State ex rel. Utility Consumers' Council of Missouri, Inc. v. Public Service Commission, No. 60848

CourtUnited States State Supreme Court of Missouri
Writing for the CourtSEILER; RENDLEN; MORGAN, C. J. and DONNELLY, J., concur and concur in separate concurring opinion of RENDLEN; FINCH, Sr.; WELLIVER; RENDLEN
Citation585 S.W.2d 41
PartiesSTATE ex rel. UTILITY CONSUMERS COUNCIL OF MISSOURI, INC., Petitioner- Appellant, and William M. Barvick, Public Counsel, Intervenor-Appellant, v. PUBLIC SERVICE COMMISSION of Missouri and Union Electric Company, et al., Respondents. STATE ex rel. William M. BARVICK, Public Counsel, Appellant, and Kansas City, Missouri, Intervenor-Relator, v. PUBLIC SERVICE COMMISSION of Missouri, Respondent, and Arkansas-Missouri Power Company, Empire District Electric Company, Kansas City Power & Light Company, Missouri Edison Company, Missouri Power & Light Company, Missouri Public Service Company, Missouri Utilities Company, St. Joseph Light & Power Company, Union Electric Company, and Armco Steel Corporation, Intervenor- Respondents.
Docket NumberNo. 60848
Decision Date29 June 1979

Page 41

585 S.W.2d 41
33 P.U.R.4th 273
STATE ex rel. UTILITY CONSUMERS COUNCIL OF MISSOURI, INC.,
Petitioner- Appellant,
and
William M. Barvick, Public Counsel, Intervenor-Appellant,
v.
PUBLIC SERVICE COMMISSION of Missouri and Union Electric
Company, et al., Respondents.
STATE ex rel. William M. BARVICK, Public Counsel, Appellant,
and
Kansas City, Missouri, Intervenor-Relator,
v.
PUBLIC SERVICE COMMISSION of Missouri, Respondent,
and
Arkansas-Missouri Power Company, Empire District Electric
Company, Kansas City Power & Light Company, Missouri Edison
Company, Missouri Power & Light Company, Missouri Public
Service Company, Missouri Utilities Company, St. Joseph
Light & Power Company, Union Electric Company, and Armco
Steel Corporation, Intervenor- Respondents.
No. 60848.
Supreme Court of Missouri, En Banc.
June 29, 1979.
Rehearings Denied Sept. 11, 1979.

Page 44

William M. Barvick, Gregory J. Christoffel, Jefferson City, for intervenor-appellant.

Samuel H. Liberman, Washington University School of Law, Lindell & Skinker, St. Louis, for petitioner-appellant.

Paul W. Phillips, Asst. Gen. Counsel, Robert L. Hawkins and James C. Swearengen, Jefferson City, Stewart W. Smith and William E. Jaudes, Union Elec. Co., August L. Griesedieck, St. Louis, for respondents.

SEILER, Judge.

This case, transferred from the court of appeals, Kansas City district, prior to opinion pursuant to rule 83.06, concerns the lawfulness and reasonableness of the Public Service Commission's (PSC) report and order in cause No. 17,730. In that order it authorized the use of an automatic fuel adjustment clause for recovery of fuel costs by electric utilities which were subject to its jurisdiction. It also authorized a roll-in to basic rates of amounts collected under a prior fuel adjustment clause, and a surcharge of fuel costs incurred by the utilities during the period in which the prior clause was effective but which were not collectible under the terms of that clause, before it was superseded. Appellants Utility Consumers' Council of Missouri, Inc., and William M. Barvick, public counsel, separately intervened in the proceedings below. Both filed motions for rehearing which were denied and both appealed the decision and order of the commission to the circuit court of Cole County by petition for writ of review, as authorized by § 386.510, RSMo 1969. The circuit court affirmed the order and decision of the commission. The appeals have been consolidated. We reverse and remand.

This proceeding has a rather long history. On March 19, 1973 the commission entered an order of investigation in case No. 17,730 in order to investigate the fuel adjustment clause method of recovery of fuel costs by electric utilities within its jurisdiction. A fuel adjustment clause is a clause, filed as a part of an electric utility's tariff, which allows it automatically to increase or decrease the charge for power per kilowatt-hour to consumers by the amount of an increase or decrease in the utility's fuel costs, usually on a monthly basis. Such a clause had never before been permitted to become a part of a residential rate schedule in Missouri, although it has been permitted as a part of industrial and large commercial rate schedules, a matter which is not before us in this case. The courts of this state have never before passed on the validity of such a clause. The commission held hearings in the summer of 1973, and on February 1, 1974 issued a report and order giving temporary authorization for application of a fuel adjustment clause (FAC) to all sales of electricity for a two year period. On September 12, 1975 the commission began review of the operation of the FAC, as a continuation of case No. 17,730. It gathered

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information from the utilities as to their experience with the clause, held hearings in February 1976 at which over 1,800 pages of testimony were heard, and received numerous filings of briefs and exhibits. The 1974 order was extended until April 15, 1976. On April 14, 1976 the commission, by a three to two decision, entered its report and order authorizing continued use of a modified FAC. The effectiveness of the original FAC was extended to May 31, 1976, and the new FAC was permitted to become effective on billings commencing June 1, 1976, and was made effective until May 31, 1978. We understand the FAC was extended by order of the commission until either decision of this court in this case or December 31, 1978, whichever was earlier, and was again extended by order of the commission until such time as the commission had ruled on the appropriate amount of the utilities' annual fuel adjustment, which has not yet occurred. In any case, the cause is not moot because of the continuing importance of the question whether an automatic fuel adjustment charge is authorized in light of the fact, of which we take notice, that a fuel adjustment charge is still a part of customer bills and the question of authorization for its use will recur, yet could evade judicial review, State ex rel. Laclede Gas Co. v. Public Service Comm'n, 535 S.W.2d 561, 565 (Mo.App.1976).

I. The Fuel Adjustment Clause

In its 1974 report and order the commission reviewed the statutory authority for authorization of an FAC, basically relying on Hotel Continental v. Burton, 334 S.W.2d 75 (Mo.1960) and § 393.130(4), RSMo 1969, discussed Infra. 1 By its order it authorized recovery of fuel adjustment costs in two parts, the basic fuel recovery cost, and a fuel adjustment charge for changes up or down in the cost of fuel from the base cost previously set by the commission.

Basically, the 1974 fuel adjustment formula authorized by the commission permitted the utility to file an FAC as part of its tariff schedule. The FAC permitted the company to determine its actual fuel cost and actual sales in any given month. Any change in fuel cost was converted into a change in cost per kilowatt-hour of power sold by applying a formula which arrived at the average number of BTU's of heat necessary to generate one kilowatt-hour of electricity. Certain technical adjustments were made, and a figure equal to the fuel adjustment charge (i. e., the increased or decreased cost of fuel over the base fuel cost) was determined. Thirty days notice was given to the commission and the adjustment then was included on consumers' bills. Because of the 60-120 day lag-time (each utility's lag varied depending on its practices), required to gather the figures necessary to compute the FAC charge, and the notice requirement, changes in fuel costs in, for example, October were added to the bills for the December 16 to January 15 meter readings. Certain safeguards, such as a requirement that information relevant to a determination of whether fuel costs in fact increased be given the commission, were ordered.

As a result of this rather inexact method, which involved charging customers in January for fuel costs incurred in October and apportioned according to the number of kilowatt-hours sold in October, the utility overrecovered its full costs if the number of kilowatt-hours sold in January were greater than in October, and underrecovered if they were less.

In its 1976 order, the commission modified the fuel adjustment clause it had previously approved. It set forth a model tariff indicating how the new FAC was to be filed. Substantial compliance with this tariff was required of any utility which wished to utilize a fuel adjustment clause. The 1976 order permitted recovery only of coal costs. In order to eliminate the possibility of under or over recovery because of a switch in the source of fuel, possible under the old clause, the heat-rate based formula was replaced by a formula permitting dollar for dollar recovery of fuel costs above or below the base fuel cost. This formula also

Page 46

permitted recovery of the cost of the fuel component of power purchased from other sources rather than generated by the utility.

Under the new formula, the utility was still required to determine actual, rather than estimated, fuel cost changes for the month in which an increase in costs occurred, but was allowed to use estimated figures for projected sales for the month in which increased charges based on the changed fuel costs would be billed. Once actual sales became known a correction factor would be included in a later month's billing. Further, the 30-day notice period was eliminated. In this way, part of the regulatory lag between incurring the costs and passing them on to the consumer was eliminated. Certain safeguards, including monthly reports to the commission and an annual audit by the commission, were required.

As an example of the operation of the 1976 FAC authorized by the commission, assume that fuel costs have risen in January. Once actual costs for that fuel are known, the utility will submit them to the commission. It will also submit its estimated sales in March and the resulting fuel adjustment charge to be used in the March billing. The staff will have the balance of the month of February to check these figures. In March, an increased fuel adjustment charge will take effect. During April, the utility will determine the difference between its actual March sales and the estimated sales used to figure the March charge. A correction factor will be figured to adjust for any inaccuracy, and will be included in figuring the May fuel charge. The same procedure would be followed each month, so that February's costs would be figured in March and applied to April estimated sales, actual April sales would be figured in May and a correction factor be included in the June billing, and so forth.

The PSC also raised the base fuel cost for each utility filing an FAC to include the annualized cost of fuel for the 12 month period preceding the commission order. This is called a "roll-in" of fuel costs. Basically, the costs previously included in the FAC became a part of the base cost, which...

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  • Mcpherson v. U.S. Physicians Mut., No. WD 59264.
    • United States
    • Court of Appeal of Missouri (US)
    • January 31, 2003
    ...restitution of money paid because of an incorrect judgment, State ex rel. Util. Consumers' Council of Mo., Inc. v. Public Serv. Comm'n, 585 S.W.2d 41, 59-60 (Mo. banc 1979). Trial courts have used their inherent powers to control the conduct of their officers. Petition of Fl. Bar, 61 So.2d ......
  • Petition of Elizabethtown Water Co.
    • United States
    • United States State Supreme Court (New Jersey)
    • June 29, 1987
    ...S.E.2d 607, 619 (W.Va.1982) (emphasis added); see also State ex rel. Utility Consumers Council of Missouri, Inc. v. Public Serv. Comm'n, 585 S.W.2d 41, 59 (Mo.1979) (retroactive ratemaking is "the setting of rates which permit a utility to recover past losses or which require it to refund e......
  • State ex rel. Gulf Transport Co. v. Public Service Com'n of State, V-K
    • United States
    • Court of Appeal of Missouri (US)
    • March 29, 1983
    ...the report and order are lawful and reasonable. State ex rel. Utility Consumers Council of Missouri, Inc. v. Public Service Commission, 585 S.W.2d 41 (Mo. banc 1979); Empire Dist. Elec. Co. v. Cox, 588 S.W.2d 263 (Mo.App.1979). The lawfulness of an order of the P.S.C. depends on whether the......
  • Central Vermont Public Service Corp., In re, Nos. 82-460
    • United States
    • Vermont United States State Supreme Court of Vermont
    • January 13, 1984
    ...with the rate actually established." State ex rel. Utility Consumers Council of Missouri, Inc. v. Public Service Commission, 585 S.W.2d 41, 59 (Mo.1979) (citing Board of Public Utility Commissioners v. New York Telephone Co., 271 U.S. 23, 31, 46 S.Ct. 363, 366, 70 L.Ed. 808 (1926)). In othe......
  • Request a trial to view additional results
82 cases
  • Mcpherson v. U.S. Physicians Mut., No. WD 59264.
    • United States
    • Court of Appeal of Missouri (US)
    • January 31, 2003
    ...restitution of money paid because of an incorrect judgment, State ex rel. Util. Consumers' Council of Mo., Inc. v. Public Serv. Comm'n, 585 S.W.2d 41, 59-60 (Mo. banc 1979). Trial courts have used their inherent powers to control the conduct of their officers. Petition of Fl. Bar, 61 So.2d ......
  • Petition of Elizabethtown Water Co.
    • United States
    • United States State Supreme Court (New Jersey)
    • June 29, 1987
    ...S.E.2d 607, 619 (W.Va.1982) (emphasis added); see also State ex rel. Utility Consumers Council of Missouri, Inc. v. Public Serv. Comm'n, 585 S.W.2d 41, 59 (Mo.1979) (retroactive ratemaking is "the setting of rates which permit a utility to recover past losses or which require it to refund e......
  • State ex rel. Gulf Transport Co. v. Public Service Com'n of State, V-K
    • United States
    • Court of Appeal of Missouri (US)
    • March 29, 1983
    ...the report and order are lawful and reasonable. State ex rel. Utility Consumers Council of Missouri, Inc. v. Public Service Commission, 585 S.W.2d 41 (Mo. banc 1979); Empire Dist. Elec. Co. v. Cox, 588 S.W.2d 263 (Mo.App.1979). The lawfulness of an order of the P.S.C. depends on whether the......
  • Central Vermont Public Service Corp., In re, Nos. 82-460
    • United States
    • Vermont United States State Supreme Court of Vermont
    • January 13, 1984
    ...with the rate actually established." State ex rel. Utility Consumers Council of Missouri, Inc. v. Public Service Commission, 585 S.W.2d 41, 59 (Mo.1979) (citing Board of Public Utility Commissioners v. New York Telephone Co., 271 U.S. 23, 31, 46 S.Ct. 363, 366, 70 L.Ed. 808 (1926)). In othe......
  • Request a trial to view additional results

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