Atmos Energy Corp. v. Public Service Com'n, No. SC 84344.

• Court: United States State Supreme Court of Missouri
• Writing for the Court: Stephen N. Limbaugh, Jr.
• Citation: 103 S.W.3d 753
• Parties: STATE ex rel. ATMOS ENERGY CORPORATION, et al., Appellants, v. PUBLIC SERVICE COMMISSION OF THE STATE of Missouri, et al., Respondents. and Ameren Corporation and Union Electric Company, d/b/a AmerenUE, Appellants, v. Public Service Commission of the State of Missouri, et al., Respondents.
• Decision Date: 22 April 2003
• Docket Number: No. SC 84344.

103 S.W.3d 753 STATE ex rel. ATMOS ENERGY CORPORATION, et al., Appellants,
v.
PUBLIC SERVICE COMMISSION OF THE STATE of Missouri, et al., Respondents. and
Ameren Corporation and Union Electric Company, d/b/a AmerenUE, Appellants,
v.
Public Service Commission of the State of Missouri, et al., Respondents. No. SC 84344. Supreme Court of Missouri, En Banc. April 22, 2003. Rehearing Denied May 27, 2003.

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Robert J. Hack, Kansas City, James M. Fischer, Jefferson City, Jeffrey A. Keevil, Columbia, Michael C. Pendergast, St. Louis, Gary W. Duffy, Jefferson City, Joseph H. Raybuck, Thomas M. Byrne, St. Louis, James B. Lowery, Phebe La Mar, Columbia, for Appellants.

Lera L. Shemwell, Dana K. Joyce, Douglas E. Micheel, Office of Public Counsel, Jefferson City, for Respondents.

STEPHEN N. LIMBAUGH, JR., Chief Justice.

Atmos Energy Corporation (Atmos); Missouri Gas Energy (MGE); Laclede Gas Company (Laclede); Trigen-Kansas City Energy Corporation (Trigen); Ameren Corporation (Ameren); and Union Electric Company (UE), d/b/a AmerenUE, appeal the judgment of the Circuit Court of Cole County affirming the final orders of rulemaking of the Missouri Public Service Commission (PSC), promulgating several rules that regulate transactions between certain public utilities and their affiliates. Appellants contest the validity of the rules by challenging the authority of the PSC to promulgate them and the procedure by which they were promulgated, claiming generally that as affected entities they were unlawfully denied contested case procedures before the PSC in voicing their objections to the promulgation of the rules. After appeal to the Court of Appeals, Western District, this Court granted transfer. Mo. Const. art. V, sec. 10. The judgment is affirmed.

I.

The PSC is a state agency established by the Missouri General Assembly to regulate public utilities operating within the state. Appellants Atmos, MGE, and Laclede are gas corporations and public utilities, as defined in sections 386.020(18) and 386.020(42),¹ subject to regulation by the PSC. Trigen is a steam distribution company operating as a retail distributor of steam in Jackson County, Missouri, and subject to PSC regulation as a "heating company," pursuant to section 386.020(20). UE is an electric and gas utility, which

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qualifies as an electrical corporation under section 386.020(15) and a gas corporation under section 386.020(18), and is subject to regulation by the PSC as a regulated investor-owned utility company. Ameren, the unregulated parent corporation of UE, is not an electrical or gas corporation and, therefore, is not directly subject to the jurisdiction of the PSC.

On April 26, 1999, the PSC, citing sections 386.250 and 393.140 as authority, filed proposed rules 4 CSR 240-20.015, 4 CSR 240-80.015, 4 CSR 240-40.015, and 4 CSR 240-40.016 with the Missouri Secretary of State. The proposed rules, applicable to electric utilities, steam heating utilities, and gas utilities, establish "asymmetrical pricing standards" that prohibit certain transactions between public utilities and their affiliates.

As required under sections 386.250(6) and 536.021, the proposed rules were then published in the Missouri Register, 24 Mo. Reg. 1346-64, and thereafter the PSC commenced separate cases for each of the proposed rules. The notice of proposed rulemaking for each of the proposed rules invited interested persons to submit written comments to the PSC and declared that a public hearing would be held at which interested persons could appear. Prior to the hearing, several utilities filed complaints with the PSC objecting to the manner in which the proceedings were being conducted. Specifically, the utilities contended that because of the "complexity and importance of the issues," the PSC should provide contested case procedures and allow the utilities to cross-examine and rebut opposing witnesses. The PSC denied the requests to provide contested case procedures, but reiterated that comments could be submitted.

After consolidating all four cases, the PSC held a three-day public hearing on September 13-15, 1999. At the hearing, the PSC considered appellants' extensive written comments opposing certain provisions of the proposed rules and allowed several representatives of the appellant utilities to orally present their arguments in opposition. In addition, witnesses were called, including representatives of the appellant utilities, who testified under oath, but only members of the PSC and the administrative law judge were permitted to examine the witnesses. Although each of the utilities participated at the hearing in varying degrees, they again objected to the proceedings on the ground that full contested case procedures should have been employed.

Following the hearing, the PSC issued "Orders of Rulemaking" in each of the cases, enacting the rules that are the subject of this appeal. Thereafter, the PSC denied timely-filed requests for rehearing in all four cases, and the appellant utilities, pursuant to section 386.510, then filed a petition for writ of review in the Circuit Court of Cole County. In the petition, appellants challenged the PSC's authority to promulgate the rules and the procedure by which they were promulgated. After hearing and argument, the Circuit Court granted judgment in favor of the PSC.

II.

There is some question about this Court's jurisdiction to hear the rulemaking challenge. Appellants correctly assert that appellate jurisdiction can be based on section 386.540.1, which provides, in pertinent part:

The commission and any party, including the public counsel, who has participated in the commission proceeding which produced the order or decision may, after the entry of judgment in the circuit court in any action in review, prosecute an appeal to a court having appellate jurisdiction in this state. Such

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appeal shall be prosecuted as appeals from judgment of the circuit court in civil cases ....

However, that section is applicable only if it is first determined that jurisdiction was proper in the circuit court. See Sumnicht v. Sackman, 968 S.W.2d 171, 174 (Mo.App. 1998) ("A judgment entered in excess of or beyond the jurisdiction of the trial court is void and an appellate court has no jurisdiction to review on the merits.") (citation omitted); Two Pershing Square, L.P. v. Boley, 981 S.W.2d 635, 639 (Mo.App.1998); Peters v. United Consumers Club, 786 S.W.2d 192, 193 (Mo.App.1990).

The circuit court's jurisdiction derives from sections 386.500 and 386.510, which provide that an applicant may seek review in the circuit court of a PSC "order or decision" if the applicant has timely filed an application for rehearing and that application has been denied. In that regard, this Court has held "that the Legislature has provided a special statutory procedure for review of an `original order or decision' of the Commission ... and that procedure [is] provided for in [section] 386.510 [and] is exclusive and jurisdictional." Union Electric Company v. Clark, 511 S.W.2d 822, 825 (Mo.1974). Moreover, this Court determined that the agency action at issue in the case "whether it be called a rule or an order, is clearly within the term `original order or decision' as used in [section] 386.510." Id. at 824. (Emphasis added.) The clear import of our decision in Clark is that, when confronted with a challenge to a rule promulgated by the PSC, a circuit court is vested with jurisdiction to review the rule if the challenging parties have complied with the rehearing procedures set forth in section 386.510. See also State ex rel. Southwestern Bell Tel. Co. v. Pub. Serv. Comm'n, 592 S.W.2d 184 (Mo.App.1979); Jefferson Lines Inc. v. Pub. Serv. Comm'n, 581 S.W.2d 124 (Mo.App.1979).

Arguably, contrary to the holding of Clark, review of PSC orders of rulemaking should be conducted via declaratory judgment actions under the Missouri Administrative Procedure Act, section 536.050, and not chapter 386. Superficially, two statutory amendments enacted since Clark appear to support such a conclusion. In 1976, the term "rule" under the MAPA was amended to exclude a "determination, decision or order in a contested case." Section 536.010(4)(d). (Emphasis added.) And one year later, section 386.250(6) was amended to mandate that PSC rules be promulgated pursuant to the procedures set forth in chapter 536. However, with respect to the first amendment, because the term "order" explicitly refers to orders that an agency issues in a contested case, the term does not include "orders" that an agency may promulgate through rulemaking, such as are permitted in chapter 386. Further, the latter amendment to section 386.250(6) merely imposes the procedural requirements of the MAPA for the enactment of PSC rules, but does not effect a change in how the rules are to be judicially reviewed. Therefore, neither amendment, either in purpose or effect, alters the holding in Clark that the procedures set forth in chapter 386 govern judicial review of PSC rulemaking.

In any event, in this case, appellants complied with each step of the review procedures mandated by chapter 386. They contested the content of the proposed rules and timely filed applications for rehearing after the PSC's final orders of rulemaking, and when the applications for rehearing were denied, they timely filed petitions for writ of review in the circuit court. At that point, the circuit court had jurisdiction to hear the claims. Under section 386.540.1, this Court, in turn, is vested

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with jurisdiction to hear this appeal. This Court now turns to the merits of those claims.

III.

Pursuant to section 386.510, the standard of review of a PSC order of rulemaking 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....