PUC Chairman: Commission Will Be Aggressive About Regulating Impact Fee Spending

• Scott Detrow
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  Scott Detrow is a congressional correspondent for NPR. He also co-hosts the NPR Politics Podcast.
  
  Detrow joined NPR in 2015 to cover the presidential election. He focused on the Republican side of the 2016 race, spending time on the campaign trail with Donald Trump, and also reported on the election's technology and data angles.
  
  Detrow worked as a statehouse reporter for member stations WITF in Harrisburg, Pennsylvania, and KQED in San Francisco, California. He has also covered energy policy for NPR's StateImpact project, where his reports on Pennsylvania's hydraulic fracturing boom won a DuPont-Columbia and national Edward R. Murrow Award in 2013.

The Public Utility Commission’s Chairman may be “letting the play come to [it]” when it comes to collecting Pennsylvania’s new impact fee and enforcing local zoning, but Chairman Rob Powelson says the commission will be aggressive about making sure local governments are using their impact fee revenue properly.
The new impact fee – now known as Act 13 – lays out specific guidelines for how municipalities and counties can use the money they receive from natural gas drilling. “There’s prescribed language about what that money can be used for,” Powelson said during a lengthy interview with StateImpact Pennsylvania.  The act lays out thirteen specific areas counties and municipalities can apply fee revenue to, including road and bridge repairs, public safety efforts, property tax cuts, and affordable housing efforts.
“One of the things I feel very strongly about is we will put forth the concept of a conformance report that municipalities and counties will have to fill out, with detailed invoices on where they spent the money,” he added. “I don’t want to be, as chairman of this commission, finding out 18 months down the road that we had some bad actors out there that didn’t spend the money properly. I think that would be a disservice to taxpayers. …So we’re going to be very focused as a fiscal watchdog to make sure the money is spent appropriately, on the appropriate items that are prescribed in the legislation.”

Powelson, who was initially appointed to the commission by Governor Rendell and elevated to chairman last year by Governor Corbett, said the PUC will be equally aggressive about making sure state agencies are using their impact fee money properly.
As for “letting the play come to it,” – a statement Powelson made during a legislative hearing last week – he said he meant “we’re not aggressively going out to municipalities or counties saying, ‘you are required by statute to implement an impact fee.’” Powelson predicted the commission will use the same approach on the local enforcement side. It will wait for drillers to challenge ordinances, rather than seek out zoning regulations that may violate the new statewide standards. “We are simply here to say if they adopt an ordinance, we review the ordinance and move forward. If the cleats overstep the chalk lines, we will take the judicial steps to say, this is the improvement you need to make around that ordinance. And if you don’t make those improvements you’re not eligible for your impact fee money,” he said.
Read and listen to StateImpact Pennsylvania’s full interview with Public Utility Commission Rob Powelson below:

Q: The commission is now going to be tasked with collecting an impact fee, regulating whether local ordinances are “reasonable or not,” and due to separate legislation, regulating pipelines. How many staffers will you need to bring on?

A: In the short-run we’re looking at probably less than 15 hires. When people talk about these two policy initiatives….people think we’re going to have this 50-person ramp up. That’s not the case. And the reason that’s not the case is due in large part to the fact that a lot of that infrastructure is here, right now at the commission. Administrative law judges, we have a bureau of audits, we have an existing law bureau function. …We will be very strategic in how we go about our hiring.  A lot of the new hires we bring on board will have to have that expertise in municipal planning code, and obviously as we deal with Act 127 requirements, a strong focus on gas safety engineers, and getting them out in the field to inspect those Class 2, 3 and 4 pipelines.

Q: So that estimate of 15 people, that includes the inspection side and the regulatory side?

A: I will say if you add the inspection side, we have seven inspectors in the queue. So we have about 22 new hires right now.

Q: During last week’s budget hearing you said that when it comes to administering the new fee, you’re going to “let the play come to [you].” What did you mean by that?

A: There was a question put forth by one of the senators about our role in reaching out to the municipalities and the counties around some of the provisions in Act 13. And the way I responded to that was, we’re going to let the play come to us. Meaning, we’re not aggressively going out to municipalities or counties saying, ‘you are required by statute to implement an impact fee.’ That’s not the case. It’s totally driven by local option. The first deadline will come here on April 14 of this year. We’re under this 60-day approval timeline where counties will have to make a decision whether they’re in or they’re out. Then we get into the next timeline of June 13, where if a county says no, those municipalities are under that 60-day window to make their decision. So when I say let the play come to us, we’re not dictating those terms. It’s prescribed in the legislation for, I think, good reason.  ….From an advisory perspective, if they’re having questions about how to adopt the model ordinance, I believe our law bureau will help from an advisory perspective. But we’re not going to be aggressively out there advocating that the counties and municipalities have to do this. It’s purely local option, and it comes to us at the end of the day when they make that approval.

Collecting The Fee

Q: You’ve said that the Public Utility Commission may outsource that fee collection in the first year to a private company. Why would you need to do that?

A: It’s a massive undertaking, both in the short run and looking down five years from now. We don’t have, built in, the ability to put these IT systems in place, that are better left to the private sector. We actually do this already with the collection and distribution of the universal service fund that many people pay for in their monthly telephone bill. So the model’s already in place.

Q: We’re on a very tight timeline here. Is there enough time to get those bids out and get a competitive bidding process and get a company in place to quickly turn around and collect that fee revenue?

A: We feel very confident we’ll be able to meet that deadline, getting an RFP out on the street beginning in March. And hopefully having a contractor on board no later than June 30. …We have some very aggressive deadlines. For me as the chairman of the Public Utility Commission, my biggest concern, or the thing that would keep me up at night is our inability on December 1 not to be able to meet the deadline to distribute those funds back to communities. I think that would be a failure on our part. ..There’s no room for error on our part.

A: …One of the things I feel very strongly about, if you look at the act …there’s prescribed language about what that money can be used for. One of the things I feel very strongly about is we will put forth the concept of a conformance report that municipalities and counties will have to fill out, with detailed invoices on where they spent the money. I don’t want to be, as chairman of this commission, finding out 18 months down the road that we had some bad actors out there that didn’t spend the money properly. I think that would be a disservice to taxpayers. I think it would be a complete and utter failure of this new legislation. So we’re going to be very focused as a fiscal watchdog to make sure the money is spent appropriately, on the appropriate items that are prescribed in the legislation.

Q: Will you apply that same oversight to the statewide agencies receiving money?

A: I think we’re all in that same boat together, so absolutely.

Policing Local Drilling Regulations

Q: Let’s go to the more controversial aspect of this: the appeals process, and the PUC’s role – some of the people who wrote the bill referred to it as the “umpire” deciding whether or not municipal zoning and regulation is reasonable. Does the PUC do anything like this in other fields right now, that it can build on?

A: We provide – if a local utility wanted to site a transmission line or file for a rate increase – consumers in Pennsylvania have the opportunity to a public input hearing to be heard in front of an administrative law judge. So those same structures are in place under this new regulatory regime.

Q: Who is ultimately going to be making the decision of whether or not municipal zoning fits into the new framework? Is that going to be something that commissioners will vote on each time? Will that be assigned to someone else?

A: We will work through our law bureau. They can provide an advisory opinion on whether the particular ordinance overstepped its bounds. We will be able to do that in a 120 window. I think it’s critically important again to mention that all these interested parties – we’re seeking input from them now, as we speak, that we can hear from them. And we might find out there were certain things we envisioned that might not work. We’re very early into this process.

Q: It seems like you’re saying that as of right now, that determination of whether local ordinances can stand will come from legal staffers within the PUC, but that could change going forward?

A: It could change going forward, but that’s how we envision it. As I stressed earlier, it’s local option. So it’s not the “Big Brother” PUC dictating terms on whether they adopt or not adopt. We are simply here to say if they adopt an ordinance, we review the ordinance and move forward. If the cleats overstep the chalk lines, we will take the judicial steps to say, this is the improvement you need to make around that ordinance. And if you don’t make those improvements you’re not eligible for your impact fee money.

Q: When you’re taking a look at local zoning, local ordinances, are you going to base that determination strictly on what’s in the act, or are you going to consider previous legislation for oil and gas drilling, as well?

A: I think you go off what’s prescribed in the legislation. And there’s a basic provision in the legislation – it’s a kind of boilerplate that the local communities can adopt when they adopt the ordinance. And so I would just, being a big advocate for rule of law, I don’t think we’re going to make up law here at the commission. We’re going to go by what’s prescribed in Act 13.

Inspecting Pipelines

The new impact fee isn’t the only legislation giving the PUC more power over natural gas drilling. An act signed in  December gives the PUC more authority over pipelines transporting natural gas from Marcellus Shale wells.

Q: Earlier this month the commission voted to create a statewide registry of pipelines. Take me through what that does, and how that will help you to start taking a look at these pipelines, through this new legislation.

A: [Act 127 creates] a new responsibility for us. Many people think of us as if there’s an event in the PECO service territory, in their gas distribution network, we send inspectors out. Or Philadelphia Gas Works, UGI, or any one of our number of local gas distribution companies. Well now you take that 46,000 miles of pipeline that we currently do gas safety oversight from, and now you overlay it with Marcellus Shale interstate pipeline being developed. So a tremendous ramp-up for us. A tremendous challenge in finding competent people to be gas safety engineers. Training them, and obviously getting them out in the field to do these inspections. We had not traditionally done that.

Q: There was a bit of confusion when this was passed. These are already-existing federal laws. Why weren’t they being enforced already?

A: The big issue is…that here at the Public Utility Commission we have approximately 15 gas safety inspectors with oversight of 46,000 miles of distribution pipeline. On a national level, [federal regulators] has only 132 inspectors required to cover 50 states. So right then and there, you recognize that we don’t have boots on the ground to properly deal with these gas safety challenges that present themselves. I need not remind anyone of those tragic events in Philadelphia, Allentown, and the west coast, with the San Bruno explosion.

Q: You’ve got about 15 inspectors now. You said you’re going to bring on another 7.

A: And then down the road we probably will bring on another ten. And that’s over a five year period. We have a huge focus now around safety oversight of the Marcellus Shale industry.

 

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