State ex rel. City of Springfield v. Public Service Com'n of State of Mo., WD

• Decision Date: 11 June 1991
• Docket Number: No. WD,WD
• Citation: 812 S.W.2d 827
• Parties: Util. L. Rep. P 26,080 STATE of Missouri, ex rel., CITY OF SPRINGFIELD, City of Fulton and City of Granby, Appellants, v. PUBLIC SERVICE COMMISSION of the STATE OF MISSOURI, Respondent. 43828.
• Court: Missouri Court of Appeals

Page 827

812 S.W.2d 827

Util. L. Rep. P 26,080

STATE of Missouri, ex rel., CITY OF SPRINGFIELD, City of

Fulton and City of Granby, Appellants, v. PUBLIC SERVICE COMMISSION of the STATE OF MISSOURI, Respondent.

No. WD 43828.

Missouri Court of Appeals,

Western District.

June 11, 1991.

Motion for Rehearing and/or Transfer to Supreme Court

Denied July 30, 1991.

Application to Transfer Denied Sept. 10, 1991.

Gary W. Duffy, Jefferson City, for appellants.

William Shansey, Jefferson City, for respondent.

Before LOWENSTEIN, P.J., and TURNAGE and FENNER, JJ.

FENNER, Judge.

This is an appeal from a circuit court judgment affirming an Order of Rulemaking of the Respondent, Missouri Public Service Commission (Commission). The Commission's Order of Rulemaking in question here sets forth new and amended gas safety rules (New Rules). The appellants all operate municipal gas utilities which, in accordance with the language of § 386.310.1, RSMo Supp.1990, are subject to the safety and health rulemaking authority of the Commission.

In this appeal, appellants argue that the New Rules are not applicable to them on constitutional grounds and because the Commission failed to follow the requisite statutory rulemaking process.

In their first point, appellants argue that the New Rules require either new activity or service or an increase in activity, or all of the same, in violation of the provisions of what is commonly known as the Hancock Amendment, consisting of Mo. Const. Art. X, §§ 16 through 24.

Appellants argue specifically that the New Rules are in violation of Mo. Const. Art. X, § 21, which provides as follows:

The state is hereby prohibited from reducing the state financed proportion of the costs of any existing activity or service required of counties and other political subdivisions. A new activity or service or an increase in the level of any activity or service beyond that required by existing law shall not be required by the general assembly or any state agency of counties or other political subdivisions, unless a state appropriation is made and disbursed to pay the county or other political subdivision for any increased costs.

A violation of Mo. Const. Art. X, § 21, exists only if both (1) a new or increased activity or service is required of a political subdivision by the state and (2) the political subdivision experiences increased costs in performing that activity or service. Miller v. Director of Revenue, 719 S.W.2d 787, 788-89 (Mo. banc 1986).

There is no dispute that the New Rules increase the frequency of inspections, replacements, testing, record keeping and other activities of gas utilities, including municipal gas utilities, with increased cost to the utilities but without appropriation from the state to pay the increased cost. However, the operation of a gas utility is a discretionary function of a municipality which can also be undertaken by private interests. ¹ It is not a service required of a municipality to be funded by tax dollars.

The purpose which appears in the whole plan of utility operations is to place municipal utilities on the same basis as investor owned utilities. Pace v. City of Hannibal, 680 S.W.2d 944, 948 (Mo. banc 1984). A public utility, whether investor owned or publicly owned, requires a franchise to operate. Id.

Gas utilities are subject to regulation by the Public Service Commission. § 386.250(1) and (5); §§ 393.110-393.295, RSMo 1986. ² Among its supervisory and regulatory functions, the Public Service Commission generally fixes rates for gas utilities. § 393.140(11); § 393.150. However, municipal utilities are free to determine and set rates without being subject to the rate making process of the Commission. Shepherd v. City of Wentzville, 645 S.W.2d 130, 133 (Mo.App.1982).

Municipal utilities are governed by a Board of Public Works pursuant to § 91.450, or as established by City Charter. The rate a governing body of a municipal utility is allowed to charge is not in the nature of taxation, which is a demand of a sovereignty; but is in the nature of a toll, which is a demand of a proprietorship. St. Louis Brewing Ass'n v. City of St. Louis, 140 Mo. 419, 37 S.W. 525, 528 (1896); see also, Shepherd v. City of Wentzville, 645 S.W.2d 130, 134 (Mo.App.1982). Taxes are enforced contribution from corporations, persons and property, levied by the state by virtue of its sovereignty, for the support of government and for all public needs. But utility rates, including those of a municipal utility, are imposed and collected merely as compensation to be paid for the commodity received by an individual customer of the utility. St. Louis Brewing Ass'n v. City of St. Louis, 37 S.W. at 528.

Operation of a municipal utility is not an activity required of government to serve public needs. It is a discretionary function often undertaken by private interests. Increased costs to a municipal utility are not a drain on general revenue, but are charges against the customers of the utility. The charges of a municipal utility are not in the nature of taxation.

The imposition by the Commission of new and amended safety rules, against municipal utilities, does not violate the Hancock Amendment even when the rules increase the utilities' activity, service and costs. The increased costs do not affect the municipality's tax structure by increasing the cost of operating government and impose no additional burden upon the taxpayers.

Appellants' first point is denied.

In their second point, appellants argue that the Commission acted unlawfully and the circuit court erred in affirming its decision in that the Commission's Order of Rulemaking requires appellants to undertake leak investigation surveys of customer-owned facilities not owned or installed by appellants and bans future installation of customer-owned service and yard lines.

Appellants argue first, under their second point, that requiring them to undertake leak investigation surveys of customer-owned lines is beyond the jurisdiction of the Commission.

A number of statutory sections address this issue. Section 386.250, RSMo Supp.1990, subsections (1) and (5) provide, in pertinent part, that the jurisdiction, supervision, powers and duties of the Commission extend to the manufacture, sale or distribution of gas and to persons or corporations owning or controlling the same and to all public utility corporations. Section 386.250(6), RSMo Supp.1990, specifically authorizes the adoption of rules which prescribe the conditions of rendering public service. Section 386.310, RSMo Supp.1990, authorizes the Commission to promulgate safety rules effective against municipal gas systems and public utilities among others. In pertinent part, § 386.310.1, RSMo Supp.1990, authorizes the Commission to "... require the performance of any other act which the health or safety of its employees, passengers, customers or the public may demand,...."

Pursuant to the foregoing statutory sections, it is reasonable for the Commission to require gas utilities to inspect customer lines in the interest of public safety. The Commission acted within its statutory authority by so ordering.

Appellants next argue, under their second point, that the Commission was without authority to prohibit, as of the effective date of its New Rules, future customer-owned service and yard lines. Appellants argue that this rule conflicts with municipal ordinances which require customer-ownership of service lines, violates Article I, § 13, of the Missouri Constitution and is an unconstitutional taking of property.

As noted previously herein, the Commission has statutory authority to adopt safety rules effective against public utilities in the interest of utility employees and customers. § 386.310.1, RSMo Supp.1990. Duly promulgated rules of a state administrative agency have the force and effect of law. Missouri National Education Association v. Missouri State Board of Mediation, 695 S.W.2d 894, 897 (Mo. banc 1985). Municipal ordinances regulating subjects, matters and things upon which there is a general law of the state must be in harmony with the state law. Frank v. Wabash Railroad Company, 295 S.W.2d 16, 21 (Mo.1956).

The safety rules of the Commission take precedent over conflicting municipal ordinances. Appellants' argument that they are entitled to relief because of conflict between the New Rules and municipal ordinances is denied.

Under their second point, appellants argue further that the Commission's ban of customer-owned service and yard lines is in violation of the Constitution of Missouri, Art. I, § 13.

Article I, § 13, Mo. Const., prohibits the enactment of any law "retrospective in its operation." Retrospective or retroactive laws are generally defined as those which take away or impair vested rights acquired under existing laws, or create a new obligation, impose a new duty, or attach a new disability in respect to transactions or considerations already passed. Martin v. Schmalz, 713 S.W.2d 22, 23 (Mo.App.1986). (citations omitted.) A law is said to be retroactive only when it is applied to rights acquired prior to its enactment. Id.

The rule prohibiting customer-ownership of service and yard lines is applicable only from the effective date forward and does not violate Art. I, § 13, Mo. Const.

In the final argument, under their second point, appellants argue that the rule prohibiting customer-ownership of service and yard lines constitutes an unconstitutional taking of appellants' property. The only authority appellants cite for this argument is State ex rel. Southwestern Bell Telephone Company v. Public Service Commission, 416 S.W.2d 109 (Mo. banc 1967).

In the Southwestern Bell case, the Supreme Court held that an order of the Commission directing the telephone company to provide service in an area where it had not professed to provide service was an unconstitutional taking of private property. The court reasoned that the company could not be required to...