Staff of The Missouri Public Service Commission v. Consolidated Public Water Supply District C-1 of Jefferson County, Missouri

CORRECTED:
November 17, 2015
In the
Missouri Court of Appeals
Western District
STAFF OF THE MISSOURI PUBLIC )
SERVICE COMMISSION, )
) WD78507
Respondent, )
) OPINION FILED:
v. ) November 17, 2015
)
CONSOLIDATED PUBLIC WATER )
SUPPLY DISTRICT C-1 OF )
JEFFERSON COUNTY, MISSOURI, )
)
Appellant. )
Appeal from the Public Service Commission
Before Division One: Anthony Rex Gabbert, Presiding Judge, Victor C. Howard, Judge
and Cynthia L. Martin, Judge
Consolidated Public Water Supply District C-1 of Jefferson County, Missouri
("CPWSD") appeals from the Public Service Commission's ("Commission") report and
order ("Report and Order") which concluded that CPWSD and the City of Pevely
("Pevely") violated section 247.1721 by failing to submit to the Commission for approval
a written contract addressing the provision of water services, and which ordered CPWSD
1
All statutory references are to RSMo 2000 as supplemented unless otherwise indicated. Section 247.172
was last amended in 2007.
and Pevely to submit a territorial agreement to the Commission for approval. CPWSD
argues that section 247.172 did not apply to its agreement with Pevely, and that in any
event, the Commission lacked jurisdiction and statutory authority to determine whether
the agreement violated section 247.172 and to order CPWSD and Pevely to submit a
territorial agreement for Commission approval.
Because the Commission has no statutory authority to determine whether an
agreement between a public water supply district and a municipally owned utility is
unlawful and has no authority to order a public water supply district and a municipally
owned utility to submit an agreement regarding the provision of water services to the
Commission for approval, the Report and Order was entered in excess of the
Commission's authority and is vacated.
Factual and Procedural Background
CPWSD is a public water supply district formed pursuant to Chapter 247 for the
purpose of supplying potable water to residents within its boundaries. 2 CPWSD's
boundaries are located within Jefferson County.
Pevely is a city of the fourth class located in Jefferson County. Pevely provides its
residents potable water as a municipal service. Pevely's municipal boundaries are located
entirely within Jefferson County.
2
Section 247.010 provides, in part, that the provisions of Chapter 247 "are intended to make possible,
through public corporations, conveniences in the use of water, ample in quantity for all needful purposes and pure
and wholesome in quality, furnished from common sources of supply to many inhabitants of our state now denied
such privileges."
2
Pevely annexed unincorporated land into its municipal boundaries in or around
2006. As a result of this, and of earlier annexations, portions of Pevely's municipal
boundaries overlap with portions of CPWSD's water service boundaries.
In 2006, CPWSD filed suit in Jefferson County, seeking to enjoin Pevely from
providing water services to those areas where the two entities' boundaries overlap. On
November 12, 2007, CPWSD and Pevely entered into a contract titled "Territorial
Agreement Between the Consolidated Public Water Supply District No. C-1 of Jefferson
County, Missouri, and the City of Pevely, Missouri" ("Territorial Agreement"). The
stated purpose of the Territorial Agreement was to resolve CPWSD's lawsuit by serving
as "a permanent determination as to which party shall provide water service to the areas
specifically described in [the Territorial] Agreement." The Territorial Agreement stated
the parties' intent "not [to] be in competition with each other for the purposes of
providing water service."
The Territorial Agreement authorized Pevely to continue providing water service
to "Hunters Glen subdivision, Tiara at the Abbey subdivision, and Vinyards at Bushberg
subdivision." For all other areas where Pevely's boundaries overlapped with CPWSD's
boundaries, Pevely "agree[d] to cease all plans to extend water service within the current
geographic boundaries of [CPWSD]." According to the Territorial Agreement, "[a]ny
future development which is within corporate boundaries of both [Pevely] and [CPWSD],
including the development presently known as Valle Creek Condominiums, shall be
served by [CPWSD] unless the rights to serve such development are assigned in writing
3
to [Pevely] by [CPWSD]." (Emphasis added.) CPWSD and Pevely agreed that "all other
territory within [CPWSD's] boundaries shall remain the exclusive territory of [CPWSD]."
Although the Territorial Agreement identified Valle Creek Condominiums as an
area where CPWSD would provide water service, the property was not yet connected to
CPWSD's water mains.3 The property was connected to Pevely's water mains. On June
30, 2008, CPWSD entered into an agreement ("Main Extension Agreement") with H and
H Development Company, the developer of Valle Creek Condominiums ("Developer").
The Main Extension Agreement provided that the Developer would pay to connect Valle
Creek Condominiums to CPWSD's water main. The Main Extension Agreement
contemplated that in the interim, Valle Creek Condominiums would receive water service
from Pevely, though that service would be metered by CPWSD. Though Pevely was not
a party to the Main Extension Agreement, Pevely verbally agreed to continue to provide
water service to Valle Creek Condominiums to permit the Developer time to connect to
CPWSD's water main. Pursuant to the Main Extension Agreement and the verbal
agreement, the Developer received monthly bills for water service from CPWSD, and
CPWSD reimbursed Pevely semiannually for the water provided by Pevely.
The Main Extension Agreement required the Developer to connect to CPWSD's
water main by February 1, 2009, or failing that, to reach an acceptable agreement with
CPWSD by March 1, 2009, to complete the project in some other manner. In the absence
of timely connection or an alternative agreement, the Main Extension Agreement
3
According to the record, undeveloped land was annexed into Pevely in or around 2006 at the owner's
urging prior to development of the Valle Creek Condominiums on that land. Thus, the undeveloped property
appears not to have required water service from CPWSD prior to its annexation into Pevely.
4
provided that "the water service line from Pevely's water main [would] be terminated on
that date[, CPWSD's] water meters will be removed, and the Developer will make other
provisions to legally serve Valle Creek Condominiums customers at that time."
The Developer did not connect to CPWSD's water main by February 1, 2009, and
no alternative agreement was reached with CPWSD by March 1, 2009. CPWSD did not,
however, remove its water meters, and Pevely did not take any immediate action to
discontinue performance of the verbal agreement reached with CPWSD.
That changed on August 28, 2012, when Pevely accused CPWSD of being in
violation of the Territorial Agreement because CPWSD had failed either to extend its
service to Valle Creek Condominiums or to notify Pevely of its inability to do so. Pevely
advised that it would be removing CPWSD's meters from the Valle Creek Condominiums
and installing its own meters to enable direct billing of the Developer for the provision of
water services. In October 2012, Pevely removed CPWSD's meters from the Valle Creek
Condominiums.
On November 1, 2012, CPWSD filed suit against Pevely in Jefferson County,
alleging breach of the verbal agreement to provide temporary service to Valle Creek
Condominiums metered by CPWSD.4 In April 2013, CPWSD removed Pevely's meters
and reinstalled its own meters. Thereafter, CPWSD once again billed Valle Creek
Condominiums directly for water service, even though the water continued to be
provided through Pevely's water main. CPWSD also sent a letter to John Holborow
4
This lawsuit was later dismissed without prejudice.
5
("Holborow"), the court-appointed receiver for the Developer,5 demanding that the work
contemplated by the Main Extension Agreement be complete within 180 days or water
service would be terminated.
Holborow contacted the Commission. In a letter to the Commission, Holborow
expressed his concerns:
Does [CPWSD] have the right to cut service as long as all the bills are
being paid[?] Is ther [sic] precedent or a law in place to block this?
As the receiver I am charged with protecting, preserving and managing the
asset. What do I need to do to prevent [CPWSD] from disconnecting the
water service? Is there a dispute or claim we can file to prevent this form
[sic] occurring?
Obviously, there is no developer and no promise of a future developer at
this point, and there is no money to install the pipe as [CPWSD] want[s] us
to do.
In investigating Holborow's letter, the Staff of the Missouri Public Service Commission
("PSC Staff") learned about the Territorial Agreement which had never been submitted to
the Commission for approval.
The PSC Staff filed a complaint with the Commission against CPWSD and Pevely
on July 19, 2013. The complaint alleged that the Territorial Agreement was subject to
the requirements of section 247.172, and that CPWSD and Pevely violated the statute by
failing to submit the Territorial Agreement to the Commission for approval. The
complaint sought declarations to that effect and the imposition of penalties. CPWSD and
Pevely filed a joint motion to dismiss the complaint for lack of jurisdiction, which the
Commission denied. Following an evidentiary hearing and briefing from the parties, the
5
The Developer defaulted on loans secured by the Valle Creek Condominiums and was placed into court-
supervised receivership in August 2012.
6
Commission issued its Report and Order. The Report and Order declared CPWSD and
Pevely to have violated section 247.172; ordered CPWSD and Pevely to "submit a
territorial agreement for Commission approval no later than February 27, 2015;" and
directed PSC Staff to notify the Commission "so that the Commission may consider
further action" should CPWSD and Pevely fail to do so. Pevely filed a notice of its
intention to comply with the Report and Order, but CPWSD filed an application for
rehearing. The Commission denied CPWSD's request for rehearing.
CPWSD appeals.
Standard of Review
When considering a challenge to an order by the Commission, we presume the
Commission's order was valid so that the appellant has the burden of proving the order's
invalidity. Big River Tel. Co. v. Sw. Bell Tel. Co., 440 S.W.3d 503, 508 (Mo. App. W.D.
2014). Appellate review of an order by the Commission requires consideration of a two-
prong test: (1) whether the Commission's order was lawful; and (2) whether the
Commission's order was reasonable. In re Verified Application & Petition of Liberty
Energy Corp., 464 S.W.3d 520, 524 (Mo. banc 2015). We do not reach the issue of
reasonableness of the Commission's order unless we conclude that the order was lawful.
Id. "The lawfulness of the [Commission's] order is determined by whether statutory
authority for its issuance exists, and all legal issues are reviewed de novo." Id. The
Commission's order is deemed reasonable if it "(1) is supported by competent and
substantial evidence upon the whole record; (2) is not arbitrary or capricious; and (3)
7
does not constitute an abuse of the PSC's discretion." Big River Tel. Co., 440 S.W.3d at
508-09.
Analysis
CPWSD asserts four points on appeal. Points one and two argue that section
247.172 does not apply to the Territorial Agreement because the statute only applies to an
agreement to displace competition involving the provision of water services outside a
water service provider's geographic boundaries, and even then, only when a water
corporation subject to regulation by the Commission is a party to the agreement. Points
three and four argue that even assuming the Territorial Agreement was within the
intended scope of section 247.172, the Commission was nonetheless without jurisdiction
or statutory authority to entertain the PSC Staff's complaint under either section 247.172
or section 386.390.
Because discussion of the Commission's statutory authority is dispositive of this
appeal, we first address points three and four. In addressing the merits of these points,
we assume arguendo, without deciding, that the Territorial Agreement is a territorial
agreement subject to the provisions of section 247.172.
The Commission's Limited Authority To Approve Territorial Agreements Does Not
Extend to Declaring or Remediating Violations of Section 247.172.4
In its third point relied on, CPWSD asserts that neither section 247.172 nor section
386.190 grants the Commission statutory authority to determine whether the Territorial
Agreement was unlawful because it had not been approved by the Commission, or to
order CPWSD and Pevely to submit "a territorial agreement" for Commission approval.
8
According to CPWSD, section 247.172 extends no authority to the Commission to hear
complaints about territorial agreements that were not first approved by the Commission,
and neither CPWSD nor Pevely is a "corporation" as that term is used in section
386.390.1, a statute which addresses the Commission's authority to hear complaints. In
its fourth point relied on, CPWSD argues that if the Territorial Agreement was within the
scope of section 247.172 (the subject of points one and two on appeal), the failure to
secure Commission approval of the Territorial Agreement as a condition of its
effectiveness rendered the agreement void ab initio, leaving the Commission with no
authority to entertain a complaint about the Territorial Agreement, or to order CPWSD
and Pevely to submit some other territorial agreement for approval. Both points require
us to address the extent of the Commission's statutory authority over the regulation of
municipally owned utilities and public water supply districts.
As a creature of statute, the Commission "only has the power granted to it by the
Legislature and may only act in a manner directed by the Legislature or otherwise
authorized by necessary or reasonable implication." Evans v. Empire Dist. Elec. Co., 346
S.W.3d 313, 318 (Mo. App. W.D. 2011). "Neither convenience, expediency or necessity
are proper matters for consideration in the determination of whether or not an act of the
Commission is authorized by statute." City of O'Fallon v. Union Elec. Co., 462 S.W.3d
438, 442 (Mo. App. W.D. 2015). "If a power is not granted to the Commission by
Missouri statute, then the Commission does not have that power." Id.
The Commission's statutory authority is primarily expressed in Chapters 386 and
393. Though provisions within Chapters 386 and 393 have purported to grant the
9
Commission the authority to regulate and control municipalities in their manufacture,
distribution, supply, and transmission of utilities, and in fixing the rates to be charged
therefor, the Supreme Court long ago declared that the Commission does not have this
power. See Forest City v. City of Oregon, 569 S.W.2d 330, 332-33 (Mo. App. 1978)
(citing City of Columbia v. State Pub. Serv. Comm'n, 43 S.W.2d 813 (Mo. 1931); State ex
rel. Union Elec. Light & Power Co. v. Pub. Serv. Comm'n, 62 S.W.2d 742 (Mo. 1933);
State ex rel. City of Sikeston v. Pub. Serv. Comm'n, 82 S.W.2d 105 (Mo. 1935)). The
Supreme Court's rationale extends by logical implication to public water supply districts,
which are "municipal corporations" in the broad sense of the word. See State ex rel.
Halferty v. Kansas City Power & Light Co., 145 S.W.2d 116, 122 (Mo. 1940) (holding
that a public water supply district is a "'municipal corporation' in the broad sense
sometimes attributed to that term"). Thus, although section 386.250(3) provides that the
Commission's "jurisdiction, supervision, powers and duties" extends "[t]o all water
corporations," "water corporations" do not include municipally owned utilities or public
water supply districts either expressly or by reasonable implication. See Forest City, 569
S.W.2d at 332-33.
Although the Commission's statutory authority is primarily addressed in Chapters
386 and 393, there are other statutes which provide the Commission with additional
limited authority. One such statute is section 247.172.
Section 247.172 appears in Chapter 247, a chapter addressing public water supply
districts. Section 247.172.1 provides:
10
Competition to sell and distribute water, as between and among public
water supply districts, water corporations subject to public service
commission jurisdiction, and municipally owned utilities6 may be displaced
by written territorial agreements, but only to the extent hereinafter provided
for in this section.
Section 247.172.2 requires territorial agreements to:
[S]pecifically designate the boundaries of the water service area of each
water supplier subject to the agreement, any and all powers granted to a
public water supply district by a municipality, pursuant to the agreement, to
operate within the corporate boundaries of that municipality,
notwithstanding the provisions of sections 247.010 to 247.670 to the
contrary, and any and all powers granted to a municipally owned utility,
pursuant to the agreement, to operate in areas beyond the corporate
municipal boundaries of its municipality.
Section 247.172 thus generally recognizes that under certain circumstances, water service
providers can enter into territorial agreements to "displace competition"7 with respect to
the provision of water service to particular geographic areas.
Though water service providers are not required to enter into section 247.172
territorial agreements, should they mutually consent to do so, the Commission is granted
limited authority over the agreements in three circumstances:
Section 247.172.3 provides that "[w]here the parties cannot agree upon the
boundaries of the water service areas that are to be set forth in the
6
CPWSD's second point relied on argues that the Commission has no authority over territorial agreements
unless a water corporation subject to the Commission's jurisdiction is a party to the agreement. In other words,
CPWSD argues that an agreement between only a public water supply district and a municipally owned utility can
never fall within the scope of section 247.172.1. This argument is problematic, however, given section 247.172.6,
which provides that a Commission-approved territorial agreement will not "affect or diminish the rights and duties
of any water supplier not a party to the agreement," including "any water corporation which is . . . subject to the
jurisdiction, control and regulation of the [C]ommission." Section 247.172.6 appears to contemplate territorial
agreements without a regulated water corporation as a party. Because we resolve this case on the basis of the
Commission's lack of statutory authority, we need not further address CPWSD's argument that section 247.172
applies only to territorial agreements where a regulated water corporation is a party to the agreement.
7
CPWSD's first point relied on argues that displacement of competition as referred to in section 247.172
occurs only where a water service provider wants to provide service outside its legal boundaries. Because we
resolve this case on the basis of the Commission's lack of statutory authority, we need not further address CPWSD's
argument.
11
[territorial] agreement, they may, by mutual consent of all parties
involved, petition the public service commission to designate the
boundaries of the water service areas to be served by each party."
(Emphasis added.) In such a case, the Commission will consider the
petition using procedures applicable to the issuance of a certificate of
convenience and necessity, and must determine whether its designated
water service areas are "in the public interest."
Section 247.172.4 provides that "[b]efore becoming effective, all territorial
agreements entered into under the provisions of this section, including
any subsequent amendments to such agreements, . . . shall receive the
approval of the public service commission by report and order."
(Emphasis added.) In such a case the Commission will consider an
application for approval using procedures applicable to the issuance of a
certificate of convenience and necessity. And the Commission may
approve an application submitted pursuant to section 247.172.4 if the
mutually agreed water service areas are "not detrimental to the public
interest." Section 247.172.5.
Section 247.172.7 provides that "[t]he commission shall have jurisdiction to
entertain and hear complaints involving any commission-approved
territorial agreement. . . . If the commission determines that a territorial
agreement that is the subject of a complaint is no longer in the public
interest, it shall have the authority to suspend or revoke the territorial
agreement. If the commission determines that the territorial agreement is
still in the public interest, such territorial agreement shall remain in force
and effect. Except as provided in this section, nothing in this section shall
be construed as otherwise conferring upon the commission jurisdiction over
the service, rates, financing, accounting, or management of any public
water supply district or municipally owned utility, or to amend, modify, or
otherwise limit the rights of public water supply districts to provide service
as otherwise provided by law." (Emphasis added.)
In summary, these provisions extend authority to the Commission in three discrete
scenarios: (1) where competing water service providers want to enter into a territorial
agreement to displace competition but cannot agree on water service areas, they can
mutually consent to permitting the Commission to determine their water service areas;
(section 247.172.3); (2) where competing water service providers mutually agreed upon
12
a territorial agreement, they must submit the agreement to the Commission for approval
as a condition of the agreement's effectiveness (section 247.172.4); and (3) to entertain
complaints to determine whether a commission-approved territorial agreement (i.e., a
territorial agreement generated pursuant to section 247.172.3 or approved pursuant to
sections 247.172.4 and .5) remains in the public interest (section 247.172.7).
These discrete scenarios are not implicated by the present case.8 First, Pevely and
CPWSD have not mutually consented to submit determination of their water service areas
to the Commission pursuant to section 247.172.3. Second, the Territorial Agreement was
never submitted to the Commission for its approval, a condition of its effectiveness
pursuant to section 247.172.4. And third, as a result, there is no "commission-approved
territorial agreement" over which the Commission has jurisdiction to hear a complaint to
determine whether the agreement remains in the public interest. Section 247.172.7.
Instead, in its Report and Order, the Commission declared that CPWSD and
Pevely violated section 247.172.4 by failing to submit the Territorial Agreement to the
Commission for approval. This holding necessarily required the Commission to
determine that the Territorial Agreement fell within the scope of section 247.172. In
addition, the Commission ordered CPWSD and Pevely to submit "a territorial agreement"
for approval, or to face other consequences, presumably an order that was intended to
address Holborow's concerns about CPWSD's threatened termination of water service to
the Valle Creek Condominiums. As we explain, infra, the Commission did not have the
8
Again, in addressing the Commission's statutory authority to entertain the PSC Staff's complaint, we are
assuming without deciding that the Territorial Agreement is the type of agreement contemplated by section 274.172,
the subject of CPWSD's first and second points on appeal.
13
statutory authority, expressly or by reasonable implication, to entertain the PSC Staff's
complaint or to enter this Report and Order. Evans, 346 S.W.3d at 318. (holding that the
Commission "only has the power granted to it by the Legislature and may only act in a
manner directed by the Legislature or otherwise authorized by necessary or reasonable
implication"); City of O'Fallon, 462 S.W.3d at 442 ("If a power is not granted to the
Commission by Missouri statute, then the Commission does not have that power.”).
(i) The Commission Did Not Have the Statutory Authority Pursuant to
Section 247.172, Expressly or by Reasonable Implication, To Entertain the
PSC Staff's Complaint Requesting a Declaration that CPWSD and Pevely
Violated Section 247.172.4
The PSC Staff's complaint giving rise to the Report and Order sought a declaration
from the Commission that the Territorial Agreement violated section 247.172.4. As
noted, section 247.172.7 addresses the Commission's jurisdiction to hear complaints, and
is expressly limited to "complaints involving any commission-approved territorial
agreement," and even then, to determining whether "commission-approved territorial
agreements" remain in the public interest. (Emphasis added.) By its plain terms, section
247.172.7 does not extend authority to the Commission to entertain complaints regarding
territorial agreements that were never approved by the Commission. And section
247.172.7 does not extend authority to the Commission to declare that an agreement
between water service providers is an unlawful territorial agreement because it required
Commission approval pursuant to section 247.172.4.
Nor can it be said that the Commission is afforded these powers by "reasonable
implication." Evans, 346 S.W.3d at 318. Section 247.172.7 expressly provides that
14
"[e]xcept as provided in this section, nothing in this section shall be construed as
otherwise conferring upon the commission jurisdiction over the service, rates,
financing, accounting, or management of any public water supply district or municipally
owned utility, or to amend, modify, or otherwise limit the rights of public water supply
districts to provide service as otherwise required by law." (Emphasis added.)
Perhaps mindful of the restraint on its authority plainly expressed in section
247.172.7, the Commission does not rely on that provision to claim authority to entertain
the PSC Staff's complaint. Instead, the Commission's Report and Order concluded that
section 247.172.9 granted it the authority to entertain the PSC Staff's complaint. We
disagree.
Section 247.172.9 provides: "Notwithstanding any other provisions of this section,
the commission may hold a hearing regarding any application, complaint or petition filed
under this section upon its own motion." The Commission contends that this section
authorizes it to file applications, complaints or petitions under section 247.172 on its own
motion. The Commission is mistaken. Section 247.172.9 does not authorize the
Commission to file applications, complaints, or petitions on its own motion. Rather,
section 247.172.9 authorizes the Commission to "hold a hearing" on its own motion
regarding applications, petitions, or complaints that are properly filed pursuant to section
247.172. That authority is expressed "notwithstanding any other provisions of" section
247.172 in recognition of the fact that sections 247.172.5 and .7 authorize the parties to
an application, complaint, or petition to waive a hearing before the Commission by
agreement. Section 247.172.9 simply empowers the Commission to require a hearing, on
15
its own motion, even if the parties to an application, complaint, or petition filed pursuant
to section 247.172 have waived a hearing.
Even if we interpreted section 247.172.9 as urged by the Commission, which we
do not, the Commission would remain limited in its authority to entertaining applications,
complaints, or petitions addressing the matters expressed in section 247.172: (i)
determining water service areas for water service providers who wish to cede the
authority for this decision to the Commission by mutual consent; (ii) determining whether
to approve a mutually agreed upon territorial agreement is in the public interest; and (iii)
determining whether a Commission-approved territorial agreement remains in the public
interest. The PSC Staff's complaint9 did not ask the Commission to act consistent with
this authority. Rather, the PSC Staff's complaint asked the Commission to declare that
the Territorial Agreement was a section 247.172 "territorial agreement," and if so, to
declare the agreement unlawful because it was not first submitted to the Commission for
approval and to impose penalties accordingly. Section 247.172.9 does not extend this
authority to the Commission no matter how it is construed.
9
Assuming arguendo that section 247.172.9 affords the Commission the authority to file section 247.172
applications, complaints, or petitions "upon its own motion," (a construction of the statute that we reject), the
Commission has delegated its authority to file matters on its behalf to the PSC Staff by regulation. See 4 CSR 240-
2.070(1).
16
(ii) The Commission Did Not Have the Statutory Authority Pursuant to
Section 386.390.1, Expressly or by Reasonable Implication, To Entertain the
PSC Staff's Complaint Requesting a Declaration that CPWSD and Pevely
Violated Section 247.172.4
The Commission's Report and Order alternatively concludes that section
386.390.1 provided the Commission with the authority to entertain the PSC Staff's
complaint. We disagree.
Section 386.390.1 allows the Commission to hear complaints filed against "any
corporation, person or public utility . . . in violation, or claimed to be in violation, of any
provision of law." The Commission notes that section 386.020(11) defines "corporation"
as "a corporation, company, association and joint stock association or company." The
Commission argues that Pevely and CPWSD are "corporations" because section 79.010
designates a city of the fourth class like Pevely as a "body corporate" and because section
247.020 classifies public water supply districts such as CPWSD as a "political
corporation." The Commission thus argues that section 386.390.1 afforded it authority
because the PSC Staff's complaint alleged that "corporations" violated a law--section
247.172.
We have already explained, however, that the provisions of Chapters 386 and 393
cannot be read or construed to grant the Commission the authority to regulate the
provision of water services by municipally owned utilities or public water supply
districts. See Forest City, 569 S.W.2d at 332-33 (citing City of Columbia, 43 S.W.2d
813; State ex rel. Union Electric Light & Power Co., 62 S.W.2d 742; State ex rel. City of
Sikeston, 82 S.W.2d 105); see also Love 1979 Partners v. Pub. Serv. Comn'n, 715
17
S.W.2d 482, 489 (Mo. banc 1986) ("The legislature, in it [sic] wisdom, has given the
Commission jurisdiction only over investor-owned utilities, and has specifically
exempted public agencies . . . ."). The Commission's urged construction of the term
"corporation" as used in section 386.190.1 would operate in direct contravention of
settled Missouri Supreme Court precedent.
It is thus immaterial that the statutory definition of "corporation" is so broad as to
technically include within its scope a "body corporate" or a "political corporation."
Municipal utilities are simply not within the regulation of Chapters 386 and 393
regardless the breadth of the statutory definition of "corporation." City of Columbia, 43
S.W.2d at 817 (holding that municipal corporations are not included within the scope of
legislature's definition of "corporation").
Lending emphasis to our conclusion is section 247.172 itself. Section 274.172
was first enacted in 1991. As noted, section 247.172.1 applies to territorial agreements as
between and among competing "public water supply districts, water corporations subject
to public service commission jurisdiction, and municipally owned utilities." (Emphasis
added.) It would have been unnecessary for the legislature to differentiate between water
service providers in this fashion if public water supply districts and municipally owned
utilities were "corporations," and thus "water corporations," subject to the Commission's
jurisdiction.10 To construe "corporation" in the manner urged by the Commission would
10
Section 386.020(43) defines "public utility" to include, in pertinent part, "every . . . water corporation . . .
and each thereof is hereby declared to be a public utility and to be subject to the jurisdiction, control and regulation
of the commission and to the provisions of this chapter." Section 386.020(59) defines "water corporation" in
pertinent part as "every corporation . . . owning, operating, controlling or managing any plant or property, dam or
water supply, canal, or power station, distributing or selling for distribution, or selling or supplying for gain any
18
render the referenced language in section 247.172.1 meaningless and superfluous, a
construction we will not entertain. Am. Nat'l Prop. & Cas. Co. v. Ensz & Jester, P.C.,
358 S.W.3d 75, 85 (Mo. App. W.D. 2011) (holding that if possible, we avoid construing
a statute in a manner that will render a portion of its language meaningless (citing In re
Estate of Hough, 457 S.W.2d 687, 692 (Mo. 1970))).
In addition, section 386.390.1 also differentiates between "corporations" and
municipal entities. Section 386.390.1 describes who can file a complaint with the
Commission, listing the Commission of its own motion, or "public counsel or any
corporation or . . . any body politic or municipal corporation." Section 386.390.1 goes
on to describe against whom complaints can be filed, listing "any corporation, person or
public utility, in violation, or claimed to be in violation of, any provision of law . . . ."
(Emphasis added.) By differentiating between "corporations" and "body politics and
municipal corporations" in describing who can initiate complaints, while naming only
"corporations" in describing against whom complaints can be filed, the legislature
evidenced its understanding that municipal corporations are not included within the
statutory definition of "corporation."
Undeterred, the Commission argues that in State ex rel. Ozark Border Electric Co-
op v. Public Service Commission, 924 S.W.2d 597 (Mo. App. W.D. 1996), this court
"found no problem in the Commission hearing a complaint against a municipal
corporation . . . under the term "any corporation" in section 386.390." [Respondent's
water." As noted, "corporation" is defined by section 386.020(11) as "a corporation, company, association and joint
stock association or company."
19
Brief, p. 34] The Commission's reading of Ozark Border is in error. That case involved
a territorial agreement displacing competition for the provision of electric service
pursuant to section 394.312, a statute nearly identical to section 247.172, though
addressing electric service and not water service. Unlike the instant case, the mutually
agreed upon territorial agreement in Ozark Border had been submitted to the Commission
for approval by the parties; one of the parties to the agreement was a regulated electric
corporation; and the territorial agreement had been determined by the Commission to be
in the public interest. 924 S.W.2d at 599. One year later, an electric cooperative who
was not a party to the Commission-approved territorial agreement filed a complaint with
the Commission claiming the agreement was no longer in the public interest. Id. The
Commission dismissed the complaint deeming it to be in excess of the Commission's
jurisdiction because: (i) there was no violation of a law alleged as required by section
386.390.1; and (ii) the complaint raised issues that did not go to whether the
Commission-approved territorial agreement remained in the public interest. Id. On
appeal, this court affirmed. Id. at 599-601. Ozark Border did not hold that a municipal
corporation is subject to the Commission's jurisdiction pursuant to section 386.390.1 any
time the municipal corporation is alleged to have violated a law. In fact, Ozark Border
was not required to address over whom the Commission can exercise authority pursuant
to section 386.390.1 because the essential predicate for the exercise of authority under
that statute--a complaint alleging violation of a law--was not established. Id. If anything,
Ozark Border underscores the limited nature of the Commission's statutory authority
under section 274.172. Ozark Border agreed that the Commission can only hear
20
complaints pursuant to section 394.312.6 about Commission-approved territorial
agreements, and even then, only if the complaint alleges a change in circumstances that
calls into question whether the approved agreement remains in the public interest. Id.
In short, we conclude that section 386.390.1 afforded the Commission no authority
to entertain the PSC Staff's complaint or to enter the Report and Order.
(iii) CPWSD's Purported Violation of Section 247.172.4 Must Be Determined
and Remediated by a Court
Our conclusion does not leave a purported violation of section 274.172.4 without
recourse. Rather, that recourse must be sought in a court of competent jurisdiction.
Section 247.172 is but one in a series of provisions in Chapter 247 addressing
permissive means for lawfully divesting a public water supply district of its obligation to
provide water service to territory within its legal boundaries. See, e.g., section 247.031
(permitting the owners or residents of territory in a public water supply district that is not
being served by the district to petition to detach the territory from the district); section
247.160.1 (providing that if territory in a public water supply district is "included by
annexation within the corporate limits of a municipality," the district can enter into a
contract with the municipality to "operat[e] the waterworks system within such annexed
area," or to sell its water works infrastructure within the annexed area to the municipality
and thus detach and exclude the annexed territory from the boundary of the district);
sections 247.165.1 and .2 (providing that if territory in a public water supply district is
"included by annexation within the corporate limits of a municipality," and the annexed
territory "is not receiving water service from such district or such municipality at the time
21
of such annexation," the district and the municipality can enter into an agreement
regarding the provision of water service to the annexed territory, and/or the detachment
of the annexed area from the district); section 247.170.1 (providing that if a "city owning
a waterworks or water supply system" annexes land within a public water supply district,
and the city and the district cannot reach an agreement or are otherwise "unable to
proceed under section 247.160," the city can seek to have the annexed land "detached and
excluded" from the district by putting the matter to a public vote). Each of these
permissive means for addressing overlapping geographic territory requires approval in
one form or another. See section 247.031.1 (requiring circuit court approval); section
247.160.2 (requiring circuit court approval); sections 247.165.1 and .2 (requiring circuit
court approval); section 247.170.1 (requiring a public vote).
Section 247.172 territorial agreements represent another permissive means by
which the provision of water services can be addressed by mutual agreement between
water service providers, albeit an agreement that does not go so far as to permanently
detach territory from the boundaries of a water service provider or so far as to sell a
portion of a water service provider's waterworks system to another water service
provider.11 And just as is the case with the permissive procedures specified in the statutes
referenced above, a section 247.172 territorial agreement must be approved as a condition
of its effectiveness, albeit by the Commission, (sections 247.172.3, .4, and .5), a
11
Once again, we understand that CPWSD's first and second points on appeal challenge whether section
274.172 applies to agreements entered into solely between a public water supply district and a municipally owned
utility. Because we otherwise hold that even assuming the Territorial Agreement was a section 247.172 territorial
agreement, the Commission had no authority to entertain the PSC Staff's complaint or to issue its Report and Order,
we need not resolve these questions.
22
legislative nod, no doubt, to the Commission's demonstrated experience in determining
whether a utility service area is in the public interest through its certificate of
convenience and necessity procedures.
In short, pursuant to Chapter 247, a public water supply district and a municipally
owned utility have no power to privately contract to alter the public water supply
district's statutory obligation to provide water service to all of the territory within its
geographic boundaries unless the contract comports with one of the statutory procedures
described in Chapter 247.12 In fact, it is settled law that unless a statutory means for
relieving a public water supply district of its right to provide water service within its
territory is successfully pursued, a municipality has no authority to provide water within
the geographic boundaries of the district, and the public water supply district remains
obligated and entitled to provide water service throughout its territory. See Pub. Water
Supply Dist. No. 1 of Butler Cnty. v. City of Poplar Bluff, 12 S.W.3d 741, 745-46 (Mo.
App. S.D. 1999) (holding that in order to provide water service in annexed areas within a
public water supply district, a municipality must first comply with either section 247.160
or section 247.170 (citing Pub. Water Supply Dist. No. 16 v. City of Buckner, 951 S.W.2d
743, 744-45 (Mo. App. W.D. 1997); Pub. Water Supply Dist. No. 10 of Cass County v.
City of Peculiar, 971 S.W.2d 849, 854-55 (Mo. App. W.D. 1998))); Mathison v. Public
Water Supply Dist. No. 2 of Jackson Cnty., 401 S.W.2d 424, 431 (Mo. 1966) (holding
12
Compare City of Harrisonville v. Public Water Supply Dist. No. 9 of Cass County, 49 S.W.3d 225 (Mo.
App. W.D. 2001), which interpreted a contract between a public water district and a city that had annexed land in
the district without discussing whether the contact comported with one of the provisions of Chapter 247. Notably,
the contract at issue in that case was entered into in 1974. Sections 247.160 and .170 were first enacted in 1949.
Section 247.031 was first enacted in 1988. Section 247.172 was first enacted in 1991. Section 247.165 was first
enacted in 2000.
23
that section 247.010's statement of Chapter 247's purpose reflects that "the legislature did
not intend that both [a] city and [a public water supply] district distribute water in the
same area at the same time"). Thus, when a public water supply district is first formed, it
can include within its legal territory "cities that do not have a waterworks system."
Section 247.030.1. However, after a public water supply district is formed,
municipalities with or without a waterworks systems that annex land within the district's
boundaries cannot displace the district's authority to provide water to the annexed land
absent compliance with one of the provisions for doing so set forth in Chapter 247.
Here, a court must determine whether the Territorial Agreement lawfully relieved
CWPSD of its obligation to provide water service throughout its territory by ceding some
of that authority to Pevely. That inquiry will not only require a court to determine
whether the Territorial Agreement is a section 247.172 "territorial agreement" but will as
well require a court to determine whether the agreement otherwise qualifies (or attempts
to qualify) as a lawful transaction pursuant to other provisions of Chapter 247.13 In fact,
in this case, CPWSD argued that the Territorial Agreement was a section 247.165
agreement and not a section 247.172 territorial agreement. The Commission considered
and rejected this contention though it plainly had no statutory authority to do so. That the
Commission was required to consider CPWSD's contention underscores the fact that the
Commission lacks the statutory authority, either expressly or by reasonable implication,
13
The record is silent with respect to whether the Territorial Agreement, which was entered into to settle a
lawsuit filed by CPWSD against Pevely in 2006, was approved by the court in substantial compliance with section
247.160 or section 247.165.
24
to determine whether a public water supply district and a municipality have unlawfully
contracted to address the provision of water services.
Further underscoring this point is the fact that only a court can remediate the legal
ramifications of an unlawful contract between a public water supply district and a
municipally owned utility addressing the provision of water services. The Commission
"cannot 'enforce, construe nor annul' contracts, nor can it enter a money judgment."
Wilshire Constr. Co. v. Union Elec. Co., 463 S.W.2d 903, 905 (Mo. 1971) (quoting May
Dep't Stores Co. v. Union Elec. Light & Power Co., 107 S.W.2d 41, 49 (Mo. 1937)).
"Likewise, the Commission does not have the authority to do equity or grant equitable
relief." State ex rel. GS Techs. Operating Co. v. Pub. Serv. Comm'n, 116 S.W.3d 680,
696 (Mo. App. W.D. 2003) (citing Am. Petroleum Exch. v. Pub. Serv. Comm'n, 172
S.W.2d 952, 955 (Mo. 1943)). Moreover, if a contract is determined to be a section
247.172 territorial agreement which required, but did not receive, the Commission's
approval as a condition of its effectiveness, then the agreement is void ab initio and not
merely voidable. See, e.g., Thies v. St. Louis Cnty., 402 S.W.2d 376, 380 (Mo. 1966)
(holding that contract involving public entity that does not comply with statutory
requirements for its formation is void ab initio and cannot be later rendered valid despite
performance); Kindred v. City of Smithville, 292 S.W.3d 420, 424 (Mo. App. W.D. 2009)
(holding that contract with municipality that does not comply, or substantially comply,
with statutory requirements that are conditions to its effectiveness is void ab initio and
not merely voidable). In such a circumstance, neither a court nor the Commission would
25
have the authority to retroactively approve the void territorial agreement or to
retroactively legitimize its unlawful performance. Thies, 402 S.W.2d at 380.
In this case, a court must determine whether the Territorial Agreement, the Main
Extension Agreement, and the corresponding verbal agreement between CPWSD and
Pevely unlawfully delegated some of CPWSD's statutory water service obligations to
Pevely. And a court must redress Holborow's complaint that CPWSD is improvidently
relying on one or more of the aforesaid agreements to threaten termination of water
service to Valle Creek Condominiums despite the property's timely payment of its water
bills.14
In summary, and for the reasons herein explained, the Commission had no
statutory authority to entertain the PSC Staff's complaint, or to issue its Report and Order
finding, as alleged by the complaint, that CPWSD and Pevely violated section 247.172 by
failing to submit the Territorial Agreement to the Commission for approval as a condition
of its effectiveness.
(iv) The Commission Did Not Have the Statutory Authority, Expressly or by
Reasonable Implication, To Order CPWSD and Pevely To Submit a
Territorial Agreement for Commission Approval
The Commission's Report and Order also ordered CPWSD and Pevely to submit
"a territorial agreement" to the Commission for its approval or to face other recourse by
the Commission. On appeal, the Commission makes no attempt to defend this order,
which plainly exceeded the Commission's statutory authority. We have already
14
We express no opinion about the applicability of section 247.031 to this scenario, a statute which permits,
in certain circumstances, the detachment of property from the geographic boundaries of a public water supply
district if the property is not being provided water service by the district.
26
explained that section 247.172 does not require competing water service providers to
enter into a territorial agreement. It certainly does not grant the Commission the
authority to order them to do so.15 The Commission's order directing CPWSD and
Pevely to submit "a territorial agreement" for the Commission's approval or to face other
recourse by the Commission is unlawful as it exceeds the Commission's statutory
authority.
CPWSD's third and fourth points on appeal are granted. Our disposition of points
three and four renders any further discussion of CPWSD's first and second points on
appeal unnecessary.
Conclusion
The Commission's Report and Order is vacated as it was entered in excess of the
Commission's statutory authority.
ss//ss .
Cynthia L. Martin, Judge
All concur
15
The Commission points out in its Brief that the Report and Order did not order CPWSD and Pevely to
perform the 2007 Territorial Agreement or to submit same to the Commission for retroactive approval. For the
reasons herein explained, the Commission would not have had the authority to do so.
27