State ex rel. Aquila, Inc. v. Pub. Serv. Com'n of State

• Decision Date: 31 August 2010
• Docket Number: Nos. WD 70788, WD 70798.,s. WD 70788, WD 70798.
• Citation: 326 S.W.3d 20
• Parties: STATE of Missouri, ex rel. AQUILA, INC., et al., Appellants, v. PUBLIC SERVICE COMMISSION OF the STATE of Missouri, Respondent.
• Court: Missouri Court of Appeals

326 S.W.3d 20

STATE of Missouri, ex rel. AQUILA, INC., et al., Appellants,

v.PUBLIC SERVICE COMMISSION OF the STATE of Missouri, Respondent.

Nos. WD 70788, WD 70798.

Missouri Court of Appeals,

Western District.

April 20, 2010.

Sustained and Cause Ordered Transferre Aug. 31, 2010.

Stuart W. Conrad, Jefferson City, MO, for Appellants, AG Processing Inc. and Sedalia Industrial Energy User's Association.

Christina Lynn Baker, Jefferson City, MO, for Appellant, Office of Public Counsel.

Kevin Allen Thompson, Jefferson City, MO, for Respondent, Public Service Commission of the State of Missouri.

John Bruce Coffman, St. Louis, MO, for Respondent, AARP.

Karl Zobrist, Kansas City, MO, for Respondent, Aquila, Inc.

Before: LISA WHITE HARDWICK, P.J., and JAMES M. SMART, JR. and ALOK AHUJA, JJ.

ALOK AHUJA, Judge.

This appeal challenges a Report and Order of the Missouri Public Service Commission, as well as two subsequent Tariff Compliance Orders, issued in a rate caseinitiated by Aquila, Inc.¹ AG Processing and Sedalia Industrial Energy Users Association ("Industrial Intervenors") appeal from the circuit court's affirmance of the two Tariff Compliance Orders, which found certain later-filed tariff sheets to be compliant with the Commission's Report and Order. The Office of Public Counsel separately appeals the circuit court's affirmance of the Report and Order, which approved a general rate increase for Aquila. We consolidated the appeals. Finding no error, we now affirm.

Factual Background

Aquila initiated this case by filing tariff sheets seeking to implement a general rate increase which totaled approximately $119 million. Numerous parties intervened, including the Industrial Intervenors. After conducting an evidentiary hearing, the Commission issued a Report and Order authorizing Aquila to increase its rates, but by only approximately $59 million. The Commission's decision ordered Aquila to file revised tariff sheets in compliance with the Report and Order. Public Counsel and the Industrial Intervenors filed timely applications for rehearing of the Report and Order.

Aquila filed revised tariff sheets which the Commission, acting through a Regulatory Law Judge, ultimately approved. Public Counsel and the Industrial Intervenors filed timely applications for rehearing of the Regulatory Law Judge's two Tariff Compliance Orders. The Commission denied all applications for rehearing.

Public Counsel and the Industrial Intervenors then filed petitions for writs of review with the circuit court, which were consolidated.² The circuit court affirmed the Commission's Report and Order "and all other orders issued" in the case. These appeals followed.

Standard of Review

Section 386.510 ³ provides for review of Commission orders by a circuit court "for the purpose of having the reasonableness or lawfulness of the original order or decision or the order or decision on rehearing inquired into or determined." See also, State ex rel. AG Processing, Inc. v. Pub. Serv. Comm'n, 120 S.W.3d 732, 734 (Mo. banc 2003). An order's lawfulness is assessed by determining whether statutory authority exists for its issuance; all legal issues are reviewed de novo. Id. The reasonableness of an order "depends on whether it is supported by substantial and competent evidence on the whole record." Id. at 735. All factual findings of the Commission are presumed correct, "and if substantial evidence supports either of two conflicting factual conclusions, 'the Court is bound by the findings of the administrative tribunal.' " Id. (citations omitted).

Analysis

I.

The Industrial Intervenors challenge only the Commission's Tariff Compliance Orders. They allege the orders are unlawful because: (1) the Commission's authority to issue such orders cannot lawfully bedelegated to a Regulatory Law Judge; and (2) even assuming the Commission could lawfully delegate the authority to issue tariff compliance orders, under § 386.240 such a delegation had to be "expressly authorized or approved," and no such express authorization or approval occurred here.⁴

A.

It is undisputed that the Tariff Compliance Orders at issue here were issued by a Regulatory Law Judge, and not by the members of the Commission themselves. Each Order reflects that the delegation of authority to the Regulatory Law Judge was "pursuant to Section 386.240, RSMo 2000," which provides:

Powers of commission, how exercised

The commission may authorize any person employed by it to do or perform any act, matter or thing which the commission is authorized by this chapter to do or perform; provided, that no order, rule or regulation of any person employed by the commission shall be binding on any public utility or any person unless expressly authorized or approved by the commission.

Notably, the scope of the functions which the Commission may delegate is not limited by § 386.240 in any way; instead, the statute authorizes the Commission to delegate the performance of " any act, matter or thing which the commission is authorized by this chapter to do or perform." (Emphasis added.) We also note that § 386.240 expressly contemplates that the Commission's delegatees may issue "order[s], rule[s] or regulation[s]" binding on public utilities and other persons (so long as those actions are properly authorized or approved).

The Industrial Intervenors argue that the issuance of Tariff Compliance Orders is non-delegable pursuant to the Missouri Supreme Court's decision in State ex rel. Philipp Transit Lines, Inc. v. Public Service Commission, 552 S.W.2d 696 (Mo. banc 1977). Philipp Transit addressed whether the Commission "may decide a case by a report and order adopted by notational voting or whether the report and order must be acted upon at a public meeting of which notice has been given." Id. at 697 (footnote omitted). The Court explained that in notational voting, "each commissioner, after consideration of the circulated order, indicates approval or dissent on a notational voting sheet which accompanies the report and order. If a commissioner is not in agreement, he has various options, including requesting a conference or preparing and filing a dissent." Id. at 697 n. 1.

Philipp Transit involved the interpretation of § 386.130,⁵ which provides in part:

A majority of the commissioners shall constitute a quorum for the transaction of any business, for the performance of any duty or for the exercise of any power of the commission, and may hold meetings of the commission at any time or place within the state. Any investigation, inquiry or hearing which the commission has power to undertake or to hold may be undertaken or held by or before any commissioner. All investigations,inquiries, hearings and decisions of a commissioner shall be and be deemed to be the investigations, inquiries, hearings and decisions of the commission, and every order and decision made by a commissioner, when approved and confirmed by the commission and ordered filed in its office, shall be and be deemed to be the order of the commission.

In Philipp Transit, the Commission argued that nothing on the face of the statute required that commissioners assemble as a group to adopt orders, or prohibited notational voting. The Court rejected this argument, noting that Missouri "borrowed" the language of § 386.130 from a substantially identical New York statute, and that at the time of the Missouri legislature's action, New York courts had interpreted the borrowed statute in People v. Whitridge, 144 A.D. 486, 129 N.Y.S. 295 (N.Y.App.Div.1911), aff'd, 204 N.Y. 646, 97 N.E. 1112 (1912). Whitridge had held:

The body is not composed of five individuals authorized to act independently, for the act provides that "there shall be a Public Service Commission for each district."

And, while individual commissioners may hold "investigations, inquiries and hearings," the final act must be that of the commission as a body at a meeting attended by a quorum, and it is only for the violation of an order of the commission as such a body that a penalty can be imposed. In order that there should have been a valid order, it was necessary that it should appear that it had been adopted by the commission, acting at least by a majority, and at a stated meeting, or a meeting properly called and of which all the commissioners had been notified and had had an opportunity to be present.

Philipp Transit, 552 S.W.2d at 700 (emphasis added, citations omitted) (quoting Whitridge, 129 N.Y.S. at 298).

Industrial Intervenors seize on Philipp Transit's statement that "the final act must be that of the commission as a body at a meeting attended by a quorum." According to Industrial Intervenors, this statement requires that § 386.240 be interpreted to allow delegation only of the authority to resolve interlocutory matters, not the substantive issues which will finally terminate a contested ratemaking proceeding.

We are unpersuaded. Neither Philipp Transit, nor the Whitridge decision on which it heavily relied, involved § 386.240 or any similar statute which expressly authorized the Commission to delegate the performance of " any act, matter or thing which the commission is authorized by this chapter to do or perform." Instead, Philipp Transit addressed the procedures applicable where the Commission itself acts, as a body, not when the Commission acts through delegatees as expressly permitted by § 386.240. Reading the quoted language from Philipp Transit as a gloss on § 386.240 would render the delegation statute a complete nullity, because under the literal language of Philipp Transit, no "valid" order enforceable against regulated entities—of any sort—can be issued except by action of "the commission [as a body], acting at least by a majority, and at a stated meeting." We will not read Philipp Transit's interpretation of another statutory provision (§ 386.130) to completely eliminate the delegation authority plainly granted by § 386.240.

We also note that, even if Philipp Transit required the Commission, as...