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Librandi lawsuit may affect electricity service; rates could go up in borough, providers could increase

By Dan Miller

danmiller@pressandjournal.com

717-944-4628
Posted 1/3/18

The recently settled crematory lawsuit got more attention, but another legal battle in Dauphin County Court could affect Middletown residents much more in the long run.

At stake is the loss of up …

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Librandi lawsuit may affect electricity service; rates could go up in borough, providers could increase

Posted

The recently settled crematory lawsuit got more attention, but another legal battle in Dauphin County Court could affect Middletown residents much more in the long run.

At stake is the loss of up to an estimated $500,000 in revenue that the borough gets each year from selling electricity to just one industrial customer — the Librandi Machine Shop.

Or think of it this way — that’s $200 added to the tax bill of someone owning property assessed at $100,000 in Middletown, based on 1 mill of taxes bringing in $248,000.

Also, depending on how a judge rules, the Librandi challenge potentially opens the door to other electrical customers in Middletown being able to shop for another energy provider, which would mean the loss of more revenue to the borough.

Librandi sued the borough in December 2016, but recent court filings have shed more light on the lawsuit.

The company is seeking to stop having to buy electricity from Middletown in order to begin buying power from Metropolitan-Edison.

Located on Harrisburg International Airport property, Librandi is partly in Middletown, and partly in Lower Swatara Township.

Librandi in the suit contends it has paid $1 million more to Middletown in “excessive fees for electricity” than Librandi otherwise would have, had the company been buying power from Met-Ed and had Librandi been able to shop for an electric energy provider under the Electricity Choice and Competition Act of 1996.

According to Librandi, Met-Ed has agreed to sell power to the company, but the transfer cannot take place until Middletown deactivates its electric lines to Librandi and takes “steps to cooperate with Met-Ed to secure the transition of electric supply from Middletown to Met-Ed” — something the borough is refusing to do, according to lawyers for Librandi.

Despite Middletown having what amounts to a monopoly on providing electrical service to all businesses and residents within the town’s borders, the Librandi lawsuit makes the case that Met-Ed is authorized to provide service in the borough.

The lawsuit attaches a document from Met-Ed, known as a tariff, in which Met-Ed says that its service territory includes both Lower Swatara Township and the borough.

Lawyers for Librandi also contend that Met-Ed is authorized to provide service in both the township and in Middletown, by virtue of an order handed down from the Pennsylvania Public Utility Commission.

However, the borough in its latest rebuttal in the lawsuit — filed on Dec. 22 — flatly states Met-Ed is not authorized to provide electrical service to Librandi, and as a result the borough is not obligated to coordinate the transfer of electrical service to Librandi from Middletown to Met-Ed.

Furthermore, Librandi “does not have the right to seek more favorable prices from others” regarding the purchase of electricity, lawyers for the borough maintain.

Language in the Met-Ed tariff regarding Met-Ed providing electrical service in Middletown is superseded by language in the borough code protecting the borough from “competing facilities” when it comes to providing electrical service, such as Met-Ed.

The PUC order Librandi refers to is “a verbal opinion” that does not have the force of law and cannot be used to enlarge Met-Ed’s service territory, lawyers for the borough state.

As Librandi notes in the lawsuit, Met-Ed provided electrical service to the company from March 1994, when the machine shop opened on the airport property, to early 1997.

In early 1997, Middletown approached Librandi offering to sell electricity at a cost “significantly below” the rates being charged by Met-Ed. Met-Ed initially resisted the switch, contending that the airport property was Met-Ed’s exclusive territory under an agreement executed between Met-Ed and the Air Force in the 1920s or 1930s, according to lawyers for Librandi.

But Met-Ed eventually relented, and Middletown began providing service at a below market rate to Librandi for about two years, until a court settlement between the borough and Met-Ed “abrograted” Middletown’s favorable rate.

Librandi in the lawsuit contends that Middletown officials at that point pledged that the electric rate would only go up “one cent per kWh (kilowatt hour) over the next 10 years. Instead, Middletown steadily raised its rates on its commercial customers until its rates reached levels almost two times those of Met-Ed.”

Lawyers for Librandi also refer to newspaper articles to document that Middletown “aided its struggling finances by setting unjust and unreasonable electricity rates imposed upon its commercial customers.”

For example, Librandi cited a 2015 PennLive article quoting then-borough Council President Chris McNamara saying that the borough each year was transferring about $2 million in electric department revenue to the general fund, and that as much as $5 million a year had been transferred in the past.

Lawyers for the borough counter that Librandi provides no written evidence to support its claim that the borough said electric rates would only go up one cent per kWh over the next decade.

Regarding Librandi’s contention that the borough keeps its electric rates higher than necessary in order to subsidize the general fund, the borough answers that “it is lawful for the borough’s rates to include a rate of return (or profit) on the system.”

The borough further contends that comparing the borough’s electrical rate with the rate charged by an electric generation supplier located outside the borough is invalid.

“The reasonableness or unreasonableness of the borough’s rate is not measured by comparing the borough’s rates with the rates charged by others for electrical distribution and electric generation services,” the borough says.

The borough also cites a Commonwealth Court decision that upheld the PUC refusing to allow a customer to switch to a different entity for electricity services just to save money.

The PUC and the court both determined that any electric cost savings for the industrial customer “did not justify the transmission line project expenditures that would be required to duplicate existing facilities,” the borough lawyers pointed out.