In the Matter of Kansas City Power&Light Company's Request for Authority to Implement a General Rate Increase for Electric Service, And Midwest energy Consumers' Group v. Missouri Public Service Commission
2016 Mo. App. LEXIS 886
| Mo. Ct. App. | 2016Background
- Kansas City Power & Light (KCPL) filed for a general rate increase (filed Oct. 30, 2014) seeking an ROE up to 10.3%, trackers for certain costs, inclusion of transmission costs in a fuel adjustment clause (FAC), and recovery of rate-case expenses.
- The Missouri Public Service Commission (PSC) suspended KCPL’s proposed tariffs, held hearings using a test year ending Dec. 31, 2014 with a true-up through May 31, 2015, and issued a Report & Order (Sept. 2, 2015).
- PSC set KCPL’s ROE at 9.5%, denied KCPL’s requested trackers, allowed an FAC but only for “true” purchased power transmission (~7.3% of SPP costs), and authorized recovery of 74.26% of KCPL’s rate-case expenses.
- KCPL appealed raising five points (ROE, methods, trackers, FAC transmission inclusion, rate-case expense allocation). PSC order presumed valid; appellant bears burden of clear and satisfactory proof.
- Midwest Energy Consumers’ Group (MECG) intervened and later appealed the PSC’s Compliance Tariff Order approving KCPL’s compliance tariffs; the court found MECG’s appeal moot and dismissed it.
Issues
| Issue | KCPL's Argument | PSC/Respondent's Argument | Held |
|---|---|---|---|
| 1. Return on Equity (ROE) | PSC's 9.5% ROE is too low; violates constitutional fair-return and is confiscatory given KCPL’s risk profile and regulatory lag. | PSC used expert testimony and market indicators; 9.5% falls within market averages and expert ranges; FAC reduces risk so lower ROE is justified. | Affirmed: 9.5% lawful and supported by substantial evidence; within zone of reasonableness. |
| 2. Trackers (accounting deferrals) | KCPL: USOA allows regulatory assets/liabilities; PSC unlawfully restricts deferrals only to "extraordinary" items. | PSC: AAOs/deferrals are discretionary; PSC policy limits trackers (matching principle, skewing incentives); only extraordinary/material items are deferred. | Affirmed: PSC may limit deferrals to extraordinary items; decision within PSC expertise. |
| 3. Use of forecasts/trends in revenue requirement | KCPL: PSC must account for known future mandatory cost increases (CIP/cyber, SPP transmission, property tax); rejecting forecasts is improper. | PSC: Forecasts considered when offered timely and supported; KCPL raised specifics in sur-rebuttal (late), violating procedural rules and denying meaningful response. PSC staff forecasts were used where credible. | Affirmed: PSC may reject late surrebuttal forecasts; it did consider credible forecasts in the record. |
| 4. Inclusion of SPP transmission costs in FAC | KCPL: FAC must include all FERC-approved wholesale transmission costs; excluding most SPP costs "traps" FERC-approved costs (Filed Rate Doctrine, Supremacy Clause). | PSC: FAC statutory scope covers prudently incurred fuel and purchased-power costs; FAC may include only "true" purchased power transmission. Remaining transmission costs are recoverable in general rates. | Affirmed: PSC’s FAC scope ("true" purchased power only) does not violate filed-rate doctrine or federal preemption; PSC may allocate other transmission costs to base rates. |
| 5. Allocation of rate-case expenses | KCPL: PSC unlawfully adopted a new formula (percentage-allocated to ratepayers) without rulemaking and without specific imprudence findings for disallowed items. | PSC: Unique facts justified case-specific formula tying recoverable expense to approved revenue; PSC may shift costs that primarily benefit shareholders; prudence standard satisfied given serious doubt about litigation-driven expenses. | Affirmed: PSC did not engage in unlawful rulemaking; it reasonably allocated expenses and acted within its discretion. |
| 6. MECG challenge to Compliance Tariff Order (procedural) | MECG: PSC unlawfully expedited the 30-day publication/notice, denied hearing/cross-examination on staff affidavits, and failed to provide findings/substantial evidence. | PSC: Compliance-tariff review is a noncontested, post-Report & Order implementation step; no hearing or MAPA contested-case findings required; filed-rate rule prevents effective relief. | Dismissed as Moot: Final compliance tariffs took effect; appeal would provide no practical relief; §386.520 inapplicable; discretionary exceptions to mootness not invoked. |
Key Cases Cited
- Bluefield Waterworks & Improvement Co. v. Pub. Serv. Comm'n of W. Va., 262 U.S. 679 (establishes constitutional standard for utility fair return)
- Fed. Power Comm’n v. Hope Natural Gas Co., 320 U.S. 591 (rate of return must be sufficient to attract capital)
- Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953 (filed-rate doctrine; state commissions must give effect to FERC-filed wholesale rates)
- Permian Basin Area Rate Cases, 390 U.S. 747 (zone of reasonableness concept for ROE review)
- State ex rel. Pub. Counsel v. Pub. Serv. Comm'n, 397 S.W.3d 441 (Mo. App. W.D.) (standard for reviewing PSC lawfulness and reasonableness)
- State ex rel. Pub. Counsel v. Pub. Serv. Comm'n, 274 S.W.3d 569 (Mo. App. W.D.) (rate-of-return and capital-cost components analysis)
- State ex rel. KCP&L Greater Mo. Operations Co. v. Mo. Pub. Serv. Comm'n, 408 S.W.3d 153 (Mo. App. W.D.) (PSC authority on prudence and disallowance of costs)