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In re Verified Application & petition of Liberty Energy (Midstates) Corp.

Supreme Court of Missouri, En Banc

June 16, 2015

IN THE MATTER OF THE VERIFIED APPLICATION and PETITION OF LIBERTY ENERGY (MIDSTATES) CORP. d/b/a LIBERTY UTILITIES TO CHANGE ITS INFRASTRUCTURE SYSTEM REPLACEMENT SURCHARGE, MISSOURI PUBLIC SERVICE COMMISSION, Respondents,
v.
THE OFFICE OF PUBLIC COUNSEL, Appellant

APPEAL FROM THE MISSOURI PUBLIC SERVICE COMMISSION.

Mark D. Poston and Dustin J. Allison of the public counsel's office in Jefferson City.

Jennifer Heintz and Kevin A. Thompson of the commission in Jefferson City.

Larry W. Dority of Fischer & Dority PC in Jefferson City.

OPINION

GEORGE W. DRAPER III, JUDGE.

The Office of the Public Counsel (hereinafter, " Public Counsel" ) appeals from an order entered by the Missouri Public Service Commission (hereinafter, " the PSC" ), granting Liberty Energy (Midstates) Corp. d/b/a Liberty Utilities' (hereinafter, Liberty" )[1] request for an increase to its Infrastructure System Replacement Surcharge (hereinafter, " ISRS" ). Because the PSC failed to follow the plain language of its statutory mandates, its order is unlawful. This Court reverses the PSC's order, and the case is remanded.

Background

Liberty is a natural gas provider. It is a " public utility" and a " gas corporation." Sections 386.020(43) and 386.020(18), RSMo Supp. 2013.[2] The PSC is a Missouri administrative agency charged with the regulation of all public utilities. Sections 386.040 and 386.250(1), RSMo 2000; see also State ex rel. MoGas Pipeline, LLC v. Missouri Pub. Serv. Comm'n, 366 S.W.3d 493, 496 (Mo. banc 2012). Public Counsel is appointed by the director of the department of economic development and may represent the public interest in any proceeding before the PSC and in appeals from the PSC's orders. Sections 386.700 and 386.710, RSMo 2000; Pub. Serv. Comm'n of State v. Missouri Gas Energy, 388 S.W.3d 221, 224 (Mo. App. W.D. 2012).

In 2012, the PSC authorized Liberty's purchase of substantially all of the assets that Atmos Energy Corporation (hereinafter, " Atmos" ) used to provide natural gas and transportation services in Missouri. The PSC issued new certificates of convenience and necessity to Liberty for the service areas Atmos previously served. Further, the PSC approved Liberty's adoption of Atmos' ISRS tariff.[3]

Gas corporations are permitted to recover certain infrastructure system replacement costs outside of a formal rate case though a surcharge on their customers' bills. When a petition to modify an ISRS is filed, the PSC staff must conduct an examination of the proposed ISRS. Section 393.1015.2, RSMo Supp. 2003. The examination may scrutinize the petitioning gas corporation's information to confirm the costs are in accordance with the ISRS code provisions and confirm the proposed charges are calculated properly. A report of the examination may be submitted to the PSC no later than sixty days after the petition was filed. Section 393.1015.2(2).

In July 2013, Liberty filed a petition with the PSC seeking an adjustment of its ISRS rate schedule. Liberty sought the adjustment to recover costs incurred in connection with ISRS-eligible infrastructure system replacements made from June 1, 2012, through May 31, 2013. After Liberty filed its petition for an adjustment of its ISRS rate schedule, the PSC staff conducted an investigation.

During the examination of Liberty's petition, the PSC staff inspected thirty-six of the two hundred seventy-five projects for which Liberty sought recovery. The projects investigated compromised approximately fifty-eight percent of the costs for which Liberty sought recovery.[4] The PSC staff also examined Liberty's project sub-ledger, which indicated, inter alia, whether a project was performed for the integrity of the overall system or was for growth.

The PSC staff submitted its report to the PSC on September 3, 2013. The report noted that Liberty included some growth projects in its application, which are not eligible for recovery in an ISRS. The PSC staff removed those projects from its calculations. The PSC staff also identified other errors and omissions in Liberty's data, including: summation errors; errors in accumulated depreciation; deferred income taxes, property taxes depreciation rates, and conversion factors; and formula errors. The report was updated on September 20, 2013, and September 26, 2013, providing amended revenue figures and customer class rates based on additional data from Liberty.

On September 9, 2013, Public Counsel filed a motion, requesting the PSC reject Liberty's ISRS petition or schedule an evidentiary hearing. Public Counsel asserted, inter alia, Liberty was seeking to recover expenses in its ISRS application that were not authorized by section ...


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