           IN THE MISSOURI COURT OF APPEALS
                   WESTERN DISTRICT
 OFFICE OF PUBLIC COUNSEL      )
 and MIDWEST ENERGY            )
 CONSUMERS GROUP;              )
 MISSOURI PUBLIC SERVICE       )
 COMMISSION,                   )
                 Respondents,  )
                               )
 v.                            )              WD83319
                               )
 EVERGY MISSOURI WEST, INC.    )              FILED: July 28, 2020
 f/k/a KCP&L GREATER           )
 MISSOURI OPERATIONS           )
 COMPANY,                      )
                    Appellant. )
                  Appeal from the Public Service Commission
                Before Division Two: Mark D. Pfeiffer, P.J., and
                       Alok Ahuja and Gary D. Witt, JJ.
      Evergy Missouri West, Inc. appeals from a Report and Order issued by the

Public Service Commission (the “PSC” or “Commission”). The PSC’s Report and

Order established an accounting authority order (“AAO”) to capture the cost savings

Evergy experienced due to the retirement of its coal-fired electric power plant in

Sibley. An AAO creates a balance-sheet account to defer extraordinary financial

items for consideration in a utility’s next general rate case, even though the items

may occur outside the “test year” utilized in the future rate case. State ex rel.

Aquila, Inc. v. Pub. Serv. Comm’n, 326 S.W.3d 20, 27 (Mo. App. W.D. 2010).

      Evergy raises four Points on appeal. In its first and second Points, it argues

that the Commission erred in ordering an AAO because Evergy’s retirement of the
Sibley plant was not an “extraordinary” event under the relevant accounting

standards. In its third Point, Evergy argues that imposition of an AAO constitutes

an improper collateral attack on the tariffs established in Evergy’s last general rate

case. Finally, Evergy’s fourth Point argues that the Commission acted

inconsistently with the prospective focus of Missouri’s ratemaking statutes, by

ordering an AAO which is intended to remedy Evergy’s past collection of

purportedly excessive revenues.

         We affirm.

                                  Factual Background
         The Sibley generating plant, which consisted of three coal-fired units, was

constructed on the Missouri River near the town of Sibley in Jackson County. The

three units were constructed between 1960 and 1969, and together had a generating

capacity of 463 megawatts. The Sibley facility was Evergy’s largest capacity power

plant.

         In 1991, Evergy 1 completed a major renovation of the Sibley generating

units, to extend their life and allow them to burn low-sulfur western coal. In State

ex rel. Office of the Public Counsel v. Public Service Commission, 858 S.W.2d 806

(Mo. App. W.D. 1993), we affirmed the Commission’s order granting Evergy’s

request to use an AAO to defer costs associated with the 1991 renovations for

consideration in the company’s next rate case. Id. at 810-12.

         In 2009, Evergy put new scrubbers on Sibley Unit 3 – the largest of the three

generating units at the plant – to meet environmental requirements.




       1      Evergy Missouri West, Inc. was formerly known as KCP&L Greater Missouri
Operations Company. Because the distinction between Evergy and its corporate
predecessors is not relevant to any of the issues presented in this appeal, we refer to Evergy
and its predecessors generically as “Evergy” in this opinion.


                                              2
       On June 1, 2017, Evergy retired all of Sibley Unit 1 except the boiler. The

next day, on June 2, 2017, Evergy announced that it would be retiring the entire

Sibley plant by December 31, 2018.

       Evergy had a general rate case pending before the Commission in 2018. In

the rate case, the Commission used a historic test year with a true-up date of June

30, 2018. 2 The Sibley plant was still operating on the true-up date. In Evergy’s

2018 rate case, the Office of Public Counsel (“OPC”) expressed its concern that

Sibley Unit 3 was being retired prematurely. OPC noted that, in 2016, Evergy

attributed a useful life of 71 total years, through 2040, to Unit 3; but, “based on

[Evergy]’s announced retirement date, the useful life of the unit . . . is [now] a little

over six months.” OPC recommended to the PSC “that all of the costs associated

with the retirements of . . . [Evergy’s] Sibley units 1, 2, 3 and Sibley common plant

not be included in the . . . utility’s cost of service used for setting rates, as each of

these units will be retired by end of 2018.” OPC argued:

              [Evergy] is seeking . . . as part of its case continued depreciation
       expense for Sibley Units 1, 2, and 3, even though it has announced
       plans to retire the units by the end of 2018. [Evergy] seeks to collect
       this depreciation expense in rates for up to four years during which the
       units will be retired and not used. . . . Additionally, in its rate case
       [Evergy] seeks to build in operating and fuel expense for the units, also
       to be collected over the next four years. Make no mistake, this case is
       about beneficial regulatory lag for [Evergy] related to building into its
       rates expenses for generating units that [Evergy] has announced will
       be retired shortly after the end of the true-up period in its case.



       2       “In Missouri, rates are set using a historical test year. The Commission
examines the utility’s revenues and expenses for that test year and uses that information to
set rates to be charged in the future.” State ex rel. Pub. Counsel v. Pub. Serv. Comm’n, 274
S.W.3d 569, 585-86 (Mo. App. W.D. 2009). “The PSC’s use of a true-up audit and hearing is
designed to balance the historical data [from the test year] with known and measurable
subsequent and future changes . . . .” In Matter of Kansas City Power & Light Co.’s Request
for Auth. to Implement a Gen. Rate Increase for Elec. Serv. v. Pub. Serv. Comm’n, 509
S.W.3d 757, 767 (Mo. App. W.D. 2016); see also State ex rel. Praxair, Inc. v. Pub. Serv.
Comm’n, 328 S.W.3d 329, 332 n.2 (Mo. App. W.D. 2010).


                                             3
      OPC “recommend[ed] that the depreciation rates for Sibley Units 1, 2, 3, and

Sibley common plant be set to zero percent as the units will no longer be used and

useful by the time new rates from this case are effective.” The Office also

recommended that “no [Sibley-related] operations or maintenance expense should

be included in the costs of service used for setting rates in these cases.” It

explained:

             Based on the applications, new rates are projected to become
      effective December 29, 2018. When paired with the announcement of
      the retirements of the Sibley units and Sibley common plant by the
      end of 2018, the longest the units could be operating under new rates
      is two days. It is very likely that by the time new rates from these
      cases are effective the units will have been retired. Ratepayers should
      not be asked to pay for operations and maintenance expense on units
      that are no longer used and are not providing a benefit.
      Evergy opposed OPC’s recommendation that all Sibley-related expenses be

excluded from the calculation of new rates in the 2018 rate case, “on the basis that

the retirement was not certain to occur and [that consideration of the financial

consequences of any retirement] was premature.”

      On September 5, 2018, a forced outage occurred at Sibley Unit 3 because of a

turbine vibration. The next day, Evergy sent a routine notification, not associated

with the rate case, to PSC Staff regarding the outage. The Sibley plant never again
produced electricity following this forced outage of Unit 3.

      On October 2, 2018, the Vice President for Generation Operations of Evergy’s

parent company stated in an internal email that “[i]t is our intention to cease

burning coal and move to decommissioning activities” at Sibley. On the same day,

the Vice President sent an email to the officers of Evergy’s parent company,

informing them that, “[f]ollowing a comprehensive evaluation of options, we have

determined the safest and most economical solution is to cease burning coal at the

[Sibley] station and to move the remaining coal currently on the ground to [another

Evergy power plant at] Iatan.” The e-mail stated that Evergy would notify the


                                           4
Southwest Power Pool and a representative of Local 412 of the International

Brotherhood of Electrical Workers of the planned shut-down.

       The parties entered into a series of stipulations to resolve Evergy’s 2018 rate

case. In particular, the parties entered into a Non-Unanimous Partial Stipulation

and Agreement to resolve issues concerning Evergy’s revenue requirements.

Although the Office of Public Counsel did not join in the Stipulation and Agreement

addressing revenue issues, it did not object to the stipulation, or request a hearing;

the Commission accordingly treated the stipulation as unanimous.

       On October 3, 2018 – the day after the internal e-mails indicating that

Evergy’s senior management had concluded that the Sibley plant should be

immediately retired – the parties presented evidence to the Commission supporting

their stipulations. As part of its presentation, Evergy moved to have its pre-filed

testimony admitted in evidence. Despite the high-level internal recommendation

that the Sibley plant be immediately retired, Evergy did not revise its pre-filed

testimony, which characterized the Sibley plant’s closure as an assumption, and

uncertain. The Commission approved the parties’ stipulations on October 31, 2018.

       The Stipulation and Agreement resolving revenue issues specifically
addressed the costs and expenses associated with the Sibley plant, and the

possibility that the plant might be retired in the future. The Stipulation provided:

             [Evergy] will create a regulatory liability[3] to capture the
       amount of depreciation expense included in [Evergy’s] revenue
       requirement beginning when each of the following units is retired and
       depreciation expense is no longer recorded on GMO’s books:



       3       The Manager of the PSC’s Auditing Department, Mark Oligschlaeger,
explained that “[a] regulatory liability represents amounts that a utility would ordinarily
book as an increase to earnings, but are instead preserved on the utility’s balance sheet for
potential return to customers in a subsequent general rate proceeding.” See also 18 C.F.R.
Part 101, Definitions ¶ 31 (Uniform System of Accounts’ definition of “Regulatory Assets
and Liabilities”).


                                              5
                    Sibley units 1, 2, and 3, including common
                    plant, and Lake Road unit 4/6.
              The depreciation amounts will accumulate in the regulatory
      liability account until new customer rates are established in a
      subsequent rate case. At that time, the regulatory liability account
      will be closed into accumulated depreciation. Additionally, the closing
      of this regulatory liability into accumulated depreciation will be
      reflected in rates that are established in that rate case.
            The Signatories agree that the rates established in this case
      include O&M [(i.e., operations and maintenance expense)] associated
      with the Sibley units.
             This Stipulation does not preclude any Signatory from
      proposing an accounting authority order (“AAO”), or any other
      ratemaking treatment, for the recovery of any other costs
      associated with the . . . [Evergy] retirements listed above. This
      Stipulation does not preclude any party from opposing an AAO, or any
      other ratemaking treatment, for the recovery of any other costs
      associated with the . . . [Evergy] retirements of the units listed above.
(Emphasis added.)

      On November 1, 2018, the day after the Commission approved the parties’

stipulations, Evergy had a meeting with PSC Staff and the Office of Public Counsel

concerning the forced outage at Sibley Unit 3. On November 13, 2018, Evergy

officially decided to retire all of the Sibley generating units. On November 20, 2018,

Evergy informed the Office of Public Counsel and the Commission Staff of this

decision.
      In Evergy’s general rate case, the Commission approved Evergy’s new tariffs

on November 26, 2018. The new rates became effective on December 6, 2018.

Pursuant to § 393.1655.2, RSMo, the rates approved by the Commission “shall be

held constant” for three years, and therefore new rates cannot become effective until

December 6, 2021. As contemplated by the parties’ Stipulation and Agreement, the

cost of operating the Sibley plant was incorporated into Evergy’s new rates.




                                          6
       On December 28, 2018, the Office of Public Counsel and the Midwest Energy

Consumers Group filed a Petition for an Accounting Order. 4 Because Evergy’s rates

included the costs associated with operating the retired Sibley plant, the petition

requested that “the Commission order [Evergy] to record as a regulatory liability in

Account 254 the revenue and the return on the Sibley unit investments collected in

rates for non-fuel operation and maintenance costs, taxes including accumulated

deferred income taxes, and all other costs associated with Sibley units 1, 2, 3, and

common plant.” In their testimony to the Commission, the petitioners suggested

that the cost savings to Evergy from the Sibley plant retirement, which they sought

to defer through an AAO, were between $29.7 and $39 million per year.

       An evidentiary hearing was held on August 7 and 8, 2019. At the hearing,

evidence was presented that Evergy’s current depreciation rates for Sibley Unit 3

were based on a 2040 retirement date. The manager of the PSC’s Auditing

Department, Mark Oligschlaeger, testified that he was not aware of a generating

plant being retired twenty years before the expiration of its useful life. Estimates of

the net book value of the assets of the Sibley plant as of June 30, 2018, ranged from

$145.7 million to $300 million. The chief economist for the Office of Public Counsel

testified that the Sibley retirement was the only coal plant retirement in the 14-

State footprint of the Southwest Power Pool that had a projected remaining

operational life of more than twenty years, and more than $100 million in

remaining book value. The Director of Policy for the Office of Public Counsel noted

that Evergy had not retired a major generating facility in the last thirty years.

Furthermore, in the last forty years, Evergy had only retired two facilities – one in

1982, and the other in 1987.


       4       After the petition was filed, the Commission determined that the petition was
best considered using complaint-type procedures, so it closed the original file and refiled the
petition as a complaint.


                                              7
      In a 2018 filing with the Securities and Exchange Commission, Evergy’s

parent company indicated that its “regulatory assets increased by $243.4 million

primarily due to the reclassification of retired generating plant of $159.9 million

related to [Evergy’s] Sibley No. 3 Unit from property, plant and equipment, net to a

regulatory asset upon the retirement of the unit in 2018.” The Office of Public

Counsel’s Director of Policy testified that the recognition of this regulatory asset

indicated that Evergy intends to seek recovery of these costs from ratepayers in a

future rate case.

      At the hearing, Evergy’s witnesses testified that the retirement of coal-fired

generating units is common in the electric utility industry nationwide. For

example, Evergy’s evidence indicated that a total of 89,731 megawatts of coal-fired

generating capacity has been retired since 1969. Of that total, 76,526 megawatts,

or approximately 85 percent, has been retired since 2010. Further, since 1969, “a

total of 815 coal-fired units have retired, with 543 units or two-thirds of the total

having retired during the last 9 years.” Evergy’s evidence indicated that the pace of

retirement of coal-fired power plants was accelerating across the electric utility

industry.
      In a Report and Order issued on October 17, 2019, the Commission ordered

that an AAO be established. 5 The Commission noted that “[Evergy]’s ratepayers

are continuing to pay for [Evergy]’s ongoing expenses to operate the Sibley units

even though they are no longer producing power.” The Commission found that the

aggregate financial impact of the Sibley retirement “exceeds five percent of

[Evergy]’s reported net income.” It also found that “[Evergy]’s position in the rate

case was that while it anticipated the Sibley units would be retired by December 31,

2018, that decision had not been finally made and the retirement could be delayed

      5       Three commissioners concurred in the Commission’s order, one commissioner
concurred in a separate opinion, and one commissioner dissented.


                                           8
by unforeseen circumstances such as the loss of other generating facilities.” The

Commission found that

      [Evergy] did not inform the signatories to the stipulation and
      agreement, including Public Counsel, or the Commission, except for a
      routine notification to Staff, that Sibley 3 had ceased operation in
      September until the units were formally retired in November, which
      was after the stipulation and agreement had been approved by the
      Commission on October 31, 2019.
(Footnotes omitted). The Commission found that, had the Office of Public Counsel

or Midwest Energy Consumers Group “known that Sibley 3 had ceased producing

power and would be retired, they could have proposed an isolated adjustment

outside the test year and true-up date to remove the operating costs of the retired

units from [Evergy]’s new rates.”

      The Commission noted that this was an unusual case because the AAO was

being requested by parties representing ratepayers “to defer to a regulatory liability

the savings the utility will accrue from its decision to close the” Sibley plant, rather

than a utility requesting to capture unanticipated expenses in a regulatory asset for

consideration in a future rate case. Despite the unusual nature of the request, the

Commission determined that the AAO request was governed by the same standards

applied in past cases.

      The Commission concluded that the retirement of the Sibley plant was an

extraordinary event which justified the creation of an AAO to capture Evergy’s cost

savings for consideration in a future rate case:

             Clearly, it is unusual for [Evergy] to retire a generating unit as
      it has not done so in the past thirty years. More importantly, it is
      unusual and unique for a utility to retire a generating unit with
      twenty years of remaining anticipated service life, and twenty years of
      unrecovered depreciation expense. It is also significant that the Sibley
      plant was retired just after [Evergy]’s last rate case was resolved and
      in fact before those new rates went into effect. Because of the . . . rate
      freeze [mandated by § 393.1655.2, RSMo], those rates, through which
      [Evergy]’s ratepayers will continue to pay [Evergy]’s cost of operating a



                                           9
      power plant that no longer produces power, will remain in effect for at
      least three years.
             Most importantly, if [Evergy] requests accelerated recovery of
      net plant depreciation costs in its next rate case, the Commission
      should preserve the option of the future Commission to consider the
      offset of those costs by consideration of the past savings amounts that
      would be deferred under the AAO. If this AAO is not granted, such an
      offset could be challenged as retroactive ratemaking.
            [Evergy] chose to close the Sibley Units, and the prudence of
      that decision is not at issue in this case. The question of prudence will
      be addressed in a future general rate case. . . .
             . . . [Evergy’s] current rates were set in [its] last rate case using
      an assumption that the Sibley units were in operation and that the
      costs of operating those units would be recovered from ratepayers
      through those rates. [Evergy’s] net income was thus enhanced when
      the costs of operating the Sibley units went away with the closing of
      the plant, while rates including those costs remain in effect. This
      order requires [Evergy] to defer that enhancement to its earnings, but
      it does not impair the company’s opportunity to earn the rate of return
      established in its last rate case.
      After its application for rehearing was denied by the Commission, Evergy

filed this appeal.

                                Standard of Review
      Our review of the PSC’s Report and Order is two-fold. In Matter of Kansas

City Power & Light Co.’s Request for Auth. to Implement a Gen. Rate Increase for
Elec. Serv. v. Pub. Serv. Comm’n, 509 S.W.3d 757, 763 (Mo. App. W.D. 2016)

(citation omitted) (“KCP&L”).

             First, we must determine whether the PSC’s order was lawful.
      An order’s lawfulness depends on whether the PSC’s order and
      decision was statutorily authorized. When determining whether the
      order is lawful, we exercise independent judgment and must correct
      erroneous interpretations of the law. Because the PSC is purely a
      creature of statute, its powers are limited to those conferred by statute
      either expressly, or by clear implication as necessary to carry out the
      powers specifically granted.
            Second, we must determine whether the PSC’s order was
      reasonable. In determining whether the Commission’s order is
      reasonable, we consider (1) whether it was supported by substantial


                                           10
      and competent evidence on the whole record, (2) whether the decision
      was arbitrary, capricious, or unreasonable, and (3) whether the PSC
      abused its discretion.
Union Elec. Co. v. Pub. Serv. Comm’n, 591 S.W.3d 478, 484–85 (Mo. App. W.D.

2019) (citation and internal quotation marks omitted).

      If substantial evidence supports either of two conflicting factual
      conclusions, we are bound by the findings of the administrative
      tribunal. The determination of witness credibility is left to the
      Commission, which is free to believe none, part, or all of the testimony.
      It is only where a Commission order is clearly contrary to the
      overwhelming weight of the evidence that we may set it aside.
      Additionally, with regard to issues within the Commission’s expertise,
      we will not substitute our judgment for that of the Commission.
KCP&L, 509 S.W.3d at 764 (citation and internal quotation marks omitted).

                                      Analysis
                                          I.
      In its first and second Points, Evergy argues that the Commission erred in

ordering an AAO to capture the cost savings associated with the retirement of the

Sibley plant, because the plant’s retirement was not an “extraordinary” event.

      The general powers of the Commission are set forth in § 393.140, RSMo.

State ex rel. Office of Pub. Counsel v. Pub. Serv. Comm’n, 858 S.W.2d 806, 808 (Mo.

App. W.D. 1993). Pursuant to § 393.140(4), the Commission has the power “to

prescribe uniform methods of keeping accounts.” KCP&L, 509 S.W.3d at 769.

Under this authority, “[t]he PSC has adopted a rule that requires utilities to use the

[Uniform System of Accounts (‘USOA’) prescribed by the Federal Energy Regulatory

Commission] to maintain their books and records.” Id. (citing 4 CSR 240-20.030,

which has been transferred to 20 CSR 4240-20.030); see also Office of Pub. Counsel,

858 S.W.2d at 808.

      The Uniform System of Accounts provides, with few exceptions, that “net

income shall reflect all items of profit and loss during the period.” 18 C.F.R. Part

101, General Instruction 7. “An exception to this general rule is for ‘extraordinary



                                          11
items’ as defined by the USOA.” KCP&L, 509 S.W.3d at 769–70. General

Instruction 7 to the Uniform System of Accounts provides:

      Those items related to the effects of events and transactions which
      have occurred during the current period and which are of unusual
      nature and infrequent occurrence shall be considered extraordinary
      items. Accordingly, they will be events and transactions of significant
      effect which are abnormal and significantly different from the ordinary
      and typical activities of the company, and which would not reasonably
      be expected to recur in the foreseeable future. (In determining
      significance, items should be considered individually and not in the
      aggregate. However, the effects of a series of related transactions
      arising from a single specific and identifiable event or plan of action
      should be considered in the aggregate.[)] To be considered as
      extraordinary under the above guidelines, an item should be more than
      approximately 5 percent of income, computed before extraordinary
      items.
18 C.F.R. Part 101, General Instruction 7.

      An AAO permits “extraordinary items” to be deferred and accounted for in a

future accounting period. See State ex rel. Aquila, Inc. v. Pub. Serv. Comm’n, 326

S.W.3d 20, 27 (Mo. App. W.D. 2010). “The PSC has followed the guidance in 18

C.F.R. Part 101, General Instruction 7, that costs should not be deferred to another

accounting period except for ‘extraordinary items.’” KCP&L, 509 S.W.3d at 770. In

following General Instruction 7, the Commission has decided that the use of AAOs

“should be limited because they violate the matching principle, tend to
unreasonably skew ratemaking results, and dull the incentives a utility has to

operate efficiently and productively under the rate regulation approach employed in

Missouri.” Id. at 769.

      We have emphasized that, because establishment of an AAO deviates from

the Commission’s general ratemaking methodology, the Commission has

substantial discretion in determining whether an AAO is appropriate in a

particular case.

           The PSC is granted wide discretion in determining the
      methodology it chooses to determine [a utility’s return on equity]. The


                                         12
      PSC has historically utilized the test year and true-up procedure to
      determine appropriate future rates because the historical test year’s
      expenses can be used to determine reasonable future rates. . . .
      Whether a cost should be afforded different treatment and merits a
      deferral directly impacts the PSC’s chosen methodology for setting
      rates and is necessarily a discretionary judgment that is within the
      expertise of the PSC and not this Court. Which costs a utility is able to
      defer would impact the PSC’s chosen method to determine rates and is
      a matter properly confined to the PSC’s expertise. As such, we will not
      second-guess the PSC’s reasoned decision that only extraordinary
      items may qualify for deferral treatment.
Id. at 770 (citations and footnote omitted).

      In this case, the Commission lawfully and reasonably applied the standards

found in General Instruction 7 of the Uniform System of Accounts. Evergy does not

dispute that the aggregate financial impact of the retirement of the Sibley plant

exceeds five percent of its reported net income. The Commission’s conclusion that

the retirement of the Sibley plant was extraordinary due to its unusual nature and

infrequent occurrence is amply supported by the record. In the past thirty years,

Evergy has not retired any major generating facilities. Moreover, the Commission
could justifiably find that it is highly unusual to retire a generating plant with

twenty years of remaining anticipated service life and twenty years of unrecovered

depreciation expense totaling hundreds of millions of dollars, since the evidence

before it indicated that no similar plant retirement had occurred in the 14-State

area comprehended by the Southwest Power Pool. The Commission also found that

it was abnormal to retire a generating plant just after a rate case was resolved but

before the new rates – which reflected the costs of operating the retired plant –

became effective. And of course, a plant’s retirement is a unique event which will

not recur in the future.

      We also note that Evergy successfully opposed the efforts of the Office of

Public Counsel to have Sibley-related costs excluded from consideration in Evergy’s

2018 rate case; Evergy argued in the rate case that the “decision [to retire the plant]



                                          13
had not been finally made and the retirement could be delayed by unforeseen

circumstances such as the loss of other generating facilities.” Having successfully

argued that the retirement of the Sibley plant was not sufficiently foreseeable to be

considered in the 2018 rate case, Evergy can hardly complain when the Commission

later determined that the cost savings associated with that retirement were

“extraordinary.”

      We will not second guess the Commission’s reasoned decision that the

retirement of the Sibley plant was an extraordinary event justifying the use of an

AAO to capture its financial consequences for consideration in a future rate case.

      Evergy argues that the AAO was unlawful because the Commission

purportedly held that foreseeable and anticipated events are not “extraordinary”

items in In the Matter of the Application of Kansas City Power & Light Co. &

KCP&L Greater Missouri Operations Co. for the Issuance of an Accounting

Authority Order, EU-2014-0077, 2014 WL 3889960 (Mo. P.S.C. July 30, 2014)

(“KCP&L AAO Order”). Evergy contends that, under this principle, no AAO should

have been ordered in this case, because the retirement of the Sibley plant was

foreseeable and anticipated.
      At the outset, we note that “[t]he PSC is not bound by its previous decisions,

so long as its current decision is not otherwise unreasonable or unlawful.” Laclede

Gas Co.’s Verified Application to Re-Establish & Extend the Fin. Auth. Previously

Approved by the Comm’n v. Pub. Serv. Comm’n, 526 S.W.3d 245, 252 (Mo. App. W.D.

2017) (citations omitted); see also, e.g., State ex rel. AG Processing, Inc. v. Pub. Serv.

Comm’n, 120 S.W.3d 732, 736 (Mo. 2003) (“an administrative agency is not bound

by stare decisis”). Further, we see no inconsistency between the Commission’s

decision in this case and the KCP&L AAO Order. In the earlier proceeding the

utility filed an application for an AAO “to track transmissions costs associated with

membership in the Southwest Power Pool and other transmission providers.”


                                            14
KCP&L AAO Order, 2014 WL 3889960, at *1. The Commission rejected the utility’s

request, but not because transmission costs were foreseeable or anticipated.

Instead, the Commission denied the application because “[t]ransmission costs are

part of the ordinary and normal costs of providing electric service and are expected

to continue in the foreseeable future,” were not “an unusual and infrequent

occurrence,” and therefore did not qualify as “extraordinary.” Id. at *5. Nothing in

the KCP&L AAO Order is inconsistent with the result the Commission reached in

this case.
      More generally, Evergy argues that its retirement of the Sibley plant cannot

be “extraordinary” because it was planned and anticipated. But AAOs are not

limited to unexpected Acts of God or force majeure events. To the contrary, the

testimony before the Commission explained that the PSC had previously issued

AAOs – at the request of regulated utilities – for the costs of planned activities such

as major construction projects, gas pipeline replacement projects, and actions taken

to comply with renewable energy standards or to address Year 2000/“Y2K”

computer problems. Indeed, the test the Commission applies in determining

whether an AAO is appropriate – the so-called “Sibley standard” – was developed in

a case in which the Commission approved an AAO to capture the costs incurred by

Evergy’s predecessor to rebuild Sibley Units 1 and 2 “to extend the life of both

units,” and the costs of “converting the plant to burn low-sulfur western coal” so

that it could achieve federal Clean Air Act emission standards. Office of Pub.

Counsel, 858 S.W.2d at 808. It has never been the law that AAOs are reserved for

unplanned, un-anticipatable events.

      In its briefing, Evergy emphasizes that, in past cases, AAOs have been

employed to protect utilities from the effects of extraordinary expenses or revenue

shortfalls. It seemingly argues that AAOs are a “one-way street” which can only be

employed to protect a utility’s financial interests, not to protect ratepayers from the


                                          15
financial windfall a utility may receive when it experiences extraordinary savings or

revenue increases. We see nothing in General Instruction 7 which limits the use of

deferral accounting to address only extraordinary costs, but not extraordinary cost

savings or revenues. Rather, General Instruction 7 refers generically to

extraordinary financial “items” caused by “events and transactions” which are of an

“unusual nature and infrequent occurrence.” General Instruction 7 does not

distinguish between extraordinary “items” which decrease revenue versus those

which increase it.

      Evergy further argues that the retirement of the Sibley plant was not

unusual because of the increasing frequency of coal plant retirements within the

electric-utility industry as a whole. General Instruction 7 specifies, however, that

whether an item is “extraordinary” is evaluated by looking at the event in relation

to “the ordinary and typical activities of the company,” not in comparison to the

activities of the industry as a whole. 18 C.F.R. Part 101, General Instruction 7

(emphasis added). Further, Evergy’s claim that Sibley’s retirement simply reflects

an industry-wide trend is inconsistent with the Commission’s finding that no other

plant in the 14-State Southwest Power Pool service territory had been retired with
a similar remaining estimated useful life and similar net book value. In any event,

many AAOs approved in the past involved the costs of addressing issues facing the

entire industry, not simply an individual utility (such as the costs of complying with

environmental standards or renewable energy mandates, or the costs to address

“Y2K” computer problems). It has never been suggested that an AAO was

inappropriate because particular costs were associated with a matter of industry-

wide concern. The Commission’s Report and Order properly focused on the rarity of

plant retirements by Evergy.

      Evergy emphasizes that no other state or federal regulatory commission has

found that a plant retirement is an extraordinary event under General Instruction


                                          16
7, and that the Wisconsin Public Service Commission, applying that state’s

regulatory scheme, has specifically rejected an AAO request like the one made here.

The Wisconsin decision, In re Wisconsin Electric Power Co., Order No. 6630-AF-100,

2018 WL 2938141 (Wis. P.S.C. June 6, 2018), applied a different legal standard,

however. In determining whether deferral accounting was appropriate for the cost

savings associated with a plant retirement, the Wisconsin commission considered,

among other factors, “whether the cost is outside of the utility’s control,” and

whether recognizing the amount in the year in which it was incurred “would cause

the utility serious financial harm[,] . . . significantly distort the current year’s

income,” or “would have a significant impact on ratepayers.” Id. at *2. The

Wisconsin standards for deferral accounting go beyond the requirements of General

Instruction 7. In any event, our Public Service Commission is not bound by the

holdings of courts or agencies in other jurisdictions. State ex rel. Union Elec. Co. v.

Pub. Serv. Comm’n, 765 S.W.2d 618, 623 (Mo. App. W.D. 1988).
       Next, Evergy argues the Commission’s AAO order was unreasonable and

arbitrary because it contradicts the order from the utility’s 2018 rate case. Evergy

contends that the Stipulation and Agreement that underlay the Commission’s

decision in the 2018 rate case “explicitly recognized [Evergy’s] plans” to retire the

Sibley plant “in the six months following the true-up period that ended June 20,

2018.” Evergy’s characterization of the proceedings in its 2018 rate case is

inaccurate. As the Commission found, during its rate case Evergy opposed the

Office of Public Counsel’s request that the Commission take account of the

upcoming retirement of the Sibley plant, by excluding Sibley-related costs from

consideration in rate-setting. On the contrary, Evergy argued – successfully – that

the planned retirement of the Sibley plant should not be considered in the rate case,

because “the retirement could be delayed by unforeseen circumstances such as the

loss of other generating facilities.” Far from “explicitly recogniz[ing]” the Sibley


                                            17
plant’s retirement, the revenue-related Stipulation and Agreement specifically

provided that, if that retirement in fact occurred, “[t]his Stipulation does not

preclude any Signatory from proposing an accounting authority order (“AAO”) . . .

for the recovery of any . . . costs associated with the . . . retirement[ ].” The petition

filed by the Office of Public Counsel and the Midwest Energy Consumers Group,

seeking imposition of an AAO for Sibley-related costs, is fully consistent with, and

was indeed contemplated by, the Stipulation and Agreement which resolved

revenue-related issues in Evergy’s 2018 rate case.
       Evergy argues that its retirement of the Sibley plant was not extraordinary

because a 2018 filing by Evergy with the Federal Energy Regulatory Commission,

which was audited by an independent accounting firm, does not characterize the

event as extraordinary. Evergy cites no authority for the proposition that the PSC

was bound by the characterization of the transaction by Evergy or its auditor. On

the contrary, § 393.140(8), RSMo expressly gives the Commission the power “to

examine the accounts” of any regulated utility, and “after hearing, to prescribe by

order the accounts in which particular outlays and receipts shall be entered,

charged or credited.” Our caselaw holds that the determination of whether an AAO

is appropriate is for the Commission to make, in its expert discretion. KCP&L, 509

S.W.3d at 770 (“The PSC . . . remains the authority that determines when an item

may be included in a different accounting period for the purpose of developing

authorized rates.”).

       Points I and II are denied.

                                            II.
       In its third Point, Evergy argues that the Commission’s order granting the

AAO was an improper collateral attack on its prior order in Evergy’s 2018 rate case.

       Section 386.550 provides: “In all collateral actions or proceedings the orders

and decisions of the commission which have become final shall be conclusive.” “This


                                            18
statute is indicative of the law’s desire that judgments be final.” State ex rel. Ozark

Border Elec. Coop. v. Pub. Serv. Comm’n, 924 S.W.2d 597, 601 (Mo. App. W.D. 1996)

(citation omitted); see also, e.g., State ex rel. MoGas Pipeline LLC v. Pub. Serv.

Comm’n, 395 S.W.3d 562, 566 (Mo. App. W.D. 2013).

      Evergy argues that its 2018 rate case “directly addressed” the issues arising

out of the retirement of the Sibley plant. It contends that, because the AAO directs

that costs associated with the Sibley plant’s retirement be accounted for as a

regulatory liability, even though the potential plant retirement was considered in

setting Evergy’s 2018 rates, the AAO is a collateral attack on the 2018 rate case.
      As an initial matter, we note that multiple prior decisions of this Court have

upheld Commission decisions authorizing Accounting Authority Orders which

captured extraordinary costs incurred by a regulated utility for consideration in a

future rate case. See, e.g., In Matter of Application of Union Elec. Co., 458 S.W.3d

430 (Mo. App. W.D. 2015) (mem.); State ex rel. Office of Pub. Counsel v. Mo. Pub.

Serv. Comm’n, 301 S.W.3d 556, 569-70 (Mo. App. W.D. 2009); State ex rel. Mo. Office

of Pub. Counsel v. Pub. Serv. Comm’n, 293 S.W.3d 63, 77-78 (Mo. App. S.D. 2009);

State ex rel. Mo. Gas Energy v. Pub. Serv. Comm’n, 210 S.W.3d 330, 335-36 (Mo.

App. W.D. 2006); State ex rel. Office of Pub. Counsel v. Pub. Serv. Comm’n, 858

S.W.2d 806, 810-12 (Mo. App. W.D. 1993). In each of those cases, the

“extraordinary” costs were incurred at a time when the utility was charging rates

approved in an earlier rate case. In each of our prior cases, it could have been

argued that the rates established in the earlier rate case were intended to fully

compensate the utility for the costs of its operations while the rates were in effect,

and that use of an AAO to defer certain costs for later consideration had the effect of

altering the rate structure approved in the earlier rate case. Yet, to our knowledge,

no prior decision has suggested that an AAO constitutes an improper collateral




                                           19
attack on the results of an earlier rate case. The silence of our earlier decisions on

this point is deafening.

      To the contrary, this Court has recognized that AAOs do not alter existing

rates, or constitute impermissible retroactive ratemaking. In State ex rel. Missouri

Gas Energy v. Public Service Commission, 210 S.W.3d 330 (Mo. App. W.D. 2006), we

rejected the argument that provisions of the Commission’s Emergency Cold

Weather Rule (“ECWR”), which authorized utilities to use an AAO to defer certain

costs to a later rate case, had the effect of modifying the utilities’ current approved

rates. We explained:
      Although recovery under the AAO is conditioned on filing a subsequent
      rate case, this is not a case of retroactive ratemaking. This court has
      held that it is permissible “to defer the final decision on current
      extraordinary costs until a rate case is in order.” The costs of the
      ECWR are merely a deferment of extraordinary costs. This procedure
      does not include nor need it include any determination of the
      reasonableness of the current rates. The Utilities are still charging the
      current tariffed rates, but under the ECWR are required to defer
      collection of part of the amount owed until a later time. The ECWR
      allows placement of any costs of compliance with the ECWR in an
      AAO. . . . The AAO allows current losses due to the rule to be
      separately accounted, thus preserving the uncollected, deferred fees
      until the next rate case. At that time the losses in combination with
      any other factors may be considered in determining a new rate. This is
      not retroactive ratemaking, because the past rates are not being
      changed so that more money can be collected from services that have
      already been provided; instead, the past costs are being considered to
      set rates to be charged in the future.
Id. at 335-36 (citations omitted); see also Mo. Gas Energy v. Pub. Serv. Comm’n, 978

S.W.2d 434, 438 (Mo. App. W.D. 1998) (emphasizing that “AAOs are not the same

as ratemaking decisions, and that AAOs create no expectation that deferral terms

within them will be incorporated or followed in rate application proceedings. The

whole idea of AAOs is to defer a final decision on current extraordinary costs until a

rate case is in order”; citation omitted).




                                             20
       More generally, the Missouri Supreme Court has expressly held that

“limit[ing] the authority granted [to a utility] by [an earlier Commission order] does

not . . . constitute a collateral attack, in violation of Section 386.550, RSMo . . ., on

such order.” State ex rel. Pub. Water Supply Dist. No. 2 v. Burton, 379 S.W.2d 593,

600 (Mo. 1964). In Burton, the Supreme Court held that the PSC’s grant of a

certificate of convenience and necessity to a utility, to operate a water distribution

system in a particular location, did not prevent a local county from further limiting

the geographic area within which the utility could operate. The Court explained

that “[s]uch limitation in no way questions the validity of the original order.

Interpretation of an order necessarily acknowledges its validity and does not

constitute a collateral attack.” Id. (citation omitted); accord, Stopaquila.org v.

Aquila, Inc., 180 S.W.3d 24, 39-40 (Mo. App. W.D. 2005) (Commission’s issuance of

certificate of convenience and necessity for construction of electric power plant did

not exempt utility from compliance with county zoning ordinances). To the extent

the AAO in some respect limits the financial consequences of the Commission’s

decision in Evergy’s 2018 rate case, that limitation does not constitute an

impermissible “collateral attack.”
       It is also highly significant that, in the 2018 rate case itself, the parties

specified that their Stipulation and Agreement would “not preclude any Signatory

from proposing an accounting authority order (‘AAO’) . . . for the recovery of . . .

costs associated with” the retirement of the Sibley plant. The Stipulation and

Agreement served as part of the basis for the Commission’s resolution of the 2018

rate case. Given that the parties agreed that resolution of the 2018 rate case would

not preclude any party from later seeking an AAO for Sibley-related costs, we will

not read the Commission’s decision in the rate case to preclude OPC and the

Midwest Energy Consumers Group from seeking that precise relief. Cf. Kesterson v.

State Farm Fire & Cas. Co., 242 S.W.3d 712, 717 (Mo. 2008) (although preclusion


                                            21
principles generally prohibit the later assertion of a claim arising out of the same

act or transaction involved in an earlier proceeding, an “exception exists when the

court in the first action has expressly reserved the plaintiff’s right to maintain the

second action”; citing and following RESTATEMENT (2D) OF JUDGMENTS § 26(1)(b)

(2007)).

      Point III is denied.

                                          III.
      In its fourth and final Point, Evergy argues that the Commission erred in

establishing an AAO because its decision was explicitly based on the finding that

the rates it approved in Evergy’s 2018 rate case reflected the costs of operating the

Sibley plant, and that it was no longer appropriate for ratepayers to pay for these

non-existent expenses. Evergy argues that, while a utility’s approved rates are
based on financial information from past periods, those rates are predictive and

intended to be forward-looking; a utility’s rates will never exactly match the utility’s

actual financial experience during the period the rates are in effect. Evergy argues

that the Commission’s effort to “fix” the rates set in Evergy’s 2018 general rate case

to take account of a later event is fundamentally contrary to Missouri’s prospective

ratemaking principles.

      It is well-established that the Public Service Commission may not engage in

“retroactive ratemaking.” “Retroactive ratemaking is defined as ‘the setting of rates

which permit a utility to recover past losses or which require it to refund past

excess profits collected under a rate that did not perfectly match expenses plus rate-

of-return with the rate actually established.’” State ex rel. Noranda Aluminum, Inc.

v. Pub. Serv. Comm’n, 356 S.W.3d 293, 316–17 (Mo. App. S.D. 2011) (quoting State

ex rel. AG Processing, Inc. v. Pub. Serv. Comm’n, 311 S.W.3d 361, 365 (Mo. App.

W.D. 2010) (internal quotation omitted)); see also, State ex rel. Util. Consumers

Council of Mo., Inc. v. Pub. Serv. Comm’n, 585 S.W.2d 41, 58-59 (Mo. 1979).


                                          22
      As explained in § II, above, however, this Court has explicitly held that

establishment of an AAO does not constitute prohibited retroactive ratemaking. As

we explained in State ex rel. Missouri Gas Energy v. Public Service Commission, 210

S.W.3d 330 (Mo. App. W.D. 2006), imposition of an AAO does not itself set or modify

any utility rate; and even if deferred financial items are considered in a future rate

case to set forward-looking rates, “past rates are not being changed so that more

money can be collected from services that have already been provided; instead, the

past costs are being considered to set rates to be charged in the future.” Id. at 335-

36; see also, e.g., State ex rel. AG Processing v. Pub. Serv. Comm’n, 340 S.W.3d 146,

153 (Mo. App. W.D. 2011) (“In prior cases, this Court has rejected claims that

measures to recoup previously incurred costs constitute retroactive ratemaking,

when the recoupment measures operate prospectively, and do not alter the cost of

utility services previously provided to consumers.” Citations omitted.).

      In the Report and Order imposing the Accounting Authority Order, the

Commission referred to the fact that the rates set in Evergy’s 2018 rate case

reflected costs associated with the operation of the now-retired Sibley plant. This

discussion was appropriate, both to explain that the Sibley retirement had not
already been considered in setting Evergy’s 2018 rates, but also to explain why the

Commission considered the financial consequences of the Sibley plant’s retirement

to be an “extraordinary” event. The fact that utility rates (which will remain in

effect for three years) became effective almost simultaneously with a significant

event which those rates did not account for, justifies treating the later event as

“extraordinary.” The Commission’s Report and Order does not purport to modify

the rates set in the 2018 rate case, either retroactively or even on a going-forward

basis. Instead, the Report and Order merely requires that Sibley-related savings be

held in a suspense account pending Evergy’s next rate case, so that those savings

can be considered at that time. This did not constitute prohibited retroactive


                                          23
ratemaking, and was not somehow inconsistent with Missouri’s forward-looking

rate-setting system.

      Point IV is denied.

                                  Conclusion
      The Commission’s Report and Order is affirmed.




                                           Alok Ahuja, Judge
All concur.




                                      24
