State ex rel. Laclede Gas v. Pub. Ser. Com.

• Decision Date: 04 March 2003
• Docket Number: No. WD 61486.,WD 61486.
• Parties: STATE of Missouri ex rel. LACLEDE GAS COMPANY and Union Electric Company d/b/a Ameren UE, Appellants, v. PUBLIC SERVICE COMMISSION OF THE STATE of Missouri, Respondent.
• Court: Missouri Court of Appeals

103 S.W.3d 813

STATE of Missouri ex rel. LACLEDE GAS COMPANY and Union Electric Company d/b/a Ameren UE, Appellants, v. PUBLIC SERVICE COMMISSION OF THE STATE of Missouri, Respondent.

No. WD 61486.

Missouri Court of Appeals, Western District.

March 4, 2003.

Motion for Rehearing and/or Transfer to Supreme Court Denied April 24, 2003.

Gary W. Duffy, Jefferson City, MO, Thomas M. Byrne and Michael C. Pendergast, St. Louis, MO, for appellants.

Dana K. Joyce and Thomas R. Schwarz, Jr., Jefferson City, MO, for respondent.

Before JAMES M. SMART, JR., P.J., ROBERT G. ULRICH and RONALD R. HOLLIGER, JJ.

ROBERT G. ULRICH, Judge.

Laclede Gas Company ("Laclede"), a gas corporation and public utility, and Union Electric Company d/b/a AmerenUE ("AmerenUE"), a gas, electric, and steam heating corporation and a public utility, appeal the Cole County Circuit Court's decision affirming the Public Service Commission's (the "Commission") Second Report and Order (the "Second Order"). In its Second Order, the Commission adopts a depreciation calculation for net salvage value that reflects net salvage amounts recently incurred by Laclede instead of estimating the future cost of removal and spreading the cost over the life of the asset. Laclede and AmerenUE raise several grounds on appeal. Because the Commission's Second Order is not supported by adequate findings of fact, this case is remanded to the Commission with directions to enter proper findings of fact to support its decision.

Factual and Procedural History

Laclede filed revised tariff sheets with the Commission on January 26, 1999, reflecting increased rates for gas service provided to customers in Missouri. The Commission issued an order on February 9, 1999, initiating a general rate case, Case No. GR-99-315, and suspending the tariffs until December 26, 1999. The order also contained a procedural schedule as well as a deadline for interventions. After the order was issued, AmerenUE filed a petition to intervene in the case. The Commission granted AmerenUE's petition on April 29, 1999.

A disputed issue in the case was how Laclede should recover the costs incurred in retiring assets at the end of their useful lives. The majority of Laclede's assets are composed of underground pipes and equipment used to carry natural gas. The cost to retire such assets is determined by estimating the "net salvage value," which is equal to gross salvage minus the cost of retiring the asset from service. In effect, the cost to dispose of the asset is deducted from any amounts received from the disposal.

Laclede and the Commission's Staff (the "Staff') proposed different methods of calculating net salvage value. Laclede's method of determining net salvage value is to estimate the future cost of retiring the asset and spread that cost over the life of the asset. It characterizes this depreciation method as the traditional method generally used by the Commission. The Staff advocated calculating net salvage value by examining the actual costs that Laclede incurs for retiring the asset to determine what those costs would be in the future. The Staff claimed that it advocated a different method of calculating net salvage value because Laclede was recovering more in depreciation from its customers for net salvage than it was spending. The Staff asserted that its method of depreciation would more accurately approximate Laclede's cost of retiring the asset. Laclede countered that the Staffs method is inconsistent with Generally Accepted Accounting Principles (GAAP) and fails to account for inflation's effect on the cost of retiring assets in the future.

On December 14, 1999, the Commission issued its Report and Order (the "First Order") adopting the Staffs method of determining net salvage value. The Commission found that the Staffs recommendation was just and reasonable because it compensated Laclede without resulting in Laclede overrecovering from its customers. Both Laclede and AmerenUE filed motions for rehearing on the issue of how net salvage value was to be calculated. The Commission issued an order denying rehearing on April 13, 2000. Laclede filed a petition for writ of review with the Cole County Circuit Court in which AmerenUE intervened. The Cole County Circuit Court entered its Order and Judgment on December 1, 2000, finding that the Commission's First Order was not supported by adequate findings of fact and thereby remanded the First Order to the Commission with directions to provide "findings of fact sufficient to support a resolution of the net salvage issue."

The Commission issued its Second Order on June 28, 2001, finding that the Staffs method of calculating net salvage value was appropriate. Laclede and AmerenUE filed an application for rehearing which the Commission denied on August 14, 2001. Subsequent to that, Laclede and AmerenUE filed a petition for writ of review of the Commission's Second Order with the Circuit Court of Cole County. The Cole County Circuit Court issued its judgment affirming the Commission's Second Order on April 29, 2002. This appeal followed.

Laclede and AmerenUE raise five points on appeal. As the first point on appeal is dispositive, it is the only one addressed. In their first point on appeal, Laclede and AmerenUE claim that the Commission erred in issuing its Second Order because the order was not supported by adequate findings of fact as required by sections 386.420, 536.090, RSMo 2000, in that the Commission's findings of fact are inadequate because they fail to provide a rationale for adopting the Staffs depreciation method for calculating net salvage value.

Whether the Commission's Second Order Was Supported By Adequate Findings of Fact

In their first point on appeal, Laclede and AmerenUE claim that the Commission erred in issuing its Second Order because such order is not supported by adequate findings of fact. §§ 386.420, 536.090, RSMo 2000. Laclede contends that the Commission's findings of fact are insufficient for failing to provide an explanation for its decision to adopt the Staffs depreciation method for calculating net salvage value. Specifically, Laclede asserts that the Staff's depreciation method is a departure from the traditional depreciation method generally used by the Commission. Laclede argues that such a departure requires an explanation. The Commission counters that its findings of fact were sufficient because they contained at least five justifications for adopting the Staff's depreciation method. Additionally, it argues that it is not required to provide a detailed accounting of the facts in its order.

When a hearing occurs before the Commission, it is required to "make a report in writing in respect thereto, which shall state the conclusion of the commission, together with its decision, order or requirement in the premises." § 386.420.2, RSMo 2000. The Supreme Court interprets section 386.420.2, RSMo 2000, as requiring the Commission to include findings of fact within its decision that are not "completely conclusory." State ex rel. Monsanto Co. v. Pub. Serv. Comm'n, 716 S.W.2d 791, 795 (Mo. banc 1986) (relying on State ex rel. Rice v. Pub. Serv. Comm'n, 359 Mo. 109, 220 S.W.2d 61 (1949)). Findings of fact that "provid[e] no insight into how controlling issues were resolved are inadequate." Id. Because section 386.420, RSMo 2000, does not set forth what constitutes adequate findings of fact, section 536.090, RSMo 2000, which applies to "[e]very decision and order in a contested case," has been used by Missouri courts to fill in the gaps of section 386.420, RSMo 2000. State ex rel. Noranda Aluminum, Inc. v. Pub. Serv. Comm'n, 24 S.W.3d 243, 245 (Mo.App. W.D.2000) (quoting section 536.090, RSMo 2000). Section 536.090, RSMo 2000, provides, in pertinent part:

Every decision and order in a contested case shall be in writing, and except in default cases or cases disposed of by stipulation, consent order or agreed settlement, the decision, including orders refusing licenses, shall include or be accompanied by findings of fact and conclusions of law. The findings of fact shall be stated separately from the conclusions of law and shall include a concise statement of the findings on which the agency bases its order.

The issue of whether the Commission made adequate findings of fact in its Second Order is an issue of law for the independent judgment of the appellate court. Friendship Vill. of South County v. Pub. Serv. Com'n, 907 S.W.2d 339, 345 (Mo.App. W.D.1995).

An inflexible standard for determining the adequacy of findings of fact has not been espoused in Missouri. Glasnapp v. State Banking Bd., 545 S.W.2d 382, 387 (Mo.App.1976). Instead, the following standard is applied to the specific facts of the case:

The most reasonable and practical standard is to require that the findings of fact be sufficiently definite and certain or specific under the circumstances of the particular case to enable the court to review the decision intelligently and ascertain if the facts afford a reasonable basis for the order without resorting to the evidence.

Id. (quoting 2 Am.Jur.2d Administrative Law § 455, at 268). Findings of fact are inadequate when they "leave the reviewing court to speculate as to what part of the evidence the [Commission] believed and found to be true and what part it rejected." State ex rel. Int'l Telecharge, Inc. v. Mo. Pub. Serv. Comm'n, 806 S.W.2d 680, 684...