Tuesday, October 14, 2008

State ex rel. Office of Public Counsel v. Public Service Commission of the State of Missouri[1]

Opinion handed down October 14, 2008 [1]
Link to Mo. Sup. Ct. Opinion

The Missouri Supreme Court once again directed the Missouri Public Service Commission (“PSC”) to vacate an administrative order that increased utility rates. On this occasion, the PSC simultaneously re-approved the tariff increase while vacating its original administrative order, thus failing to properly follow the previous order of the Supreme Court. The act of re-approving the tariff in the vacating action was contra to "[t]he general rule . . . that when an order or judgment is vacated, the previously existing status is restored and the situation is the same as though the order or judgment had never been made. The matters in controversy are left open for future determination."[2] This litigation highlights the expense and time delay inherent in the adversarial process Missouri has implemented to regulate utilities.

I. Facts and Background[3]

The PSC is an administrative body that regulates numerous investor-owned utilities for the state. The Missouri Office of Public Counsel represents the interests of the public and utility customers in proceedings before the PSC and courts. Empire District Electric Co. ("Empire") is a privately-owned utility company regulated by the PSC.

On February 1, 2006, Empire initially petitioned the PSC to implement new tariffs that would raise electricity rates by 10 percent, effective January 1, 2007.[4] After a rejection by the PSC and subsequent re-filing, PSC approved the tariffs on Friday, December 29, 2006, at 3:40pm.[5] Due to the vagaries of the PSC's filing system and the calendar date,[6] the Office of the Public Counsel was given until 5 p.m. that same day, or a total of one hour and 20 minutes, to file an application for a rehearing.[7]

The Office of the Public Counsel filed a writ of mandamus with the Supreme Court, asking that the PSC order be vacated and rescinded.[8] The statutorily-mandated review process requires that an application for rehearing must be filed before the administrative order takes effect - January 1, 2006 in this case. The Supreme Court held that the PSC had not adhered to the required review process because it failed to give public counsel a reasonable period of time to file their petition for rehearing. The Supreme Court directed the commission "to vacate its order . . ., and allow public counsel reasonable time to prepare

Following the Supreme Court's ruling, the PSC entered an order on December 4, 2007, vacating its previous order. However, the new order also approved the new tariffs and stated that "if Empire charged the rates as approved in the December 29, 2006, order, it charged the correct rates. Furthermore, those rates remain 'in effect at the time' until the order is vacated."[9]

II. Instant Decision

Public counsel once again challenged the PSC, arguing that the commission had not vacated its December 29, 2006 order in accordance with the Supreme Court's direction because the new order did more than simply vacate the old; it also "attempted to determine the effect on those moneys collected under the tariffs the commission had previously approved."[10] This attempt to disposition the disputed monies broke against "[t]he general rule...that when an order or judgment is vacated, the previously existing status is restored and the situation is the same as though the order or judgment had never been made. The matters in controversy are left open for future determination."[11] Of note, the parties agreed that the actual, or correct, disposition of the already-collected moneys was not at issue here, merely the overreaching of the PSC.[12] The Supreme Court once again vacated the PSC's order.[13]

III. Commentary

The legal aspects of this decision - and its mother case - are fairly nondescript. While a writ of mandamus (or two) is perhaps an unusual administrative law occurrence, no new ground is broken. Obviously the taxpayer is funding the Battle Royale between these two administrative bodies. The more interesting question is what interest of the state of Missouri, and its taxpayers, was furthered by the legal rigmarole. It is doubtful that the Office of the Public Counsel expected to save Missouri residents money. While the increased rate may have been delayed, with the recent two-year surge in the cost of natural resources, this can only mean a greater increase than the proposed ten-percent down the road to cover the gap. Perhaps the Public Counsel sought to teach the PSC a lesson: do not try to sneak rate hikes past us; and it does seem the PSC tried as much. If so, the first legal challenge was appropriate as the tariffs would have passed unchallenged by the body charged with protecting the utility consumer.

Still, the current legal action is less defensible. The PSC overreached, however, that piece of the order could have been challenged in a rehearing (and likely appeal), which would also determine the disposition of the monies already collected by Empire. Now, the final resolution of this morass is, once again, months down the road. This decision shows the aggressiveness of the PSC in defending any slight to the "public interest." The public entity should take a page from private litigators and realize that sinking dollars into litigation does not always benefit the client.

- David R. Swaney

[1] No. SC89176 (Mo. 2008) (en banc). The West reporter citation is State ex rel. Office of Public Counsel v. Public Service Commission, 266 S.W.3d 842 (Mo. 2008) (en banc).
[2] Id.
[3] Id.
[4] State ex rel. Office of the Public Counsel v. Public Service Comm. of the State of Mo., 236 S.W.3d 632, 634 (Mo. 2007).
[5] Id.
[6] The PSC receives filings during business hours only. If the filing office did not receive the application for rehearing before the close of business Friday, the application would not be considered received until Tuesday, January 2. Id. at 634-35.
[7] Id.
[8] Id. at 635.
[9] State ex rel. Office of Public Counsel, 2008 WL 4559740 at *1.
[10] Id.
[11] Id.
[12] Id.
[13] Id.