Friendship Village of South County v. Public Service Com'n of Missouri

• Citation: 907 S.W.2d 339
• Decision Date: 10 October 1995
• Docket Number: No. WD,WD
• Parties: Util. L. Rep. P 26,497 FRIENDSHIP VILLAGE OF SOUTH COUNTY, et al., Appellants, v. PUBLIC SERVICE COMMISSION OF MISSOURI, et al., Respondents. 50582.
• Court: Court of Appeal of Missouri (US)

Page 339

907 S.W.2d 339

Util. L. Rep. P 26,497

FRIENDSHIP VILLAGE OF SOUTH COUNTY, et al., Appellants, v. PUBLIC SERVICE COMMISSION OF MISSOURI, et al., Respondents.

No. WD 50582.

Missouri Court of Appeals Western District.

Oct. 10, 1995.

Paul H. Gardner, Jr., Jefferson City, for appellants.

Jeffrey A. Keevil, Jefferson City, for respondents.

Before FENNER, C.J., P.J., and LOWENSTEIN and BRECKENRIDGE, JJ.

FENNER, Chief Judge.

Friendship Village of South County (FVSC) and Friendship Village of West County (FVWC) appeal the order of the Circuit Court of Cole County affirming the findings of the Missouri Public Service Commission (the Commission) in an administrative proceeding regarding the charging of the proper utility rate to appellants by Union Electric (UE).

FVSC and FVWC are Missouri not-for-profit corporations which operate retirement communities in St. Louis County, Missouri. These retirement communities provide what is known as "life care," where retirees are offered lifetime use of a living unit, support services, and long-term nursing care if they can no longer live independently. Residents pay an entrance fee and monthly fees in accordance with a Residency Agreement. Except for long distance telephone calls, FVSC and FVWC pay all utilities including water, sewer, local telephone, gas, and electricity. FVSC and FVWC are located within the exclusive franchise territory of UE.

UE provides electric service to its customers under ten service classifications. Each classification contains a rate application paragraph that defines the requirements necessary to receive service from that particular rate classification schedule. Appellants receive service from three of UE's service classifications: 1(M)--Residential Service Rate; 2(M)--Small General Service Rate; and 3(M)--Large General Service Rate.

The electric distribution system at FVSC has a total of 14 meters, with six designated as "commercial" and eight designated as "residential." UE segregates electric service at the main building complex at FVSC between its Large General Service (LGS) rate classification and Multiple-Occupancy Residential rate classification.

Electrical service to FVWC is supplied in a different manner. UE segregates electric service by building at FVWC between the LGS and Multiple-Occupancy Residential rate classifications. Each building is designated as either commercial or residential and receives service through a single meter for both commercial and residential loads. Electrical usage for commercial and residential loads is not segregated and separately metered within each building. Appellants claim segregation of the facilities between the rate classifications results in higher rates than if they received service exclusively under the LGS rate, claiming this was demonstrated by a five month period in 1987 in which they were billed exclusively at the LGS rate.

In August 1987, the administrator for FVSC and FVWC requested that UE convert those portions of appellants' facilities service subject to the Multiple-Occupancy Residential rate to the LGS rate. UE complied with this request and provided unsegregated electric service under the LGS classification to both facilities for approximately five months.

On December 18, 1987, UE's Manager of Rate Engineering, Richard Kovach, prepared a memorandum in response to inquires by two of UE's own commercial marketing engineers assigned to appellants concerning the rate classifications applicable to FVWC and FVSC. Kovach's interpretation of the rate classifications was that the LGS rate classification was available only to service which did not qualify for any residential rate. Thomas Castro, UE's Manager for Commercial Marketing, wrote appellants' administrator in January 1988 to inform him that the conversion of the facilities to totalized LGS in August 1987 was "contrary to the applicability provisions of UE's filed rate tariffs" and to advise that UE would be rebilling appellants' accounts for the time the LGS rate was erroneously applied.

Appellants contacted a utility rate consultant firm to assist them in protesting the rescission of the LGS rate. After UE refused to reinstate the totalized LGS rate, the consulting firm contacted the Commission staff regarding UE's refusal to provide service at the requested rate. Commission staff member Michael Straub inspected FVWC in February 1988 and concluded that FVWC was receiving service from the appropriate residential and general service classifications. ¹ After this sequence of events, there is a notable gap in time before the next documented activity of appellants in this matter--the filing of their respective complaints in May 1992.

Appellants' Complaints to the Commission requested an order requiring UE to charge appellants the correct, lawful, non-discriminatory rate applicable to appellants' premises, determine the existence of and extent of past overcharges, and determine the correct rate(s) applicable to those periods that appellants were charged under the inapplicable residential rate tariff. In support of the requested Order, appellants alleged that application of UE's residential rate was prohibited by service classification rate schedule 1(M), that application of the residential rate schedule to appellants constituted an unreasonable preference and advantage favoring other customers of UE, that the service classification applied by UE to appellants was incorrect and unreasonably discriminatory based on UE's criteria for the provision of electric service, and that UE refused to classify and charge appellants properly after UE had been contacted by appellants concerning their rate classifications.

After a full hearing on the matter, the Commission issued a twenty page order on January 4, 1994, containing its findings. The Commission found that the character of the FVSC and FVWC facilities was neither wholly commercial nor wholly residential, stating that there was a "mixed" quality to the facilities. Because of the "mixed" quality of the FVSC and FVWC facilities, the Commission determined that both were currently charged on the appropriate rate schedule if given the option of segregated residential and general service rates or total commercial rates. The Commission determined that appellants' designated issue in the case, the identification of the correct rate appellants were to be charged, to not be a true issue because UE offered appellants the option of converting their facilities to a total commercial rate. However, the estimated costs of the changeover must be paid by appellants to UE in advance, consistent with the terms of UE's filed tariffs, and a term which appellants did not accept. By allowing appellants to make the election as to the type of electrical rate they desire, the issue becomes a non-issue because the choice is appellants' as long as they qualify for the rate they seek.

Further, in response to what the parties stated to be the primary issue of the hearing, the Commission concluded that FVSC and FVWC were offered the different available options for electrical distribution and rate treatment prior to their construction. Appellants' complaint was, accordingly, denied.

Appellants appealed the decision of the Commission to the Cole County Circuit Court, where the Commission's decision was affirmed on December 14, 1994. This appeal followed.

I. STANDARD OF REVIEW

Although this matter is appealed from the circuit court, we review the findings and decisions of the agency, not the judgment of the circuit court. Branson R-IV Sch. Dist. v. Labor & Indus. Relations Comm'n, 888 S.W.2d 717, 720 (Mo.App.1994). The standard of review of the Commission's order is two-pronged: first, it must be determined whether the Commission's order is lawful; and second, we must determine whether the order is reasonable and based on competent and substantial evidence upon the whole record. State ex rel. Util. Consumers Council of Missouri, Inc. v. Pub. Serv. Comm'n, 585 S.W.2d 41, 47 (Mo. banc 1979); Mo. Const. Art. V, § 18 (1945). However, when findings of fact and conclusions of law are absent from a Commission order, a reviewing court has no basis for determining the reasonableness or lawfulness of the Commission's decision under the standard of review established by section 386.510. ² State ex rel. GTE North v. Pub. Serv. Comm'n, 835 S.W.2d 356, 374 (Mo.App.1992). The Commission order has a presumption of validity and the burden is on those attacking it to prove its invalidity. State ex rel. Dyer v. Pub. Serv. Comm'n, 341 S.W.2d 795, 800 (Mo.1960), cert. denied, 366 U.S. 924, 81 S.Ct. 1351, 6 L.Ed.2d 384 (1961).

An order's lawfulness turns on whether the Commission had the statutory authority to act as it did. State ex rel. Beaufort Transfer Co. v. Clark, 504 S.W.2d 216, 217 (Mo.App.1973). When determining whether the Commission's order is lawful, the appellate courts exercise unrestricted, independent judgment and must correct erroneous interpretations of the law. Burlington N. R.R. v. Director of Revenue, 785 S.W.2d 272, 273 (Mo. banc 1990); Branson R-IV Sch. Dist., 888 S.W.2d at 720.

As to matters of reasonableness, the court determines whether the order was supported by substantial and competent evidence on the whole record, whether the decision was arbitrary, capricious, or unreasonable or whether the Commission abused its discretion. State ex rel. Chicago, Rock Island & Pac. R.R. Co. v. Pub. Serv. Comm'n, 312 S.W.2d 791, 794 (Mo. banc 1958); § 536.140.2, RSMo 1994. "Substantial evidence" means evidence which, if true, would have a probative force upon the issues, and necessarily implies and comprehends competent, not incompetent evidence. State ex rel. Rice v. Pub. Serv. Comm'n, 359 Mo. 109, 220 S.W.2d 61 (1949).

In reviewing the reasonableness of an order of the Commission, the court considers the evidence in the light most favorable to the agency together with all reasonable supporting...