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.
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.
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
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.
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.
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).
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.
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 is moot when "intervening events make a decision unnecessary[,] and it is impossible for this [c]ourt to grant effectual relief"; that is, when "the question presented for decision seeks a judgment upon some matter which, if the judgment was rendered, would not have any practical effect upon any then existing controversy." Id. at 333-34 (internal quotation omitted).
"When tariffs are superseded by subsequent tariffs that are filed and approved, the superseded tariffs are generally considered moot and therefore not subject to consideration because superseded tariffs cannot be corrected retroactively." Id. at 334 (internal quotation omitted). However, the parties have requested that we exercise our discretion to invoke an exception to the mootness doctrine and review the issues in this case. We have recognized that "`[i]t is not unusual in public-utility rate cases for new tariffs to overtake proceedings involving old tariffs.'" Id. at 334 (quoting State ex rel. City of Joplin v. Pub. Serv. Comm'n, 186 S.W.3d 290, 296 (Mo.App. W.D.2005)). "Invocation of [an] exception to the mootness doctrine is within this [c]ourt's discretion when it is demonstrated that the case in question presents an issue that[:] (1) is of general public interest; (2) will recur; and (3) will evade appellate review in future live controversies." Id. at 334-35.
Certain of the issues in this case are currently pending appellate review in a present live controversy or are fact specific and have been superseded by new or additional facts evaluated by the PSC in the January 9, 2013 Report and Order. We thus believe not only that those issues are moot, but that they also fail to fall within the exception to the mootness doctrine justifying the exercise of our discretion to examine those issues: the OPC's point alleging unlawfully approved tariff sheets with an effective date less than the statutorily prescribed length of time; KCP & L-GMO's Point I regarding the valuation of Crossroads Energy Center; and KCP & L-GMO's Point III regarding the PSC's calculation of Crossroads' Accumulated Deferred Income Tax. Other issues in this case involve whether the PSC lawfully exercised its authority. These are legal issues of general public interest, the issues are recurring in nature, and these issues are susceptible to evading appellate review; thus, we elect to exercise our discretion under the exception to the mootness doctrine to examine the following issues in this case: KCP & L-GMO's Point II regarding the PSC's disallowance of transmission costs from recovery in rates and AGP's points relating to the difference between the PSC's rates and allocations and those requested by the utility.
The three issues raised by KCP & L-GMO in its appeal all relate to the determinations
Located in Clarksdale, Mississippi, Crossroads is a 300 megawatt ("MW") simple-cycle electric generation peaking plant that consists of four natural gas-fired combustion turbines. Aquila Merchant purchased eighteen 75 MW combustion turbines and used four of them at Crossroads and installed ten of them at its two Illinois energy centers. Aquila Merchant sold both of its Illinois energy centers to Union Electric Company, d/b/a AmerenUE, at substantially below book value in 2006.
Aquila relied exclusively on purchased power to meet its retail customers' demands for electricity until it built South Harper, a regulated generating unit, in 2005 in Peculiar, Missouri. Because KCP & L-GMO decided to install only three instead of five combustion turbines at the regulated generating unit, KCP & L-GMO had to satisfy the remainder of its capacity needs by purchasing power. KCP & L-GMO determined that Crossroads was the lowest cost option for meeting its purchased power requirements.
In February 2007, GPE announced that it was seeking to acquire the Missouri regulated electric operations of Aquila, KCP & L-GMO's predecessor, and Crossroads. In 2008, after GPE acquired Aquila, the Crossroads unit was transferred to the regulated books of KCP & L-GMO.
In its first point, KCP & L-GMO asserts that the PSC's Order is unlawful and unreasonable because the PSC erred in valuing Crossroads at $61.8 million.
Given the fact-specific nature of this rate issue that has been superseded by a subsequent rate order involving additional facts not present in the record relating to the current proceeding, KCP & L-GMO's Point I is denied, as the issue on appeal is moot.
In its second point, KCP & L-GMO argues that the PSC erred in disallowing transmission costs associated with delivering power from Crossroads to KCP & L-GMO's customers in Missouri from recovery in rates. KCP & L-GMO contends that the PSC's findings of fact and conclusions of law on this issue are insufficient, that the disallowance was logically inconsistent with its conclusion that Crossroads was the prudent choice because it was the overall lowest cost option, and that the disallowance unlawfully "traps" transmission costs incurred under a federally approved rate in violation of the filed rate doctrine and the Supremacy Clause.
KCP & L-GMO asserts that the PSC's findings of fact and conclusions of law on the transmission cost issue are conclusory and do not explain the PSC's rationale for disallowing the transmission costs. Part of Staff's argument for removing Crossroads from KCP & L-GMO's cost of service was the cost of transmission to move energy from Crossroads in Mississippi to KCP & L-GMO's service territory in Missouri. KCP & L-GMO argued that the cost of transmission was offset by the lower gas reservation costs. Whenever an investigation is made by the PSC, section 386.420.2 requires it to "make a report in writing in respect thereto, which shall state the conclusions of the commission, together with its decision, order or requirement in the premises." The PSC is
"Whether or not the commission made adequate findings of fact is an issue of law for our independent judgment." State ex rel. Pub. Counsel v. Pub. Serv. Comm'n, 274 S.W.3d 569, 577 (Mo.App. W.D.2009). Our standard of review is flexible. Id. Findings are adequate if they are "sufficiently definite and certain or specific under the circumstances of the particular case to enable the court to review the decision intelligently and ascertain if the facts afford a reasonable basis for the order without resorting to the evidence." Id. (internal quotation omitted). "Findings are inadequate if they cause us to speculate as to which part of the evidence the commission believed." Id.
We have no difficulty understanding the basis for the PSC's decision to disallow the excessive transmission costs from recovery in rates. Those findings include the following. The PSC found that the estimated monthly cost of transmission to move energy from Crossroads to customers served by MPS was $406,000, which is far greater than the transmission costs for power plants located in the MPS district. The PSC noted that while this higher transmission cost is ongoing and will be paid every year that Crossroads is operating to provide electricity to customers located in and around Kansas City, Missouri, KCP & L-GMO does not incur any transmission costs for its other production facilities located in the MPS district that provide service in the district. The PSC excluded the excessive transmission costs from recovery in rates because "[i]t is not just and reasonable to require ratepayers to pay for the added transmission costs of electricity generated so far away in a transmission constricted location."
KCP & L-GMO argues that the PSC's disallowance of transmission costs associated with the delivery of power from Crossroads from KCP & L-GMO's rate base was logically inconsistent with its conclusion that Crossroads was the prudent choice because it was the overall lowest cost option. The PSC determined that KCP & L-GMO's decision to include Crossroads in KCP & L-GMO's generation fleet at an appropriate value was prudent — with the exception of the additional transmission expense. One of the benefits of Crossroads was that the natural gas shipped to Crossroads typically comes from a different supply region than natural gas shipped to KCP & L-GMO's generating station located in Peculiar, Missouri. Thus, with Crossroads in its portfolio, KCP & L-GMO could take advantage of short-term pricing disparities and generate electricity from a region with lower priced natural gas. However, the lower prices at Crossroads are offset by significantly higher electric transmission costs, estimated at $406,000 per month.
The PSC found that it would be unjust and unreasonable to require ratepayers to pay for the added transmission costs of electricity generated at Crossroads in a transmission constricted location in Mississippi. The ongoing transmission cost associated with Crossroads is a cost that KCP
The PSC has the duty to set rates that are "just and reasonable"; any unjust or unreasonable charge is prohibited. § 393.130.1. The PSC employs a "prudence" standard to determine whether a utility's costs meet this statutory requirement. State ex rel. Associated Natural Gas Co. v. Pub. Serv. Comm'n, 954 S.W.2d 520, 528 (Mo.App. W.D.1997). If a utility's costs satisfy this standard, the utility is entitled to recover those costs from its customers. Id. The PSC has defined its prudence standard:
Id. (internal quotation omitted). In this case, Staff raised a serious doubt about the prudence of including the transmission costs. In fact, Staff argued that the cost of transmission to move energy from Crossroads in Mississippi to KCP & L-GMO's service territory justified, in part, removing Crossroads from KCP & L-GMO's cost of service entirely.
In order to disallow a utility's recovery of costs from its ratepayers, the PSC must find both that "(1) the utility acted imprudently, [and] (2) such imprudence resulted in harm to the utility's ratepayers." Id. at 529. In its decision, the PSC explains how the presumption of prudence was overcome by the fact that the cost of transmission to move energy from Crossroads to customers served by MPS was far greater than the transmission costs for power plants located in the MPS rate district. The PSC also determined that the estimated annual transmission cost of $406,000 per month would be an ongoing cost paid every year that Crossroads operates to provide electricity to customers located in and around Kansas City, Missouri. In contrast, KCP & L-GMO does not incur any transmission costs for its other production facilities located in its MPS rate district that are used to serve customers in that district. The PSC found that it would not be just and reasonable to require ratepayers to pay for the added transmission costs of the electricity generated at Crossroads. Because the PSC made the decision on the recoverability of transmission costs based on a prudency analysis that considered both the prudence of including the transmission costs and the resulting harm to the ratepayers if such costs were included, the PSC's decision denying recovery was lawful. We also conclude that the PSC's decision to deny KCP & L-GMO recovery of transmission costs was reasonable.
As part of the transmission path to get power from the Crossroads plant in Mississippi to the Kansas City area, KCP & L-GMO takes transmission service from Entergy Services, Inc. ("Entergy"), an integrated energy company engaged primarily in electric power production and retail distribution operations.
The federal preemption and filed rate doctrine invoked by KCP & L-GMO involves the relationship between the federal and state rate-setting authorities. FERC regulates the transmission and sale of electric energy in interstate commerce and the sale of such energy at wholesale in interstate commerce; however, such regulation extends only to those matters that are not subject to regulation by the states. 16 USC § 824(a). "Because of the potential conflict between the federal and state rate-setting agencies, the `filed rate doctrine' was developed as an outgrowth of straightforward principles of [f]ederal preemption and the Supremacy [C]lause." Associated Natural Gas Co., 954 S.W.2d at 530 (citing Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953, 963, 106 S.Ct. 2349, 90 L.Ed.2d 943 (1986); Ark. La. Gas Co. v. Hall, 453 U.S. 571, 577, 101 S.Ct. 2925, 69 L.Ed.2d 856 (1981)). The filed rate doctrine requires "that interstate power rates filed with FERC or fixed by FERC must be given binding effect by state utility commissions determining intrastate rates." Nantahala, 476 U.S. at 962, 106 S.Ct. 2349. The filed rate doctrine prohibits a state regulatory commission from "trapping" FERC-approved costs by preventing a distributor from fully recovering those costs from its retail customers. Id. at 970, 106 S.Ct. 2349.
The PSC points out that its decision had nothing to do with whether the transmission rates charged by Entergy to transport power from Crossroads in Mississippi to Missouri are just and reasonable, and therefore does nothing to call a FERC-approved Entergy tariff into question. We agree.
What the PSC did decide was that it would be unjust and unreasonable to allow KCP & L-GMO to both reap the benefit of energy producing cost savings at Crossroads (due in part to short-term pricing disparities and utilization of regionally lower priced natural gas used in energy production) and to recover the otherwise unnecessary transmission costs of the energy from Mississippi to Missouri. In fact, Staff went so far as to argue that the otherwise unnecessary cost of energy transmission justified, in part, removing Crossroads from KCP & L-GMO's cost of service entirely (as Crossroads was not the only energy production option available to KCP & L-GMO to service the two relevant rate districts in Missouri). The PSC rejected Staff's recommendation regarding Crossroads and, instead, included Crossroads in KCP & L-GMO's rate base but disallowed the cost of energy transmission (from Mississippi to Missouri) from chargeable rate expenses.
In effect, the PSC relented and granted KCP & L-GMO its requested option of using a distant energy producing facility so that it could take advantage of revenue opportunities, but required KCP & L-GMO to bear the burden of getting that energy to Missouri since other Missouri energy production options in the relevant Missouri rate districts bore no transmission expense whatsoever. The PSC did not conclude that Entergy's transmission service rate was unreasonable; instead, the PSC concluded that it was unreasonable for KCP & L-GMO to pass through otherwise unnecessary transmission costs to ratepayers when KCP & L-GMO is the one that wanted to conduct energy speculation operations in a transmission constricted location hundreds of miles away
KCP & L-GMO relies on Nantahala, 476 U.S. 953, 106 S.Ct. 2349, in which the Supreme Court considered the preemptive effect of a FERC order that reallocated the respective shares of two affiliated companies' entitlement to low-cost energy. Under an agreement between the two affiliated companies, Nantahala, a public utility selling to both retail and wholesale customers in North Carolina, had been allocated 20% of the low-cost energy purchased from the Tennessee Valley Authority ("TVA"), while 80% was reserved for the affiliate whose only customer was their common parent company. Id. at 956, 106 S.Ct. 2349. FERC found that the agreement was unfair to Nantahala and ordered it to file a new wholesale rate schedule based on an entitlement to 22.5% of the low-cost energy purchased from TVA. Id. at 958, 106 S.Ct. 2349. Subsequently, in a retail rate proceeding, the North Carolina Regulatory Commission ("NCRC") reexamined the issue, pooled the various sources of power available to the affiliates, and then allocated the pooled power according to demand, which resulted in an allocation of energy that did not take into account FERC's allocation of that same energy. Id. at 960-61, 106 S.Ct. 2349. The Court held that the NCRC could not order Nantahala to calculate its rate based on a different allocation percentage than that ordered by FERC. Id. at 969, 106 S.Ct. 2349. The facts of this case and Nantahala are distinguishable. Here, there is no FERC-required allocation of power between affiliates that the PSC is disturbing and, likewise, no dueling allocation percentages advocated by the PSC in contradiction to a FERC allocation percentage. In short, the PSC's 2011 Report and Order does not conflict with any FERC orders and, as such, the Nantahala case is inapposite to the present appeal.
KCP & L-GMO also relies on Mississippi Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354, 356, 108 S.Ct. 2428, 101 L.Ed.2d 322 (1988), in which the Mississippi Public Service Commission ("MPSC") granted an electric utility an increase in its retail rates to enable it to recover the cost of purchasing an allocation of nuclear plant power mandated by FERC. The Mississippi Supreme Court reversed the decision, holding that the MPSC exceeded its authority by adopting retail rates to pay nuclear power plant expenses without first determining that the expenses were prudently incurred and that such prudence inquiry would not violate the Supremacy Clause. Id. The Supreme Court held that FERC proceedings preempted the MPSC's inquiry into prudence of management decisions that led to construction and completion of the nuclear power plant. Id. at 370, 108 S.Ct. 2428. According to the Court, "States may not alter FERC-ordered allocations of power by substituting their own determinations of what would be just and fair. FERC-mandated allocations of power are binding on the States, and States must treat those allocations as fair and reasonable when determining retail rates." Id. at 371, 108 S.Ct. 2428. Again, the facts of this case and Mississippi Power are distinguishable, as FERC has not ordered KCP & L-GMO to purchase power from Crossroads to meet its energy supply needs in Missouri; furthermore, no FERC-approved cost allocations between affiliated energy companies have been subjected to reevaluation in this state ratemaking proceeding. Thus, the Mississippi Power is equally inapposite to this appeal.
State ex rel. City of West Plains v. Pub. Serv. Comm'n, 310 S.W.2d 925, 928 (Mo. banc 1958). For reasons previously identified herein, we find that the PSC's decision to disallow the transmission expense associated with bringing power from Crossroads to Missouri is lawful, reasonable, and supported by substantial and competent evidence in the record.
KCP & L-GMO's Point II is denied.
In its third point, KCP & L-GMO asserts that the PSC erred in calculating the amount of Crossroads' Accumulated Deferred Income Tax ("ADIT").
Given the fact-specific nature of this rate issue that has been superseded by a subsequent rate order involving additional facts not present in the record relating to the current proceeding, KCP & L-GMO's Point III is denied, as the issue on appeal is moot.
Both of AGP's points assert that the PSC erred in granting rate increases in excess of the amount requested by the utility. In considering AGP's challenge to the PSC's rates and allocations, we start from the premise that the rates are lawful and reasonable. State ex rel. Midwest Gas Users' Ass'n v. Pub. Serv. Comm'n, 976 S.W.2d 485, 492 (Mo.App. W.D.1998). See § 386.270. The burden of proof is on AGP to prove otherwise by clear and convincing evidence. § 386.430.
In its first point, AGP contends that the PSC erred by exceeding its statutory authority and violated due process in granting KCP & L-GMO a rate increase for the L & P service area of $7 million in excess of the $22.1 million annual rate increase sought in KCP & L-GMO's filed tariffs, contained in the public hearing notice, and on which both public and technical hearings were held.
Id. (quoting Weinbaum v. Chick, 223 S.W.3d 911, 913 (Mo.App. S.D.2007)).
Here, the PSC ordered KCP & L-GMO to provide an individual notice to each of its customers in its Missouri service areas of the public hearings scheduled on KCP & L-GMO's rate increase request. Included in the notice was the following information:
The notice also included the dates, times, and locations of the public hearings and invited members of the public to make their views on the request known to the PSC. After providing reasonable notice to interested persons, a full hearing on KCP & L-GMO's tariff request, and consideration of all relevant factors, the PSC entered its Report and Order. We conclude that the notice reasonably apprised ratepayers of the nature and the extent of the possibility of rate increases and the public hearings reasonably afforded ratepayers with the opportunity to be heard with regard to the proposed rate increases. Accordingly, the constitutional requirements of due process were satisfied in this case.
AGP also argues that the tariff filed by the utility with the PSC fixes the aggregate level of revenues in the case, and the PSC is without statutory authority to approve rates in excess of the utility's request. Because, as the factual summary indicates, the aggregate rates set by the PSC were not higher than KCP & L-GMO sought (in fact, the rates were lower than KCP & L-GMO originally proposed: $97.9 million requested; $59.4 million granted), AGP is, in essence, arguing that the PSC erred in adopting a different method of allocating the supply/costs of Iatan 2 between the MPS and L & P rate districts than that proposed by KCP & L-GMO. KCP & L-GMO proposed allocating 41 MW of Iatan 2 to the L & P service area, and the remaining 112 MW to the MPS service area; Staff recommended allocating 53 MW of Iatan 2 to the L & P rate jurisdiction and 100 MW to the MPS service area. Staff's recommendation would necessarily result in a higher percentage rate increase to L & P customers than that proposed by KCP & L-GMO in its overall aggregate rate increase request.
The impact of the PSC's Order was not to grant KCP & L-GMO a greater aggregate rate increase than that requested; instead, the PSC's Order granted an aggregate rate increase that was $38.5 million less than KCP & L-GMO requested along with a corresponding allocation of that rate increase that was different than that requested by KCP & L-GMO. "[A] public utility may by filing schedules suggest to the [PSC] rates and classifications which it believes are just and reasonable, and, if the [PSC] accepts them, they are authorized rates[;] but the [PSC] alone can determine that question and make them a lawful charge." May Dep't Stores Co. v. Union Elec. Light & Power Co., 341 Mo. 299, 107 S.W.2d 41, 50 (1937) (emphasis added). See also State ex rel. Util. Consumers' Council of Mo., Inc. v. Pub. Serv. Comm'n, 585 S.W.2d 41, 56 (Mo. banc 1979).
"If the PSC's decision is based on purely factual issues, we may not substitute our judgment for that of the PSC." State ex rel. Midwest Gas Users' Ass'n v. Pub. Serv. Comm'n, 976 S.W.2d 485, 491 (Mo.App. W.D.1998). The PSC had the discretion to allocate the cost of Iatan 2 between KCP & L-GMO's MPS and L & P rate districts in its rate design, and its cost allocation was reasonable and supported by the record. See State ex rel. City of West Plains, 310 S.W.2d at 933.
AGP's Point I is denied.
In its second point, AGP restates its first point of error and further asserts that the PSC erred in ordering the phase-in of a rate increase for the L & P service area in excess of the amount the utility sought in its filed tariffs. AGP argues that section 393.155.1, the "phase-in statute," limits the amount to be phased in to the amount requested by the utility. Based upon our resolution of AGP's first point, we find no support for AGP's argument that the rate set by the PSC is limited to the amount requested by the utility.
Before this rate case, KCP & L-GMO's rate base was $190,457,404. As a result of this case, KCP & L-GMO's rate base is $422,039,507. This "unusually large increase" in KCP & L-GMO's rate base resulted from the inclusion of Iatan 2. The PSC allocated Iatan 2 between KCP & L-GMO's L & P and MPS service areas, with the L & P service area allocated a greater portion of the increase than KCP & L-GMO originally asked to be attributed to that service area. Thereafter, the PSC determined that a phase-in of the rate increase in the L & P service area was a just and reasonable method of implementing this large increase. The PSC concluded that rates for the L & P service area should initially be set at an amount equal to the $22.1 million originally proposed by KCP & L-GMO, with the remaining increase plus carrying costs phased-in in equal parts over a two-year period.
Under section 393.155.1, when, after hearing, the PSC determines that an electrical corporation should be allowed a total increase in revenue that is primarily due to an unusually large increase in the corporation's base rate, the PSC is permitted to phase-in that unusually large increase in base rate over a reasonable number of years. "Any such phase-in shall allow the electrical corporation to recover the revenue which would have been allowed in the absence of a phase-in and shall make a just and reasonable adjustment thereto to reflect the fact that recovery of a part of such revenue is deferred to future years." § 393.155.1. The statute further provides that the PSC may, in its discretion, implement the phase-in by approving tariff schedules that take effect from time to time after the phase-in is initially approved. Id. The statute is applicable to this case, where KCP & L-GMO's rate base changed significantly due to the addition of Iatan 2 to its rate base. The PSC's decision to allow a phased-in increase due to the addition of Iatan 2 to KCP & L-GMO's rate base is lawful under section 393.155.
AGP's Point II is denied.
The OPC's point on appeal argues that the PSC unlawfully approved tariff sheets with an effective date less than the statutorily prescribed length of time.
We deny this point as moot. The tariff at issue in this proceeding has been superseded by a subsequently approved tariff in the previously mentioned January 2013 Report and Order. And, presently pending before this court is the OPC's Petition for Writ of Mandamus (Case No. WD76079) arising from the January 2013 Report and Order in which OPC has lodged the same general argument as it has presented on this appeal. On March 13, 2013, this court issued a preliminary writ of mandamus and directed the PSC to file a written answer to the OPC's Petition for Writ of Mandamus and for the parties to otherwise conform to a briefing schedule in accordance with the schedule set forth in Rule 84.24(i). These procedural details reflect that this issue, albeit one of general public interest and recurring in nature, is being addressed by appellate review in a presently pending live controversy. Thus, this issue does not fall within the exception to the mootness doctrine, and we decline to exercise discretion to examine this issue in the context of a mooted tariff case. The OPC's Point is denied, as the issue on appeal is moot.
KCP & L-GMO's Point I and III and the OPC's point on appeal are denied as moot. In all other respects, the circuit court's judgment upholding the PSC's May 4, 2011 Report and Order, as clarified and modified by Order issued May 27, 2011, is affirmed.
VICTOR C. HOWARD, Judge, concurs.
ALOK AHUJA, Judge, concurs in part and dissents in part in separate opinion.
ALOK AHUJA, Judge.
I concur in the majority opinion to the extent it recognizes that all of the issues in this case are moot in light of the Public Service Commission's January 2013 approval of tariffs for KCP & L which supersede the tariffs at issue in this appeal. As the majority explains, because of the Commission's approval of the superseding tariffs, and because no party sought to stay the effectiveness of the tariffs authorized in 2011, this Court cannot provide the parties with any meaningful relief with respect to the 2011 order. Quite simply, the appeal is moot because a decision by this Court would have no real-world impact whatsoever.
I dissent, however, from the majority's decision to address the merits of the other issues raised by the parties, despite their acknowledged mootness. In my view, none of the issues presented in this moot appeal justify resolution, because those issues are fact- and record-specific, and do not present novel legal questions of relevance beyond the circumstances of this case; to the extent these issues will ever recur, they will arise on a different factual record, and will not evade appellate review in future proceedings.
At the outset, I emphasize that my disagreement with the majority opinion concerns only the procedural issue of the justiciability of this appeal; I do not disagree with the majority opinion's substantive resolution of the issues it decides. But for the mootness issue, I would fully concur in the majority opinion without hesitation.
As we explained in Public Service Commission v. Missouri Gas Energy, 388 S.W.3d 221 (Mo.App. W.D.2012), we will decide an issue presented on appeal, even if it is moot, "when it is demonstrated that the case in question presents an issue that (1) is of general public interest; (2) will recur; and (3) will evade appellate review in future live controversies." Id. at 229 (citations and internal quotation marks omitted). "We will exercise this discretionary jurisdiction if there is some legal principle at stake not previously ruled as to which a judicial declaration can and should be made for future guidance." Id. (citations and internal quotation marks omitted). The issues presented in this appeal do not meet these standards.
1. Most of the issues the majority decides are dependent on the particular facts of, and record in, this case. Because the issues are so fact-specific, the majority opinion announces no "legal principle ... not previously ruled," and will not provide meaningful precedent for future cases; the issues are therefore not "of general public interest." Id.
For example, the PSC's decision to prohibit KCP & L from recovering the costs of transmission of electricity from the Crossroads facility, despite its determination that KCP & L's acquisition of an interest in Crossroads was otherwise prudent, is a highly fact-dependent question. Resolution of the question depends on, among other things: the distance between Crossroads and KCP & L's service area, and the transmission infrastructure available to transport electricity from one to the other; the amount of KCP & L's transmission costs; the difference between the cost of generating electricity in Mississippi and in Missouri (which may offset in whole or in part the increased transmission expense); KCP & L's cost to acquire its interest in the Crossroads facility; and the alternatives available to KCP & L to supply the same electricity needs.
The only legal principles at stake in connection with the transmission-cost issue are: that Commission decisions must be supported by sufficient competent evidence on the record as a whole; that the Commission must make sufficiently detailed factual findings to support its decisions and enable meaningful appellate review; and that the Commission must set utility rates at a level that is just and reasonable. But those are commonplace
The Commission's refusal to permit KCP & L to recover its interstate transmission costs, despite the fact that those costs are regulated by the Federal Energy Regulatory Commission ("FERC"), does present a purely legal issue, on which no Missouri caselaw currently exists. Even this issue does not require decision in this moot appeal, however. First, decision of the FERC preemption issue may be unnecessary, depending upon whether the Commission's decision to disallow recovery of transmission costs was supported by the record evidence. Moreover, as I explain below, the FERC preemption issue is very likely to arise again in a future, live controversy, in which it would not evade review.
AG Processing has attempted to characterize the issues it raises, concerning the rates set by the Commission for the L & P rate district, as issues of broad legal significance concerning the power of the Commission to establish rates higher than those requested by a utility. But the issue presented in this case is in fact far narrower. Ratepayers in the L & P district were notified of the aggregate rate increase KCP & L sought, as well as the portion of that rate increase KCP & L proposed to extract from L & P ratepayers. And, as the majority explains, the Commission's decision does not award KCP & L more than it asked for: to the contrary, the Commission awarded KCP & L a total rate increase far below the aggregate increase that it sought. The Commission did, however, re-allocate some of KCP & L's proposed rate increase to the L & P rate district, based on the Commission's determination that, on the facts of this case, L & P ratepayers should shoulder a greater share of the costs of the Iatan generating plant than KCP & L had proposed. This is, once again, a highly fact-specific issue. Moreover, given that KCP & L is now aware of the allocation of Iatan-related costs which the Commission deems appropriate, this issue (where KCP & L proposes one allocation of such costs, and the Commission adopts another) is unlikely to recur, even with respect to KCP & L.
An additional factor counsels against deciding the transmission-cost issue here. The PSC has informed us that additional evidence related to the issue was presented to the Commission in the proceedings which resulted in the January 2013 Report and Order, and the 2013 order itself makes additional factual findings concerning the issue, beyond the findings contained in the 2011 order we review in this appeal. Although the transmission-cost issue raised in this appeal, and the issue that will be raised in the appeals of the 2013 order, may be similar, the resolution of the issue in the later appeal will necessarily depend on the evidence contained in the record of the proceedings which resulted in the 2013 order, and on the findings the Commission made in the 2013 order. Given a different record, and different findings, a decision
State ex rel. Missouri Public Service Co. v. Fraas, 627 S.W.2d 882 (Mo.App. W.D. 1981), is perhaps the leading case applying mootness principles to Commission proceedings. Fraas holds that it may be appropriate to decide questions which have been mooted by the Commission's adoption of superseding tariffs, where those questions present recurrent legal issues of general public interest. Id. at 885. Fraas emphasizes, however, that "[i]f the matter in dispute is simply a question of fact dependent upon the evidence in the particular case, there is no necessity for a declaration of legal principle such as to call the exception into play." Id. Fraas itself refused to decide a majority of the issues presented, finding that the issues were "peculiar to this case, with the ruling being confined to the particular facts here." Id. at 890; see also, e.g., State ex rel. Pub. Counsel v. Pub. Serv. Comm'n, 328 S.W.3d 347, 353 (Mo.App. W.D.2010). The same could be said in this case: the issues the majority decides are "question[s] of fact dependent upon the evidence in th[is] particular case," which have significance "confined to the particular facts here."
I recognize that in State ex rel. Praxair, Inc. v. Public Service Commission, 328 S.W.3d 329 (Mo.App. W.D.2010), we suggested that issues "regarding the cost at which retail electric services are provided to the public at large in certain portions of Missouri" were "inherently `of general public interest'" within the meaning of the exception to the mootness doctrine. Id. at 335. Of course, the fact that issues raised in a utility ratemaking case may be of "general public interest" cannot alone justify deciding those issues in a moot case: the issues must also be recurrent, and it must be likely that the issues will evade appellate review in future proceedings, when they recur. But I also question whether the statement in Praxair can be taken literally: I fail to see how an issue decided in a prior ratemaking proceeding is of "general public interest" where the rates approved in that proceeding are no longer in effect, and where no relief is available with respect to the past period during which those rates were in effect. At that point, it seems to me, the issue is of only academic or historical interest, unless it presents a legal question on which a decision will have precedential value in future cases. Even if a particular issue may have been of "general public interest" when it actually affected the prices ratepayers paid, it ceases to be of "general public interest" when it has no real-world effects, without some indication that a decision of the issue will materially affect future proceedings.
2. Quite apart from the fact-specific nature of the issues presented here, decision of the issues is also unjustified because, to the extent similar issues recur in the future, those issues will not evade appellate review.
To the extent issues similar to those involved here are raised in any of these other proceedings, the issues will not evade appellate review in those other cases. In the mandamus proceeding, we have stayed the effectiveness of the challenged Commission order; issues concerning its validity will therefore not become moot. Moreover, the PSC orders which are challenged in the other appeals were issued after July 1, 2011. Those orders are accordingly subject to § 386.520.2, RSMo Cum.Supp.2012, which authorizes the Commission to adjust prospective rates where a judicial decision determines that the rates the Commission previously approved were unlawful or unreasonable. Therefore, it appears that, even if no party sought a stay of the Commission's later orders, and those orders were then superseded by yet further Commission orders, the issues would not be mooted, because a judicial decision concerning the lawfulness of the superseded tariffs could have real consequences in light of the rate-adjustment authority provided by § 386.520.2, RSMo Cum.Supp.2012. The fact that the issues will not evade review in future proceedings provides yet another reason for this Court to decline to address these issues now.
This Court is not, and should not be, in the business of issuing advisory opinions which will have no immediate impact, and which will have no (or at best limited) precedential value in future cases. Our reluctance to decide moot questions should only be heightened when the issues presented are capable of being presented, and decided, in a future live controversy. Because I believe the majority opinion disregards these principles by deciding the merits of any of the issues presented in this appeal, I respectfully dissent in part.
