State Ex Rel. Noranda Aluminium, Inc. v. Public Service Com'n of State
2011 Mo. App. LEXIS 1462
| Mo. Ct. App. | 2011Background
- Noranda Aluminum and the Missouri Office of the Public Counsel appeal a PSC order allowing AmerenUE to raise annual Missouri revenue by about $161.7 million.
- The circuit court reversed the PSC order, but the court of appeals reviews PSC decisions, not the circuit court’s action.
- The appeal challenges five PSC findings: common equity capital structure, return on equity, excess depreciation for Callaway, the 95% fuel adjustment clause, and vegetation/infrastructure expenses.
- AmerenUE’s test year runs through March 31, 2008, with a true-up through September 30, 2008 for the revenue requirement.
- A key dispute is O’Bryan’s adjusted common equity percentage, moving from 50.928% to 52.009%, affecting the allowed ROE and overall revenue requirement.
- PSC's analysis culminates in a 10.76% ROE with a 95% FAC, and allowances for vegetation/infrastructure costs and depreciation guidance pending further study.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper common equity percentage in AmerenUE's capital | O'Bryan's 52.009% credible; Hill's critique insufficient. | O'Bryan's revised figure supported by evidence; Hill not carrying burden. | No reversible error; 52.009% affirmed. |
| Reasonableness of the ROE determination | ROE of 10.76% unsupported; improper methods and data use. | ROE within zone of reasonableness; supported by multiple methods and national averages. | ROE of 10.76% affirmed. |
| Validity of the 95% FAC design and effect on return | FAC may not guarantee fair return and could overstate benefits. | FAC reasonably designed to provide incentives and reflect market conditions; supported by evidence. | 95% FAC upheld as reasonable. |
| Depreciation adjustments for Callaway | Under-depreciation or over-recovery possible; expert showed significant impact. | Complete depreciation study not required for this rate case; monitor for future adjustment. | Depreciation approach sustained; no immediate adjustment. |
| Tracking, deferral, and amortization of vegetation/infrastructure costs | Tracking and retroactive ratemaking concerns; retroactive recovery improper. | Costs incurred in compliance with new rules may be recovered prospectively; not retroactive. | Tracking/deferral/amortization upheld; not retroactive ratemaking. |
Key Cases Cited
- Public Serv. Comm'n v. Hope Natural Gas Co., 320 U.S. 591 (1944) (rate-making depends on the result; burden on challengers to show unjust/undue consequences)
- Bluefield Waterworks & Improvement Co. v. Public Serv. Comm'n of West Virginia, 262 U.S. 679 (1923) (return on equity should reflect risk and allow creditworthiness)
- Permian Basin Area Rate Cases, 390 U.S. 747 (1968) (judicial review uses 'zone of reasonableness' and substantial evidence standard)
- State ex rel. Missouri Gas Energy v. Public Serv. Comm'n, 210 S.W.3d 330 (Mo.App. W.D.2006) (standard for reviewing commission rate decisions and evidence sufficiency)
- State ex rel. Pub. Counsel v. Public Serv. Comm'n of the State of Missouri, 293 S.W.3d 63 (Mo. App. S.D.2009) (limits on shifting burden and de novo review of legal questions)