State v. Public Service Com'n, SC 86474.

• Citation: 165 S.W.3d 152
• Decision Date: 14 June 2005
• Docket Number: No. SC 86474.,SC 86474.
• Parties: STATE 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: United States State Supreme Court of Missouri

165 S.W.3d 152

STATE 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 86474.

Supreme Court of Missouri, En Banc.

June 14, 2005.

Thomas R. Schwartz, Cliff E. Snodgrass, Jefferson City, for appellant.

Richard M. Paul, III, Gregory L. Musil, Kansas City, Charles B. Stewart, Columbia, Brian T. McCartney, Jefferson City, for respondents.

STEPHEN N. LIMBAUGH, JR., Judge.

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.

I.

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 1994,¹ 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.

II.

On transfer, the PSC, taking the lead from the court of appeals which ruled the jurisdictional issue sua sponte, now claims that there was no jurisdiction on appeal because Riverside and MKP do not have standing to appeal. They explain 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. 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 ...