Pub. Serv. Comm'n of Mo. v. Mo. Gas Energy

• Decision Date: 20 November 2012
• Docket Number: No. WD 74732.,WD 74732.
• Citation: 388 S.W.3d 221
• Parties: PUBLIC SERVICE COMMISSION OF the STATE of Missouri, Respondent, v. MISSOURI GAS ENERGY, A Division of Southern Union Company, Respondent, Office of Public Counsel, Appellant.
• Court: Missouri Court of Appeals

388 S.W.3d 221

PUBLIC SERVICE COMMISSION OF the STATE of Missouri, Respondent,

v. MISSOURI GAS ENERGY, A Division of Southern Union Company, Respondent,Office of Public Counsel, Appellant.

No. WD 74732.

Missouri Court of Appeals, Western District.

Oct. 23, 2012.

Motion for Rehearing and/or Transfer to

Supreme Court Denied Nov. 20, 2012.

Application for Transfer Denied Jan. 29, 2013.

Marc Poston, Jefferson City, MO, for Appellant.

Shelley Brueggemann, Jefferson City, MO, for Respondent, Public Service.

Paul Boudreau, Jefferson City, MO, for Respondent, Southern Union Co.

Before JAMES EDWARD WELSH, C.J., THOMAS H. NEWTON, J., and CHARLES E. ATWELL, Sp.J.

JAMES EDWARD WELSH, Chief Judge.

The Office of the Public Counsel (OPC) appeals the Public Service Commission's granting summary determination in favor of Southern Union Company, d/b/a Missouri Gas Energy (MGE), in regard to MGE's Tariff Sheet R–34, which concerned in part MGE's legal liability to its customers in tort. The OPC claims that the Commission's order granting MGE's motion for summary determination is unlawful because it lacks the required public interest determination as required by 4 CSR 240–2.117(1)(E) and lacks sufficient findings and conclusions to support the summary determination. Further, the OPC asserts that the Commission erred to the extent that it allowed MGE's tariff to include an exculpatory clause releasing MGE from liability for any injuries or harm caused by MGE's negligence occurring on customer-owned gas utilization equipment on the customer side of the meter. In particular, the OPC contends that the Commission's order is unlawful and unreasonable in that (1) granting such immunity was beyond the Commission's authority, (2) the Commission's decision violates common law and public policy, and (3) the Commission failed to articulate a rational basis for contradicting a recent order in another case before the Commission, where the Commission rejected a similar provision regarding immunity. We reverse this Commission's decision and remand this case to the Commission for further action consistent with this opinion.

MGE is a natural gas provider to over 500,000 residential, commercial, and industrial customers in 34 counties in Missouri. The Commission is an administrative state agency responsible for the regulation of public utilities, including gas corporations, in Missouri. MGE is subject to regulation by the Commission. The OPC is an agency of the State of Missouri that represents consumers in proceedings before the PSC and in all appeals of PSC orders.

On October 7, 2010, the Staff of the Commission (Staff) filed a complaint against MGE asserting that the language in MGE's Tariff Sheet R–34 ¹ limiting MGE's liability to its customers was unjust and unreasonable and was void and unenforceable as a matter of public policy. The Staff alleged MGE's tariff violated Commission policy as set out in the Commission's Report & Order in GT–2009–0056 (Laclede Order). In GT–2009–0056, the Commission ultimately rejected a tariff sheet proposed by Laclede Gas Company (Laclede) limiting Laclede's liability to its customers, which the Staff asserted in this complaint established policy. Specifically, the Staff alleged the Commission policy was not complied with because MGE's Tariff Sheet R–34 purported to:

(a) ... immunize MGE from all liability, even in cases in which MGE fails to comply with Commission rules and applicable codes and standards;

(b) ... limit MGE's liability even when MGE is negligent in the operation of its system, so that, for example, MGE would not be liable for over-pressuring its system and thereby causing damage to a customer's home and appliances;

(c) ... limit MGE's liability even when MGE has inspected the customer's equipment; and

(d) ... limit MGE's liability even for gross negligence or wanton or willful conduct.

The Staff also asserted that MGE's Tariff Sheet R–34 did not comply with the Commission's Natural Gas Safety Rules at 4 CSR 240–40.030(10)(J) and (12)(S), in that MGE's Tariff Sheet R–34 purported to “eliminate MGE's duty to test for leakage in a competent way, ensure compliance with industry standards and local codes,” warn of potential hazards, and discontinue service to a customer when equipment was unsafe.

MGE filed its answer to the Staff's complaint on November 12, 2010. On November 29, 2010, MGE filed a motion to dismiss the Staff's complaint.

On December 1, 2010, the Staff filed its response to MGE's motion to dismiss and filed a “Motion For Summary Determination” and its suggestions in support, asserting that no genuine issues of material fact were at issue. In addition, the Staff stated that it was entitled to relief as a matter of law and that “the public interest demand[ed] that [the] Staff's complaint be sustained.” On April 11, 2011, MGE also filed a “Motion For Summary Determination” and its suggestion in support, asserting that no genuine issue of material facts remained in dispute and that such a determination was in the public interest. The OPC filed its suggestions in support of the Staff's motion for summary determination on June 2, 2011. Thereafter, the Commission found the motions for summary determination and the motion to dismiss ready for ruling.

On November 9, 2011, the Commission issued its “Final Decision and Order To File A New Tariff Sheet” (Final Order) with an effective date of November 19, 2011. The Commission granted in part and denied in part both the Staff's and MGE's summary determination motions and denied MGE's motion to dismiss.

The Commission found that Paragraph 1 of MGE's Tariff Sheet R–34 was unjust and unreasonable. This rejected provision stated:

Customer shall save Company harmless from all claims for trespass, injury to persons, or damage to lawns, trees, shrubs, buildings or other property that may be caused by reason of the installation, operation, or replacement of the service line, yard line and other necessary appurtenances to serve customer unless it shall affirmatively appear that the injury to persons or damage to property complained of has been caused by willful default or gross negligence on the part of Company or its accredited personnel.

The Commission determined that this provision made the customer liable to third persons for MGE's conduct and was not supported by public policy. Specifically, the Commission found “[n]o public policy supports making an insurer out of a customer who is powerless—and is not paid—to control those risks.”

The Commission also found Paragraph 2 of MGE's Tariff Sheet R–34 to be unjust and unreasonable insofar as it purported to immunize MGE from liability against any allegation of MGE's negligence relating to inspection, leakage, and repair. This partially rejected provision stated:

Company may refuse or discontinue service if an inspection or test reveals leakage, escape or loss of gas on customer's premises. Company will not be liable for any loss, damage or injury whatsoever caused by such leakage, escape or loss of gas from customer's service line, yard line, ancillary lines, house piping, appliances or other equipment.

The Commission determined that this provision immunized MGE from “any liability for any inspection, leakage, and repair on the customer side, on any facts, regardless of causation and culpability.” The Commission concluded that “[i]mmunity for conduct more culpable than ordinary negligence [was] against Missouri's public policy” and that “[l]iability for negligence encourages [MGE] to take such safety precautions as are in [MGE's] control, which promotes the public interest.”

Further, the Commission found that Paragraph 3 of MGE's Tariff Sheet R–34 was unjust and unreasonable insofar as it purported to immunize MGE from liability against any allegation of MGE's negligence relating to inspection, leakage, and repair. This partially rejected provision stated:

The Company does not own, nor is it responsible for the repair or maintenance of any piping, vents, or gas utilization equipment on the delivery side of the gas meter, its related appurtenances and piping. All piping, vents or gas utilization equipment furnished by the owner/customer of the premises being served shall be suitable for the purposes hereof and the owner/customer of the premises shall be responsible for the repair and maintenance of such at all times in accordance with accepted practice and in conformity with requirements of public health and safety, as set forth by the properly constituted authorities and by the Company. As with any fixture or appurtenance within premises, piping, vents or gas utilization equipment can fail, malfunction or fall into disrepair at any time and as such the owner/customer of the premises being served shall be aware of this fact, and Company shall owe customer no duty to warn of potential hazards that may exist with such facilities on the delivery side of the gas meter, its related appurtenances and piping.

The Commission found that this provision incorporated equipment standards and provided that “conformity with those standards[was] the customer's duty” and never MGE's duty. Like Paragraph 2 of Tariff Sheet R–34, the Commission concluded that this provision immunized MGE from “any liability for any inspection, leakage, and repair on the customer side, on any facts, regardless of causation and culpability.” Further, the Commission stated that “[i]mmunity for conduct more culpable than ordinary negligence [was] against Missouri's public policy” and that “[l]iability for negligence encourages [MGE] to take such safety precautions as are in [MGE's] control, which promotes the public interest.”

In regard to MGE's Tariff Sheet R–34 Paragraph 4, which “limits the customer's liability to damage caused by [third] persons on the premises,” the Commission found that this paragraph was not unjust and unreasonable on its face. This provision stated:

The owner/customer shall be responsible at all times for...