State ex rel. Laclede Gas Co. v. Public Service Commission, KDC

• Citation: 600 S.W.2d 222
• Decision Date: 05 May 1980
• Docket Number: No. KDC,KDC
• Parties: STATE ex rel. LACLEDE GAS COMPANY, Relator-Appellant, v. PUBLIC SERVICE COMMISSION of Missouri, Respondent. 30581.
• Court: Court of Appeal of Missouri (US)

Page 222

600 S.W.2d 222

STATE ex rel. LACLEDE GAS COMPANY, Relator-Appellant, v. PUBLIC SERVICE COMMISSION of Missouri, Respondent.

No. KDC 30581.

Missouri Court of Appeals, Western District.

May 5, 1980.

Motion for Rehearing and/or Transfer to Supreme Court Denied

June 9, 1980.

Application to Transfer Denied July 15, 1980.

Richard L. Eckhart, Morris E. Stokes and Robert M. Lee, St. Louis, for relator-appellant.

Paul W. Phillips, William F. Schwer and L. Russell Mitten, II, Jefferson City, for respondent.

Before WASSERSTROM, C. J., Presiding, and SHANGLER, PRITCHARD, SWOFFORD, SOMERVILLE, CLARK and MANFORD, JJ.

MANFORD, Judge.

This is an appeal from a Circuit Court judgment affirming ¹ an order of the Public Service Commission. The order established new rate schedules for the natural gas utility. The judgment is affirmed.

The instant proceedings commenced with the filing of new proposed rate schedules by Laclede Gas Co. (hereinafter referred to as Laclede) with the Public Service Commission (hereinafter referred to as the P.S.C.) on August 16, 1976. The proposed rate schedule was designed to increase Laclede's gross operating revenues by an annual amount of $13,570,000, exclusive of gross receipt taxes.

Pursuant to § 393.150(1), RSMo 1969, the P.S.C., under date of September 7, 1976, suspended for a period of 120 days the effective date of the proposed schedule. The suspension was to allow sufficient time to study the effects of the proposed schedule and to determine if they were reasonable, just and in the public interest.

On October 13, 1976, pursuant to § 393.150(2), RSMo 1969, the P.S.C. further suspended the effective date of the proposed schedule for an additional six months. This order also established a schedule for the filing and service of the staff's (P.S.C. staff's) and intervenors' testimony and exhibits; scheduled public hearings at several locations within Laclede's service area; scheduled a prehearing conference for March 28, 1977 and directed hearings to cross-examine witnesses on April 18, 1977.

On February 3, 1977, the P.S.C. permitted intervention by the City of St. Louis, St. Louis County, General Motors Corporation Public hearings were conducted on March 28, 1977 at Poplar Bluff, on March 29, 1977 at Farmington, on March 30, 1977 at Festus, on April 4, 1977 in the City of St. Louis, on April 5, 1977 at Clayton and on April 6, 1977 at St. Charles. On April 18, 1977, another hearing was held in Jefferson City, which continued for eight days, and upon the completion of this hearing, the record in these proceedings was closed, except for the filing of late-filed exhibits.

the Monsanto Company, ACF Industries, Inc., Anheuser-Busch, Inc., McDonnell Douglas Corporation and Nooter Corporation, as industrial intervenors. In addition, Lela Vasal (a consumer advocate), the Utility Consumers Council of Missouri, Inc., and the Missouri affiliate of the Association of Community Organization for Reform Now were also permitted to intervene.

Following the hearings, a briefing schedule was established and dates were prescribed for submission of briefs by all the parties.

On an earlier date, (April 7, 1977) a preconference hearing had been held, at which time certain matters were stipulated to between the parties.

The test year was established as the twelve-month period ending September 30, 1976, based upon actual data adjusted for that time period. In their stipulation, the parties agreed that a year-end rate base be used. They also agreed that the figures shown in the exhibits were mathematically correct regarding dollar amounts. Three major issues, which included numerous subtopics, were defined for consideration. These were:

I RATE BASE ISSUE

(a) Minor construction work in progress (CWIP)

(b) Cash Working Capital Minimum Bank Balances

(c) Depreciation Reserve

II NET OPERATING ITEMS COST OF SERVICE

(a) Unaccounted for gas expense

(b) Charitable contributions

(c) Advertising charged to sales expense

(d) Advertising charged to administrative and general expense (Labor negotiations advertising)

(e) Dues and donations charged to administrative and general expense

(f) Salaries charged to sales expense

(g) Rate case expense

(h) Wage expense Missouri Natural Division

(i) Deferred income taxes on certain general and administrative expense capitalized

(j) Research and development coal gasification project conducted by the American Gas Association and the Energy Research and Development Agency

(k) Main (piping) replacement program

(l) other issues raised by public counsel

III COST OF CAPITAL AND RATE OF RETURN

(a) Return on repriced equity

(b) Return on original cost common equity

(c) Capital structure

(d) Fair value rate base

Upon issue of its initial order, followed by a petition for review, the P.S.C. failed to make findings of fact and to enter conclusions of law as required, and the Circuit Court reversed the order, directing such P.S.C. findings and conclusions be made. The following is a listing of only those findings relative to the issues to which this opinion is directed.

NET OPERATING ITEMS COST OF SERVICE

The P.S.C. concluded Laclede's unaccounted-for gas expense on a ten-year average amounted to $674,000. The P.S.C. also concluded that the sum of $252,000, representing charitable contributions, was not a proper item includable in the rate schedule. The P.S.C. concluded that of the total sum expended for advertising, the sum of.$219,399.40 was properly included in the rate schedule as being informative advertising designed to promote safety, conservation and/or off-peak gas use. The remainder of this expense was held to be goodwill advertising. Laclede had been involved in labor negotiations and had expended the sum of $9,465 in newspaper advertisements relative to the problems related to these negotiations. The P.S.C. concluded that such advertisements were goodwill advertisements and not includable in the rate schedule. The sum of $19,470, representing dues and donations to various organizations, was denied by the P.S.C. as part of the rate schedule. Laclede proposed to include the sum of $62,553 as salary expense for the display and sale of gas appliances. The P.S.C. denied this amount within the rate schedule. In preparation for the instant proceedings, Laclede had hired or retained the services of Foster & Associates, utility consultants, for the sum of $5,000, and the P.S.C. approved this amount as part of the rate schedule. Laclede has within its structure a Missouri Natural Division and its salary pension costs and FICA taxes increase in the sum of $79,500 were included within the rate schedule by the P.S.C. The P.S.C. denied the request to include the sum of $483,700 in deferred taxes. Determination of this issue was made upon the conclusion that no evidence was shown to indicate that Laclede would or might possibly suffer any cash flow problem relating to tax adjustments. Laclede, as a participant in a $30,000,000 coal gasification project is required to pay, as its annual contributive share, the sum of $86,000, and the P.S.C. approved inclusion of this cost in the rate schedule. Gas utilities, Laclede stated, are required to replace piping within their systems and this process is referred to as the main replacement program. The P.S.C. staff had recommended that Laclede be required to budget an additional $125,000 for pipe replacement. The P.S.C concluded that such expense need not be required.

A petition for review was filed by Laclede and after being ordered to do so by the circuit court, the P.S.C. filed its conclusions and the above findings. The circuit court, following arguments on the issues, then entered its judgment. Both Laclede and the P.S.C. filed notices of appeal. During the pendency of the proceedings before this court, the P.S.C. filed a motion to dismiss the appeal upon the premise of mootness. This motion was ordered taken with the case on appeal. The P.S.C. voluntarily dismissed its appeal, leaving the parties as Laclede as appellant and the P.S.C. as respondent, rather than as cross-appellant as first recorded. The case was scheduled to the "en banc" docket of this court, and both parties presented oral argument.

This court must first turn its attention to the pending motion to dismiss for mootness by respondent P.S.C. While, as will be later explained, no immediate or direct relief to either party can ensue from this opinion, some of the issues involved present matters of general public interest and persuade this court to dispose of those issues. The P.S.C. correctly argues that due to the extensive time lag occurring as a result of the extended proceedings before the P.S.C., the circuit court and the time before this court, Laclede has, in fact, applied for and has received authorization for additional rate schedules. Nevertheless, as previously stated, the instant case presents some issues of general public interest which create an overriding influence and which cause this court to overrule respondent's motion to dismiss in part.

While arguments were presented to this court upon the issue of fair value rate base and fair rate of return, along with claimed constitutional violations, this court, for the reasons set forth below address only two of the arguments presented. These arguments are (1) there was no substantial and competent evidence to support the P.S.C.'s disallowance of $204,691, this amount representing advertising charged to sales expense, because such action unlawfully deprives appellant of its constitutional right to free speech, deprives appellant of its right to meet competition, and permits the unlawful substitution of the P.S.C.'s judgment for that of appellant company and (2) there was no substantial and competent evidence to support the P.S.C.'s disallowance of the sum of $252,000, this amount representing charitable contributions, because such action permits the unlawful substitution of the P.S.C.'s judgment for that of...