State v. Mo. Pub. Serv. Comm'n

408 S.W.3d 153

STATE of Missouri ex rel. KCP & L GREATER MISSOURI OPERATIONS COMPANY, AG Processing, Inc., and Office of the Public Counsel, Appellants,

v.MISSOURI PUBLIC SERVICE COMMISSION and Dogwood Energy, LLC, Respondents.

Nos. WD 75038, WD 75057, WD 75058.

Missouri Court of Appeals, Western District.

May 14, 2013.

Motion for Rehearing and/or Transfer to Supreme Court Denied June 25, 2013.

Application for Transfer Denied Oct. 1, 2013.

Karl Zobrist, Lisa A. Gilbreath, Wade Carr, and Roger W. Steiner, Kansas City, MO, Attorneys for Appellant KCP & L Greater Missouri Operations Company.

Jeremiah D. Finnegan and Stuart W. Conrad, Kansas City, MO, Attorneys for AG Processing, Inc.

Lewis R. Mills, Jr., Public Counsel, Jefferson City, MO, Attorney for Appellant, Office of the Public Counsel.

Jennifer Heintz, Jefferson City, MO, Attorney for Respondent, Public Service Commission.

Carl J. Lumley and Leland B. Curtis, St. Louis, MO, Attorneys for Respondent Dogwood Energy, LLC.

Before Division I: MARK D. PFEIFFER, Presiding Judge, and VICTOR C. HOWARD and ALOK AHUJA, Judges.

MARK D. PFEIFFER, Presiding Judge.

This appeal challenges the Public Service Commission's (“PSC”) May 4, 2011 Report and Order, as clarified and modified by Order issued May 27, 2011, that ordered KCP & L Greater Missouri Operations Company (“KCP & L–GMO”) to file tariffs comporting with the PSC's findings in that Report and Order and Order of Clarification and Modification. Three parties to the proceedings before the PSC appeal: KCP & L–GMO, AG Processing, Inc. (“AGP”), and the Office of the Public Counsel (“OPC”). Dogwood Energy, LLC, was allowed to intervene and participate as a party respondent in this appeal.

Factual and Procedural Background ¹

The PSC is a state agency established by the Missouri legislature to regulate public utilities operating within the state. KCP & L–GMO is an electrical corporation within the meaning of section 386.020(15), and a public utility within the meaning of section 386.020(43), subject to the jurisdiction, control, and regulation of the PSC.² KCP & L–GMO was formerly known as Aquila, Inc. (“Aquila”). It changed its name after being acquired in 2008 by Great Plains Energy, Inc. (“GPE”), the parent of Kansas City Power & Light Company. KCP & L–GMO's service area is divided into two separate rate districts, referred to as MPS and L & P. The MPS rate district includes parts of Kansas City, Lee's Summit, Sedalia, Warrensburg, and surrounding areas. The L & P rate district is in and around St. Joseph, Missouri. To serve its customers, KCP & L–GMO owns generating capacity and also purchases power.

KCP & L–GMO initiated this case on June 4, 2010, by filing proposed tariff sheets with the PSC. The tariffs were designed to implement a general rate increase for electrical service in KCP & L–GMO's Missouri service area. KCP & L–GMO's proposed tariffs were designed to recover an additional $75.8 million per year in rate revenues from its customers in the MPS rate district, and an additional $22.1 million per year in rate revenues from its customers in the L & P rate district. The tariff sheets proposed an effective date of May 4, 2011, but KCP & L–GMO voluntarily extended the tariff effective date until June 4, 2011. Notice of the filing of the proposed tariffs was issued by the PSC on June 22, 2010. The PSC allowed AGP, Dogwood, and nineteen others to intervene in the matter. AGP is an agricultural cooperative that operates a major soybean processing facility in St. Joseph, Missouri, and is among the largest electrical customers of KCP & L–GMO in the L & P rate district. Dogwood is both a retail power customer of KCP & L–GMO and a wholesale power supplier to KCP & L–GMO.

Subsequently, the PSC held local public hearings in six cities. The main evidentiary hearing in this matter was held from January 14 through February 4 and February 14 through February 17, 2011. A true-up hearing was held on March 3–4, 2011.

The PSC's Report and Order rejecting the tariffs was issued on May 4, 2011. It required KCP & L–GMO to file tariffs in compliance with the Report and Order by May 12, 2011, which KCP & L–GMO did. Staff requested changes to the fuel adjustment clause (“FAC”) sheets, and KCP & L–GMO filed revised and substituted tariff sheets on May 16 and 17. On May 16, 2011, KCP & L–GMO filed its request to shorten the effective date of the compliance tariffs to June 4, 2011, which the PSC granted.

On May 26, 2011, the PSC held an on-the-record argument of the points raised in multiple applications for rehearing, motions for clarification, and objections to the tariff sheet submissions. The next day, the PSC issued its May 27, 2011 Order of Clarification and Modification, with an effective date of June 3, 2011. The Order rejected certain proposed tariff sheets and ordered KCP & L–GMO to file new tariff sheets to comply with the PSC's clarifications and modifications. The PSC set a deadline of June 2, 2011, for parties to file objections to the revised tariffs to allow them to go into effect on June 4, 2011. The PSC found good cause to grant expedited treatment of all but certain portions of KCP & L–GMO's compliance tariffs to become effective on less than thirty days' notice under section 393.140(11). The May 27 Order also extended the effective date of the FAC tariffs to July 2, 2011.

On May 31, 2011, KCP & L–GMO filed revised compliance tariffs to become effective on June 4, 2011, and FAC compliance tariffs to become effective on July 1, 2011. On June 1, 2011, KCP & L–GMO filed substitute tariff sheets with an effective date of June 4, 2011. The OPC objected to the compliance tariffs on June 1 and June 2. In response to the objections to the revised compliance tariffs, the PSC ordered that the compliance tariffs be suspended until June 18, 2011. The PSC set a deadline of June 8 for any additional objections to be filed. The OPC filed further objections and responses to KCP & L–GMO's arguments on June 8, 2011. The PSC found good cause to allow the tariffs to go into effect on less than thirty days' notice, and ordered the May 31 compliance tariffs to go into effect on June 25, 2011, and the May 31, 2011 FAC compliance tariffs to go into effect on July 2, 2011. The PSC had rejected KCP & L–GMO's request of a $97.9 million rate increase in favor of a $59.4 million rate increase, allocating $30,142,949 to the MPS rate district and $29,293,182 to the L & P rate district.

Petitions for review were filed in the Circuit Court of Cole County on June 24, 2011, by KCP & L–GMO; on June 30, 2011, by AGP; and on July 19, 2011, by the OPC. These matters were consolidated. The circuit court granted Dogwood's motions to intervene in the consolidated cases. On February 16, 2012, the circuit court issued its Judgment, finding that the PSC's Report and Order was both lawful and reasonable, and affirming the Report and Order in all respects.

KCP & L–GMO, AGP, and the OPC each filed a separate notice of appeal from the circuit court. The appeals were ordered consolidated, and Dogwood's motion to intervene as a respondent was sustained. Further details regarding the relevant disputed issues will be presented as applicable in the analysis section following.

Standard of Review

On appeal, we review the decision of the PSC rather than that of the circuit court. State ex rel. Praxair, Inc. v. Mo. Pub. Serv. Comm'n, 344 S.W.3d 178, 184 (Mo. banc 2011). “Under section 386.510, the appellate standard of review of a PSC order is two-pronged: first, the reviewing court must determine whether the PSC's order is lawful; and second, the court must determine whether the order is reasonable.” Id. (internal quotation omitted). The PSC's order is prima facie lawful and reasonable. § 386.270. The burden of proof is upon the party attacking the order to show by clear and satisfactory evidence that the order or determination of the PSC is unlawful or unreasonable. § 386.430.

“The lawfulness of an order is determined by whether statutory authority for its issuance exists, and all legal issues are reviewed de novo.” Praxair, Inc., 344 S.W.3d at 184 (internal quotation omitted).

“The decision of the [PSC] is reasonable where the order is supported by substantial, competent evidence on the whole record[,] the decision is not arbitrary or capricious or where the [PSC] has not abused its discretion.” Id. (internal quotation omitted).

The PSC is required to make and file written findings of fact “upon all matters concerning which evidence shall have been introduced before it which in its judgment have bearing on the value of the property ” of the electrical corporation affected. § 393.230.2 (emphasis added). “The [PSC's] factual findings are presumptively correct, and if substantial evidence supports either of two conflicting factual conclusions, [we are] bound by the findings of the administrative tribunal.” State ex rel. AG Processing, Inc. v. Pub. Serv. Comm'n, 120 S.W.3d 732, 735 (Mo. banc 2003) (internal quotation omitted).

Mootness

On February 27, 2012, KCP & L–GMO again filed tariffs seeking revenue increases for its MPS and L & P rate districts. At oral argument, the parties conceded that the tariffs that are the subject of this appeal have been superseded by tariffs approved by the PSC in a Report and Order with an issue and effective date of January 9, 2013.³ Certain of the issues addressed in the January 9, 2013 Report and Order, which is now on appeal before this court, had also been ruled upon in the May 4, 2011 Report and Order, which is the subject of this appeal.

In light of this intervening event, we must first decide whether we should dismiss this appeal in its entirety or in part because the issues are moot. “A threshold question in any appellate review of a controversy is the mootness of the controversy.” State ex rel. Praxair, Inc. v. Pub. Serv. Comm'n, 328 S.W.3d 329, 333–34 (Mo.App. W.D.2010) (internal quotation omitted). An issue or a case...