Environmental and Energy Law

Christiaan D. Horton, Esquire

The Missouri Public Service Commission’s order approving the 2008-2009 actual cost adjustment rates for Atmos Energy Corporation was upheld on appeal after challenge by the Office of Public Counsel that PSC’s order was not supported by competent and substantial evidence, was unlawful and unreasonable because it violated the Affiliate Transaction Rule found at 4 C.S.R. 240-40.016.  Atmos Energy, et al. v. Public Service Commission, No. 74916 (Mo. App. W.D., December 18, 2012), Ellis, J.

Atmos Energy is a public utility operating a local distribution company providing retail natural gas service to approximately 65,000 residential and business customers in Missouri and has contracts with gas marketing companies to purchase the natural gas required by its customers in its various service areas. The gas marketing companies used by Atmos are chosen for each service through a competitive bidding process, with PSC jurisdictional oversight. This case involved the PSC’s review of the Atmos Energy 2008-2009 actual cost adjustment filings. Initially, PSC staff recommended that the PSC disallow a portion of the ACA amounts claimed by Atmos for several of its service areas because of an unregulated affiliate that realized a profit on those transactions. Atmos Energy challenged the staff’s recommendation, and after hearing, the PSC ultimately rejected the recommendation of its staff and approved the ACA amounts submitted by Atmos Energy. The Office of Public Counsel appealed that decision. On review, the court placed reliance upon Office of Public Counsel v. Missouri Public Service Commission, WD 74719 (Mo. App. W.D., 2012) in rejecting OPC’s points in its holding that the PSC’s Order was supported by sufficient and competent evidence, that Atmos Energy did not act imprudently in its transaction with its affiliate, and that the PSC’s Order was both lawful and reasonable.

Held: Affirmed.

Appellate court upholds the Missouri Public Service Commission’s Revised Final Order of Rulemaking for the enforcement of the Renewable Energy Standard codified in §§ 393.1020, 309.1025 and 393.1030, RSMo (2011). State of Missouri, ex rel v. Public Service Commission, No. 74852 (Mo. App. W.D., December 11, 2012), Welsh, C.J.

In November of 2008, Missouri voters approved Proposition C, the renewable energy standard, requiring investor-owned electric utilities to meet a certain portion of their energy portfolio requirements with electricity from renewable energy sources including, but not limited to, wind, solar thermal sources, waste to energy and hydropower. The Missouri PSC was charged with promulgating rules “necessary to enforce the renewable energy standard” and initiated proposed rulemaking, and received comments from interested parties.

After the comment and hearing, PSC transmitted an Order of Rulemaking which was challenged by certain investor-owned utilities and interested parties who contended that the proposed rule known as the Retail Rate Impact Provision found at 4 C.S.R. 240-20.100 (No. 5) was unlawful, unreasonable, arbitrary and capricious and in direct conflict with § 393.1030, RSMo, because it allowed rate impacts from the renewable energy standard to greatly exceed one percent (1%). The trial court found in favor of the challengers to the rulemaking, but the court of appeals upheld the rationale of the PSC in the adoption of this rule and held the rule consistent with the intention of § 393.1030.2(1). Thus, the court held the revised Final Order of Rulemaking was a reasonable exercise of the rulemaking authority granted to the PSC by § 393.1030 and its broad discretion in interpreting the statute.

Held:  Reversed.