State ex rel. Missouri Public Service Co. v. Fraas, WD32075

Citation627 S.W.2d 882
Decision Date22 December 1981
Docket NumberNo. WD32075,WD32075
PartiesSTATE ex rel., MISSOURI PUBLIC SERVICE CO., Relator-Appellant, v. Charles J. FRAAS, et al., Defendants-Respondents.
CourtCourt of Appeal of Missouri (US)

Gary J. Brouillette, Jackson, Dillard, Brouillette & Farchmin, William H. Sanders, D. Brook Bartlett, Blackwell, Sanders, Matheny, Weary & Lombardi, Kansas City, for relator-appellant.

Kent M. Ragsdale, Holly E. Peck, Jefferson City, for defendants-respondents.



Missouri Public Service Company ("the Company") sought approval of the Public Service Commission ("the Commission") of new tariffs filed September 1, 1978, which proposed to increase electricity revenues by approximately $22,100,000 and gas revenues by approximately $1,400,000. The effective date for the tariffs were suspended under Section 393.150. 1 By order dated July 19, 1979, the Commission approved an increase in electricity revenues of $1,351,307 and gas revenues of $46,096. Believing those increases so granted to be inadequate, the Company filed a petition for review in the circuit court. The circuit court affirmed the Commission, and the Company now appeals here.

By its points relied on, the Company complains of affirmance by the circuit court of the following aspects of the Commission's order: (1) the establishment of a rate schedule which the Company says did not make proper allowance for attrition from inflation; (2) the inclusion in the Company's rate base of only 25% of the cost of constructing the Jeffrey Energy Center "common facilities"; (3) the exclusion of certain payroll expenses; (4) the exclusion from rate base of compensating bank balances; (5) the flow through instead of normalizing certain income tax timing differences; and (6) the alleged insufficiency of the Commission's findings of fact.

Before those issues can be considered, a threshold question, raised by the Commission on its motion to dismiss this appeal on the ground of mootness, must be considered.


As the basis for its motion to dismiss, the Commission calls attention to the fact that subsequent to the order of July 19, 1979, which is here in question, the Company filed new tariffs on October 5, 1979, and part of the increases there requested were allowed under an order of the Commission dated August 25, 1980. In addition, the Company filed for still a further increase on September 5, 1980, which was permitted in part pursuant to a stipulation which was approved by a Commission order dated May 27, 1981. The rates currently being collected by the Company are governed by the order of May 27, 1981, and the new tariffs filed thereunder. The Commission says the order of July 19, 1979, and the tariffs filed under it, which are the subject of the present appeal, have been superseded, have The Commission's argument correctly states the general rule. Any error which may have been made against the Company by reason of the order dated July 19, 1979, cannot now be corrected retroactively to give relief for the period of time that the old tariffs here questioned were in effect. State ex rel. Utility Consumers Council, etc. v. P.S.C., 585 S.W.2d 41 (Mo.banc 1979); State ex rel. Gas Service Company v. Public Service Commission, 536 S.W.2d 491 (Mo.App.1976). Nor can those old tariffs now be amended prospectively, because the 1979 tariffs have been superseded by subsequent tariffs filed and approved. It is because of this inability by the reviewing court to give any relief, that issues under old, superseded tariffs are generally considered moot and therefore not subject to consideration. State ex rel. Gas Service Company v. Public Service Commission, supra; State ex rel. Mo. Public Service v. Pierce, 604 S.W.2d 623 (Mo.App.1980); State ex rel. Mo. Public Service Co. v. Fraas, 615 S.W.2d 587 (Mo.App.1981); State ex rel. Kansas City Power & Light Company v. Public Service Commission of Mo., 615 S.W.2d 596 (Mo.App.1981); State ex rel. The Empire District Electric Company v. Public Service Commission of State of Mo., 615 S.W.2d 598 (Mo.App.1981).

ceased to have any present effect, and any error therein no longer is of any consequence because there is no action which can now be taken by way of correction.

An exception, however, is made where an issue is presented of a recurring nature, is of general public interest and importance, and will evade appellate review unless the court exercises its discretionary jurisdiction. State ex rel. Laclede Gas Co. v. P.S.C., 535 S.W.2d 561 (Mo.App.1976); State ex rel. The Empire District Electric Company v. Public Service Commission of State of Mo., supra; State ex rel. Laclede Gas Co. v. P.S.C., 600 S.W.2d 222 (Mo.App.1980). The question of whether to exercise this discretionary jurisdiction comes down to whether there is some legal principle at stake not previously ruled as to which a judicial declaration can and should be made for future guidance. If the matter in dispute is simply a question of fact dependent upon the evidence in the particular case, there is no necessity for a declaration of legal principle such as to call the exception into play.

In the present case, some of the issues raised by the Company fit within the exception to the mootness rule, while others do not. The mootness rule and its exception can best be dealt with here by considering them in connection with each issue separately.


The Company argues that in every given case the Commission sets rates based upon an historical test year. By the time the data for that year has been collected and reviewed, hearings held, and a decision reached by the Commission, the factual basis for that decision has already been rendered obsolete by inflation. To make the matter worse, the rates declared are then to be in effect for a future period, during which the ravages of inflation will further erode the relief granted. Still worse, judicial review through the circuit court and then the appellate court generally takes over two years, during which time new tariff filings become necessary, thereby starting the same process all over again. The Company says that the only solution to this situation is for the Commission to supplement the rate increase by adding an attrition factor.

In presenting this argument, the Company finds itself confronted with the serious hurdle that this court has already twice ruled this attrition issue moot within the last few months. State ex rel. Mo. Public Service Co. v. Fraas, supra; State ex rel. Kansas City Power & Light Company v. Public Service Commission of Mo., supra. The Company responds that application of the mootness doctrine to this problem deprives the public utilities of this state of any effective judicial review despite Article V, Section 18 of the Missouri Constitution The crowded docket of this court impedes the luxury of repeated consideration of the same issue, and the doctrine of stare decisis would amply warrant a declination to undertake reconsideration of an issue so recently decided. Nevertheless, the seriousness of the problem and the eloquence of the plea made by the Company have persuaded us to consider the matter once again.

which guarantees the right of judicial review of administrative decisions. It further argues that the net result is to deny the utilities any opportunity to earn a fair return, thus violating due process. The Company characterizes the mootness doctrine as having developed "into a judicial killer that strangles or suffocates" the constitutional rights of the utilities.

There can be no argument but that the Company and its stockholders have a constitutional right to a fair and reasonable return upon their investment. That right carries as a corollary the duty by the Commission to consider all relevant factors including the effects of inflation. State ex rel. Missouri Water Company v. Public Service Commission, 308 S.W.2d 704 (Mo.1958); New England T. & T. Company v. Dept. of Pub. Util., 371 Mass. 67, 354 N.E.2d 860 (1976); So. Cent. Bell Tel. Co. v. La. Public Service Commission, 352 So.2d 964 (1977); New England Telephone & Telegraph Co. v. State, 113 N.H. 92, 302 A.2d 814 (1973); Potomac Elec. Power Co. v. Public Service Commission, 402 A.2d 14 (D.C.1979); Utah Power & Light v. Idaho Public Utility Commission, 102 Idaho 282, 629 P.2d 678 (1981).

It is no answer to the foregoing duty to say that a forecast as to future inflation is merely speculative. Despite that hazard, the Commission must make an intelligent forecast with respect to the future period for which it is setting the rate; rate making is by necessity a predictive science. State v. N.J. Bell Tel. Co., 30 N.J. 16, 152 A.2d 35 (1959).

Notwithstanding the general rules just stated, the Company's plea for an attrition allowance in this case must fail for at least two reasons. In the first place, the Company has not supplied sufficient proof that the Commission's rate making procedures will end up with a confiscatory result unless the attrition allowance is given. The Company's proof in this regard depends upon a set of statistics furnished by it to show that for the five year period 1974 through 1978, the Company had been unable to earn the rate of return authorized by the Commission. 2 Those statistics so offered by the Company are as follows:

These statistics are supplemented by further evidence that the Company's common stock during the same period has rather consistently sold at below book value, which the Company's witnesses attribute to the short fall in earnings due to inflation and regulatory lag.

A number of utilities in other jurisdictions attempted to prove the need for an attrition allowance by the presentation of similar statistics. The courts have rather regularly answered that although a failure to earn the authorized rate...

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