Kan. City Power v. Mo. Pub. Serv. Comm'n (In re Amendment of the Commission's Rule Regarding Applications for Certificates of Convenience & Necessity)

• Decision Date: 09 February 2021
• Docket Number: No. SC 98039,SC 98039
• Parties: In the MATTER OF the AMENDMENT OF the COMMISSION'S RULE REGARDING APPLICATIONS FOR CERTIFICATES OF CONVENIENCE AND NECESSITY; Kansas City Power and Light and KCP&L Greater Missouri Operations Company, Appellants, v. Missouri Public Service Commission and Dogwood Energy, Respondents.
• Court: Missouri Supreme Court

618 S.W.3d 520

In the MATTER OF the AMENDMENT OF the COMMISSION'S RULE REGARDING APPLICATIONS FOR CERTIFICATES OF CONVENIENCE AND NECESSITY;

Kansas City Power and Light and KCP&L Greater Missouri Operations Company, Appellants,

v.Missouri Public Service Commission and Dogwood Energy, Respondents.

No. SC 98039

Supreme Court of Missouri, en banc.

Opinion issued February 9, 2021

Rehearing Denied April 6, 2021

KCP&L was represented by Karl Zobrist and Cody Wood of Dentons US LLP in Kansas City, (816) 460-2400; and Robert J. Hack and Roger W. Steiner of Kansas City Power & Light Company in Kansas City, (816) 556-2791.

The public service commission was represented by Shelley E. Brueggemann, Jennifer Leigh Heintz and Curt Stokes of the commission in Jefferson City, (573) 751-8377; and Carl J. Lumley of Curtis, Heinz, Garrett & O'Keefe PC in St. Louis, (314) 725-8788.

APPEAL FROM THE MISSOURI PUBLIC SERVICE COMMISSION

Paul C. Wilson, Judge

Kansas City Power & Light Company ("KCP&L") and KCP&L Greater Missouri Operations Company ("GMO" and, together with KCP&L, "the Companies") appeal from an order of rulemaking issued by the Public Service Commission ("PSC"). In August 2018, the PSC promulgated 4 CSR 240-20.045,¹ which provided new regulations related to certificates of convenience and necessity ("CCNs"). The Companies argue that the order promulgating 4 CSR 240-20.045 exceeds the PSC's statutory authority and that the fiscal note accompanying the promulgated regulation is deficient, rendering 4 CSR 240-20.045 void and unenforceable. This Court has jurisdiction pursuant to article V, section 10 of the Missouri Constitution. Because the order falls within the PSC's statutory authority and the fiscal note complies with the applicable statutes, the order is affirmed.

Background

"The PSC is a state agency established by the Missouri General Assembly to regulate public utilities operating within the state." State ex rel. Praxair, Inc. v. Mo. Pub. Serv. Comm'n , 344 S.W.3d 178, 186 (Mo. banc 2011) (quotation marks omitted). The Companies are electrical corporations and public utilities, as those terms are defined in section 386.020,² and are subject to the PSC's regulations.

In April 2018, the PSC filed a notice of proposed rule with the Secretary of State regarding electric utility applications for CCNs. The PSC sought to rescind a then-existing regulation, 4 CSR 240-3.105 (2017), and replace it with 4 CSR 240-20.045. Comments in support of or opposition to the proposed regulation were accepted until June 14, 2018. KCP&L, GMO, and Dogwood Energy LLC ("Dogwood") – which owns the largest interest in the Dogwood Energy Facility, a 650-megawatt natural gas-fired, combined-cycle electric power-generating facility – submitted written comments. A public hearing was held on June 19, 2018, at which KCP&L and GMO appeared.

In August 2018, the PSC filed two orders of rulemaking with the Secretary of State – one rescinding 4 CSR 240-3.105 and one adopting 4 CSR 240-20.045. The order adopting 4 CSR 240-20.045 summarized and responded to comments submitted regarding the proposed rule. The order included a public entity fiscal note pursuant to section 536.200 stating the cost of compliance for state agencies and political subdivisions would be less than $500 in the aggregate. The PSC filed a revised private entity fiscal note pursuant to section 536.205, which estimated that four investor-owned electric utilities would be affected by the new regulation and that compliance for those entities would result in an additional aggregate cost of $0 to $100,000. The revised private entity fiscal note stated the assumed life of the rule was three years and estimated one additional CCN would be required during that assumed life based on the number of instances during the previous three years in which a CCN would have been required had 4 CSR 240-20.045 been in force.

In September 2018, the Companies timely applied for rehearing and requested the PSC to stay the effectiveness of 4 CSR 240-20.045. The PSC denied rehearing and the stay. The Companies filed a notice of appeal pursuant to section 386.510. The court of appeals granted Dogwood intervention. Following disposition by the court of appeals, this Court granted transfer and has jurisdiction under article V, section 10 of the Missouri Constitution.

Analysis

I. Standard of Review

"Pursuant to section 386.510, appellate review of an order by the [PSC] 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." Grain Belt Express Clean Line, LLC v. Pub. Serv. Comm'n , 555 S.W.3d 469, 471 (Mo. banc 2018) (quotation marks omitted). All questions of law, including whether statutory authority exists to support an order of the PSC, are reviewed de novo. See State ex rel. MoGas Pipeline, LLC v. Pub. Serv. Comm'n , 366 S.W.3d 493, 496 (Mo. banc 2012). An order of the PSC is reasonable when "the order is supported by substantial, competent evidence on the whole record; the decision is not arbitrary or capricious; [and] where the PSC has not abused its discretion." In the Matter of Verified Application & Petition of Liberty Energy (Midstates) Corp. , 464 S.W.3d 520, 524 (Mo. banc 2015). The PSC's orders are presumed to be valid, and the burden is on those challenging the orders to prove their invalidity. State ex rel. Utility Consumers’ Council of Mo., Inc. v. Pub. Serv. Comm'n , 585 S.W.2d 41, 47 (Mo. banc 1979). This standard applies to the PSC's orders of rulemaking. See State ex rel. Atmos Energy Corp. v. Pub. Serv. Comm'n , 103 S.W.3d 753, 758 (Mo. banc 2003).

II. General Principles Governing the Public Service Commission

Before answering the questions presented to this Court on appeal, several principles fundamental to the law governing public utility regulation warrant discussion.

As this Court has long recognized, "The PSC is a creature of statute and can function only in accordance with its enabling statutes." MoGas Pipeline , 366 S.W.3d at 496 (quotation marks omitted). "Its powers are limited to those conferred by statutes, either expressly or by clear implication as necessary to carry out the powers specifically granted." Id. (quotation marks and alteration omitted). The PSC's enabling statutes were first enacted more than a century ago. See § 10412, RSMo 1919 (citing Mo. Laws 1913 at 561) ("A public service commission is hereby created and established, which said public service commission shall be vested with and possessed of the powers and duties in this chapter specified, and also all powers necessary or proper to enable it to carry out fully and effectually all the purposes of this chapter.").³ As this Court has concluded, the General Assembly's original purpose in establishing the PSC was "to protect the consumer against the natural monopoly of a public utility, as provider of a public necessity, while at the same time permitting a recovery by the utility of a just and reasonable return." Utility Consumers’ Council of Mo. , 585 S.W.2d at 47 (citation omitted). In furtherance of that mission, the PSC has had express statutory authority from its inception in 1913 to require electrical corporations to apply for CCNs.⁴

The basic statutory structure for CCNs has existed without significant change for more than 100 years. The electricity industry, on the other hand, has undergone revolutionary changes and has dramatically expanded in scope and operation since the PSC's inception. Without significant changes in its enabling statutes, the PSC, nonetheless, has maintained its regulatory authority over the industry. The reason for this expansion of authority is the PSC's singular, continual mission to regulate the natural monopoly of a public utility. See id.

Accordingly, where the PSC is concerned, this Court has maintained some degree of deference to certain determinations of the agency. For instance, this Court has been willing to defer to the agency's interpretation of its own rules, provided that interpretation was reasonable. See Mo. Pub. Serv. Comm'n v. Union Elec. , 552 S.W.3d 532, 539 n.9 (Mo. banc 2018) ("[I]f the meaning of a statute or regulation enforced by the [PSC] is ambiguous and the canons of construction cannot resolve the issue, this Court is entitled to give weight to a textually permissible interpretation adopted by the [PSC]."). Further, the Court grants a presumption of validity to all orders of the PSC. Utility Consumers’ Council of Mo. , 585 S.W.2d at 47. Thus, where an action of the PSC does not contravene the plain language of an enabling statute, the Court recognizes the General Assembly's broad grant of authority to the PSC consistent with that agency's mission and infers a power the General Assembly intended to vest in the PSC rather than a limitation. Cf. Grain Belt Express , 555 S.W.3d at 474 ; Liberty Energy (Midstates) Corp. , 464 S.W.3d at 525. Of course, if the General Assembly disagrees, it can amend the PSC's enabling statutes to confer as much (or as little) authority on the PSC as it deems appropriate.

Finally, as is always the case, an agency does not divest itself of the authority granted to it by its enabling statutes merely by failing to exercise the full extent of that authority from time to time. Cf. MoGas Pipeline , 366 S.W.3d at 496. Since 1913, the General Assembly has vested the PSC with "all powers necessary or proper to enable it to carry out fully and effectually" the agency's mission. § 386.040; § 10412, RSMo 1919 (citing Mo. Laws 1913 at 561) (same). As this Court has concluded, although convenience, expedience, and necessity are not proper considerations for determining whether the PSC has been granted a certain power, the PSC's enabling "statutes are remedial in nature and should be liberally construed in order to effectuate the purpose for which they were enacted." Utility Consumers Council of Mo. , 585 S.W.2d at 49. See also MoGas Pipeline , 366...