On January 8, 2025, the Pennsylvania Public Utility Commission (PA PUC) reversed its longstanding enforcement stance, holding that landlords will be regulated as a “gas pipeline operators” when furnishing gas to their tenants using behind-the-meter gas distribution systems on their properties. In addition to aboveground and underground pipelines, the commission now claims jurisdiction over gas piping contained entirely within buildings.
In its opinion and order in Pennsylvania Public Utility Commission, Bureau of Investigation and Enforcement v. Westover Property Management Company, L.P., Docket Nos. C-2022-3030251 & P-2021-3030002 (Order entered Jan. 8, 2025), the PA PUC found that several of Westover’s apartment buildings and complexes contained “Master Meter Systems.” In turn, the PA PUC determined that Westover qualifies as a pipeline operator under the federal regulations.
The PA PUC’s unprecedented interpretation will require any landlord—regardless of size and whether they own one building or many in one complex—to comply with federal gas pipeline safety laws, including the federal Pipeline Safety and Hazardous Materials Administration, which have historically only applied to natural gas distribution companies and gas pipeline operators. Further, the PUC held that submetered properties are defined as master meter systems when meeting the other factors of the definition. These new, onerous and costly requirements include registration, operation, maintenance and reporting obligations, undoubtedly resulting in increased costs to landlords.
In 2012, the Pennsylvania Legislature enacted Act 127, which gave the PUC jurisdiction over gas pipeline operators, other than public utilities, for purposes of enforcing federal pipeline safety standards and regulations. The PA PUC has historically stated that it would not consider gas systems operated entirely on the landlord’s own property to be pipelines to which the federal gas safety laws would apply. However, the PA PUC changed course in approximately 2021, when the PA PUC Bureau of Investigation & Enforcement began investigating landlords as master meter operators and threatening enforcement if the landlords would not voluntarily agree to subject themselves to commission jurisdiction.
The PA PUC’s new classification may ultimately be applied beyond the multifamily residential realm, potentially reaching industrial and commercial operators, educational and healthcare institutions, and submetering companies.
Westover has until February 7, 2025, to appeal, but regardless of the ultimate resolution of the Westover matter, the PA PUC’s decision is destined to spark a discussion at the Legislature about how to adequately ensure gas pipeline safety without imposing burdensome and costly regulatory requirements upon landlords.
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Duane Morris helps clients who are property owners, developers, lenders and submetering providers comply with various regulations and utility-related disputes.
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