State ex rel. Riverside v. Public Service

• Decision Date: 30 January 2007
• Docket Number: No. SC 87495.,SC 87495.
• Parties: STATE of Missouri ex rel. RIVERSIDE PIPELINE COMPANY, L.P., Mid-Kansas Partnership, and Missouri Gas Energy, Respondents, v. PUBLIC SERVICE COMMISSION OF the STATE of Missouri, Appellant.
• Court: Missouri Supreme Court

215 S.W.3d 76

STATE of Missouri ex rel. RIVERSIDE PIPELINE COMPANY, L.P., Mid-Kansas Partnership, and Missouri Gas Energy, Respondents, v. PUBLIC SERVICE COMMISSION OF the STATE of Missouri, Appellant.

No. SC 87495.

Supreme Court of Missouri, En Banc.

January 30, 2007.

Thomas R. Schwarz, Jefferson City, for Appellant.

Richard M. Paul, III, Gregory L. Musil, Kansas City, Charles B. Stewart, Columbus, Brian T. McCartney, Gary W. Duffy, Jefferson City, for Respondents.

STEPHEN N. LIMBAUGH, JR., Judge.

This appeal is the continuation of a complicated jurisdictional dispute pertaining to the right to obtain judicial review from decisions of the Public Service Commission (PSC) and the procedures therefor. In particular, the PSC asks this Court to reconsider its earlier, unanimous holding in this same case as set out in State ex rel. Riverside Pipeline Co., L.P., et al. v. Pub. Serv. Comm'n, 165 S.W.3d 152 (Mo. banc 2005) (Riverside I). This Court introduced the case in Riverside I as follows:

Following a decision by the Public Service Commission (PSC), Riverside Pipeline Co. (Riverside) and Mid-Kansas Partnership (MKP) filed a petition for a writ of review in the Cole County Circuit Court. The circuit court reversed the PSC's decision, and the PSC appealed the judgment to the Court of Appeals, Western District. The court of appeals dismissed the appeal for lack of jurisdiction, and this Court granted transfer. Mo. Const. art. V, sec. 10. Having now determined that jurisdiction was proper in the court of appeals, the case is retransferred to that court for consideration of the merits of the appeal.

Although this Court retransferred the case, the court of appeals again dismissed the appeal for lack of jurisdiction, and again, this Court granted transfer. The Court now reaffirms its holding in Riverside I on the appellate jurisdiction of the appeal and affirms the judgment of the circuit court on the merits of the appeal.

The facts and procedural posture of the case as set out in Riverside I require repetition here:

Riverside and MKP contracted with Missouri Gas Energy (MGE) to supply and transport natural gas to MGE's distribution system serving Kansas City, Missouri. MGE is a utility subject to the jurisdiction of the PSC. Natural gas distribution companies such as MGE are allowed to recoup approved costs for obtaining natural gas from their suppliers as part of the rate they charge their customers. Periodically, the PSC conducts an Actual Cost Adjustment (ACA) review to determine what costs public utilities are allowed to recover from their customers. As part of this effort, the PSC staff conducts a "prudence review" to evaluate the utility's contracts with its suppliers. The staff then decides whether the costs associated with the contracts should be disallowed in whole or part.

In May of 1996, after a recently completed ACA review, Riverside, MKP, MGE, Western, the staff, and the Office of Public Counsel entered into a "Stipulation and Agreement" to "resolve certain disputes [then pending] between the parties." These disputes involved actual and potential disallowances by the PSC for the expenses MGE incurred from Riverside and MKP. The stipulation provided that Riverside and MKP would pay nearly $3 million to indemnify MGE for the credits that would be due its ratepayers as a result of the PSC's disallowance of costs associated with MGE's contracts with Riverside and MKP. In return, as Riverside and MKP contend, it was agreed that their contracts and contract renewals with MGE would not be subject to any further ACA prudence reviews by the PSC. The PSC staff disputes this contention, arguing that the stipulation and agreement applied only to the contract at issue at the time of the settlement, not contract renewals.

In 1998, the PSC staff challenged the prudence of the parties' contract renewals, recommending that nearly $3.5 million of the associated costs be disallowed. Riverside and MKP filed motions to dismiss the review, alleging that it was precluded by the 1996 stipulation. The PSC overruled the motions; thereafter, Riverside and MKP filed a petition for a writ of prohibition in the Cole County Circuit Court, seeking to prevent the PSC from conducting the prudence review. The court, upon PSC's motion, remanded for a hearing to allow the PSC to construe the stipulation, but after conducting a hearing, the PSC again overruled the motions to dismiss.

Then, in January 1999, pursuant to section 386.510, RSMo 1994, Riverside and MKP filed a petition for a writ of review in the circuit court. The court held that the PSC had "acted unlawfully and/or unreasonably when it failed to make any finding that the 1996 Stipulation and Agreement was ambiguous, yet interpreted the Stipulation and Agreement without hearing any testimony or otherwise receiving any evidence to determine the intent of the parties to the Stipulation and Agreement." As a result the court again remanded the case to the PSC.

On March 12, 2002, the PSC issued its decision and declared the stipulation to be ambiguous as to whether it barred the prudence review. However, on the merits, it rejected the staff's recommendation to disallow a portion of the costs for the ACA period under review; consequently, Riverside and MKP were not obligated to reimburse MGE. Even though they prevailed on the disallowance issue, Riverside and MKP filed an application for rehearing, which the PSC denied. They then returned to the circuit court with another petition for a writ of review, claiming that the PSC should not have taken up the disallowance issue in the first place. The court agreed, reversing the PSC and holding that the stipulation barred the staff's proposed disallowance and precluded any further ACA review of the contracts. The PSC appealed to the court of appeals, which dismissed the appeal for lack of jurisdiction.

Riverside I, at 153-54.

On transfer in Riverside I, the PSC, taking the lead from the court of appeals, which had ruled the jurisdictional issue sua sponte, claimed that there was no jurisdiction on appeal because Riverside and MKP did not have standing to appeal. They explained that Riverside and MKP were not aggrieved parties; that is, they were not aggrieved by the decision of the PSC because the PSC ruled in their favor by denying the staff's claim for disallowances. In response, this Court held that,

The appeal at issue, however, is not the "appeal" of the decision of the PSC to the circuit court by way of petition for review, and the appellants are not Riverside and MKP. Instead, the appeal is from the judgment of the circuit court to the court of appeals and this Court, and the appellant is the PSC. . . . [Thus] the only determination necessary to establish appellate jurisdiction is whether the PSC was aggrieved by the judgment of the circuit court, and surely it was by virtue of the fact that the judgment was entered against it.

Id. at 154-55.

Although the court of appeals acknowledged this holding on retransfer, it held, nonetheless, that it still had no jurisdiction to entertain the appeal because Riverside and MKP still were not "aggrieved" by the decision of the PSC. This is the issue on which the PSC seeks the Court's reconsideration. The court of appeals reasoning, which was tacitly, if not expressly, adopted by the PSC, is that:

[T]he attack in this appeal, by Riverside and MKP, has nothing to do with the PSC's decision on the merits in the present case. Rather, it is designed to prevent "future" prudence reviews by the PSC of any of the [agreements between Riverside and MKP with MGE] that "might" occur and to avoid the potential costs they "may" have to pay MGE, pursuant thereto, by seeking an interpretation of the Stipulation that the intent of the parties to the Stipulation was to preclude all further prudence reviews by the PSC of the [agreements], including the prudence review in this case. . . . Here, Riverside and MKP did not suffer any "immediate" prejudice as a direct result of the decision of the PSC from which it seeks appellate review and relief. In fact, the direct result of the decision favored them.

The court of appeals then added that,

[T]he Court's holding in [Riverside I] raises the additional question of whether in interpreting the Stipulation, pursuant to the claim of error raised by Riverside and MKP, we would be giving them what amounts to an advisory opinion on that issue inasmuch as they were clearly not aggrieved by the decision they attack on appeal . . . which is generally prohibited.

Finally, the court of appeals also maintained that this Court, in Riverside I,

did not address the issue which we raise here: Whether Riverside and MKP, as the appellants for purposes of briefing, pursuant to Rule 84.05(e), with the burden of persuasion on appeal, had to be "aggrieved" by the PSC decision, which they attack on appeal, so as to avoid our giving an advisory opinion.

In explanation, the court then stated,

The answer to the question is found in the rule itself. Rule 84.05(e) reads, in pertinent part: "If the circuit court reverses a decision of an administrative agency and the appellate court reviews the decision of the agency rather than of the circuit court, the party aggrieved by the agency decision shall file the appellant's brief and reply brief."

The court of appeals then concluded, in dismissing the case for lack of jurisdiction, that,

The Court in [Riverside I] never addressed this issue, and the Court's decision there cannot act to contravene the rule's requirement as to standing to file the appellant's brief. It simply ruled on whether there was a party with standing to bring the appeal, deciding that the PSC had such standing.

To the contrary, this Court in Riverside I did indeed address the issues with which the court of appeals concerned itself, as follows:

To the extent that the PSC is claiming that Riverside and MKP must be "aggrieved" by the decision of the...