In the Matter of the Empire District Electric Company's Request for Authority to File Tariffs Increasing Rates for Electric Service Provided to Customers in its Missouri Service Area, Office of Public Counsel, Midwest Energy Consumers Group v. Public Service Commission
WD84090, WD84117
| Mo. Ct. App. | Jul 27, 2021Background
- Empire District Electric Company (Empire) is a Missouri-regulated electric utility and subsidiary of Liberty Utilities Co. (LUCo); Empire sought a general rate increase based on a test year ending March 31, 2019 (updated through Sept. 30, 2019) with a true-up period through Jan. 31, 2020.
- Empire's Asbury coal-fired plant ceased generating in December 2019; Empire recorded unused Asbury assets removed from service as of March 1, 2020, and retirement was expected to affect income and O&M costs materially.
- During the true-up period OPC moved to adjust rates to reflect Asbury’s retirement; the Public Service Commission (PSC) denied inclusion of those adjustments as not "known and measurable," but authorized an Accounting Authority Order (AAO) to capture retirement impacts for the next rate case.
- The PSC used an adjusted capital structure (based on LUCo) that treated $395 million in LUCo guarantees as debt when determining Empire’s rates; Empire objected and sought use of Empire’s per-books capital structure instead.
- Both OPC and Empire separately appealed the PSC’s Amended Report and Order; the Missouri Court of Appeals (Western District) affirmed the PSC on both issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Asbury retirement effects should be incorporated into current rates | OPC: Retirement was known (plant shut down) and adjustments should be included in the rate case | PSC/Empire: Effects were not sufficiently known and measurable; some Asbury facilities remain potentially useful; use AAO to capture impacts later | Court: Affirmed PSC—retirement effects were not known/measurable for this rate case; AAO lawful and reasonable |
| Whether PSC erred by using an adjusted LUCo capital structure treating guarantees as debt | Empire: PSC must use Empire’s per-books capital structure (and Merger Stipulation precludes adjusted treatment) | PSC/OPC: PSC has broad ratemaking discretion and may adjust capital structure to reflect economic reality (including guarantees) | Court: Affirmed PSC—adjusted capital structure within PSC discretion; resulting ROE within zone of reasonableness |
Key Cases Cited
- State ex rel. AG Processing, Inc. v. Pub. Serv. Comm'n, 120 S.W.3d 732 (Mo. banc 2003) (standard of review for PSC orders)
- Off. of Pub. Couns. v. Evergy Mo. West, Inc., 609 S.W.3d 857 (Mo. App. W.D. 2020) (use of AAO to capture plant retirement impacts)
- State ex rel. GTE North, Inc. v. Mo. Pub. Serv. Comm'n, 835 S.W.2d 356 (Mo. App. W.D. 1992) (criteria for including post-test-year adjustments)
- State ex rel. Assoc. Nat. Gas Co. v. Pub. Serv. Comm'n, 706 S.W.2d 870 (Mo. App. W.D. 1985) (PSC discretion in ratemaking and balancing investor/consumer interests)
- Praxair, Inc. v. Pub. Serv. Comm'n, 328 S.W.3d 329 (Mo. App. W.D. 2010) (deference to PSC expertise and discretionary determinations)
- In the Matter of KCP&L v. Pub. Serv. Comm'n, 509 S.W.3d 757 (Mo. App. W.D. 2016) (zone-of-reasonableness test for ROE)