Peoples Natural Gas Division of Northern Natural Gas Co. v. State Corp. Commission

• Decision Date: 12 May 1982
• Docket Number: No. 52870,52870
• Court: Kansas Court of Appeals
• Parties: PEOPLES NATURAL GAS DIVISION OF NORTHERN NATURAL GAS COMPANY, Appellee, v. The STATE CORPORATION COMMISSION of the State of Kansas; R. C. Loux, William G. Gray and Jane T. Roy, as the Constituent Members of the State Corporation Commission, Kansas Power & Light Company and MBPXL Corporation, Appellants.

Page 999

644 P.2d 999

7 Kan.App.2d 519

PEOPLES NATURAL GAS DIVISION OF NORTHERN NATURAL GAS COMPANY, Appellee, v. The STATE CORPORATION COMMISSION of the State of Kansas; R.

C. Loux, William G. Gray and Jane T. Roy, as the Constituent

Members of the State Corporation Commission, Kansas Power &

Light Company and MBPXL Corporation, Appellants.

No. 52870.

Court of Appeals of Kansas.

May 12, 1982.

Review Denied July 21, 1982.

Syllabus by the Court

1. K.S.A. 66-118b requires that an application for rehearing by the Kansas Corporation Commission set forth the specific grounds upon which the applicant considers the order to be unlawful and unreasonable. The allegation of grounds must be sufficiently specific and direct to apprise the commission and opposing parties of the actual points relied on. Any ground not set forth in the application for rehearing cannot be relied upon in judicial review proceedings. It is not necessary that in an application for judicial review the grounds upon which the applicant considers the order to be unlawful or unreasonable be stated in precisely the same language used in the application for rehearing; however, any ground not specifically and directly alleged in the application for rehearing may not be raised in an application for judicial review. A general or mere allegation in the application for rehearing of unlawfulness or unreasonableness is insufficient to raise an issue for judicial review.

2. In a proceeding for judicial review of a Kansas Corporation Commission order, it is held none of the urged grounds for finding the order unlawful or unreasonable were preserved by the application for rehearing.

Curtis Irby and Elizabeth R. Herbert, Asst. Gen. Counsel, Topeka, for appellant Kansas Corp. Com'n.

John K. Rosenberg, Asst. Gen. Counsel, Topeka, for appellant Kansas Power & Light Co.

Jack N. Turner and Robert Hall of Hall, Turner & Pike, Chartered, Wichita, for appellee.

Before SPENCER, P. J., and REES and MEYER, JJ.

REES, Judge:

This is an appeal from a district court order vacating and setting aside the dismissal by the Kansas Corporation Commission (KCC) of a complaint filed by Peoples Natural Gas Division of Northern Natural Gas Company (Peoples) challenging performance of a retail gas supply contract between Kansas Power & Light Company (KP&L) and MBPXL Corporation (MBPXL).

Peoples and KP&L are regulated natural gas public utilities. MBPXL has built and is operating a beef packing plant in Ford County near Dodge City. On August 23, 1978, while the plant was under construction, KP&L and MBPXL entered into a contract (the contract) providing for the sale by KP&L to MBPXL of up to 2,000 mcf of natural gas per day to be delivered at the connection of a KP&L transmission line and a 13.5 mile pipeline to be constructed, owned and operated by MBPXL. The contract recites the parties' understanding that gas deliveries would be initiated on or about October 1, 1979. The gas to be delivered under the contract is primarily for operation of boilers at the MBPXL plant. The physical point of delivery of the gas to MBPXL is in KP&L's certificated territory. The physical point of consumption, or use, of the gas is in Peoples' certificated territory.

KP&L filed the contract and an appropriate related price schedule with the KCC on August 24, 1978, for approval. Peoples had actual notice of the filing. KCC approval was granted September 8, 1978, without a hearing. No hearing was asked for by Peoples or any other party. (See K.A.R. 82-1-232(b).) More than a year later, on September 20, 1979, Peoples filed with the KCC a complaint having as its stated basis KP&L's intended transaction of the business of a natural gas public utility in Peoples' certificated territory.

By its complaint, Peoples requested the KCC to "order" that (1) sale by KP&L of natural gas as provided under the contract constitutes an "unauthorized invasion of Peoples' certificated area" and (2) "the contract and ... sale thereunder are in violation of the laws of this state and the Rules of (the KCC), and therefore void." Following a full hearing on the complaint, the KCC, by written order entered January 17, 1980, held the complaint was not timely filed and denied the relief requested. Peoples' application for rehearing was denied by the KCC. Peoples filed and successfully prosecuted an application for judicial review in the Ford County District Court. The KCC and KP&L have appealed from the decision of that court.

Of particular importance is recognition that the proceeding before the district court and now before us on appeal is for judicial review of the January 17, 1980, order of the KCC denying the relief requested by Peoples and dismissing its complaint. The proceeding is not for judicial review of the September 8, 1978, KCC approval of the contract, despite the attacks upon that approval made by Peoples in its complaint, presentation of the complaint to the KCC, presentation to the district court, and presentation to us.

It is appropriate to restate the following from Midwest Gas Users Ass'n v. Kansas Corporation Commission, 3 Kan.App.2d 376, 380-381, 595 P.2d 735, rev. denied 226 Kan. 792 (1979):

"K.S.A. 1978 Supp. 66-118d limits judicial review of an order by the commission to determining whether the order is 'lawful' or 'reasonable.' Kansas Gas & Electric Co. v. State Corporation Commission, 218 Kan. 670, Syl. P 1, 544 P.2d 1396 (1976). A court has no power to set aside such an order unless it finds that the commission acted unlawfully or unreasonably. Jones v. Kansas Gas and Electric Co., 222 Kan. 390, 396-7, 565 P.2d 597 (1977). An order is 'lawful' if it is within the statutory authority of the commission, and if the prescribed statutory and procedural rules are followed in making the order. Central Kansas Power Co. v. State Corporation Commission, 221 Kan. 505, Syl. P 1, 561 P.2d 779 (1977). An order is generally considered 'reasonable' if it is based on substantial competent evidence. Jones v. Kansas Gas and Electric Co., 222 Kan. 390, Syl. P 2(, 565 P.2d 597).

"The legislature has vested the commission with wide discretion and its findings have a presumption of validity on review. Central Kansas Power Co. v. State Corporation Commission, 221 Kan. at 511 (561 P.2d 779). Since discretionary authority has been delegated to the commission, not to the courts, the power of review does not give the courts authority to substitute their judgment for that of the commission. Central Kansas Power Co. v. State Corporation Commission, 206 Kan. 670, 675, 482 P.2d 1 (1971). The commission's decisions involve the difficult problems of policy, accounting, economics and other special knowledge that go into fixing utility rates. It is aided by a staff of assistants with experience as statisticians, accountants and engineers, while courts have no comparable facilities for making the necessary determinations. Southwestern Bell Tel. Co. v. State Corporation Commission, 192 Kan. 39, 48-9, 386 P.2d 515 (1963). Hence a court may not set aside an order of the commission merely on the ground that it would have arrived at a different conclusion had it been the trier of fact. It is only when the commission's determination is so wide of the mark as to be outside the realm of fair debate that the court may nullify it. Kansas-Nebraska Natural Gas Co. v. State Corporation Commission, 217 Kan. 604, 617, 538 P.2d 702 (1975); Graves Truck Line, Inc. v. State Corporation Commission, 215 Kan. 565, Syl. P 5, 527 P.2d 1065 (1974)."

In essence, Peoples complains and has complained that the approval of the contract was unlawful, KP&L's intended transaction of natural gas public utility business in Peoples' certificated area is unlawful, and if lawful, KCC permission of the intended transaction of business is unreasonable. Premises of these contentions are that sale and delivery of natural gas by KP&L to MBPXL as called for by the contract constitutes transaction of natural gas public utility business by KP&L outside KP&L's certificated territory and within Peoples' certificated territory, and the KCC approval of the contract constituted de facto "dual certification" of KP&L to transact natural gas public utility business at the MBPXL plant. It is argued the purported de facto certification was unlawful because it was effected without a hearing. Differing but little from the foregoing, it also has been and is argued that if KP&L is not treated as certificated to transact business at the MBPXL plant, (1) its sale of gas under the contract is an unlawful transaction of natural gas public utility business outside its certificated territory, and (2) it is unreasonable to permit KP&L to sell to a "customer" of Peoples (a "customer" because located and using the gas in Peoples' certificated territory) when Peoples presently has the facilities and capability to serve MBPXL.

Peoples, noting that K.A.R. 82-1-220 expresses no time requirement for the filing of a complaint, contended in the trial court and contends before us that dismissal of its complaint on the ground it was not timely filed, was not within the statutory authority of the KCC. Other than this argument, there is and has been no contention the January 17, 1980, KCC order was unlawful, that is, the order was not within the statutory authority of the KCC or the prescribed statutory and procedural rules were not followed in making the order. See Central Kansas Power Co. v. State Corporation Commission, 221 Kan. 505, Syl. P 1, 561 P.2d 779 (1977); Midwest Gas Users Ass'n v. Kansas Corporation Commission, 3 Kan.App.2d at 380, 595 P.2d 735. Thus, all other bases of the appeal from the January 17, 1980, KCC order must be in the nature of claim of unreasonableness. See Jones v. Kansas Gas and Electric Co., 222 Kan. 390, 396-397, 565 P.2d 597 (1977); Kansas Gas & Electric Co. v. State Corporation Commission, 218 Kan. 670, Syl. P 1, 544 P.2d 1396 (1976); Midwest Gas Users Ass'n v....