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In re Verified Application and Petition of Laclede Gas Co.

Court of Appeals of Missouri, Western District, Second Division

September 27, 2016

IN THE MATTER OF THE VERIFIED APPLICATION AND PETITION OF LACLEDE GAS COMPANY TO CHANGE ITS INFRASTRUCTURE SYSTEM REPLACEMENT SURCHARGE IN ITS LACLEDE GAS SERVICE TERRITORY; MISSOURI GAS ENERGY; USW LOCAL 11-6; MISSOURI PUBLIC SERVICE COMMISSION, Respondents,
v.
OFFICE OF PUBLIC COUNSEL, Appellant.

         Appeal from the Public Service Commission

          Before James E. Welsh, Presiding Judge, Cynthia L. Martin, Judge and Gary D. Witt, Judge.

          Gary D. Witt, Judge.

         The Office of Public Counsel ("OPC") appeals the Missouri Public Service Commission's ("Commission") order approving the petition of Laclede Gas Company ("Laclede Gas") to change its Infrastructure System Replacement Surcharge ("ISRS"). Laclede Gas submitted two ISRS petitions on August 3, 2015, one for Laclede Gas and one for its operating unit, Missouri Gas Energy ("MGE"), (collectively "Laclede"). The petitions contained proposed rate schedules and supporting documentation for eligible infrastructure investments for March 1, 2015 through June 30, 2015. The petitions also contained requests for rate increases based on estimated expenditures for July and August 2015 with no supporting documentation. The OPC contends that the Commission's order granting the petitions was unlawful because it could not award Laclede recovery for the July and August expenditures because the required documentation was not provided at the time the petitions were filed. We affirm.

         Procedural and Factual Background

         Laclede is a natural gas provider which operates as Laclede Gas in Eastern Missouri and MGE in Western Missouri. Both operate as a "gas corporation" and "public utility" under section 386.020.[1] Both are subject to the jurisdiction of the Commission, as provided in Chapters 386 and 393. The Commission is a state administrative agency responsible for the regulation of public utilities in Missouri, including gas corporations, pursuant to sections 386.040 and 386.250(1). State ex rel. MoGas Pipeline, LLC v. Mo. Pub. Serv. Comm'n, 366 S.W.3d 493, 496 (Mo. banc 2012). The Commission has a staff ("Staff") charged with representing the Commission and state in all Commission investigations, contested cases, and other proceedings, unless it timely files a notice of intention not to participate in proceedings. The OPC is a state agency that, in its discretion, represents consumers in utility proceedings before the Commission and in appeals of Commission orders. Office of Pub. Counsel v. Empire Dist. Elec. Co., 307 S.W.3d 220, 221 (Mo. App. S.D. 2010); sections 386.700 and 386.710.

         The ISRS statutes authorize a method for gas corporations to recover the cost of certain government-mandated infrastructure system replacement projects outside of a general rate case. See sections 393.1009, 393.1012, 393.1015. On August 3, 2015, Laclede filed separate ISRS petitions for Laclede Gas and MGE seeking to recover certain infrastructure investments made during the period from March 1 through June 30, 2015, as well as estimated infrastructure replacement costs through August 31, 2015 (collectively "Petitions"). The Petitions included necessary supporting documentation for the work completed through June 30, 2015. The replacement costs for July and August, 2015 were estimates and did not include supporting documentation for those costs. The July estimated costs were revised and supported by documentation in a supplemental filing on August 14. The August estimates were revised and supported by documentation in supplemental filings on September 14 by Laclede Gas, and September 15 by MGE.

         OPC requested a hearing on the ISRS Petitions alleging, inter alia, that Laclede was not entitled to recover for the July and August costs because they were not properly documented at the time the Petitions were filed on August 3, 2015. A hearing was held on October 15, 2015 ("Hearing"). Following the Hearing, the Commission found that the use of estimated costs supported by later submitted documentation was not a violation of the ISRS statutes or regulations. The Commission's Staff was able to fully review the Petitions and determine their validity prior to its report submission deadline to the Commission. Finally, the Commission found that OPC failed to make an effort to seek discovery of any July and August projects or otherwise challenge those projects and was thus not prejudiced by any late amendments to the Petitions.

         On November 12, 2015, the Commission issued its Report and Order ("Report and Order") granting to Laclede Gas and MGE the requested ISRS tariff changes with some modifications based on issues raised by the Commission's Staff and OPC.

         OPC filed an Application for Rehearing on both Petitions on November 30, 2015, and the Commission issued its order denying each on December 16, 2015. This appeal followed.

         Discussion

         OPC raises three issues on appeal, all related to the Commission's inclusion of recovery for the July and August infrastructure projects in the Petitions.

         Standard of Review

"This Court reviews the decision of the PSC rather than that of the circuit court." State ex rel. Praxair, Inc. v. Missouri Pub. Serv. Comm'n, 344 S.W.3d 178, 184 (Mo. banc 2011). Appellate review of a PSC order is two-pronged: first, to determine whether the PSC's order is lawful; and second, to determine whether the PSC's order is reasonable. [State ex rel. MoGas Pipeline, LLC v. Mo. Pub. Serv. Comm'n], 366 S.W.3d [493, ] 495-96; see also section 386.510. The appellant bears the burden of proof to demonstrate that the PSC's order is unlawful or unreasonable. State ex rel. AG Processing, Inc. v. Pub. Serv. Comm'n of State, 120 S.W.3d 732, 734 (Mo. banc 2003); section 386.430, RSMo 2000. The lawfulness of the PSC's order is determined "by whether statutory authority for its issuance exists, and all legal issues are reviewed de novo." Office of Public Counsel v. Missouri Pub. Serv. Comm'n, 409 S.W.3d 371, 375 (Mo. banc 2013) (quoting AG Processing, Inc., 120 S.W.3d at 734). This Court need not reach the issue of the reasonableness of the PSC's order if it finds the order unlawful. MoGas Pipeline, LLC, 366 S.W.3d at 496. The PSC's order is determined to be reasonable when "the order is supported by substantial, competent evidence on the whole record; the decision is not arbitrary or capricious[;] or where the [PSC] has not abused its discretion." Id. (quoting Praxair, Inc., 344 S.W.3d at 184).

In Matter of Verified Application & Petition of Liberty Energy (Midstates) Corp., 464 S.W.3d 520, 523-24 (Mo banc 2015).

         I.

         OPC's first point on appeal alleges that the Commission erred in approving increases to Laclede's ISRS Petitions because Laclede failed to comply with the filing requirements of Section 393.1015 and 4 CSR 240-265(20), rendering the Commission's judgment both unlawful and unreasonable. We begin with the question of lawfulness.

         OPC claims that the plain language of the ISRS statutes and applicable regulations require that, at the time an ISRS petition is filed, the utility supports its petition with all supporting documentation in final form. Although Laclede presented supporting documentation for the Petitions, OPC claimed that because the projects for July and August were not fully documented, were based upon budgeted[2] amounts at the time of the filing of the Petitions, and actual costs were not submitted until later, Laclede was in violation of the statute and regulations, barring recovery for those two months. Laclede responded, and the Commission agreed, that nothing in the statutes or regulations prevents budgeted information from being used at the time of a petition filing, updated later with actual costs, so long as an appropriate review of the ISRS petition is permissible. The Commission found that "[s]o long as Staff has sufficient time to perform an effective review of ISRS eligibility within the sixty days allowed by the ISRS statute, the budgeted July and August documents, along with actual expense records provided after the filing of the petitions are acceptable."

Section 393.1015.1(1) requires that:
At the time that a gas corporation files a petition with the commission seeking to establish or change an ISRS, it shall submit proposed ISRS rate schedules and its supporting documentation regarding the calculation of the proposed ISRS with the petition, and shall serve the office of public counsel with a copy ...

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