State ex rel. Arkansas Power & Light Co. v. Missouri Public Service Com'n

• Decision Date: 21 July 1987
• Docket Number: No. WD,WD
• Citation: State ex rel. Arkansas Power & Light Co. v. Missouri Public Service Com'n, 736 S.W.2d 457 (Mo. App. 1987)
• Parties: STATE ex rel. ARKANSAS POWER & LIGHT COMPANY, Appellant, v. MISSOURI PUBLIC SERVICE COMMISSION, Respondent. 38897.
• Court: Missouri Court of Appeals

Page 457

736 S.W.2d 457

STATE ex rel. ARKANSAS POWER & LIGHT COMPANY, Appellant, v.MISSOURI PUBLIC SERVICE COMMISSION, Respondent.

No. WD 38897.

Missouri Court of Appeals Western District.

July 21, 1987.

Motion for Rehearing and/or

Transfer to Supreme Court

Denied Sept. 1, 1987.

Application to Transfer Denied Oct. 13, 1987.

James C. Swearengen, Jefferson City, for appellant.

Paul H. Gardner, Jefferson City, for respondent.

Robin Edward Fulton, Fredericktown, for intervenor.

Before KENNEDY, P.J., and LOWENSTEIN and GAITAN, JJ.

LOWENSTEIN, Judge.

In this appeal by a utility company from an order involving a rate increase, the primary issue presented is whether the regulatory body may, as sanctions for enforcement of discovery, Rule 61.01, strike crucial evidence of the applicant.

Arkansas Power & Light Company(AP & L), a wholesale and retail electric supplier, has a service area in eight southeastern Missouri counties.AP & L is one of four operating electrical companies wholly owned by a holding company, Middle South Utilities (MSU).

AP & L, based on revenue requirements, under Chapter 393, RSMo 1986 wanted to raise Missouri tariffs by approximately $5,001,000 to recover increases in its operating costs.It also sought to recover an additional $12,177,000 of Missouri costs resulting from a decision of the Federal Energy Regulatory Commission(FERC) which allocated to AP & L the costs of a nuclear generating station in the MSU system.While AP & L asked for a total of $17,178,000 in revenues from Missouri customers, the Public Service Commission(Commission or PSC) staff proposed a reduction from present revenues of $7,815,196 and did not allow any of the $12,177,000 request for the nuclear costs.

The PSC found AP & L was not entitled to an increase of its Missouri revenues, but was subject to a decrease of $3,030,979.The PSC did find $9,033,000 was owed to AP & L because of the federal action on the Grand Gulf nuclear plant.The result was a net increase to AP & L of $6,002,021.AP & L appealed the PSC decision which was affirmed by the Cole County Circuit Court.Several lead mining companies, as intervenors, support the PSC decision.

As appellant AP & L takes issue with the PSC's imposition of a sanction which excluded part of AP & L's evidence, and with the PSC's methodology in affixing costs and expenses.The facts from the 2000 pages each of transcript and legal file will be summarized in the appropriate points.

I.

At the heart of AP & L's first point is the Commission's striking, and therefore failing to take into account, AP & L's evidence as to fuel costs.Summarized and reduced to English for the benefit of the reader, AP & L produces electricity from coal, oil and nuclear processes.AP & L has negotiated advantageous contracts for the supply and transportation of coal.To determine the fuel cost of electricity produced, AP & L contracted with a firm to set up a computer analysis or model.The manual of this process is called "promod."AP & L claimed the promod manual and the coal invoices were highly sensitive and should not be open to scrutiny by those not connected with the PSC.

The following is a timetable of relevant events:

                                     1985
                June 7         AP&L submitted to Commission a request for an increase in
                               tariffs
                July 3         PSC issues suspension order and sets hearing for 1/27/86
                October 29     PSC issues a Data Request (DR) to AP&L for promod manual.  (A DR
                               is equivalent to an interrogatory)
                November 17    PSC sends a DR on the coal invoices.
                December 3     PSC grants staff extension on hearings until 2/24/86; Staff's
                               case to be filed 1/23 and 1/26/86.
                December 13    With regard to promod, AP&L later asks for protective order.
                December 15    With regard to coal invoices, AP&L asks for a confidentiality
                               agreement or a protective order.
                                                     1986
                January 2      Commission order for AP&L to produce promod.
                January 8      AP&L says promod confidential and belongs to a third party,
                               staff also again requests coal invoices.
                January 22     Staff asks for a hearing on AP&L's failure to produce promod.
                January 27     Commission orders production of coal invoices and promod, but
                               decides they are trade secrets.
                February 4     Commission now grants the protective order for invoices and
                               promod and dismisses staff complaints that AP&L failed to
                               produce.  The staff signs nondisclosure agreements, and somewhere
                               between February 6 and February 20, promod and invoices given to
                               staff by AP&L.
                

The Commission's order is somewhat confusing.As to promod, the Commission excluded the witness testimony and the manual because "the company cannot be allowed to maintain its burden of proof by the use of secret or unrevealed information or delay producing the information so that it cannot be utilized or verified by the other parties, particularly the Commission Staff."This order was in response to an earlier staff motion to strike or exclude.After the Commission sustained staff's motion to exclude promod, the AP & L witness attempted to testify as to his calculations based on non-promod methods, to which the Commission made an evidentiary ruling against AP & L. Due to the disposition of the order to strike, that subsequent ruling will not be addressed.The ruling in the final order excludes the coal invoices based on the delay in AP & L providing them.

Needless to say exclusion of promod and the coal invoices left the case with evidence which did not present a true or accurate picture of AP & L's expenses.The Commission, without the higher costs of coal produced electricity, considered only the lower cost of the less utilized nuclear method.This first issue boils down to whether the PSC can exclude the described evidence as a sanction against AP & L. Rule 61.01.A determination of the issue is based on these facts and legal propositions: (a) AP & L had the burden of proving its case; (b) Because of the time constraints, the Commission had to reach a decision promptly, even though the staff may not have had enough time to analyze the information after its receipt; (c) the Commission ultimately upheld AP & L's position that the evidence was secret, proprietary and subject to protection and confidentiality; and (d) the ratemaking process is supposed to involve fair play and a full hearing, State ex rel. Fischer v. Public Service Commission, 645 S.W.2d 39, 43(Mo.App.1982),cert. denied464 U.S. 819, 104 S.Ct. 81, 78 L.Ed.2d 91; and a just and reasonable utility rate is a bilateral proposition that it be just and reasonable both as to the utility and the customer.State ex rel. Valley Sewage Co. v. Public Service Commission, 515 S.W.2d 845, 850(Mo.App.1974).

There is no presumption in favor of the Commission's nor the circuit court's determination of legal issues.Love 1979 Partners v. Public Service Commission, 715 S.W.2d 482, 486(Mo. banc 1986).

This court agrees that a time limitation was involved and the Commission staff was entitled to a meaningful review of the figures provided by the requester of a rate increase.It seems though, the stance of AP & L in not quickly complying with discovery was completely upheld when the Commission granted AP & L all the protective relief it requested.

The evidence subject of this point was highly relevant and material, and critical to AP & L's case--the remaining question being, was the sanction too harsh under these circumstances.This court holds the Commission erred in excluding the subject evidence.To consider the case without the promod information and the cost (coal) which generated of some 80% of AP & L's electricity, denied the applicant a meaningful hearing, and resulted in an order which distorted the true costs.

The PSC may adopt rules as to hearings and investigations.§ 386.410, RSMo 1986.Commission Rule 4 CSR 240-2.090 allows the use of written interrogatories under the same conditions as in civil cases.State ex rel. Southwestern Bell Telephone Company v. Public Service Commission, 645 S.W.2d 44, 49-50(Mo.App.1983).Although proprietary interests may be protected in those kinds of cases, they cannot be unilaterally used to allow the utility to fail to disclose and still carry its burden of proof.State ex rel. Utility Consumers Council v. Public Service Commission, 562 S.W.2d 688, 694(Mo.App.1978), cert. denied394 U.S. 866, 99 S.Ct. 192, 58 L.Ed.2d 177.

Trial courts are allowed wide discretion in meting out sanctions under Rule 61.01.Appellate decisions read of "repeated failures to comply,"Baughn v. Rapidways Truck Leasing, 698 S.W.2d 618, 620(Mo.App.1985); repeated failures to appear, Kingsley v. Kingsley, 716 S.W.2d 257, 260(Mo. banc 1986); no excuse or failure to appear at depositions, Union State Bank of Clinton v. Dolan, 718 S.W.2d 522, 528(Mo.App.1986), and of the drastic remedy of dismissal with prejudice where the parties"inertia flouted the court's authority,"Wipke v. Louisiana Farm Supply, Inc., 622 S.W.2d 772, 774(Mo.App.1981).

This court holds the PSC may impose sanctions pursuant to Rule 61.01.But in this case the striking of admissible and vitally necessary evidence as a sanction amounts to an abuse.Foster v. Kohm, 661 S.W.2d 628, 632(Mo.App.1983)."Elimination of this important evidence from consideration completely destroyed appellants' case and permitted what amounted to a default judgment against them."Id.As was written in Foster, this court is sympathetic to the PSC's need, as the trial court, to expeditiously control its docket.But here, as in Foster, there "was no bad...