City of O'Fallon, Missouri and City of Ballwin, Missouri v. Union Electric Company D/B/A Ameren Missouri

In the Missouri Court of Appeals
Western District

CITY OF O'FALLON, MISSOURI and )
CITY OF BALLWIN, MISSOURI, )
Appellants,)
v. ) WD78067
)
UNION ELECTRIC COMPANY )
d/b/a AMEREN MISSOURI, ) FILED: April 28, 2015
Respondent. )

APPEAL FROM THE PUBLIC SERVICE COMMISSION

BEFORE DIVISION TWO: LISA WHITE HARDWICK, PRESIDING JUDGE,
VICTOR C. HOWARD AND CYNTHIA L. MARTIN, JUDGES

The City of O'Fallon and the City of Ballwin (collectively, "Cities") appeal the

Missouri Public Service Commission's order dismissing their complaint against

Union Electric d/b/a Ameren Missouri ("Ameren") for failure to state a claim upon

which relief could be granted. The Cities contend that the Commission had

jurisdiction over their complaint and the statutory authority to grant them the relief

they requested. For reasons explained herein, we affirm.

FACTUAL AND PROCEDURAL HISTORY

The Cities are municipal customers of Ameren who receive street lighting

services. The Cities are billed pursuant to Ameren's 5(M) Street and Outdoor Area
Lighting Tariff ("5(M) Tariff") for Ameren-owned street lighting facilities. Pursuant

to the 5(M) Tariff, Ameren inventories, furnishes, installs, maintains, and delivers

electric service to automatically-controlled lighting fixtures. The City of O'Fallon

has approximately 4444 street lights and pays over $1 million dollars per year to

Ameren for its street lighting services. The City of Ballwin has approximately 2159

street lights and pays over $500,000 per year to Ameren for its street lighting

services. The vast majority of the street lights serving the Cities have been in

service for over ten years.

In April 2014, the Cities filed a complaint in the Commission against Ameren

alleging that Ameren's tariff provisions for street lighting services and its refusal to

tariff or otherwise offer the Cities the opportunity to purchase the depreciated

street light fixtures were unreasonable, uneconomic, and contrary to the public

interest. The Cities noted that Ameren has a different tariff, the 6(M) Tariff, for its

customers who own their street lighting fixtures, and the rates for lighting services

under this tariff are considerably less than the rates under the 5(M) Tariff for

Ameren-owned lighting fixtures. The Cities alleged that if they, instead of Ameren,

owned the street lights, their payments under the 6(M) Tariff would result in

O'Fallon's saving approximately $820,000 per year in street lighting costs and

Ballwin's saving approximately $400,000 per year.

The Cities further noted that paragraph 7 of the 5(M) Tariff provides for

termination of the street lighting service:

Termination

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 If customer requests in writing the termination of all or a portion of
any lighting service, not paid for in advance, within three years of the
installation of the lamps being terminated, or within ten years of the
installation of post top luminaires, wood poles or cable being
terminated, customer shall pay in advance to Company $100.00 per
lamp for both the removal costs associated therewith and the loss of
the remaining life value of such facilities. If said request for
termination of lighting service is made after the above three and ten
year in-service periods, as applicable, and customer requests a new
lighting installation within twelve months after the removal of the prior
terminated lighting facilities, customer shall pay the amount specified
earlier in this paragraph for all facilities previously removed prior to
Company making any new lighting installation.

The Cities asserted that, if they were to choose to issue termination notices

pursuant to this paragraph, Ameren would incur substantial costs to remove the

6603 total street lights and additional costs if it destroyed or refurbished the

removed street lights. The Cities alleged that they separately approached Ameren

representatives about terminating service under the 5(M) Tariff and suggested that,

instead of Ameren's removing the street lights, the Cities purchase the light

fixtures for fair market value, assume maintenance and replacement of the street

lights, and make future payments to Ameren for street lighting services under the

6(M) Tariff. The Cities alleged that Ameren refused to discuss the sale of its street

lights to the Cities and declined to say why it refused to discuss such a sale.

In Count I of their complaint, the Cities requested that the Commission find

that Ameren's refusal to sell its street lights at fair market value to them was

unreasonable, uneconomic, and contrary to the public interest, and they asked the

Commission to order Ameren to negotiate in good faith to sell them the street

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lights at fair market value. In Count II, the Cities alleged that paragraph 7 of the

5(M) Tariff is unreasonable and unlawful because it does not permit a municipality,

upon termination of all or a portion of its street lighting service, to purchase the

lights at fair market value. Therefore, the Cities asked the Commission to order

Ameren to revise and amend paragraph 7 of the 5(M) Tariff to allow any Missouri

municipality the option of purchasing, in situ, street lights within its city limits for

fair market value after ten years of service. Lastly, in Count III, the Cities

requested that the Commission ask Ameren for its consent to have the Commission

serve as an arbitrator in this dispute.

Ameren filed a motion to dismiss the Cities' complaint. In its motion,

Ameren argued that the complaint failed to state a claim upon which relief could be

granted in that it did not invoke the Commission's jurisdiction, it constituted a

collateral attack on a tariff, and it sought relief that the Commission lacked the

authority to grant. The Staff of the Commission filed a response agreeing with

Ameren's position.

After further briefing by the parties, the Commission granted Ameren's

motion to dismiss. In its order, the Commission found that it did not have

jurisdiction over the Cities' complaint because: (1) by the Cities' own admission,

the complaint did not concern the reasonableness of any utility rate or charge; and

(2) the Cities failed to allege that Ameren violated any statute, rule order or

Commission decision. Additionally, the Commission found that it lacked the

authority to order Ameren to sell property that it did not wish to sell.

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 The Cities filed an application for rehearing. After the parties filed

responses, the Commission denied the Cities' application. The Cities appeal.

STANDARD OF REVIEW

Appellate review of the Commission's order is limited to determining whether

the order was lawful and reasonable. State ex rel. MoGas Pipeline, LLC v. Pub.

Serv. Comm'n, 366 S.W.3d 493, 495-96 (Mo. banc 2012). An order is lawful if

the Commission acted within its statutory authority. State ex rel. Sprint Mo., Inc.

v. Pub. Serv. Comm'n, 165 S.W.3d 160, 164 (Mo. banc 2005). An order is

reasonable if it is supported by substantial, competent evidence, it is not arbitrary

or capricious, and the Commission has not abused its discretion. State ex rel.

Praxair, Inc. v. Pub. Serv. Comm'n, 344 S.W.3d 178, 184 (Mo. banc 2011). The

Commission's order is presumed valid, and the party challenging the order bears

the burden of proving that it is invalid. Sprint Mo., 165 S.W.3d at 164.

The Cities assert that the Commission's dismissal of the complaint for failure

to state a claim upon which relief can be granted was unlawful and unreasonable.

"'A motion to dismiss for failure to state a cause of action is solely a test of the

adequacy of the plaintiff's petition. It assumes that all of plaintiff's averments are

true, and liberally grants to plaintiff all reasonable inferences therefrom.'" State ex

rel. Laclede Gas Co. v. Pub. Serv. Comm'n, 392 S.W.3d 24, 38 (Mo. App. 2012)

(citations omitted). To withstand a motion to dismiss for failure to state a claim,

the facts alleged must "'meet the elements of a recognized cause of action, or of a

cause that might be adopted in that case.'" Id. (citation omitted). We must affirm

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the dismissal if it can be sustained on any ground supported by the motion to

dismiss. Foremost Ins. Co. v. Pub. Serv. Comm'n, 985 S.W.2d 793, 796 (Mo.

App. 1998).

ANALYSIS

In their sole point on appeal, the Cities contend the Commission's order

dismissing their complaint was unlawful and unreasonable because the Commission

had both the jurisdiction to review their complaint and the authority to grant the

relief they requested. The Cities argue that, in dismissing their complaint, the

Commission failed to adhere to the liberal pleading standards required by law.

Because it is dispositive, we will address only the issue of whether the Commission

had the authority to grant the Cities the relief they requested.

"The Commission is 'an administrative body created by statute and has only

such powers as are expressly conferred by statute and reasonably incidental

thereto.'" Pub. Serv. Comm'n v. Mo. Gas Energy, 388 S.W.3d 221, 230 (Mo.

App. 2012) (citation omitted). "The Commission's authority, therefore, must come

from the statutes." Id. "'Neither convenience, expediency or necessity are proper

matters for consideration in the determination of whether or not an act of the

[C]ommission is authorized by statute.'" State ex rel. Cass County v. Pub. Serv.

Comm'n, 259 S.W.3d 544, 548 (Mo. App. 2008) (citation omitted). "If a power is

not granted to the [Commission] by Missouri statute, then the [Commission] does

not have that power." MoGas Pipeline, 366 S.W.3d at 496.

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 In Count I, the Cities asked the Commission to "order Ameren to negotiate in

good faith with O'Fallon and Ballwin to establish fair market value for its street

lights and offer to sell said street lights to the two cities at fair market value." In

Count II, the Cities asked the Commission to "order Ameren to revise and amend

Paragraph 7 . . . of Ameren's 5(M) Company-Owned Street Lighting Tariff to allow

any Missouri municipality, after ten years of street lighting service, the option of

purchasing, in situ, the street lights within its city limits at fair market value."

Although the Cities requested an order in Count I and a tariff amendment in Count

II, the relief sought through both the order and the tariff amendment was

effectively the same: that the Commission order Ameren to sell its street lights to

the Cities.

In their complaint, the Cities cited Section 393.190, RSMo Cum. Supp.

2013,1 as authority for the Commission to "approve the transfer of property."

Section 393.190.1 concerns the Commission's authority with regard to a utility's

sale of its property. Specifically, the statute states that no utility can sell any part

of its franchise, works, or system that is necessary or useful in the performance of

its duties to the public without first securing an order from the Commission

authorizing such a sale. § 393.190.1. Thus, Section 393.190 grants the

Commission the statutory authority to approve a sale only where the seller has

agreed to sell its property and sought the Commission's approval, because it refers

1
All statutory references are to the Revised Statutes of Missouri 2000, as updated by the 2013
Cumulative Supplement.

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to approval after an affirmative, voluntary act by the seller, i.e., the seller's

petitioning and securing the Commission's order authorizing the sale.

Rule 4 CSR 240-3.110, a Commission regulation promulgated pursuant to

Section 393.190, confirms that the applicant seeking authorization for the sale of a

utility's property must be the utility itself and that the sale must be voluntary. Rule

4 CSR 240-3.110 is titled "Filing Requirements for Electric Utility Applications for

Authority to Sell, Assign, Lease or Transfer Assets." (Emphasis added.) The rule

requires the applicant to provide both a copy of the contract or agreement of sale

and "verification of proper authority by the person signing the application or a

certified copy of resolution of the board of directors of each applicant authorizing

the proposed action." 4 CSR 240-3.110(1)(B) and (C). It is axiomatic that, where

the utility does not wish to sell its property, it will not file the necessary

application, and there will be no contract and no approval or board resolution to

attach to the application. Section 393.190 does not give the Commission the

authority to order Ameren to sell its street lights to the Cities without its consent.

In their response to Ameren's motion to dismiss and in their brief on appeal,

the Cities contend that Section 393.140(5) provides the Commission the authority

to order Ameren to sell its street light to the Cities. Section 393.140 sets forth the

Commission's general powers. Subsection (5) of Section 393.140 gives the

Commission the power to examine corporations under its supervision and to "keep

informed as to the methods, practices, regulations and property employed by them

in the transaction of their business." If the Commission finds, after a hearing had

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upon its own motion or upon complaint, that the corporation's rates, charges, acts,

or regulations are unjust or unreasonable, Section 393.140(5) gives the

Commission the power to "determine and prescribe the just and reasonable rates

and charges thereafter to be in force for the service to be furnished, . . . and the

just and reasonable acts and regulations to be done and observed." The Cities

argue that, pursuant to this provision, the Commission could order Ameren to sell

its property to the Cities if the Commission found that it was just and reasonable

for Ameren to do so.

The Commission's powers are limited to those conferred by statute either

expressly "'or by clear implication as necessary to carry out the powers specifically

granted.'" State ex rel. Office of Pub. Counsel & Mo. Indus. Energy Consumers v.

Mo. Pub. Serv. Comm'n, 331 S.W.3d 677, 682 (Mo. App. 2011) (quoting State ex

rel. Util. Consumers' Council of Mo. v. Pub. Serv. Comm'n, 585 S.W.2d 41, 49

(Mo. banc 1979)). Because Section 393.140(5) does not expressly give the

Commission the power to order a utility to sell its property, the Cities are

essentially asserting that such power is clearly and necessarily implied in the

statute. We disagree.

If Section 393.190, the statute that specifically addresses the Commission's

authority regarding the sale of utility property, does not permit the Commission to

order a utility to sell its property, then Section 393.140(5), a statute that does not

even refer to the sale of utility property, cannot reasonably be read to confer on the

Commission the authority to order a utility to sell its property. Moreover, Section

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71.525 expressly prohibits municipalities from condemning a utility's property

except under certain circumstances, none of which are present here. If Section

71.525 prohibits the Cities from taking the street lights from Ameren through the

power of eminent domain, it cannot implicitly be deemed "just and reasonable"

under Section 393.140(5) to order Ameren to sell the lights to the Cities without

Ameren's consent.

The authority to order a utility to sell its property without its consent is

simply not a power that has been implicitly read into Commission statutes. Indeed,

in discussing the extent of the Commission's authority with regard to a utility's

property in State ex rel. Harline v. Pub. Serv. Comm'n, 343 S.W.2d 177, 181 (Mo.

App. 1960), this court stated that, while the Commission has the regulatory power

"to correct the abuse of any property right of a public utility," it does not have the

power to direct the use of a utility's property. Directing the use of a utility's

property "would involve a property right in the utility," and "[t]he law has conferred

no such power upon the Commission." Id. The court further explained:

The utility's ownership of its business and property includes the
right of control and management, subject, necessarily, to state
regulation through the Public Service Commission. The powers of
regulation delegated to the Commission are comprehensive and extend
to every conceivable source of corporate malfeasance. Those powers
do not, however, clothe the Commission with the general power of
management incident to ownership. The utility retains the lawful right
to manage its own affairs and conduct its business as it may choose,
as long as it performs its legal duty, complies with lawful regulation
and does no harm to public welfare.

Id. at 181-82.

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 Nevertheless, the Cities argue that the Commission has previously ordered a

utility to transfer its property to customers without its consent. They note that, in

Re: Detariffing of Embedded Customers Premises Equipment owned by Independent

Telephone Companies, 90 P.U.R. 4th 428 (Dec. 8, 1987) ("Re: Detariffing"), the

Commission ordered the transfer of ownership of customer premises equipment

from independent telephone companies to their customers. Although the

Commission in Re: Detariffing did not specifically cite Section 393.140(5) as

authority to transfer ownership of the utilities' equipment, the Cities contend that

the Commission implicitly relied on that statute. They argue that Re: Detariffing

stands for the proposition that the Commission has the power to force the sale of

any utility "property dedicated for public service to protect customers" and,

therefore, the case serves as precedent for the Commission to order Ameren to sell

its street lights to the Cities. We do not read Re: Detariffing so broadly.

Re: Detariffing was instituted to meet the Federal Communications

Commission ("FCC") requirements for establishing a plan for deregulation of

embedded customer premises equipment owned by independent telephone

companies, which were subject to state regulation. 90 P.U.R. 4th at 430. The

FCC required the Commission "to accelerate the depreciation of embedded

[customer premises equipment] to ensure the telephone companies recover their

investment by December 31, 1987," the FCC's date of deregulation. Id. at 432.

The FCC also required the Commission to follow the criteria set forth in a federal

case for balancing the interests of ratepayers and investors with regard to the

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embedded customer premises equipment once it was deregulated. Id. The

Commission found that the ratepayers bore the risk of loss of the embedded

customer premises equipment and, therefore, "should be allowed whatever gain

which occurs upon deregulation." Id. To satisfy the federal case's balancing test

and ensure that the ratepayers were not charged twice for the equipment, the

Commission determined that transfer of ownership of the equipment to the

ratepayers was essential. Id. at 432-33.

In so holding, the Commission found generally that it derived its subject

matter jurisdiction from Chapters 386 and 392 (telephone company general

regulations). Id. at 433. The Commission further stated that its authority to

transfer ownership of the embedded customer premises equipment was derived

from "its broad discretion in establishing just and reasonable rates and the

requirements placed upon the Commission by the FCC." Id. at 432.

The deregulation case of Re: Detariffing bears no resemblance to the

complaint case before us. Ameren is not being deregulated pursuant to federal

authority. The street lights are not being depreciated on an accelerated basis to

ensure return of capital investment to the utility prior to deregulation, such that

ratepayer investment must be balanced. Re: Detariffing is neither precedential nor

instructive.

Moreover, even if the Commission's decision in this case could be

interpreted as contradictory to Re: Detariffing, the Commission was not required to

follow its prior decision. The Commission, like other administrative agencies, "is

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not bound by stare decisis based on prior administrative decisions, so long as its

current decision is not otherwise unreasonable or unlawful." State ex rel. Aquila,

Inc. v. Pub. Serv. Comm'n, 326 S.W.3d 20, 32 (Mo. App. 2010). The legislature,

not the Commission, sets the extent of the Commission's authority. See Util.

Consumers' Council of Mo., 585 S.W.2d at 54. "The mere fact that the

[C]ommission has approved similar clauses in the past, or that other states permit

them, is irrelevant if they are not permitted under our statute." Id. Because the

Cities provided no statutory authority for the Commission to grant the requested

relief of ordering Ameren to sell its street lights to the Cities without its consent,

the Commission properly dismissed Counts I and Count II of the Cities' complaint.

In Count III of their complaint, the Cities alternatively requested that the

Commission ask Ameren to consent to have the Commission serve as an arbitrator

in this dispute. The Cities concede that, unless Ameren is willing to arbitrate, the

Commission cannot order it to do so under Section 386.230. Therefore, the

Commission properly dismissed Count III for failure to state claim upon which relief

could be granted.

CONCLUSION

The Commission's order dismissing the Cities' complaint is affirmed.

____________________________________
LISA WHITE HARDWICK, JUDGE

ALL CONCUR.

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