing pipes. The staff then toured Aqua’sheadquarters in Bryn Mawr, where Chairman andChief Executive Officer Nicholas DeBenedictisspoke to the staff and answered questions.


Keystone Connection - Telecommunications

PUC Reverses ALJ Decision onAccess Charge Increases

By orders entered June 23, 2006, the PUC permittedthree rural carriers (Denver & Ephrata Telephone andTelegraph Company, Buffalo Valley Telephone Company,and Conestoga Telephone and Telegraph Company) toincrease their intrastate access rates as part of their 2006Annual Price Stability Index/Service Price Index filings.These increases were made on the express condition thatthey would be subject to further investigation in the pend-ing intrastate rural company access charge investigationat Docket No. I-00040105.

Subsequently, the rural telephone carriers requestedand received a further stay of the rural company accesscharge investigation for one year or until the Federal Com-munications Commission completed its access reformproceeding.

As such, on Nov. 15, 2006, the PUC entered an order toreconsider its prior determination that allowed the rateincreases and directed the Office of Administrative LawJudge to conduct hearings to determine whether anyrescission or amendment to the PUC’s previous June 23,2006, orders is warranted. The PUC was also concernedthat the three companies’ move to raise access chargesappeared to contradict long-standing access chargereform in Pennsylvania.

The matter was subsequently assigned to an admini-strative law judge (ALJ), who recommended, based on theevidence, that no rescission or amendment of the priororders was necessary. However, by order entered July 11,2007, the PUC reversed the ALJ’s recommendation anddirected that the June 23, 2006, orders be rescinded andamended. In the July 11th order, the PUC noted that noparty to this case filed an incremental cost study tosupport whether or not access rates are being subsidized.

The PUC also rejected arguments, without prejudice, bythose parties who maintained that the National ExchangeCarrier Association proxy cost model may be used bysmall carriers to demonstrate actual cost support for ac-cess rates. The PUC concluded that the record failed toadequately support the companies’ argument that accesscharges are not being subsidized. As such, the PUC ex-plained that it is reluctant to abandon a generic, industry-wide approach to achieve access charge reform for theaccommodation of the three companies based on thelimited record in this proceeding and in light of the factthat the companies failed to demonstrate, on the record,whether the deviation from the generic access chargeapproach was appropriate. The companies were directedto file tariffs within 30 days of the order’s entry date toplace access rates at their prior levels and to refund carri-ers for the higher access rates that were charged.

A petition for reconsideration was filed on July 26, 2007,by the three rural carriers.

www.puc.state.pa.us

Audit of Verizon PA’s NetworkModernization Plan

The Liberty Consulting Group has been contracted toconduct a review and evaluation of Verizon PennsylvaniaInc.’s Network Modernization Plan (NMP) implementationprogress as reported in its biennial NMP update of June30, 2007, representing its progress as of Dec. 31, 2006. Liberty began its work in late June and its report is ex-pected to be released during the second quarter of 2008.

This audit is being conducted in compliance with thePUC’s order entered Oct. 28, 2005, in which the Com-mission affirmed its authority under Act 183, the newChapter 30 of the Public Utility Code, to performinvestigative audits. The audits are performed for thepurpose of independently verifying the reported progressof an incumbent local exchange carrier’s broadbanddeployment obligations contained in their Commission-approved NMPs and to require the audited company topay for the audit. In this order the Commission alsoagreed to defer conducting the first such audit untilVerizon filed its 2007 biennial NMP report and to allowVerizon to use the money remaining in the Escrow Fundestablished to facilitate the PUC’s analysis of perform-ance metric reports to help pay for its NMP audits.

The PUC has concluded the 17th annual recalcula-tion of the Pennsylvania Telecommunications RelayService (TRS) surcharge in accordance with the May29, 1990, order at Docket No. M-00900239, directingthat the Commission complete and notify localexchange carriers (LECs) by June 1 of each year ofthe surcharge rate to be applied for the prospective12-month period commencing July 1 of that year.

The 2007-08 monthly TRS surcharge for residentialand business wireline access will remain set at $0.08and $0.09, respectively.

The surcharge recalculation includes componentsto fund the TRS Program, the TelecommunicationsDevice Distribution Program (TDDP) and the PrintMedia Access System Program (PMASP).

In related TRS news, Eric Jeschke of the PUC’sBureau of Fixed Utility Services, was nominated tothe TRS Advisory Board for a two-year term endingMay 30, 2009. The Commission unanimously votedon his nomination at the public meeting of May 30,2007.

TRS Surcharge

Keystone Connection

Keystone Connection - Telecommunications

11

AcceleratingBroadband Deployment

www.puc.state.pa.us

Partnering with the Department of Community andEconomic Development (DCED) and the Office ofConsumer Advocate, the PUC has worked with thePennsylvania Telephone Association and individualtelephone companies to produce a brochure educatingconsumers about the Bona Fide Retail Request (BFFR)programs. Consumer outreach specialists and companyfield representatives are distributing these brochures in aneffort to enhance consumer awareness of theseprograms.

The law requires Verizon PA, Verizon North, Embarqand Windstream to provide high-speed access no laterthan 2015, but under BFFR programs, consumers canrequest that high-speed Internet service be provided totheir area sooner. If enough consumers in a certaingeographic area commit to purchasing service, thecompanies are obligated to accelerate deployment.

Many consumers of these companies havesuccessfully met the thresholds required to gain high-speed access by 2008, seven years earlier than theymight otherwise have received this service. Efforts of theinteragency group and the companies over the pastseveral months to enhance consumer awareness andease consumer participation should result in even greaternumbers of consumers enjoying the benefits of theseprograms.

More information about the status of deploymentthroughout the Commonwealth, and on how to participatein these programs to accelerate deployment to certainareas may be obtained from DCED’s Web site atwww.newpa.com/broadband.

Price Caps Adopted by ILECsTo date, 23 incumbent local exchange carriers

(ILECs) adopted price caps using the GrossDomestic Product – Price Index outlined in the Actas the inflation factor under the alternative regulationportion of their Chapter 30 Plan. As a result, thecarriers file their annual price stability index eitheraccompanied by tariffed rate increases or bankedrevenue.

Through past settlements reached with the Office ofConsumer Advocate, most of the ILECs are requiredto implement banked increases within four years orforego the revenue.

During the fiscal year, companies with price capscollectively were permitted to increase local servicerates $29.1 million with accumulated bankedrevenues of $8.3 million.

Chapter 30Implementation

The Commission continues to implement keyprovisions of Act 183 of 2004 (66 Pa. C.S. §§ 3011-3019, i.e., Chapter 30 or the Act), which seeks toencourage earlier completion of existing networkmoderization plans (NMPs) by incumbent localexchange carriers (ILECs) with more economicincentives and less Commission regulation. Thecontinued Commission-approved alternative regulationencourages companies to accelerate broadbanddevelopment.

FeedbackWe welcome any feedback on the Pennsylva-

nia PUC’s quarterly newsletter, KeystoneConnection.

Staff from the Office of Administrative LawJudge, Bureau of Audits, Bureau of Conservation,Economics and Energy Planning, Bureau ofConsumer Services, Office of Communications,Bureau of Transportation and Safety, Office ofSpecial Assistants, Bureau of Fixed UtilityServices and the Law Bureau all contribute andwrite articles for this publication.

For media inquiries or to share ideas, feel freeto contact Cyndi Page of the CommunicationsOffice at (717) 787-5722.

PUC Celebrates 70 Years

On Thursday, Sept. 27, the PUC will be celebrating its70th Anniversary. Activities will commence after publicmeeting, which starts at 10 a.m. Former PUC Commis-sioners will be invited and recognized, and highlights ofthe history of the PUC will be briefly recounted.

Keystone Connection

Keystone Connection - Natural Gas

12

Gas Safety DivisionHelps Verizon Contractors

www.puc.state.pa.us

Since the spring of 2006, the Commission’s GasSafety Division has been cooperating with Verizon,contractors for Verizon, PPL, PA One Call, and theDepartment of Labor and Industry to hold periodicsafety presentations for excavation contractorsinvolved with Verizon’s Fiber to the Premises (FTTP)project. The safety training is offered to the Verizoncontractors to help to make them aware of thehazards they may encounter during excavation toinstall fiber optic lines. The weekly classes arenormally held at Verizon’s Harrisburg facilities.

The safety presentation consists of approximatelytwo hours of instruction that focuses on the majortenets of the PA One Call Law, the different types ofunderground utilities and the hazards associated witheach, and other basic worker protection standards.The training is also offered in Spanish. Thus far,more than 1,000 Verizon contractor employees havereceived the orientation training.

The impetus for developing the contractor trainingwas a large spike in underground facility damagewhen Verizon began its FTTP project. Since thattime, line hits have significantly decreased duelargely to the cooperation of Verizon, an improvedcommunication among project stakeholders andsafety training for the contractors performing theexcavation.

Know What’s Below.Call 811 Before You Dig.

On June 14, 2007, the PUC and Pennsylvania One CallSystem Inc. (PA One Call) hosted a joint press con-ference to remind Pennsylvanians planning any outdoorexcavation project to call PA One Call, by dialing 811, atleast three business days before the digging begins. PUCVice Chairman James H. Cawley joined PA One CallPresident Bill Kiger for the press conference during PAOne Call’s “Central PA Safety Day” at Harrisburg AreaCommunity College. Vice Chairman Cawley emphasizedthat no matter the size of the job – whether it’s planningshrubs or trees, installing a new mailbox post –the lawrequires anyone planning to do any digging must contactPA One Call at least three business days in advance.

“Before you start digging your new fence, mailbox postor tree, dial PA One Call using the new abbreviateddialing system of 811 to make certain underground utilitylines are marked,” said Cawley. “PA One Call wasdesigned to keep residents safe while preventing damageto underground facilities. We were pleased to provide theregulatory support needed to allow Pennsylvania to jointhe nation with 811 abbreviated dialing for the PA One Callsystem that can help everyone complete theirimprovement projects safely.”

In May, the PUC launched a statewide consumer-education campaign as part of an effort to increaseawareness of the new abbreviated dialing. An information-al brochure on the “Know what’s below. Call 811 beforeyou dig” was created along with statewide radio advertis-ing featuring Chairman Wendell F. Holland, ViceChairman Cawley, and Commissioner Kim Pizzingrilli.

PUC Vice Chairman James H. Cawley and PA One CallPresident and Executive Director Bill Kiger used the backdropof backhoes, trench diggers, as well as emergency personneland equipment attending PA One Call’s “Central PA SafetyDay” at Harrisburg Area Community College, to drive thepoint home.

Vice Chairman James H. Cawley recently tried his hand atbackhoe operation during PA One Call’s Safety Day event onJune 14. The event announced 811 as the new abbreviateddialing code to access the PA One Call network.

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Keystone Connection


13

On April 13, 2007, the PUC released a Management Effici-ency Investigation (MEI) that examined Equitable Gas Com-pany’s progress in implementing recommendations from aJanuary 2003 Focused Management and Operations Auditand reviewed their corporate governance practices. The MEI,which was conducted by the PUC’s Bureau of Audits, identi-fied potential annual and one-time savings of approximately$30.4 million and $2.2 million, respectively, by implementingnew recommendations from the Audit staff.

The Commission directed Equitable to proceed with its planto implement the 19 follow-up recommendations in the auditreport. Equitable’s implementation plan indicated that thecompany accepted all 19 of the staff’s follow-up recommenda-tions. Furthermore, the company reported that it has alreadyfully implemented five and partially implemented 11 of thefollow-up recommendations.

Staff found that Equitable has effectively implemented six ofthe 21 recommendations reviewed and has taken someaction on 12 other recommendations from the 2003 audit. Atthe time of the MEI, the company had not taken any actionon three recommendations.

As a result of its implementation efforts, Equitable hasexperienced annual savings of about $9 million. Some of thechanges made by Equitable since the 2003 audit include:

• Decreasing write-offs of uncollectible accounts, achievingsavings of about $17.5 million from 2002-04;• Obtaining competitive bids to assure costs for certainfunctions are reasonable and service is provided on a leastcost basis;• Reducing the number of indoor residential gas meterswhile implementing an automated meter reading system;• Decreasing residential service terminations; and• Implementing systems to assist in pipeline repair andreplacement decisions.The 19 follow-up recommendations contained in the MEI

include:• Implementing procedures to improve customer servicetelephone performance to at least levels comparable withother Pennsylvania gas distribution companies;• Investigating the causes of the high justified consumercomplaint rate and strive to lower this rate;• Continuing efforts to reduce the capital project backlogthrough the improved capital project monitoring process;• Determining the causes of high PUC infraction rate andstrive to lower this rate;• Reducing response times to consumer complaints andpayment arrangement requests;• Continuing to reduce the under-representation of womenand minorities within the company’s workforce; and• Striving to reduce distribution expenses by adopting thebest operating practices of other gas distributioncompanies.

Management EfficiencyInvestigation of Equitable Gas

www.puc.state.pa.us

The United States Court of Appeals for the ThirdCircuit is considering a request by the Federal TradeCommission (FTC) to block the purchase of thePeoples Natural Gas Company by Equitable Re-sources, parent of Equitable Gas, until after the FTCcompletes its administrative review of the purchase.In early June, the court granted a request by the FTCfor a temporary injunction to stop the purchase whilethe appeal is pending. The court is expected tomake a final judgment in early October after briefsare filed and arguments are heard.

This case began in March 2006 when EquitableResources and Peoples filed a joint application withthe PUC seeking permission for Equitable Resourcesto acquire the stock of Peoples. Following an investi-gation into the purchase, public input hearings andevidentiary hearings, the PUC approved a settlement,with conditions, among many of the parties. ThePUC’s order, entered April 13, 2007, allowed thepurchase to proceed.

The FTC immediately filed suit in federal districtcourt in Pittsburgh to stop the purchase until the FTCcould complete its investigation. The FTC maintainedthat the purchase could be detrimental to competitionin the Pittsburgh area. It argued that the eliminationof gas-on-gas competition was anti-competitive.

The PUC’s decision found that gas-on-gas competi-tion was unique to Southwestern Pennsylvania whereservice territories overlap. In the past, the PUC hadallowed distribution utilities to discount sales tocustomers who switch to another local distributioncompany. The PUC found that generally, these rateswere subsidized by other customers in the system.The PUC concluded that the potential improvementsto all customers in available gas supply outweighedthe benefits of gas-on-gas competition to a relativefew customers. It found that supplier competition asmandated by the Natural Gas Choice and Competi-tion Act was more desirable than subsidized gas-on-gas competition.

The PUC joined Equitable Resources and DominionResources, the parent of Peoples, in opposing theFTC. On May 14, 2007, the United States DistrictCourt for the Western District of Pennsylvaniagranted the motion of Equitable and Dominion, anddismissed the case. The court said an injunctionwould “interfere and abrogate the statutory duty of thePUC to protect the interest of the public inPennsylvania.”

It was then that the FTC sought an injunction fromthe Third Circuit.

Equitable’s Purchase ofDominion Peoples

Keystone Connection


Activity from April 1, 2007 to July 31, 2007.

Gas Supplier Licensing

14

Number of Licensed NGSs

85 Active Licenses

2 licenses canceled

0 applications pending

1 license approved

www.puc.state.pa.us

Philadelphia Gas WorksRate Filing

On Dec. 22, 2006, Philadelphia Gas Works(PGW) filed a request for an increase in rates of$100 million. The effective date of the rate filingwas suspended by the Commission until Sept.20, 2007, and voluntarily extended by thecompany until Sept. 28, 2007.

Four public input hearings were held in PGW’sservice territory to provide customers with theopportunity to comment on the proposed rateincrease. Evidentiary hearings were held in lateMay. The PUC’s administrative law judges areissued a recommended decision on July 30,2007, for consideration by the Commission. Afinal commission order is expected in mid-September.

On April 27, 2006, PPL Gas filed a tariff supplementproposing to increase base rates by $12.8 million (6.2percent). The administrative law judge’s recommendeddecision, issued on Dec. 8, 2006, recommended a rateincrease of $7.7 million. At the Feb. 8, 2007, public meeting,the Commission adopted an order which authorized PPL Gasto file tariffs to produce revenues not in excess of $8.1 million(3.9 percent).

The Commission on Economic Opportunity, Transcon-tinental Gas Pipe Line, the Hess Corporation, and PPL GasLarge Users Group, the Office of Small Business Advocate,the Office of Consumer Advocate, and the PUC’s Office ofTrial Staff participated in the proceedings.

The average annual residential bill will increase by $80 toabout $1,876 or by approximately 4.5 percent. Thecompany’s proposal would have increased the annual bill foran average residential customer by about $127.

The rates went into effect on or after Feb. 9, 2007. TheCommission also ordered the company to file a proposed LowIncome Usage Reduction Program, including fundingmechanisms, for Commission consideration. PPL Gas servesabout 75,000 customers in 27 counties in Pennsylvania.

PPL Gas Utilities General RateIncrease

Valley Energy RateIncrease

On April 30, 2007, Valley Energy filed for abase rate increase for its gas delivery rates of$638,025 or an approximate 7 percent increase.The average monthly bill for a residentialcustomer using 76 Mcf could increase from$89.04 to $94.29 or by around 6 percent if theentire amount of the request was authorized.The average monthly bill for a commercialcustomer using 311 Mcf could increase from$332.26 to $345.88 or around 5.9 percent if theentire amount of the request was authorized.Bills for other types of customers, includingcustomers purchasing only transportation servicewill also increase.

The major drivers for the increase are thesubstantial increases in operation andmaintenance costs, coupled with increases incosts of materials. Valley Energy has alsoreplaced 1.7 miles of distribution mains and 172service laterals as well as maintaining an ongoingreplacement program which has essentiallyeliminated all of the cast iron pipes on theirsystem.

The company is currently working on aprogram to replace the 4.4 miles of bare steelpipe that remains on its system. Valley Energyprovides natural gas delivery services to around5,500 homes and businesses in Bradford County.

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Energy Price Forecast for August 2007

Wholesale Fuel Prices by Heat ContentData from EIA’s Weekly Gas Report and Weekly Petroleum Status Report

(Unweighted Average)

The Energy Information Agency’s (EIA’s) August 2007Short Term Energy Forecast reports that risingconsumption, the continued effects of production cutsby members of the Organization of Petroleum ExportingCountries (OPEC), and modest increases in non-OPECproduction have pulled oil inventories down. Yet, oilprices have been stable and the average price of retailgasoline declined by more than 40 cents per gallonfrom the record nominal price of $3.22 per gallon onMay 21. In 2007 regular gasoline pump prices are nowexpected to average $2.74 per gallon.

www.puc.state.pa.us

West Texas Intermediate crude oil (WTI) is thebenchmark crude oil in the United States. In 2006 WTIcrude averaged $66.02 a barrel. WTI crude oil is expectedto average around $67.61 per barrel in 2007 and $71.25 in2008.

EIA shows that Henry Hub (Louisiana) wholesale naturalgas prices averaged $6.41 per Mcf in 2006 and areprojected to average $7.45 per Mcf in 2007. For 2008, theHenry Hub average price is projected to move up to anaverage of $8.06 per Mcf.

Additional forecast details can be found athttp://www.eia.doe.gov/oiaf/forecasting.html.

$0.00

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4

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5

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Jul-0

6

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7

$/m

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Natural Gas Henry Hub Spot Price

Crude Oil W. Texas intermediate Spot price

No. 2 Fuel Oil NY Spot Price

Propane Mont Belvieu, Texas

Natural gas


Keystone Connection - Transportation

www.puc.state.pa.us

Rail Safety Inspection ProgramScores High with FRA State Program

The PUC Railroad Safety Inspection Program ranked 5th overallamong the 30 states that conduct inspections in association with theFederal Rail Administration’s (FRA) State Program. The track inspec-tion discipline was ranked first.

The Rail Safety Act of 1970 authorized the states to enter into anagreement with the FRA to conduct inspections of track, equipment,operating practices, hazardous materials and crossing signals in orderto ensure compliance with the FRA’s regulations. Currently 30 stateshave work agreements with the FRA. State programs vary in regard tothe number of inspectors employed and types of disciplines. However,regardless of the program size, all inspectors are required to becertified by the FRA to enforce its safety regulations.

The PUC’s Rail Safety Division employs six inspectors and one su-pervisor. The disciplines covered include track (two certified inspec-tors, one certified supervisor), equipment (two certified inspectors),operating practices (one certified inspector) and hazardous materials(one certified inspector). The Rail Safety Division does not employ asignals inspector. The inspectors conduct daily inspections of variousrailroad facilities, and examinations of safety related records. The railsafety inspectors have achieved the fine ranking based on an excellentevaluation primarily of their quantity and quality of inspection activity.

State programs are ranked by assigning a “score” to the followingcategories: number of inspection days, reports filed, units inspected,defects recorded, defect ratio, and violations submitted. Workcategory scores are totaled for each technical discipline to determinea state discipline score. The program score is a summation of alldiscipline scores. States with inspectors in five disciplines have thehighest program scores. Pennsylvania has four technical disciplines.

Pennsylvania’s overall program was ranked fifth, with Track rankedas first, Motor Power & Equipment was ranked fifth, and OperatingPractices coming in sixth among the states participating in the FRA’ssafety program. The PUC’s activities associated with hazardousmaterial inspections statistics were not included in the FRA’s rankingsbecause the inspector was in trainee status.

Since 2004, the Director of Operations, theLaw Bureau, Office of Human Resources andthe Bureau of Transportation and Safety (BTS)have been working together to evaluate non-lethal personal protection equipment for theMotor Carrier Division enforcement staff. BTShas developed detailed policies and proce-dures for the deployment of chemical sprayand the reporting of incidents. In addition,BTS has procured all necessary equipmentfor the enforcement staff to carry chemicalspray while on duty.

On June 4, five Motor Carrier Divisionenforcement personnel completed aninstructor certification training course aboutthe use of chemical spray for on-dutypersonal protection. The training was thenext step in the process of issuing chemicalspray to the Motor Carrier Division enforce-ment staff. In addition to the five instructors,Chief Wendy Keezel and Safety CoordinatorGerry Clark also attended the training.

The instructor certification course wasprovided as a train-the-trainer concept, whichwill permit the five instructors to providetraining to the remainder of the enforcementstaff. The training covers subjects such as:the properties of the chemical spray(Oleoresin Capsicum), safety and liabilityconsiderations, officer survival techniques,use of force options, and decontaminationtechniques.

It is anticipated that the training of theenforcement staff will be completed by fall.

Enforcement StaffAttends InstructorCertification forChemical Spray

PUC Extends Compliance with Taxiand Limousine Age Requirement

At its May 30, 2007, public meeting, the Commission extended thecompliance date for the eight-year taxicab and limousine vehicle agelimitation until Dec. 31, 2007. This action was taken in response to apetition filed by the PA Taxicab and Paratransit Association (PTPA).

The Commission had established a maximum taxicab and limousinevehicle age requirement of eight model years. This regulation was tobe effective on Aug. 6, 2007. The PTPA had petitioned the PUC todelay the eight-year age requirement until 2009.

The eight-year age requirement also allows for carriers to operateolder vehicles if authorized by the PUC. The PUC delegated thisauthority to the Bureau of Transportation and Safety (BTS) in its order.BTS has developed a procedure for carriers to request permission tooperate vehicles older than eight years. The procedure includes jus-tification for the request, a review of the vehicles maintenance history,a safety inspection at an official Pennsylvania Inspection Station, anda compliance check by a Motor Carrier Enforcement Officer.

Keystone Connection

Keystone Connection - Federal News

FCC Highlights

www.puc.state.pa.us

The Federal Communica-tions Commission (FCC)recently issued several

important orders that impact Pennsylvania.

Establishing Just and Reasonable Rates for LocalExchange Carriers, WC Docket No. 07-135, FinalOrder

On June 28, 2007, the FCC issued a Declaratory Rulingthat interexchange and wireless carriers are not permittedto block calls because a local exchange carrier’s (LEC)access charges are considered unreasonable. The FCCin this Declaratory Ruling clarifies that carriers cannotengage in self help measures by blocking traffic to LECs.The FCC determined previously that no carriers, includinginterexchange carriers, may block or restrict traffic in anyway and has found that call blocking is an unjust andunreasonable practice under section 201(b) of theCommunications Act of 1934, as amended.

IP-Enabled Services; Access to TelecommunicationsRelay Services and Speech-to Speech Services forIndividuals with Hearing and Speech Disabilities,WC Docket No. 04-36, Final Order

On June 15, 2007, the FCC released an order extendingthe disability access requirements to providers of Voiceover Internet Protocol (VoIP) service and to manufacturersof specially designed equipment used to provide thoseservices. The FCC also extends the TelecommunicationsRelay Services (TRS) requirements to providers ofinterconnected VoIP services including contributing to theInterstate TRS Fund and offering 711 abbreviated dialing foraccess to relay services.

Recommendations of the Independent PanelReviewing the Impact of Hurricane Katrina onCommunications Networks, EB Docket No. 06-119, WCDocket No. 06-63, Final Order

On June 8, 2007, the FCC directed its Public Safetyand Homeland Security Bureau to implement severalrecommendations impacting communications networks.In doing so, the FCC adopted rules requiring allincumbent and competitive LECs, as well as wirelesscarriers, to have an emergency back-up power source forall assets that are normally powered from local ACcommercial power. The assets include those insidecentral offices, cell sites, remote switches and digital loopcarrier system remote terminals. The FCC exemptssmaller LECs (those companies that have less than $134million in annual revenues from regulatedtelecommunications operations) from the minimumemergency back-up power requirements. In addition, theFCC is requiring all LECs, wireless service providers, andinterconnected VoIP service providers to analyze and

report on their 911 and E911 networks for redundancy,resiliency and reliability of those networks in accordancewith the schedule established by the Public Safety andHomeland Security Bureau.

Interim Cap on High Cost Universal Service Fund, WCDocket Nos. 05-337, 96-45

On May 1, 2007, the Federal-State Joint Board onUniversal Service recommended that the FCC takeimmediate action to address the explosive growth in high-cost universal service support disbursement. The JointBoard recommended that the FCC immediately impose aninterim, emergency cap on the amount of high-costsupport that competitive eligible telecommunicationscarriers (ETCs) may receive for each state, based on theaverage level of competitive ETC support distributed in thatstate in 2006. The FCC has sought comment on thisrecommendation.

Also, the FCC sought comment on the Joint Board’srecommendation on proposals for long-term,comprehensive reform of the high-cost program, includingthe use of reverse auctions to determine high-costuniversal service support. The FCC also requestedcomment on whether universal service funding should beused to promote broadband deployment directly.

The PA Commission and the Mid-Atlantic Conference ofRegulatory Utility Commissions (MACRUC) states filedreply comments in this proceeding in June.

Numbering Resource Optimization, CC Docket Nos.99-200, 96-98 and 95-116, Final Order

On April 26, 2007, the FCC issued its Fourth Order onReconsideration dismissing petitions requestingreconsideration of the FCC’s service-specific andtechnology-specific overlay (SO) requirements. Thepetitioners argued that a blanket prohibition on SOsshould be reinstated because SOs have discriminatoryeffects against service providers. The FCC determinedthat the petitioners had not presented any new evidence orchanged circumstances and therefore found that it isunnecessary for the FCC to revisit this issue.

Inquiry Concerning the Deployment of AdvancedTelecommunications Capability to All Americans, GNDocket No. 07-45

On April 16, 2007, the FCC issued a Notice of Inquiryinto whether advanced telecommunications capability isbeing deployed to all Americans in a reasonable andtimely fashion. The FCC sought comment on variousmarket, investment and technological trends in order forthe FCC to analyze and assess whether infrastructurecapable of supporting advanced services is beingappropriately deployed. The FCC sought Comments inMay.

FCC HIghlights Continued on Page 22.

17

Keystone Connection


18

FERC Highlights

www.puc.state.pa.us

The Federal Energy Regulatory Commission (FERC)recently issued several important decisions that impactPennsylvania.

Duquesne Light FilingOn Sept. 29, 2006, Duquesne Light Company filed a

petition for a declaratory order for approval of incentiverate treatment for a high-voltage transmission project andFederal Power Act Section 205 formula rate filing in theform of revised tariff sheets to the Duquesne FERC openaccess transmission tariff. The petition requested theCommission to issue a declaratory order approvingcertain incentive treatments authorized by FERC orders679, 679A and 679B in connection with a new high-voltage transmission upgrade project Duquesne isplanning to construct, or cause to be constructed, toenhance reliability of service to the City of Pittsburgh andsurrounding area.

On Feb. 6, 2007, FERC issued an interim order, by a 3-2 vote, conditionally granting Duquesne’s petition fordeclaratory order. FERC granted the incentives requestedand accepted the proposed formula rate, subject toconditions and established hearing and settlementprocedures. FERC stated that:

• Duquesne’s request satisfied FERC’s policy thatthe transmission projects have some nexus toimplementation of new technology or increasedrisk to the company;

• It conditionally concluded that an upwardadjustment regarding the return on equity (ROE)in the upper end of the range of reasonablenessup to 150 basis points was appropriate;

• Inclusion of Duquesne’s construction work inprogress (CWIP) in rate base was appropriate;

• Pre-construction and pre-commercial costs canbe expensed and recovered in current rates; and

• Allowing recovery of prudently incurred costsassociated with abandoned transmission projectswould be appropriate, if the abandonment isoutside of the control of management.

FERC directed the parties and FERC trial staff torequest a settlement judge if they thought that settlementof the hearing issues was appropriate. To date, severalsettlement conferences have been held and negotiationsare continuing.

Trans-Allegheny Interstate Line Company (TrAILCo)In February 2006, Allegheny Power filed a petition for

declaratory order with FERC requesting that theCommission approve incentive rate treatment on aproposed project for a new 500 kV transmission line it isproposing to construct within the Allegheny Powertransmission zone. Allegheny Power sought incentives inthe following: the return on equity, construction work in

progress, preconstruction/preoperating expenses, andabandonment.

In July 2006, FERC issued it order in which it grantedthe petition for declaratory order. In the order FERCapproved the incentive rate treatments proposed by Alle-gheny Power. FERC predicated its approval on AlleghenyPower making a subsequent section 205 filing and heldthat Allegheny Power must demonstrate the justness andreasonableness of its overall rates in that filing.

Between February 2006 and March 2007, AlleghenyEnergy organized a separate entity, TrAILCo, to finance,construct, own, operate and maintain the project. InFebruary 2007, TrAILCo filed tariff sheets regarding theformula rate for inclusion in FERC’s Open AccessTransmission Tariff pursuant to section 205 of the FederalPower Act and also sought approval for an incentivereturn on equity for installation of specific equipment atone of the existing substations. In March 2007, the PUCintervened in the case.

On May 31, 2007, FERC issued an order that requiredTrAILCo to submit a compliance filing. The filing wasrequired to include:

1. A narrative describing TrAILCo’s internalaccounting procedures and controls;

2. Revisions to the tariff to require a filing undersection 205 or 206 of the Federal Power Act priorto modifying the post-employment benefits otherthan pensions expense;

3. Revisions to the tariff requiring a section 205 filingprior to modifying extraordinary property losses;

4. An attestation pursuant to FERC regulationsregarding Period II information;

5. Revisions to the tariff to incorporate theinformational filing with FERC for the annualupdate; and

6. Tariff revisions to correct typographical errors.The order accepted and suspended the proposedformula rates, subject to conditions andestablished hearing and settlement judgeprocedures.

On July 2, 2007, TrAILCo submitted its compliancefiling. The filing included revised tariff sheets to the OpenAccess Transmission Tariff, provided a narrative ofTrAILCo’s internal accounting procedures and controls,and provided an attestation for certain projectedinformation in accordance with FERC’s May 31 Order.

The parties have commenced settlement discussionson this matter, and met as recently as July 19.

Regional Transmission New Additions CostAllocation

FERC recently issued a decision in Docket EL05-121in which it determined that new transmission facilities atvoltage levels of 500 kV and above serve the entire regionas major backbone facilities and the costs of such new

FERC HIghlights Continued on Page 19.

Keystone Connection


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FERC HighlightsContinued from Page 18.

facilities should be borne by all transmission customers. Italso directed that the issue of allocation of sub-500 kVtransmission facility costs be set for further hearing.

On May 21, 2007, in compliance with the April 19, 2007,order, PJM Interconnection submitted a filing containingamendments to Schedule 12-Appendix of the PJM ElectricTariff filed with FERC. The amendments allocate the costresponsibility for 500 kV or above transmission facilities, andlower voltage transmission facilities required to support thehigher voltage facilities included in the PJM RegionalTransmission Expansion Plan, on a region-wide basis ratherthan “beneficiary pays” basis.

On April, 10, 2007, FERC issued an order in which itaccepted PJM’s filing of revised tariff sheets proposing sub-500 kV cost allocation, suspended the effective date subjectto refund, and set the matter for hearing. In addition, theFERC consolidated the cost allocation proceeding at DocketER07-424-000 with the numerous other ongoing transmissioncost proceedings in Docket Nos. ER06-456-000, -001, and-002; ER06-880-000; ER06-954-000; and ER06-1271-000.

The parties have commenced settlement discussions.These discussions are ongoing at this time.

Market Monitoring UnitFERC has long recognized the importance of market moni-

toring in the electricity markets and active market monitoringis a required core function of regional transmission organiza-tions (RTOs). In Order 2000, the commission articulated theimportant role that market monitoring plays in the electricitymarket. Among other duties, RTO market monitors arerequired to be independent of market participants and RTOmanagement, and have an obligation to monitor and reportexercises of market power or gaming, and to recommendimprovements to the wholesale electricity markets.

Recently, FERC reaffirmed its position on the importancethe market monitoring plays in the markets in its May 27,2005 Policy Statement on Market Monitoring Units. In thePolicy Statement, FERC established protocols for referrals forenforcement, reaffirmed the important role of marketmonitoring within the RTO and in assisting FERC in ensuringjust and reasonable rates, and in maintaining markets for thebenefit of end use customers. FERC has continued review ofthe market monitors and held a technical conference on April5, 2007, to review its general policies on market monitoring.

On April 17, 2007, a number of parties including electriccooperatives, state public advocates, and municipalities fileda complaint against PJM, as did the Organization of PJMStates (OPSI) on April 23, 2007. OPSI is an organizationformed by and consisting of all 14 state regulatory commis-sions within the PJM footprint. Both complaints were basedon testimony by the PJM Market Monitor at a April 5, 2007,FERC technical conference that PJM management hadinterfered with the independent market monitoring function

and had sought to remove market monitoring unitemployees and resources.

The complaints raise serious concerns about theindependence of the PJM market monitor from PJMmanagement and PJM’s compliance with its marketmonitoring tariff obligations. The OPSI complaintalso sought interim action by FERC directing thatsupervision of the PJM market monitoring unit beremoved from existing senior PJM managementeither to a joint federal/state board or to a commit-tee of the PJM Board of Managers.

FERC has not yet acted on the complaints,although it submitted data requests to PJM and thePJM market monitor for information. On July 2,2007, PJM sent a letter to FERC seeking to havethe complaints dismissed. The matter continues inlitigation and the Pennsylvania PUC, in coordinationwith OPSI, will continue to play an active role in itsresolution.

National Interest Electric Transmission CorridorDesignations

On May 7, 2007, the Office of Electricity Deliveryand Energy Reliability of the United States Depart-ment of Energy (DOE) published notice of DraftNational Interest Electric Transmission CorridorDesignations in the Federal Register under Section1221 of the Energy Policy Act of 2005. The noticedesignated two large draft national interest electrictransmission corridors: the Mid-Atlantic Areacorridor and the Southwest corridor.

In the Mid-Atlantic area, the Departmentdesignated all or major portions of West Virginia,Pennsylvania, Maryland, Delaware, the District ofColumbia, New Jersey, New York and Virginia, aswell as minor portions of Ohio as a National InterestElectric Transmission Corridor (NIETC), which wouldenable transmission project developers, undercertain circumstances, to seek siting authorizationand eminent domain power from the federal govern-ment instead of state siting authorities. Subse-quently, on June 7, 2007, DOE issued an errata inwhich it amended the notice by adding six countiesin three states to the Mid-Atlantic designation.

On July 6, 2006, the PUC filed comments on thismatter with DOE opposing the draft designation inthe Mid-Atlantic Area. In its comments, the PUCthe draft designation misinterpreted and failed tofollow the legal requirements set forth by Congressfor NIETC designation, failed to make the detailedfactual findings required by Congress, and that theDepartment should not adopt the draft Mid-AtlanticArea national corridor. The PUC will continue toparticipate in this matter on an ongoing basis.

Keystone Connection

Keystone Connection - Consumer News

Improvements to theFormal Complaint Form

With InfoMAP (Information Management and AccessProject) on track for summer 2008 deployment, PUC staff hasbeen working on proposed regulations to permit electronicfilings. A stakeholder meeting on this issue, was held onMay 4, during which interested parties provided their views ona variety of issues, including whether paper copies should berequired, how service on parties should be handled, the sizeand type of documents that may be electronically filed andthe registration of e-users.

After considering that feedback, staff circulated draftproposed regulations on electronic filing on July 11 fordiscussion at a stakeholder meeting to be held on Aug. 13.Staff is also encouraging the submission of written commentseither in lieu of participating in that meeting or as asupplement to discussions held at that time. Thosecomments should be sent to [email protected]. Toaccess a copy of the staff’s proposal or to obtain additionalinformation about InfoMAP, you may go to the PUC’s Website at www.puc.state.pa.us/general/infomap.aspx.

InfoMAP is a $6.6 million project that began in March 2006to replace the PUC’s case management system that wasdeveloped in-house in 1978. Construction of the first phase is88 percent complete and, by the fall of 2007, the PUCexpects to be operating with a new system that automatesworkflows and relies less on paper. Enhancing public accessto information, permitting electronic filings and implementinge-commerce are in the second and third phases.

InfoMAP Update

www.puc.state.pa.us

The PUC has made several improvements to theformal complaint form and to the instructions thataccompany the form. Many of the changes shouldsimplify the process for consumers and ensure thatthey are aware of their obligations and options. Forinstance, the new form describes the legal proceed-ing that is initiated when a formal complaint is filed,and explains when it may be appropriate to use theCommission’s informal complaint process. Some ofthe changes were simply needed to bring the formalcomplaint form into the 21st century, such as inclusionof a space for consumers to indicate their e-mailaddress, if they wish.

In addition, the PUC has developed a special formthat permits consumers to register their objection orcomment on proposed rate increases. This form willgive consumers a streamlined method for expressingtheir views without filing a formal complaint. Their ob-jections and comments will be placed in the officialdocument folder for review by the presiding officer, theparties and the PUC staff. It will also let them know apublic input hearing may be scheduled in their area.

With the new complaint form, consumers will bemade aware of the possibility of having their disputeresolved by mediation. Consumers are also given theoption of contacting the Office of Consumer Advocateor the Office of Small Business Advocate forassistance.

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Commission’sBudget Approved

On June 30, Gov. Edward G. Rendell signed Act 5A of2007 (Senate Bill 795), approving the PUC’s budget forthe fiscal year starting on July 1, 2007. This approvalprovides the PUC with $51.5 million in state funds andauthorizes expenditures of anticipated federal funds in theamount of $2.9 million. The budget, which is slightly lessthan the level authorized for the fiscal year that ended onJune 30, will fully fund the recently negotiated salaryincreases, support a complement of 509, and permit thePUC to fulfill statutory responsibilities in all programareas. With assessments on public utilities of $51.5million, which may be recovered from ratepayers, thePUC’s budget costs the Commonwealth’s 5 million utilitycustomers an average of about $10 per year.

Energy Expo

On Thursday, April 26, PUC Chairman Wendell F.Holland (above) joined Department of GeneralServices Secretary James P. Creedon to kick off the2007 Energy Expo. The Expo was held in the atriumof the Commonwealth Keystone Building. The Expo was part of the state’s Energy Conserva-tion Week, April 22-28, to showcase the state’s workto conserve and reduce energy consumption. The expo featured over 50 vendors who displayedinnovative energy conservation measures and state-of-the-art conservation technology.


Keystone Connection - Commission News

Spotlight on the PUC’s Law Bureau

www.puc.state.pa.us

The Commission’s Law Bureau functions much like a corporatelegal department. While each Commissioner has his or her ownattorney(s), the Law Bureau provides legal services to theCommission as a whole and to individual bureaus within theCommission. The Law Bureau is committed to the Commission’sgoals of balancing the needs of consumers and utilities to ensure safeand reliable utility service at reasonable rates; protecting the publicinterest; educating consumers to make independent and informedutility choices; furthering economic development; and fostering newtechnologies and competitive markets in an environmentally soundmanner. In support of these goals, the three main categories of legalservices provided by the Bureau are advisory, representational, andprosecutory and enforcement.

Advisory services include interpreting state and federal laws andregulations, analyzing court decisions and administrative rulings,ensuring fairness to parties, recommending resolutions in contestedcases, and addressing ethics questions. Advice is provided via formalwritten memos, e-mail, and orally. The opinions rendered areconfidential and not for public disclosure. The Law Bureau alsoprovides legal support to other bureaus on assignments such as tarifffilings, applications for authority, and final adjudication orders.

In addition to advisory work, the Law Bureau represents theCommission before state and federal courts and agencies whenutility-related matters are at issue such as in appeals of decisionsregarding rates or service problems, in rulemaking proceedings andmatters relating to utility competition, and in bankruptcy proceedingsinvolving public utilities. In such matters, the Law Bureau defends theCommission’s actions or presents the Commission’s point of view.For example, the Law Bureau represents the Commission before theFederal Energy Regulatory Commission (FERC), the FederalCommunications Commission (FCC) and, most recently, in federalcourt regarding the Federal Trade Commission (FTC) challenge to theEquitable/Dominion acquisition.

Additionally, the Law Bureau represents the Commission incollaboratives (i.e., non-adversarial) matters, such as the demand sideworking group, the natural gas competition collaborative, and thetelecommunications carrier working group. Personnel litigation andtort claims against Commission employees, however, are typicallyreferred to the Office of the Attorney General or outside counsel.

The third major component of the Law Bureau’s function is to initiateprosecutions and enforcement proceedings against public utilities thatare alleged to have failed to comply with applicable law. For example,the Law Bureau will investigate and file complaints before theCommission against utilities that are alleged to have operated withoutauthority or to have failed to file annual reports, to pay annualassessments, or to maintain adequate insurance or service reliability.If a Commission order or court order is already in place, the LawBureau will represent the Commission by initiating an enforcementaction in Commonwealth Court.

Some Law Bureau assignments involve several functions andtypically come from requests for regulatory action or approval, suchas petitions for waiver of regulations or for a declaratory order tointerpret the law or resolve a controversy, requests for an emergency

order in a situation that requires immediaterelief before the next public meeting, orrequests for an opinion-of-counsel letter toaddress questions of legal interpretation. TheLaw Bureau also investigates allegations ofutility wrongdoing such as false reporting,wasteful spending, and other unlawfulconduct.

The Law Bureau is headed by the ChiefCounsel, Bohdan R. (Buck) Pankiw, and hasthree deputy chief counsels (DCC), presentlyFrank Wilmarth and Robert Young. The thirdDCC position is vacant with the recentretirement of Robert Longwell, who has comeback as an annuitant in CommissionerTerrance J. Fitzpatrick’s office. There are 20assistant counsels, an administrator, anexecutive secretary, a regulatory reviewcoordinator, an appeals clerk, and threesecretarial support staff.

CommissionRetirements Soar

During June alone, the PUC saw 36retirements, representing over 1,000years of service – a millennium of service- to the Commission and theCommonwealth.

Coupled with the 17 retirements fromJanuary through May, over 10 percent ofthe PUC’s complement has retired.During 2007, the PUC said farewell to1,500 years of institutional knowledgethat cannot be replaced. The employeeswho are “left behind” have opportunitiesto advance, learn and meet the chal-lenges created by these departures. Weare confident that the remaining employ-ees will step up to ensure that the PUC’sstatutory duties and mission are fulfilled.

Coming this fall is a PUC Open House. Allinterested parties will be invited to visit us inthe Keystone Building for overview presenta-tion of PUC and bureau responsibilities,building and office tours, as well asopportunities to interact with Commissionersand staff. The date will be announced soon!

Commission toHold Open House

Keystone Connection www.puc.state.pa.us22

Keystone Connection - Commission News

On April 13, 2007, Allegheny Energy applied forauthorization to construct a high voltage line in WesternPennsylvania. The proposed $1.8 billion, 240-mile, 500 kvTrans-Allegheny Interstate Line (TrAIL) will extend fromSouthwestern Pennsylvania, into West Virginia and intoVirginia.

The Commission will hold hearings to consider thenecessity, safety, and environmental impact of the proposedline. The PUC also considers a variety of other issuesincluding need for the proposed line; risk of danger to thehealth and safety of the public; compliance with applicablestatutes and regulations providing for the protection of naturalresources; and minimal adverse environmental impact.

More than 420 consumers have called, written or emailedthe Commission to share their opinions on the proposal.About 25 residents and advocacy groups filed formal protestsin the case.

The Commission’s Office of Administrative Law Judge willconduct technical hearings in addition to public inputhearings. Six public input hearings, which will take place inAugust, are planned for the case. The public input hearingswill be held in the areas affected by the application. Byattending a public input hearing and providing comments,consumers place their views in the official record of the case,which becomes part of the record on which the PUC will baseits decision. The schedule of public input hearings will beannounced shortly.

Trans-Allegheny Interstate Line(TrAIL) Update

Broadband Industry Practices, WC Docket No.07-52

On April 16, 2007, the FCC issued a Notice ofInquiry into broadband industry practices. In thisdocket, the FCC is seeking comment on the natureof the broadband market and related servicesincluding whether network platform providers andothers favor or disfavor particular content. Also, theFCC sought comment in July on how consumers areaffected by these policies and whether consumerchoice of broadband providers is sufficient to ensurethat all such policies ultimately benefit consumers.The FCC also is requesting information on whetherany regulatory intervention is necessary.

Development of Nationwide Broadband Data toEvaluate Reasonable and Timely Deployment ofAdvanced Services to All Americans, WC DocketNo. 07-38

In a related matter, on April 16, 2007, the FCCissued a Notice of Proposed Rulemaking seekingcomment on how the FCC can continue to acquirethe information it needs to develop and maintainappropriate broadband policies. The FCC isrequesting information on the best means to receivesufficient information about the availability anddeployment of broadband services nationwide,particularly in rural and other hard-to-serve areas,including tribal lands. Also, the FCC is seekingcomment on how it can improve the data aboutwireless broadband Internet access and whether itshould modify the speed tier information it currentlycollects. Further, the FCC requested comment inJuly on how the FCC can best collect informationabout subscribership to interconnected VoIP service.

Time Warner Cable Request for DeclaratoryRuling, WC Docket No. 06-55, Final Order

On March 1, 2007, the FCC issued a DeclaratoryRuling that wholesale telecommunications carriersare entitled to interconnect and exchange traffic withincumbent LECs when providing services to otherservice providers, including VoIP service providers.The FCC reaffirmed that wholesale providers oftelecommunications services are telecommunicationscarriers for the purposes of interconnection. The FCCconcluded that state decisions denying wholesaletelecommunications service providers the right tointerconnection with incumbent LECs areinconsistent with section 251 of the CommunicationsAct of 1934, as amended.

FCC HighlightsContinued from Page 17.

retail competition and the potential for price shock as theyexpire. To mitigate the anticipated increases, the PUC willpursue a strategy of educating customers, encouragingconservation, reviewing low-income assistance programs, andencouraging plans that would give customers the option ofphasing in significant increases. He encouraged furtherconsideration of long-term contracts and noted the proposedlanguage specifically restricts the ability of utilities to enterinto long-term wholesale contracts. Lastly, he questioned ifthe systems benefit charge (SBC) is good public policy andopined that it should not be a high priority to provideadditional subsidies to alternative energy projects, especiallywith other pressing issues facing the state.

Daniel Desmond, Deputy Secretary for Energy andTechnology Deployment and Sonny Popowsky, PA ConsumerAdvocate, also testified at this hearing.

Senate HearingContinued from Page 3.

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