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In re Petition of Missouri-American Water Co. for Approval to Change its Infrastructure System Replacement Surcharge (ISRS)

Supreme Court of Missouri, En Banc

March 14, 2017

In the Matter of the Petition of Missouri-American Water Company for Approval to Change its Infrastructure System Replacement Surcharge (ISRS), and Missouri Public Service Commission, Respondents,
Office of the Public Counsel, Appellant.

         Appeal from the Missouri Public Service Commission


         The Office of the Public Counsel appeals the order of the Public Service Commission (PSC) approving Missouri American Water Company's (MAWC) petition under section 393.1000-393.1006[1] to charge an "infrastructure system replacement surcharge" (surcharge or ISRS) to its St. Louis County customers. Public Counsel argues the PSC had no authority to grant MAWC's petition because the statute authorizes a surcharge only in counties with a population of more than one million persons, a criterion Public Counsel argues St. Louis County no longer met at the time the PSC approved the surcharge. This Court does not resolve the question of whether St. Louis County is required currently to meet the statute's threshold population requirement or whether it is sufficient, as MAWC argues, that St. Louis County concededly met the population requirement when the surcharge statute was adopted.

         The propriety of the surcharge was rendered moot once the tariffs were incorporated into MAWC's general rate base during the pendency of this case. The ruling of this Court would not affect the validity of the now superseded surcharge, nor is the validity of the incorporation of the surcharge into the base rate before the Court in this case. Neither does this Court find that the issues presented meet the requirements for an exception to the mootness doctrine. Accordingly, the relief requested is no longer viable, and this case is dismissed as moot.


         In 2003, the Missouri General Assembly enacted sections 393.1000-393.1006, allowing public utility corporations providing water in a county with "a charter form of government and with more than one million inhabitants" to file a petition with the PSC seeking permission to charge customers a surcharge to recover the cost of certain infrastructure improvements. § 393.1003.1, RSMo Supp. 2013.[2] At the time these surcharge statutes were adopted in 2003, only St. Louis County had more than 1 million inhabitants and a charter form of government as required by section 393.1003.1.

         The surcharge statutes permit a water corporation to recover qualifying infrastructure costs, without requiring the water corporation to wait for its next general rate case to recover these costs. Recovery is limited to no more than 10 percent of the utility's base revenue level approved by the PSC in the most recent general rate proceeding. § 393.1003.1. A reconciliation must be performed at the end of each 12-month calendar period that a surcharge is in effect. § 393.1006.5(2). If the water corporation seeks adjustment of an existing surcharge, it should "submit the reconciliation and a proposed ISRS adjustment to the [PSC] for approval to recover or refund the difference, as appropriate, through adjustment of an ISRS." Id. Once a new general rate case is filed and a new base rate approved incorporating the infrastructure improvement costs that are the basis of the surcharge, the surcharge for those costs must be reset at zero. § 393.1006.6(1).[3]

         MAWC applied for and was granted its initial authority to collect a surcharge from its customers in St. Louis County in 2012. MAWC since has requested and been given permission to charge other surcharges to its customers to recover other infrastructure costs twice in 2013 and twice in 2014. On February 27, 2015, MAWC filed the petition that is the subject of the current appeal. It sought to recover a 0.7-percent surcharge from its St. Louis County customers for infrastructure replacement costs for the period October 1, 2014 through January 31 2015.

         The PSC held a hearing on the petition. Public Counsel and the staff of the PSC opposed the increase because they believed it exceeded the 10-percent statutory cap on the surcharge established by section 393.1003.1. On June 17, 2015, the PSC approved MAWC's proposed surcharge subject to the requirement that, no later than 60 days before it expects to reach the 10-percent cap, MAWC would be required to file a new tariff that would discontinue the surcharge then being approved.

         Public Counsel filed an application for rehearing, arguing that the proposed inclusion of certain charges still violated the 10-percent cap. Public Counsel also argued for the first time in its petition for rehearing that the PSC did not have the authority to approve MAWC's surcharge petition because St. Louis County no longer met the requirements in section 393.1003.1.

         In support, Public Counsel noted that Missouri's population is determined by the latest U.S. census. § 1.100.1.[4] While the 2000 census showed St. Louis County had a population of more than 1 million inhabitants, the 2010 census showed that the population of St. Louis County had fallen to 998, 954 inhabitants. Public Counsel argued that a county with only 998, 954 inhabitants does not qualify for a surcharge under section 393.1003.1, which by its terms permits a surcharge only for, "as of August 28, 2003, a water corporation providing water in a county with a charter form of government and with more than one million inhabitants."[5]

         The PSC denied the petition for rehearing. In so doing, the PSC did not make findings about the population of St. Louis but did state that, "as a county with the specified population at the time the law passed, " it believed St. Louis County qualified for the requested surcharge under section 393.1003.1. Public Counsel appealed to the Missouri Court of Appeals.

         While that appeal was pending, MAWC filed a separate rate case on July 31, 2015. As part of that rate case, MAWC and PSC staff reached a stipulation and agreement establishing a new base rate that incorporated the costs of the MAWC projects for all then-existing surcharges, including the surcharge at issue in this case. MAWC's surcharge was reset to zero as required by section 393.1006.6(1) once the new base rates went into effect. Accordingly, the surcharges that were the subject of the underlying interim rate case were no longer in effect by the time the appellate court issued its opinion. This Court granted transfer after opinion by the court of appeals, pursuant to Mo. Const. article V, section 10.

         II. ...

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