Court of Appeals of Missouri, Western District, Third Division
IN THE MATTER OF THE AMENDMENT OF THE COMMISSION'S RULE REGARDING APPLICATIONS FOR CERTIFICATES OF CONVENIENCE AND NECESSITY; KANSAS CITY POWER AND LIGHT AND KCP&L GREATER MISSOURI OPERATIONS COMPANY, Appellants,
MISSOURI PUBLIC SERVICE COMMISSION AND DOGWOOD ENERGY, Respondents.
FROM THE PUBLIC SERVICE COMMISSION
Before: Thomas H. Newton, Presiding Judge, Anthony Rex
Gabbert, Judge and Edward R. Ardini, Jr., Judge
R. ARDINI, JR., JUDGE
City Power & Light Company ("KCP&L") and
KCP&L Greater Missouri Operations Company
("GMO") appeal an Order of Rulemaking issued by the
Public Service Commission ("PSC") adopting a new
rule relating to certificates of convenience and necessity.
KCP&L and GMO argue that the rule exceeds statutory
authority, and further that the rule's fiscal note is
deficient, rendering the rule void and unenforceable. We
agree that the rule exceeds statutory authority, and
therefore vacate the Order of Rulemaking.
and Procedural Background
PSC is a state agency established by the Missouri General
Assembly to regulate public utilities operating within the
state." State ex rel. Praxair, Inc. v. Mo. Pub.
Serv. Comm'n, 344 S.W.3d 178, 186 (Mo. banc 2011).
KCP&L and GMO are electrical corporations and public
utilities as defined in section 386.020,  subject to
regulation by the PSC. Dogwood Energy, LLC
("Dogwood") owns a majority interest in the Dogwood
Energy Facility, "a natural gas-fired, combined cycle
electric power generating facility" located in Missouri.
The Dogwood Energy Facility is the "largest combined
cycle plant in the state."
is vested with rulemaking authority under section
386.250. On April 5, 2018, the PSC filed a proposed
rule with the Missouri Secretary of State regarding electric
utilityapplications for certificates of
convenience and necessity ("CCNs"). The PSC sought
to rescind the then-existing rule regarding applications for
CCNs-4 CSR 240-3.105-and replace it with a new rule, the
provisions of which are discussed in detail below. The
proposed rule contained a statement that it would "not
cost private entities more than five hundred dollars ($500)
in the aggregate." Comments in support of or in
opposition to the proposed rule were accepted until June 14,
2018, and a public hearing regarding the proposed rule was
held on June 19, 2018.
GMO, and Dogwood submitted written comments to the PSC, and
KCP&L and GMO appeared at the hearing to express their
positions on the proposed rule. KCP&L and GMO generally
opposed the proposed rule; Dogwood generally supported it. On
August 8, 2018, the PSC filed two "Orders of
Rulemaking" with the Secretary of State: one rescinding
4 CSR 240-3.105 and one adopting 4 CSR 240-20.045 ("the
Rule"). The Order of Rulemaking adopting the Rule set
forth the provisions of the Rule, summarized and responded to
the comments that had been submitted regarding the proposed
rule, and included a fiscal note, which estimated that
compliance with the Rule "would result in an additional
cost of $0 to $100, 000" for private entities.
and GMO filed a timely Application for Rehearing and Request
for Stay, asserting that the PSC "should rehear this
matter, and thereafter revoke and rescind its Order of
Rulemaking." The PSC denied the request, and KCP&L
and GMO appealed to this Court. See § 386.510
(orders of the PSC are directly appealable to "the
appellate court with the territorial jurisdiction over the
county where the hearing was held or in which the commission
has its principal office"). Dogwood moved to intervene
as a respondent in the appeal; we granted Dogwood's
request. The Rule was published in the Missouri Register on
October 15, 2018, and became effective on November 30, 2018.
facts are set forth in our analysis.
standard of review of a PSC order of rulemaking is
two-pronged: first, the reviewing court must determine
whether the PSC's order is lawful; and second, the court
must determine whether the order is reasonable."
State ex rel. Atmos Energy Corp. v. Pub. Serv.
Comm'n, 103 S.W.3d 753, 759 (Mo. banc 2003); see
also § 386.510. To be lawful, the order of
rulemaking "must be consistent with and subject to
statutes adopted by the General Assembly." See State
ex rel. Philipp Transit Lines, Inc. v. Pub. Serv.
Comm'n, 523 S.W.2d 353, 356 (Mo. App. 1975); see
also State ex rel. Sprint Mo., Inc. v. Pub. Serv.
Comm'n, 165 S.W.3d 160, 163 (Mo. banc 2005) (The
lawfulness of the PSC's order "turns on whether the
PSC had the statutory authority to act as it did.");
§ 536.014. When determining whether an order of
rulemaking is lawful, "we exercise independent judgment
and must correct erroneous interpretations of the law."
State ex rel. Pub. Counsel v. Pub. Serv. Comm'n,
397 S.W.3d 441, 447 (Mo. App. W.D. 2013). "There is no
presumption in favor of the Commission's resolution of
legal issues" and "we decide the legal points
anew." Atmos Energy Corp., 103 S.W.3d at 759.
If we find the PSC's order of rulemaking unlawful, we
need not reach the issue of reasonableness. In re
Verified Application & Petition of Liberty Energy
(Midstates) Corp., 464 S.W.3d 520, 524 (Mo. banc 2015).
Law and the Rule
and GMO raise four points on appeal. Before we address these
points, however, we believe it helpful to set forth some
general law regarding CCNs, along with the relevant
provisions of the Rule.
393.170 requires that an electrical corporation obtain a CCN
from the PSC before the corporation can take certain actions.
Specifically, subsection 1 provides that, "[n]o . . .
electrical corporation . . . shall begin construction of a[n]
. . . electric plant . . . other than an energy generation
unit that has a capacity of one megawatt or less, without
first having obtained the permission and approval of the
commission." § 393.170.1. Subsection 2 provides
that, "[n]o such corporation shall exercise any right or
privilege under any franchise . . . without
first having obtained the permission and approval of the
commission." § 393.170.2. Finally, subsection 3
The commission shall have the power to grant the permission
and approval herein specified whenever it shall after due
hearing determine that such construction or such exercise of
the right, privilege or franchise is necessary or convenient
for the public service. The commission may by its order
impose such condition or conditions as it may deem reasonable
and necessary. Unless exercised within a period of two years
from the grant thereof, authority conferred by such
certificate of convenience and necessity issued by the
commission shall be null and void.
other words, "[s]ection 393.170 sets out two types of
CCNs the Commission may grant a utility." Grain Belt
Express Clean Line, LLC v. Pub. Serv. Comm'n, 555
S.W.3d 469, 471 (Mo. banc 2018). "These types are
provided for in separate subsections of section 393.170 and
are commonly referred to as 'line
certificates' and 'area
certificates.'" Id. (emphasis in original).
"Section 393.170.1 grants the Commission the authority
to issue a line CCN to a utility to construct electrical
plants." Id. Additionally, "[p]ermission
to build transmission lines or production facilities is
generally granted in the form of a 'line
certificate.'" State ex rel. Cass Cnty. v. Pub.
Serv. Comm'n, 259 S.W.3d 544, 549 (Mo. App. W.D.
2008); see also State ex rel. Union Elec. Co. v.
Pub. Serv. Comm'n, 770 S.W.2d 283, 285 (Mo. App.
W.D. 1989) (describing the utility's certificate to
construct an electric line as "a line certificate"
and noting the authority for which was contemplated in
section 393.170.1). "Section 393.170.2 grants the
Commission the authority to issue an area CCN for the utility
to exercise a franchise and provide retail utility service to
a geographic territory." Grain Belt Express,
555 S.W.3d at 471.
an electric utility generally must obtain a line CCN before
building transmission lines, it need not do so if the utility
is seeking to build or extend the transmission lines in
"its certificated area (i.e. the territory covered by
its area [CCN])." Cass Cnty., 259 S.W.3d at 549
n.6; see also State ex rel. Harline v. Pub. Serv.
Comm'n, 343 S.W.2d 177, 185 (Mo. App. 1960); cf.
Pub. Serv. Comm'n v. Kan. City Power & Light
Co., 31 S.W.2d 67, 71 (Mo. banc 1930). However,
"[b]ecause the construction of a new power plant, even
within a certificated area, is governed by section 393.170.1,
a utility may not rely solely upon its area certificate and
must obtain a line certificate from the PSC before doing
so." Cass Cnty., 259 S.W.3d at 549 n.6; see
also Stopaquila.org v. Aquila, Inc., 180 S.W.3d 24,
35-39 (Mo. App. W.D. 2005).
this background in mind, we turn to the Rule promulgated by
the PSC. The stated purpose of the Rule is to "outline
the requirements for applications to the commission, pursuant
to section 393.170.1 and 393.170.2, RSMo, requesting that the
commission grant a certificate of convenience and necessity
to an electric utility for a service area or to operate or
construct an electric generating plant, an electric
transmission line,  or a gas transmission line that
facilitates the operation of an electric generating
plant." 4 CSR 240-20.045.
Rule provides that an "electric utility must obtain a
certificate of convenience and necessity prior to (1)
Providing electric service to retail customers in a service
area pursuant to section 393.170.2, RSMo; (2) Construction of
an asset pursuant to section 393.170.1, RSMo; or (3)
Operation of an asset pursuant to section 393.170.2,
RSMo." 4 CSR 240-20.045(2)(A). The Rule defines
1. An electric generating plant, or a gas transmission line
that facilitates the operation of an electric generating
plant, that is expected to serve Missouri customers and be
included in the rate base used to set their retail rates
regardless of whether the item(s) to be constructed or
operated is located inside or outside the electric
utility's certificated service area or inside or outside
2. Transmission and distribution plant located outside the
electric utility's service territory, but within
4 CSR 240-20.045(1)(A). The Rule defines
1. Construction of new asset(s); or
2. The improvement, retrofit, or rebuild of an asset that
will result in a ten percent (10%) increase in rate base as
established in the electric utility's most recent rate
4 CSR 240-20.045(1)(B). The Rule does not define
Rule sets forth requirements applicable to all CCN
applications, then provides for additional requirements
depending on the type of CCN being applied for. The Rule
states that its provisions "do not create any new
requirements for or affect assets, improvements, rebuilds or