State Of Mo. Ex Rel. Office Of The Pub. Counsel And v. Mo. Pub. Serv. Comm'n, WD72498

Decision Date01 February 2011
Docket NumberWD72498,Consolidated with WD72508
CourtCourt of Appeal of Missouri (US)

Appeal from the Circuit Court of Cole County, Missouri

The Honorable Jon E. Beetem, Judge

Before Division I: Mark D. Pfeiffer, Presiding Judge, and

Thomas H. Newton and Alok Ahuja, Judges

Appellants, Office of Public Counsel1 ("OPC") and Missouri Industrial Energy Consumers2 ("MIEC") appeal from the judgment of the Circuit Court of Cole County affirmingthe Public Service Commission ("PSC") Order promulgating 4 CSR 240-3.162 and 4 CSR 240-20.091 (the "Regulations") as lawful and reasonable. OPC and MIEC raise four points of error on appeal. They argue: (1) the PSC failed to timely adopt the Regulations pursuant to section 386.266.9;3 (2) the Regulations allow electric utilities to earn more than a fair rate of return on equity for each periodic rate adjustment, thereby violating section 386.266.4(1); (3) the Regulations are contrary to the true-up mechanism required in section 386.266.4(2); and (4) the cap on annual adjustments in the Regulations conflicts with section 386.266.2. We disagree and affirm.

Factual and Procedural Background

The PSC is the state agency responsible for regulation of public utilities operating in the State of Missouri. § 386.040. The PSC has jurisdiction over the manufacture, sale, and distribution of electricity. § 386.250(1); see also § 393.140. The PSC is authorized to approve rate schedules for electrical corporations, typically during a general rate case, as long as the rate is just and reasonable both to the utility and to its customers. § 393.150. Only after providing reasonable notice to interested persons, a full hearing on the matter, and consideration of all relevant factors, including operating expenses, depreciation of plant, taxes, and the utilities' approved rate of return on equity, may the PSC approve the new rate. Id.

During the 2005 legislative session, the Missouri legislature passed Senate Bill 179, later codified at section 386.266. Section 386.266 authorizes the PSC to establish an environmental cost recovery mechanism ("ECRM")4 to reflect increases and decreases in a utility's prudentlyincurred costs to comply with any federal, state, or local environmental law, regulation, or rule. Pursuant to section 386.266, the PSC drafted two proposed rules, 4 CSR 240-20.091 and 4 CSR 240-3.162. 4 CSR 240-20.091 provides for the establishment of an ECRM in an electric utility's rate schedule which allows periodic rate adjustments to reflect net increases or decreases in a utility's prudently incurred costs directly related to compliance with any federal, state, or local environmental law, regulation, or rule.5 4 CSR 240-3.162 implements section 386.266 by providing electric utility ECRM filing and submission requirements.

On December 17, 2008, the PSC initiated the rulemaking proceeding to consider the adoption of the rules. The notice of proposed rulemaking was transmitted to the Secretary of State on January 2, 2009, and published in the Missouri Register on February 3, 2009. After the public comment time period ended on March 4, 2009, a public hearing was held on that same day. A second comment period ended on April 15, 2009, followed by another hearing. Among the participants who commented at the hearings were the OPC, MIEC, Union Electric Company ("AmerenUE"), and the PSC Staff ("Staff'). While OPC and MIEC opposed the proposed rules, AmerenUE and Staff supported them. Proposals to change the language and operation of the rules were made by both supporters and opponents of the rules; however, no significant changes were made.

The PSC transmitted orders of rulemaking to the Secretary of State on April 23, 2009. On May 22, 2009, OPC filed its Application for Rehearing of the two orders of rulemaking for the proposed rules. The PSC transmitted the final orders of rulemaking to the Secretary of Stateon May 26, 2009, and denied OPC's application for rehearing on June 10, 2009. The rules were published in the Missouri Register on July 1, 2009, as 4 CSR 240-20.091 and 4 CSR 240-3.162 and became effective on August 30, 2009.

OPC filed a timely petition for writ of review in the Circuit Court of Cole County ("circuit court"). MIEC and AmerenUE both filed motions to intervene which were sustained by the circuit court. On March 31, 2010, the circuit court affirmed the final orders of rulemaking, holding that the Regulations were lawful and reasonable. OPC and MIEC filed separate notices of appeal, which were consolidated by this court.6

Standard of Review

When a party appeals from an order of the PSC, we review the PSC's findings and decision and not the circuit court's judgment. State ex rel. Mo. Gas Energy v. Pub. Serv. Comm'n, 186 S.W.3d 376, 381 (Mo. App. W.D. 2005). Our review of the PSC's order is two-fold: first, we must determine "whether the [PSC's] order is lawful, and second, whether the order is reasonable[.]" Id. Additionally, the party seeking to set aside the PSC's order has the burden to prove by clear and satisfactory evidence that the order was unlawful or unreasonable. E.g., § 386.430; State ex rel. Util. Consumers' Council of Mo., Inc. v. Pub. Serv. Comm'n, 585 S.W.2d 41, 47 (Mo. banc 1979); State ex rel. BPS Tel. Co. v. Mo. Pub. Serv. Comm'n, 285 S.W.3d 395, 401-02 (Mo. App. W.D. 2009).

Lawfulness is determined by whether or not the PSC had the statutory authority to act as it did. Mo. Gas Energy, 186 S.W.3d at 382. When determining whether the order is lawful, weexercise independent judgment and must correct erroneous interpretations of the law. Burlington N. R.R. v. Dir. of Revenue, 785 S.W.2d 272, 273 (Mo. banc 1990). Because the PSC "is purely a creature of statute, [its] powers are limited to those conferred by [statute] either expressly, or by clear implication as necessary to carry out the powers specifically granted." Util. Consumers' Council of Mo., 585 S.W.2d at 49. While section 386.266 should be liberally construed in order to effectuate its purpose, "'neither convenience, expediency or necessity are proper matters for consideration in the determination of' whether or not an act of the [PSC] is authorized by the statute." Id. (quoting State ex rel. Kansas City v. Pub. Serv. Comm 'n, 257 S.W. 462 (Mo. banc 1923)).

However, "[o]nce it is determined that an act is within the [PSC's] authority... these considerations and others become part of the broad discretion accorded the [PSC] to set just and reasonable rates." Id. The reasonableness of the order setting new rates is dependent upon whether or not "(i) the order is supported by substantial and competent evidence7 on the whole record, (ii) the decision is arbitrary, capricious or unreasonable, or (iii) the [PSC] abused its discretion." Mo. Gas Energy, 186 S.W.3d at 382. Furthermore, if the PSC's decision is based on purely factual issues, we may not substitute our judgment for that of the PSC. State ex rel. Office of Pub. Counsel v. Pub. Serv. Comm'n, 938 S.W.2d 339, 342 (Mo. App. W.D. 1997).8


While OPC and MIEC present four separate points on appeal, a common issue appears in each-the statutory construction of section 386.266 and its necessary impact on the Regulations. The parties agree that "[i]f the legislature wishes to approve automatic adjustment clauses, it can of course do so by amendment of the statutes, and set up appropriate statutory checks, safeguards, and mechanisms for public participation." Util. Consumers Council of Mo., 585 S.W.2d at 57. Thus, there is no dispute that the legislature had the authority to enact section 386.266. The dispute centers upon the intent of the legislature's statutory checks and balances in section 386.266 and the argument by OPC and MIEC that the Regulations fail to comply with the "appropriate statutory checks" and "safeguards" for consumers.

Statutory construction is a matter of law. City of St. Joseph v. Vill. of Country Club, 163 S.W.3d 905, 907 (Mo. banc 2005). When employing principles of statutory construction, the primary rule is to ascertain the intent of the legislature from the language used, by considering the plain and ordinary meaning of the words used in the statute. S. Metro. Fire Prot. Dist. v. City of Lee's Summit, 278 S.W.3d 659, 666 (Mo. banc 2009); State v. McLaughlin, 265 S.W.3d 257, 267 (Mo. banc 2008) (stating that in the absence of guiding case or other authority, the language of the statute itself provides the best guide to determine the legislature's intent). "Where the language of a statute is unambiguous and clear, this Court will give effect to the language as written, and will not engage in statutory construction." Dubinsky v. St. Louis Blues Hockey Club, 229 S.W.3d 126, 130 (Mo. App. E.D. 2007) (citing Maxwell v. Daviess County, 190 S.W.3d 606, 610-11 (Mo. App. W.D. 2006)). A court will look beyond the plain meaning of the statute only when the language is ambiguous or will lead to an absurd or illogical result. Spradlin v. City of Fulton, 982 S.W.2d 255, 258 (Mo. banc 1998).

When "determining the intent and meaning of statutory language, 'the words must be considered in context and sections of the statutes in pari materia, as well as cognate sections, must be considered in order to arrive at the true meaning and scope of the words.'" State ex rel. Evans v. Brown Builders Elec. Co., 254 S.W.3d 31, 35 (Mo. banc 2008) (quoting State ex rel. Wright v. Carter, 319 S.W.2d 596, 600 (Mo. banc 1959)). Furthermore, the purpose of the whole act must be considered. Neske v. City of St. Louis, 218 S.W.3d 417, 424 (Mo. banc 2007). We presume that the legislature intended that each word, clause, sentence, and provision of a statute have effect and should be given meaning. Id.;State ex rel. Womack v. Rolf, 173 S.W.3d 634, 638 (Mo. banc ...

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