Verified Application & Petition of Liberty Energy (Midstates) Corp. v. Office of Public Counsel

464 S.W.3d 520, 2015 Mo. LEXIS 98, 2015 WL 3759566
CourtSupreme Court of Missouri
DecidedJune 16, 2015
DocketNo. SC 94470
StatusPublished
Cited by20 cases

This text of 464 S.W.3d 520 (Verified Application & Petition of Liberty Energy (Midstates) Corp. v. Office of Public Counsel) is published on Counsel Stack Legal Research, covering Supreme Court of Missouri primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Verified Application & Petition of Liberty Energy (Midstates) Corp. v. Office of Public Counsel, 464 S.W.3d 520, 2015 Mo. LEXIS 98, 2015 WL 3759566 (Mo. 2015).

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 PSG’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 [523]*523ISRS 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 evi-dentiary hearing. Public Counsel asserted, inter alia, Liberty was seeking to recover expenses in its ISRS application that were not authorized by section 393.1009(5). The PSC held an evidentiary hearing on September 26,2013.

At the evidentiary hearing, Liberty’s president testified that the requested ISRS rate increase included costs to cover damage to Liberty’s facilities caused by a contractor or another third party. Public Counsel argued that Liberty should not recover expenses for its infrastructure that was replaced because it was damaged accidentally or negligently- by a third party. Public Counsel maintained that Liberty’s replacement of the pipe that was damaged accidently during excavation did not satisfy the section 393.1009(5)(a) requirement that the replacement was for “existing facilities that have worn out or are in a deteriorated condition.”

The PSC approved the ISRS increase for Liberty, concluding that “damaged” infrastructure is synonymous with “deteriorated.” The' PSC found replacing the pipes that were damaged by a third party qualified as a “gas utility project” pursuant to section 393.1009(5)(a), and the projects were “extending the useful life or enhancing the integrity of the pipeline system components” pursuant to section 393.1009(5)(b). Accordingly, Liberty filed a new ISRS tariffs in compliance with the PSC’s order, and the PSC approved the tariffs.

Public Counsel filed an application for rehearing, which the PSC denied. Public Counsel appealed, and the court of appeals affirmed. This Court granted transfer pursuant to Mo. Const, art. V, sec. 10, after opinion by the court of appeals.1

Discussion

Standard of Review

“This Court reviews the decision of the PSC rather than that of the circuit [524]*524court.” 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. MoGas Pipeline, LLC, 366 S.W.3d at 496-96; 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.

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464 S.W.3d 520, 2015 Mo. LEXIS 98, 2015 WL 3759566, Counsel Stack Legal Research, https://law.counselstack.com/opinion/verified-application-petition-of-liberty-energy-midstates-corp-v-mo-2015.