State ex rel. Union Elec. Co. v. Public Service Com'n

• Decision Date: 26 February 1985
• Docket Number: No. 66014,66014
• Citation: 687 S.W.2d 162
• Parties: STATE ex rel. UNION ELECTRIC COMPANY, Appellant, v. PUBLIC SERVICE COMMISSION of the State of Missouri, Public Counsel for the State of Missouri, and Missouri Public Interest Research Group, Respondents.
• Court: Missouri Supreme Court

Page 162

687 S.W.2d 162

53 USLW 2463

STATE ex rel. UNION ELECTRIC COMPANY, Appellant, v. PUBLIC SERVICE COMMISSION of the State of Missouri, Public Counsel for the State of Missouri, and Missouri Public Interest Research Group, Respondents.

No. 66014.

Supreme Court of Missouri En Banc.

Feb. 26, 1985.

Rehearing Denied April 2, 1985.

Paul A. Agathen, Debra H. Janoski, St. Louis, for appellant.

William C. Harrelson, Kent M. Ragsdale, Public Service Com'n, Jefferson City, Tom W. Ryan, Jr., Missouri Public Interest Research Group, St. Louis, Douglas Brooks, Richard W. French, Daniel L. Maher, Jefferson City, for respondents.

BLACKMAR, Judge.

Union Electric Company is an investor owned electric utility serving the St. Louis metropolitan area, other parts of Missouri, and parts of three other states. In 1975 it sought and received a certificate of convenience and necessity from the Missouri Public Service Commission to commence construction of two nuclear reactor power plants in Callaway County, Missouri. See State ex rel. Util. Consumers Council v. Pub. Serv. Com., 562 S.W.2d 688 (Mo.App.1978). The two projects are commonly known as Callaway I and Callaway II.

While the plants were in the process of construction, and before either had come on line for the generation of electric power, the voters of the state adopted at the 1976 general election, through the initiative process, "Proposition One," now codified as §§ 393.135 and 393.136, RSMo 1978. Proposition One was enacted as a statute and not as a constitutional amendment. It reads as follows:

393.135--Any charge made or demanded by an electrical corporation for service, or in connection therewith, which is based on the costs of construction in progress upon any existing or new facility of the electrical corporation, or any other cost associated with owning, operating, maintaining, or financing any property before it is fully operational and used for service, is unjust and unreasonable, and is prohibited.

393.136--Notwithstanding the foregoing, any such charge which is being made or demanded on November 2, 1976, shall not be deemed unjust or unreasonable by reason of section 1 [§ 393.135] of this law, and shall not be prohibited thereby, for a period of ninety days after the effective date of this law.

Construction at both Callaway I and Callaway II continued following the enactment of Proposition One. No issue is presented in this case as to Callaway I. In 1981, however, Union Electric decided to abandon Callaway II, assigning as reasons the slackening of consumer demand and the high cost of borrowed funds. It then applied to the Commission for authority to amortize the portion of the costs expended on Callaway II attributable to Missouri over a five-year period. It sought to charge these costs as expense and not to include them in its rate base from which return on investment is computed. The Commission held that, by the terms of Proposition One, it was precluded from allowing the recovery of any amount from the ratepayers on account of the abandoned construction. Union Electric appealed to the Circuit Court of Cole County, which affirmed. Union Electric now appeals to this Court.

Jurisdiction

The question of our jurisdiction was raised in oral argument. We sense a degree of confusion in this case and others as to the scope of our initial appellate jurisdiction under Art. V, § 3, following the 1976 amendment. The pertinent language is as follows:

The supreme court shall have exclusive appellate jurisdiction in all cases involving the validity ... of a statute or provision of the constitution of this state, ...

Earlier constitutional language about "construction of the Constitution of the United States or this state" has been completely eliminated, and the numerous decisions about the difference between "construction" and "application" of constitutional provisions are no longer of concern. The sole question is whether the validity of the statute is involved. Appellant's Point II distinctly draws the validity of Proposition One into question. The appellant argues as follows:

If Proposition 1 is interpreted as a prohibition against recovery of prudent cancelled plant costs, denial of such recovery would deprive Appellant of its property without due process of law in violation of U.S. Const.Amend. XIV, Sec. 1, and Mo. Const. Art. 1, Sec. 10.

Appellant's Point III likewise argues that Proposition One, if interpreted as the Commission has interpreted it, violates the equal protection clause of the Fourteenth Amendment ¹ and also Art. I, Sec. 2 of the Missouri Constitution. Appellant argues as follows:

If the Circuit Court's interpretation of Proposition 1 is correct, Appellant contends that it is a violation of the equal protection clause of the United States Constitution Amend. XIV, Sec. 1, and the Missouri Constitution Art. 1, Sec. 2, to single out electric utilities for treatment different from that accorded telephone, gas, sewer or water companies in this state.

Both of these points ² clearly allege that Proposition One is constitutionally invalid if construed so as to prohibit the recovery of the cost of abandoned construction.

It makes no difference that the appellant first argues that the Commission and the circuit court erred in the construction of Proposition One, so that this Court could decide the case in its favor without reaching the constitutional questions. A statute is to be construed so as to render it constitutional, if this is possible. ³ A court will avoid the decision of a constitutional question if the case can be fully determined without reaching it. ⁴ If our appellate jurisdiction properly attaches jurisdiction is not lost if the case is decided without reaching the constitutional issues, because our jurisdiction extends to all issues in the case. Appeals are not bifurcated under our practice.

The dissent to the contrary notwithstanding, we perceive no "stratagem" on appellant's part to confer a jurisdiction on this Court which does not exist. Nor do we recognize, tacitly or otherwise, "the lack of our jurisdiction." The appellant made a decision about points to be preserved for appeal. ⁵ It had no way of knowing which point or points the decision might turn on. The Court of Appeals was without power to decide some of the points properly preserved. We know of no precedent by which a case could be taken to the Court of Appeals for resolution of some issues and then transferred to this Court for a decision or other issues. The historic and sound rule is that the appeal is properly lodged in the court having jurisdiction over all issues in the case.

The Merits

The respondents argue that Proposition One states clearly that no construction costs may be charged to the ratepayers until the facility is on line and ready to produce electric power. They go on to argue that, by the terms of the statute, construction work which is never incorporated into an operational facility can never be charged for. This latter proposition is by no means so clear as respondents would have it.

It is helpful to review briefly the theory of utility regulation. Utilities, and particularly electric utilities, enjoy natural monopoly in the distribution of services which, under modern conditions, are absolutely necessary for the public. Pace v. City of Hannibal, 680 S.W.2d 944 (Mo. banc 1984). The legislature has shown concern that utilities which return a profit to shareholders, if left unregulated, would be able to exact unconscionable charges from the public, with no competitive pressure to inhibit rate increases. Rates charged by investor-owned utilities, in contrast to charges for other products and services, have long been subject to regulation by the Missouri Public Service Commission.

A helpful discussion of the theory of utility regulation and of the methods of treating costs of construction in progress is found in the opinion of the Supreme Court of New Hampshire in Appeal of Public Service Co. of New Hampshire, 480 A.2d 20 (N.H.1984). The general regulatory pattern discussed in that opinion is essentially the same as ours.

There is a limit to the regulatory power. Rates established by the Commission must not be confiscatory. The utility must be able to recover its proper expenses and also a reasonable return on its prudent investment. The Commission has the corollary authority to scrutinize the expenditures of public utilities to determine whether they are appropriate in the rendition of utility services.

The construction of Callaway I and II was expressly authorized by the Commission. It was undertaken by Union Electric because of its projections of the needs of its customers, present and future. The law commends to the utility decisions as to what facilities are necessary in the service of its customers, subject to the commission's supervisory authority as exercised in certification and in the rate making process.

As soon as the Callaway project was authorized Union Electric sought to include an allowance for construction work in progress on Callaway I and II in its rate structure and was allowed by the Commission to do so. ⁶ Proposition One changed all this.

The manifest purpose of Proposition One was to make the utility wait until completion of new construction before including the cost in its rate base, or otherwise recovering its expenditures. Charges for construction work in progress had been expressly authorized by the Commission just a few months earlier. The language contains no express reference to cancellation. There are substantial indications that Proposition One was primarily concerned with timing, and that the possibility of abandonment was not present in the thoughts of the sponsors or of the voters. There was then much discussion in reports of regulatory commission decisions about the treatment of construction work in progress but little case law, judicial or administrative, about allowances for abandoned...