The Joint Application of Missouri-American Water Co. & DCM Land v. Office of Pub. Counsel
| Decision Date | 27 December 2022 |
| Docket Number | WD85352 |
| Parties | IN THE MATTER OF THE JOINT APPLICATION OF MISSOURI-AMERICAN WATER COMPANY AND DCM LAND, LLC, FOR A VARIANCE FROM THE COMPANY'S TARIFF PROVISIONS REGARDING THE EXTENSION OF COMPANY MAINS, Respondent, v. OFFICE OF PUBLIC COUNSEL, Appellant. |
| Court | Missouri Court of Appeals |
APPEAL FROM THE PUBLIC SERVICE COMMISSION
W Douglas Thomson, Presiding Judge, Alok Ahuja, Judge and Edward R. Ardini, Jr., Judge
This appeal concerns the Public Service Commission's authority to grant variances from a utility's tariff. Missouri-American Water Company ("Water Company") and DCM Land, LLC ("DCM Land") jointly applied to the Public Service Commission (the "Commission") for variances from certain provisions of Water Company's tariff. The Office of the Public Counsel ("Public Counsel") opposed the variance requests. The Commission granted the variances and Public Counsel appeals, asserting (1) the Commission had no legal authority to grant the variances; (2)even if the Commission had authority "good cause" did not exist to grant the variances and (3)the Commission's order granting the variances was unlawful and unjust because it allowed Water Company to unduly discriminate in favor of DCM Land. For the reasons stated below, we affirm the order of the Commission granting the variances.
Water Company provides water service to Missouri customers, and is a "water corporation" and "public utility" as those terms are defined in § 386.020 RSMo.[1] Water Company provides its services subject to a tariff approved by the Commission. A tariff is "a document published by a public utility, and approved by the commission, that sets forth the services offered by that utility and the rates, terms and conditions for those services."[2] Water Company's tariff contains provisions relating to the funding of water main extensions.
DCM Land develops real estate projects, and is developing the Cottleville Trails subdivision (the "Development") in St. Charles County, Missouri. The Development will be built in two phases. 355 single family homes and 175 apartment units will be built in Phase 1, and 217 additional attached, single family homes will be built in Phase 2. The Development is expected to take five years to complete.
The Development is located in the service areas of both Water Company and Public Water Supply District No. 2 of St. Charles County ("Water District No. 2"). However, pursuant to a territorial agreement previously entered into by Water Company and Water District No. 2, the Development is wholly within Water Company's exclusive territory.
Water Company and DCM Land filed a joint application with the Commission, seeking a variance from three rules in Water Company's tariff relating to the funding of water main extensions: Rule 23A.2, Rule 23A.3, and Rule 23C.6, specifically seeking variances from the tariff language emphasized below.
[Rule 23A.]2. The Company will be responsible for all main extensions where the cost of the extension does not exceed four (4) times the estimated average annual revenue from the new Applicant(s) whose service pipe(s) will immediately be connected directly to the extension and from whom the Company has received application(s) for service upon forms provided by the Company for this purpose. New Applicants shall be those who commit to purchase water service for at least one year, and guarantee to the Company that they will take water service at their premises within one hundred twenty (120) days after the date the Company accepts the main and determines it ready for Customer Service. . . .
Relating to this tariff rule, Water Company and DCM Land requested a variance from the definition of "New Applicants," to increase the 120-day deadline to five years. In other words, the variance would allow the "estimated average annual revenue from new Applicant(s)" to include those who guaranteed they would take water service within five years after the main was ready, as opposed to 120 days, as provided by the tariff.
Rule 23A.3 and Rule 23C.6 describe the funding scheme for water main extensions, and specifically which portion of the cost will be borne by Water Company:
The Development is located in the "St. Louis Metro District" for purposes of Water Company's tariff. DCM Land and Water Company requested a variance that would make them subject to the 86:14 funding ratio applicable to all districts other than St. Louis, as opposed to the 95:5 funding ratio applicable under the tariff.
Effectively, the requested variances from Rule 23A.2, Rule 23A.3, and Rule 23C.6 would increase Water Company's responsibility-and decrease DCM Land's responsibility-for the cost of the water main extension.
Water Company and DCM Land filed their joint application for variances pursuant to 20 CSR 4240-2.060(4), which requires that an application for a tariff variance contain certain information, including "[t]he reasons for the proposed variance or waiver and a complete justification setting out the good cause for granting the variance or waiver[.]" 20 CSR 4240-2.060(4)(B). Water Company and DCM Land asserted that good cause existed for the variances because "the build-out of a development of such magnitude may not reasonably be expected to occur in 120 days, but is reasonably anticipated to occur over a 5-year period." DCM Land also asserted that good cause existed in that "but for the territorial agreement filed between [Water District No. 2] and [Water Company], . . . for which DCM Land and its predecessors in interest received no notice, Cottleville Trails could be served by [Water District No. 2] and DCM Land would not be required to construct the water system in the development at its cost and contribute it to [Water Company] without a reasonable opportunity to recover the cost thereof . . . ." Without the requested relief, DCM Land asserted that it would be required "to pay significantly higher development costs, and/or the home buyers in the Cottleville Trails subdivision to pay higher costs for their homes, than would result if water service were provided" by Water District No. 2.
The Staff of the Commission ("Staff") filed a Recommendation urging the Commission to deny the application, asserting the Commission lacked authority to grant tariff variances and the funding-ratio variance would be unduly discriminatory.[3] Water Company and DCM Land filed responses, and the parties filed a joint stipulation of facts. Among other facts, the parties stipulated that DCM Land was "installing a 12 [inch] main in place of an existing 4 [inch] main in Old Town Cottleville," and "[t]hat replacement would improve fire protection in the area and provide water main access to several additional properties nearby." After additional briefing, the Commission granted Water Company and DCM Land's application. Thereafter, Public Counsel[4] filed an application for rehearing, which was granted by the Commission. After additional briefing, the Commission issued a revised order ("Revised Order") again granting the application for variances.
In its Revised Order, the Commission concluded that it had statutory authority to grant a tariff variance and that good cause existed to grant Water Company and DCM Land's variance requests. The Commission found good cause existed "[b]ecause of the added fire protection and access gained to nearby areas, the number of new customers taking service and the revenue expected to be produced, and the specific facts surrounding the location of this development within the service territory of St. Louis Metro District of [Water Company] instead of another tariffed district or [Water District No. 2]." The Commission determined that, for these same reasons, the variances were "reasonable and not unduly discriminatory."
Public Counsel appeals.
Appellate review of a Commission order is two-pronged: "first, the reviewing court must determine whether the [Commission's] order is lawful; and second, the court must determine whether the order is reasonable." In re Amendment of Comm'n Rule Regarding Applications for Certificates of Convenience & Necessity, 618 S.W.3d 520, 523 (Mo banc 2021); see also § 386.510. "All questions of law, including whether statutory authority exists to support an order of the [Commission], are reviewed de novo." In re Amendment of Comm'n Rule, 618 S.W.3d at 523. An order of the Commission is...
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