Kansas Gas & Elec. Co. v. State Corp. Commission

• Decision Date: 24 January 1976
• Docket Number: No. 47832,47832
• Citation: 544 P.2d 1396,218 Kan. 670
• Parties: KANSAS GAS AND ELECTRIC COMPANY, Appellee, v. The STATE CORPORATION COMMISSION of the State of Kansas, Appellant.
• Court: Kansas Supreme Court

Page 1396

544 P.2d 1396

218 Kan. 670

KANSAS GAS AND ELECTRIC COMPANY, Appellee, v. The STATE CORPORATION COMMISSION of the State of Kansas, Appellant.

No. 47832.

Supreme Court of Kansas.

Jan. 24, 1976.

Syllabus by the Court

1. Under the provisions of K.S.A. 66-118d review by a district court of an order of the State Corporation Commission is limited to determining the lawfulness or reasonableness of such order.

2. In the exercise of its authority in fixing rates of a public utility the State Corporation Commission has a two-phase duty in determining rate base under the provisions of K.S.A. 66-128; (1) to determine the property of a utility used or required to be used in its services to the public within the state; and (2) to ascertain the reasonable value of all such property whenever it deems the ascertainment of such value necessary in order to fix fair and reasonable rates.

3. In determining the property to be included in the rate base of a public utility under the provisions of K.S.A. 66-128, the question whether property is used or required to be used is one of fact to be determined by the State Corporation Commission. If the property is found either used or required to be used it is to be included in the rate base.

4. In an appeal by the State Corporation Commission from a judgment setting aside an order of the commission excluding thirty-three and one-third percent of the value of a public utility's interest in an electric power generating plant, wherein the commission found significant use of the plant and did not find that the plant was not required to be used, it is held that the commission's order is contrary to the provisions of K.S.A. 66-128.

Sard Fleeker, Topeka, argued the cause and was on the brief for the appellant State Corporation Commission.

Ralph Foster, Wichita, argued the cause and was on the brief for the appellee Kansas Gas and Electric Company.

KAUL, Justice:

This appeal stems from an application filed by appellee, Kansas Gas and Electric Company (hereafter referred to as KG&E) with the State Corporation Commission (hereafter referred to as the commission) seeking an increase in electricity service rates. The crux of the controversy centers around the commission's exclusion from KG&E's rate base one-third of its interest in a new electric generating facility, which is referred to as the La Cygne plant.

The La Cygne plant is a jointly-owned facility. One-half is owned by KG&E and the other one-half is owned by the Kansas City Power and Light Company (hereafter referred to as KCP&L). The cost of operation is equally shared by the two companies and the generating capacity is for practical purposes equally apportioned.

KG&E filed its application on August 31, 1973, seeking a rate increase amounting to approximately 13.5 million dollars. The commission docketed the application as No. 99,486-U and hearings were held, commencing January 28, 1974, and running through February 1, 1974. On March 29, 1974, the commission entered its order granting a rate increase of approximately 8.3 million dollars, the difference resulting from the allocation of only sixty-six and two-thirds percent of KG&E's interest in the La Cygne plant to rate base. KG& E's motion for rehearing was denied.

Thereafter, on May 14, 1974, KG&E filed its notice of appeal with the district court of Neosho County. The relief requested was that those portions of the commission's order which excluded thirty-three and one-third percent of KG& E's interest in the La Cygne plant be found to be unlawful, unreasonable, arbitrary and confiscatory and be set aside.

On October 14, 1974, the district court set aside the commission's order and ordered that KG&E's full investment in the La Cygne plant be included in the rate base and that appropriate rates be filed with the commission giving effect to the district court's judgment.

The court rested its decision on two propositions; one that the commission's order was not authorized by statute; and two that it was not supported by any evidence. The court specifically fround there was no evidence to support the commission's order allocating only sixty-six and two-thirds percent of the utility's investment in the La Cygne facility. The court further stated that it was unable to find any legal authority, and that none was cited to it, enabling the commission to ascertain the value of a utility's property and then apply a fraction of that value for the determination of a rate base. The court concluded that:

'. . . (A) generating plant is a unit and it is either used or required to be used, or not used or not required to be used, and therefore it should be included in full or excluded in full . . .'

Thereafter, KG&E submitted new rate requests as allowed by the district court and these rates were approved by the commission on October 29, 1974. However, the commission qualified its approval by ruling that the excess rates above those allowed by the commission's original order be held by the utility subject to refund with interest in case the district court's judgment should be reversed. KG&E objected to these refund conditions in a limited notice of compliance, but apparently the commission took no action with regard to the objections. On January 21, 1975, on the grounds that the commission had taken no action on its objections, KG&E filed a motion in the district court to enforce the judgment of October 14, 1974, by compelling the commission to strike and remove the refund and interest conditions in the commission's October 29, 1974, order.

On March 12, 1975, the district court issued its order setting aside all parts of the commission's order, which made the new rates subject to refund and interest.

During the pendency of these proceedings, further hearings were had before the commission in another rate increase application filed by KCP&L, KG&E's co-owner of the La Cygne plant. The commission previously had excluded one-third of KCP&L's half interest in the La Cygne plant from its rate base, but after hearings on November 15, 1974, the commission determined that the La Cygne plant was now operating properly, and that it could, as of December 19, 1974, be included in the KCP&L rate base. By order, dated February 12, 1975, in Docket No. 99,486-U, the commission took administrative notice of its action in KCP&L's case and thereupon, likewise, allowed the full KG&E portion of the La Cygne plant into KG&E's rate base effective December 19, 1974. Consequently, the issue became narrowed to the disallowance of one-third of KG&E's portion of the La Cygne plant in rate base for the period of time between implementation of the district court's order and the date the plant was allowed in the rate base for both companies, a time span of approximately two months.

On October 29, 1974, the commission filed its appeal from the original judgment of the district court of Neosho County and raised the following issues in its statement of points:

'1. The District Court of Neosho County, Kansas, committed error in finding that the disallowance of 1/3 of the Plaintiff's LaCygne Plant from rate base by the State Corporation Commission was arbitrary, unreasonable, and unlawful; the court's action being a misinterpretation of K.S.A. 66-128.

'2. The District Court of Neosho County, Kansas, committed error in determining that the exclusion of 1/3 of the LaCygne Plant from Plaintiff's rate base was not based on substantial and competent evidence, the record having been revealed that the LaCygne Plant was not operating properly and having been so acknowledged by the court.

'3. The District Court of Neosho County, Kansas, committed error in substituting its judgment for that of the State Corporation Commission upon a determination by the court that the evidence disclosed that the LaCygne Plant was not operating properly.'

We are first confronted with procedural questions raised by a motion to dismiss filed by KG&E. We have concluded, however, that in view of our disposition of the appeal it is unnecessary to decide or discuss the procedural points raised.

The statutory authority of the commission in its rate fixing function under the Public Utilities Act (K.S.A. and K.S.A.1975 1975 Supp. 66-101 et seq.) and the scope of judicial review of its actions are set forth in detail in the recent case of Kansas-Nebraska Natural Gas Co. v. State Corporation Commission, 217 Kan. 604, 538 P.2d 702 (July 17, 1975). A restatement at this early date would serve no useful purpose. It will suffice to say that in this case we are not confronted with any question pertaining to the scope of judicial review. Neither are we concerned with the application of any particular rate base formula which is usually the question in such cases. It is uncontroverted that the plant was in operation as distinguished from being under construction. The case before us, as we see it, involves only the construction of the pertinent statute with respect to essentially undisputed facts. We are concerned herein only with K.S.A. 66-128, which specifies the property to be included or excluded from the rate base of a utility. The language of 66-128 pertinent to our consideration reads:

'Said commission shall have the power and it shall be its duty to ascertain the reasonable value of all property of any common carrier or public utility governed by the provisions of this act used or required to be used in its services to the public within the state of Kansas, whenever it deems the ascertainment of such value necessary in order to enable the commission to fix fair and reasonable rates . . ..' (Emphasis supplied.)

The basic controversy in this appeal involves the interpretation of the foregoing language. KG&E maintains that under the clear wording of the statute the commission has no authority to 'split' on a percentage or fractional basis a composite facility, such as the La Cygne plant; that the duty and authority of the commission is to...