Case Title: Hanson v. Kansas Corp. Commission

Citation: 

Docket Number: 119834

State: kansas

Court: Kansas Supreme Court

Date: 2021-07-16T00:00:00Z

Document:
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IN THE SUPREME COURT OF THE STATE OF KANSAS 
 
No. 119,834 
 
RICHARD L. HANSON, CIRCLE H FARMS LLC, ROME FARMS LLC, 
STEGMAN FARMS PARTNERSHIP, 
Appellees, 
 
v. 
 
KANSAS CORPORATION COMMISSION, Respondent, 
and 
TEXAS-KANSAS-OKLAHOMA GAS, LLC,  
Appellant. 
 
 
SYLLABUS BY THE COURT 
 
1. 
Under the Kansas Judicial Review Act, K.S.A. 77-601 et seq., a court shall grant 
judicial relief from an agency action only if it determines there exists one or more of the 
eight circumstances enumerated in K.S.A. 77-621(c). 
 
2. 
K.S.A. 77-621(c)(3) authorizes judicial relief when an agency action fails to 
decide an issue requiring resolution. When addressing a challenge under K.S.A. 77-
621(c)(3), a reviewing court exercises unlimited review. 
 
3. 
K.S.A. 77-621(c)(4) authorizes judicial relief when an agency action is based on 
the agency's erroneous interpretation or application of the law. A reviewing court 
exercises unlimited review of the agency's interpretation or application of the law without 
deference to the agency. 
 
 
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4. 
K.S.A. 77-621(c)(7) authorizes judicial relief when an agency action is based on a 
determination of fact, made or implied by the agency, that is not supported to the 
appropriate standard of proof by evidence that is substantial when viewed in light of the 
record as a whole. This includes the agency record, supplemented by any additional 
evidence received by the court under the KJRA. K.S.A. 77-621(d) defines substantial 
evidence "'in light of the record as a whole'" to include evidence both supporting and 
detracting from the agency's factual findings. 
 
5. 
Kansas courts do not consider an issue unless it is ripe.  
 
Review of the judgment of the Court of Appeals in 58 Kan. App. 2d 82, 464 P.3d 357 (2020). 
Appeal from Stevens District Court; BRADLEY E. AMBROSIER, judge. Opinion filed July 16, 2021. 
Judgment of the Court of Appeals affirming in part and reversing in part the district court is affirmed on 
the issues subject to review. Judgment of the district court is affirmed in part and reversed in part. The 
case is remanded to the Kansas Corporation Commission with directions. 
 
Jeremy L. Graber, of Foulston Siefkin LLP, of Topeka, argued the cause, and C. Edward Watson 
II, and Daniel J. Buller, of the same firm, were with him on the briefs for appellant.  
 
Lee Thompson, of Thompson Law Firm, LLC, of Wichita, argued the cause and was on the briefs 
for appellees. 
 
The opinion of the court was delivered by 
 
BILES, J.:  A natural gas utility company appeals from two lower court decisions 
that held it unlawfully billed its customers. See Hanson v. KCC, 58 Kan. App. 2d 82, 95, 
464 P.3d 357 (2020) (declaring the utility's billing practice was "neither honest nor fair"). 
The utility argues a Kansas Corporation Commission order that upheld the company's 
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billing calculation deserves more deference. The controversy arises after three customers 
who bought gas for their irrigation operations alleged the utility overcharged them by 
distorting the energy content of the gas sold. The customers claim this overpriced their 
gas by about 9.5%. But the Commission determined the utility did not violate state law 
even though it acknowledged that for each cubic foot of gas the utility sold, it charged its 
customers for the energy that would have been contained in a more concentrated gas of 
the same volume. 
 
We affirm the lower courts' judgment that the utility's invoicing practice was 
"unjust, unreasonable, [or] unfair" under K.S.A. 66-1,206(a). We remand the case to the 
Commission to fashion an appropriate remedy. See K.S.A. 66-1,205(b) (empowering 
Commission to require natural gas public utilities "to make such improvements and do 
such acts as are or may be required by law to be done"); K.S.A. 66-1,206(a) (empowering 
Commission to substitute "such other regulations, practice, service or act as it determines 
to be just, reasonable and necessary").  
 
    FACTUAL AND PROCEDURAL BACKGROUND 
 
In 2007, Texas-Kansas-Oklahoma Gas, LLC, began selling natural gas in Kansas 
to residential and nonresidential customers acquired from Anadarko Gas Gathering 
Company. In 2010, the Commission conditionally granted TKO a limited certificate of 
public convenience and authority, with final approval in 2012. The Commission allowed 
TKO to serve specific customers transferred from Anadarko and to negotiate individual 
contracts for natural gas service with nonresidential customers. This meant traditional 
utility rate making at the Commission level did not take place. The certificated rate for 
customer sales was the price set by private contract. But as the panel correctly observed, 
it is undisputed TKO is a "'[n]atural gas public utility'" under K.S.A. 66-1,200 et seq. 
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Hanson, 58 Kan. App. 2d at 91; see also K.S.A. 66-104 (definition of public utility 
subject to agency's supervision). 
  
In 2014, Richard L. Hanson, a residential customer, along with Circle H Farms 
LLC, Rome Farms LLC, and Stegman Farms Partnership, complained to the Commission 
about TKO's billing practices. Hanson is no longer a party. The three remaining are 
nonresidential customers who bought gas for agricultural irrigation purposes, referred to 
here as "the Irrigators." As TKO explains, their contracts with TKO refer only to a rate 
per MMBtu (metric million British thermal units). The rate is on an "index plus" basis, 
meaning the price fluctuates based on a published index, plus a fixed additur (e.g., index 
plus $.50 per MMBtu). The Irrigators explained in their complaint: 
 
"The rates and charges of TKO appear to calculate volume using a pressure base 
of 13.45 psia [pounds per square inch absolute] and a btu factor measured at a pressure 
base of 14.73 psia, an inconsistency and inaccuracy which results in customers being 
charged approximately 9.5% more for irrigation gas than is justified under commonly 
accepted industry standards, as historically interpreted and applied by the Kansas 
Corporation Commission."  
 
The Irrigators argued "the rates charged by TKO to [them] . . . for the sale of 
natural gas are unreasonable, unfair, unjust . . . and are therefore unlawful and void." 
(Emphasis added.) As for why TKO's rates were unlawful, they alleged, "The 
calculations and billing practices employed by TKO [used] inaccurate or false pressure 
base numbers." (Emphasis added.) Said another way, the Irrigators presented two distinct 
but interrelated issues—unlawful rates and unlawful billing practices. TKO denied the 
allegations. 
 
The Irrigators brought these challenges to the Commission under K.S.A. 66-
1,205(a), which provides: 
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"Upon a complaint in writing made against any natural gas public utility 
governed by this act that any rates or rules and regulations of such natural gas public 
utility are in any respect unreasonable, unfair, unjust, unjustly discriminatory or unduly 
preferential, or both, or that any rule and regulation, practice or act whatsoever affecting 
or relating to any service performed or to be performed by such natural gas public utility 
for the public, is in any respect unreasonable, unfair, unjust, unreasonably inefficient or 
insufficient, unjustly discriminatory or unduly preferential, . . . the commission may 
proceed, with or without notice, to make such investigation as it deems necessary." 
(Emphases added.)  
 
And in their prayer for relief, the Irrigators asked: 
 
"Upon confirmation of the truth of the allegations of unfair, unjust and 
discriminatory rates, complainants ask the Commission to enter an order: 
 
"(a) substituting such rates or rules and regulations as the Commission 
determines to be just, reasonable and necessary; 
 
"(b) adjusting the rates of TKO as to all future sales of natural gas and adjustment 
of the measurements, calculations, and practices which are the gist of the problem; and, 
 
"(c) investigate and compute the amount of charges or rates which have been 
overbilled and with respect to past sales made under such unfair and discriminatory terms 
or rates to issue a show cause order as to why TKO should not refund all overcharges 
shown to have been imposed since August, 2007 or the first date of each jurisdictional 
meter which TKO operates." 
 
It is important to appreciate three important aspects to the calculation making up 
the Irrigators' gas bills:  (1) price, which is the dollar amount charged per MMBtu, (2) 
volume (Mcf or MMcf), which is the cubic feet delivered to the customer at a pressure 
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base, and (3) energy, which is an amount of MMBtu's in the measured cubic foot as the 
designated pressure base. Our concern here is with the pressure base factor used when 
measuring volume because TKO applied a different pressure base when it sold the gas to 
the Irrigators than the one used to measure the energy content by volume when TKO 
bought the gas from third-party suppliers. As the district court explained: 
 
"Natural gas is delivered by TKO to irrigators through a positive displacement 
meter which generates the volumes per thousand cubic feet (Mcf). When gas is sold 
pursuant to contracts which base pricing on heating values (Btu's) it is necessary to 
convert the volumes of Mcf's to reflect the volume based on the heating value expressed 
per MMBTu's. 
 
"Measurement of molecules of natural gas depends on the pressure because 
natural gas is compressible. If the pressure of a fixed quantity of gas [molecules] 
increases, the volume decreases. If pressure decreases, the volume increases."  
 
The Court of Appeals provided this succinct description of the technical aspects 
underlying the Irrigators' complaint: 
 
"To convert the volume of gas sold in Mcf into MMBTU (its heat content), the 
gas company uses a formula incorporating the gas' temperature, pressure, and chemical 
composition. In particular, as a report by Commission staff observed, 'the reference 
temperature and pressure of the BTU calculation are critical to creating a fungible unit of 
measurement.' The sticking point in this case is the reference pressure—or the pressure 
base—used by TKO in that calculation. The pressure base (measured in pounds per 
square inch absolute or psia) is essentially the average pressure the natural gas is under 
when its heating value and volume are measured. 
  
"The volume of a gas is inversely proportional to its pressure. Thus, when other 
factors such as temperature and the number of molecules of a gas remain constant, higher 
7 
 
 
 
pressure compresses the gas, while lower pressure allows the gas molecules to expand 
into a greater volume." Hanson, 58 Kan. App. 2d at 86. 
 
Leo Haynos, the Chief Engineer of the Commission's Utility Division, prepared 
two staff reports for the agency proceedings. He explained that although TKO's contracts 
were priced based on energy (MMBtu), volume (MMcf) still mattered because volume is 
"the surrogate way of measuring energy." And since there is "no good way to measure" 
the heat content, he said, "we measure volume, and we convert it to energy." So, he 
added, for utilities like TKO that resell gas purchased from suppliers the pressure base at 
"the purchase point" and the pressure base at "the sales point" must be identical. 
 
But here TKO's use of a lower reference pressure at its sales point to customers 
increased the gas volume delivered without accounting for the corresponding MMBtu 
reduction. And recall that TKO's contracts refer only to a rate per MMBtu. In Haynos' 
words, "to price the gas for the customer in dollars per million BTUs ($/MMBTU), TKO 
simply multiplies the volume calculated at 13.45 psia by its suppliers' BTU value 
(obtained at 14.73 psia)." By doing this, Haynos continued, TKO misrepresented the 
amount of energy (MMBtu) delivered to the Irrigators. He offered two possible ways to 
correct this misrepresentation—either negotiate with customers to use the 13.45 psia 
pressure base by disclosing it and agreeing to it, or use the same pressure base as the 
suppliers so the energy factor remains reasonably constant. 
 
Haynos' second staff report concluded: 
 
"[T]his manipulation of the gas volume sold without performing a corresponding 
modification of the BTU content for that volume overstates the BTU value of the gas sold 
by approximately 9.5%. Because TKO's contracts with its customers state a price in 
$/MMBTU, overstating the amount of BTUs purchased results in overcharging the 
customer by 9.5%."  
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The Commission's order 
 
After a two-day evidentiary hearing, the Commission decided the Irrigators failed 
to carry their burden of proving "TKO's rates or practices with regard to them are 
unreasonable." 
 
As to the rate question, the Commission largely relied on Haynos' report stating 
that TKO's "gas sales rate even with the misapplied BTU adjustment may be a reasonable 
rate" for the region. It noted TKO's contracts did not include reference to a pressure base 
or specifics about calculating the BTU value of the gas. Similarly, the Commission 
continued, neither the conditional nor final certificates issued to TKO referenced a 
specific pressure base. And it cited Kansas Gas and Elec. Co. v. State Corp. Comm'n, 
239 Kan. 483, 488, 720 P.2d 1063 (1986), to support its conclusion that rates are just and 
reasonable if they are within a "zone of reasonableness," balancing the interests of:  "(1) 
the utility's investors vs. the ratepayers; (2) the present ratepayers vs. the future 
ratepayers; and (3) the public interest." Finally, the Commission held private contracts for 
service, such as those with the Irrigators, that set rates consistent with those filed with the 
Commission should be respected unless "the public welfare is being adversely affected 
by such contracts," citing Kansas Power & Light Co. v. Mobil Oil Co., 198 Kan. 556, 
559, 426 P.2d 60 (1967).  
 
Regarding TKO's billing practice, the Commission also relied on Hanson's 
testimony that there was no regulatory requirement for a utility to use the same pressure 
base as its suppliers when calculating the gas volume delivered to customers. And it 
rejected the agency's staff recommendation to use Docket 34,856-U Rule, Rules and 
Regulations Relating to Standards of Quality, Pressure, Accuracy of Measurement, 
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Safety and Service of Natural Gas in the State of Kansas, January 16, 1961. As 
characterized by the Commission,  
 
"[t]he 34,856-U Docket Rule offers a standard measurement when a pressure base is not 
determined. What the reading of the 34,856-U Docket Rule and the testimony suggests is 
that there is not necessarily a violation for using a different pressure base—the actual 
violation here is that it was not disclosed. Therefore, the Commission cannot hold that 
the 34,856-U Docket Rule is a hardline rule on what pressure base shall be utilized and 
in turn cannot deduce that TKO is using an improper billing practice or charging unjust 
or unreasonable rates on that basis." (Emphasis added.) 
 
The Commission then quoted staff testimony that "TKO gas sales contracts, 
signed by the Complainants and filed with the Commission do not contain any reference 
to a pressure base or specifics on calculating the BTU value of the gas." And with this 
perspective it held it would not evaluate this matter under either the 34,856-U Docket 
Rule or K.A.R. 82-3-101(a)(36) (generally defining "Gas [cubic foot]" as meaning "the 
volume of gas contained in one cubic foot of space at a standard pressure base and at a 
standard temperature base. The standard pressure base shall be 14.65 pounds per square 
inch absolute, and the standard temperature base shall be 60 degrees Fahrenheit."). 
 
As to its comment that "the actual violation here is that it was not disclosed," the 
Commission explained nondisclosure was reasonable because TKO negotiated its 
contracts with the Irrigators "with the price term established therein without reference to 
any pressure base for measurement." The Commission also noted TKO had used the 
same pressure base since it began operations in Kansas, and that its negotiated contracts 
with the Irrigators expressly allowed TKO to use a billing methodology "to derive the 
revenue it calculated it needed to support the business of providing sufficient and 
efficient service of a natural gas public utility." Finally, it concluded TKO's prices were 
"among the lowest in the region." In short, the Commission concluded that even though 
10 
 
 
 
TKO engaged in the complained of practice, it was not necessarily unreasonable, unfair, 
or unjust because using a different pressure base from the one used by suppliers did not 
violate either TKO's contracts or its certificate as a public utility. 
 
The Irrigators asked for reconsideration, arguing the Commission misconstrued 
their complaint as simply attacking the reasonableness of TKO's rates, as opposed to their 
request for relief in which they sought "investigation and enforcement of TKO's practices 
and measurement of MMBtu's by the Commission in the exercise of its duty to regulate 
practices, charges and exactions of the utility." And they contended the Commission's 
order "confuses a 'rate' with a billing under the rate and approves a charge based on a 
unilateral and undisclosed alteration of the measurement of MMBtu's." 
 
The Commission refused to change its decision. It said it understood the Irrigators' 
request for reconsideration to raise three points: 
 
"First, the Complainants assert that the Commission improperly narrowed the scope of 
their complaint to one of contract abrogation. Second, the Complainants contend that the 
Commission has ignored Complainants' request for investigation into TKO's billing 
practices and instead turned its focus to a determination of whether the contract rates are 
just and reasonable. Finally, the Complainants argue that the Commission has erred by 
disregarding alleged facts that through its billing practices, TKO has manipulated, 
altered, adjusted or otherwise circumvented the Commission's authority thus resulting in 
a per se unjust act." 
 
The Commission disagreed that its reasoning ignored the Irrigators' arguments 
against TKO's billing methodology. It explained the billing practice was consistent with 
its contracts. In the Commission's view, the Irrigators were "asking [it] to change the 
terms of or at the very least read into their contracts with TKO a term that is absent." To 
that extent, it concluded, the Irrigators were essentially asking to abrogate "part if not the 
11 
 
 
 
whole of the contracts," and therefore it found they had not met the burden of proving 
TKO's use of a different pressure base was unlawful. The Commission acknowledged 
"there are standards or calculation methodologies that may be applicable." But it again 
emphasized TKO's contracts were silent on the pressure base to be used, and that both 
Hanson, who gave evidence as a consulting engineer, and Haynos testified TKO was not 
obliged to use a particular reference pressure. The Commission stated, "Hanson and 
Haynos' comments were substantial against [the Irrigators'] purported factual support that 
TKO's billing practices are unreasonable." 
 
The KJRA appeal in the lower courts 
 
The Irrigators appealed to the district court under the Kansas Judicial Review Act, 
K.S.A. 77-601 et seq. They advanced four grounds for relief from the Commission's 
decision:  (1) the agency failed to consider their billing error claim; (2) it erroneously 
interpreted and applied the law; (3) its final order was based on factual findings not 
supported by substantial evidence; and (4) its ultimate ruling was arbitrary and 
capricious. See K.S.A. 77-621(c)(3), (4), (7), and (8). The court agreed with the Irrigators 
on all points, observing:  "TKO unilaterally inflated the measurement of the volume 
component specified in the contracts for the expressed purpose of meeting its revenue 
needs." It concluded: 
 
"The Order at issue if sustained would approve an erroneous manipulation of 
billing volumes of MMBtu's without notice, approval or consideration by either the 
Commission or customers. The Order's attempt to avoid that determination by paying 
homage to rate making principles based on contract terms flies in the face of a liberal 
construction of the governing statutes and the uncontroverted evidence that TKO's billing 
practices unfairly inflated billings of MMBtu's by 9.5% from the first date it began 
operating in Kansas. Such practices are unfair, unjust and unreasonable. In sum, the 
12 
 
 
 
Order is factually, logically and legally erroneous, not supported by the record or the 
evidence and arbitrary and capricious."  
 
The district court remanded the case to the Commission to calculate how much 
TKO overbilled the Irrigators since 2007 and then to order the utility to refund that 
amount. TKO appealed. 
 
A Court of Appeals panel affirmed the district court in part and reversed in part. It 
agreed the Commission erred in its analysis of TKO's billing methodology. But the panel 
altered the district court's refund directive and instead ordered the Commission to decide 
an appropriate remedy that balances the interests of the customers and the public. It 
noted:  "K.S.A. 66-1,206(a) vests the Commission with authority to craft a remedy when 
a natural gas public utility's rates or practices are found to be 'unreasonable, unjust, [or] 
unfair.'" Hanson, 58 Kan. App. 2d at 96. 
 
The panel's decision, however, limited its legal basis for granting judicial relief to 
K.S.A. 77-621(c)(3) (agency failed to resolve an issue requiring resolution) and (c)(4) 
(agency erroneously applied the law). Hanson, 58 Kan. App. 2d at 95. It did not address 
the district court's additional KJRA justifications for judicial relief under subsections 
(c)(7) (agency action based on facts not supported by the record) and (c)(8) (agency 
action otherwise unreasonable, arbitrary, or capricious).    
 
TKO petitioned this court for further judicial review, which we granted. The 
Irrigators filed a conditional cross-petition for review, which we denied. Jurisdiction is 
proper. See K.S.A. 20-3018(b) (providing for petitions for review of Court of Appeals 
decisions); K.S.A. 60-2101(b) (Supreme Court has jurisdiction to review Court of 
Appeals decisions upon petition for review). 
 
 
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THE PANEL'S GRANT OF RELIEF UNDER K.S.A. 77-621(c)(3) 
 
Under the KJRA, a court shall grant judicial relief from an agency action only if it 
determines there exists one or more of the eight circumstances enumerated in K.S.A. 77-
621(c). The panel held the Commission "failed to decide the central issue in the 
Irrigators' complaint." (Emphasis added.) Hanson, 58 Kan. App. 2d at 95. This undecided 
issue, in the panel's view, was the legality of TKO's billing practices, citing K.S.A. 77-
621(c)(3). TKO argues the panel erred in this respect because the Commission's order 
carefully considered that matter. We agree with TKO. 
 
Standard of review 
 
When resolving an issue seeking judicial relief under K.S.A. 77-621(c)(3) 
(authorizing judicial relief if "the agency has not decided an issue requiring resolution"), 
this court exercises unlimited review. And typically when subsection (c)(3) is implicated, 
remand to the agency to consider the undecided issue is appropriate unless the question 
the agency did not resolve is a purely legal one. Compare Pittsburg State Univ./Kansas 
Nat. Educ. Ass'n v. Kansas Bd. of Regents/Pittsburg State Univ., 280 Kan. 408, 429, 122 
P.3d 336 (2005) (remanding the case to the agency for additional findings; citing K.S.A. 
77-621[c][3]), with In re Tax Protest of Emil Liston Foundation, 13 Kan. App. 2d 353, 
355, 771 P.2d 77 (1989) (noting K.S.A. 77-621[c][3] authorized court to decide a 
question of law when the agency failed to do so). 
 
Discussion 
 
In their complaint to the Commission, the Irrigators raised two separate, but 
closely related, questions—rates and practices. And the Commission plainly ruled on 
both. On the billing question, it considered various reasons why TKO's unilaterally 
selected pressure base was not unlawful. And as previously noted, the Commission 
14 
 
 
 
addressed head on the Irrigators' claim in their request for reconsideration that the agency 
ignored the billing practice issue in its original order. The Commission explained TKO's 
billing practice was consistent with the contracts, the Irrigators had not met their burden 
of proving TKO's use of a different pressure base was unlawful, and that both Hanson 
and Haynos had testified TKO was not obliged to use a particular reference pressure. 
Based on those points, the Commission denied reconsideration, noting it "simply could 
not find that Complainants proved manipulation, misrepresentation, or 
unreasonableness." That holding effectively resolved the issue the panel held was 
unresolved. Hanson, 58 Kan. App. 2d at 95. 
 
To be sure, the panel disagreed with the Commission's rationale, but that does not 
mean the Commission failed to decide "an issue requiring resolution" under K.S.A. 77-
621(c)(3). The panel's reliance on that statutory basis for granting judicial relief from an 
agency action was misplaced. 
 
THE PANEL'S GRANT OF RELIEF UNDER K.S.A. 77-621(c)(4) 
 
The next question is whether the panel erred when it determined the Commission 
"erroneously applied the law" under K.S.A. 77-621(c)(4). Hanson, 58 Kan. App. 2d at 
95. On this point, we agree with the panel, although this is a more involved question that 
necessarily implicates another statutory ground for judicial relief—K.S.A. 77-621(c)(7) 
("[T]he agency action is based on a determination of fact, made or implied by the agency, 
that is not supported to the appropriate standard of proof by evidence that is substantial 
when viewed in light of the record as a whole."). Said differently, facts are needed to 
make the point, so we must decide if the facts found by the Commission are supported by 
the agency record. See Atkins v. Webcon, 308 Kan. 92, 102, 419 P.3d 1 (2018) (affirming 
the Court of Appeals as being right for the wrong reason); Supreme Court Rule 
8.03(b)(6)(C)(ii) (2021 Kan. S. Ct. R. 54). 
15 
 
 
 
 
Standard of review 
 
Judicial review of an agency's interpretation and application of the law is 
permitted under K.S.A. 77-621(c)(4) and is unlimited without deference to the agency's 
view. Via Christi Hospitals Wichita v. Kan-Pak, 310 Kan. 883, 890, 451 P.3d 459 (2019); 
May v. Cline, 304 Kan. 671, 675, 372 P.3d 1242 (2016); Douglas v. Ad Astra Information 
Systems, 296 Kan. 552, 559, 293 P.3d 723 (2013) (rejecting the doctrine of deference to 
an agency on questions of law). 
 
Subsection (c)(7) requires review of factual determinations for evidence "that is 
substantial when viewed in light of the record as a whole." Our caselaw has "defined 
substantial evidence as evidence possessing something of substance and relevant 
consequence to induce the [agency's] conclusion." Redd v. Kansas Truck Ctr., 291 Kan. 
176, 183, 239 P.3d 66 (2010). Subsection (d) provides: 
 
"For purposes of this section, 'in light of the record as a whole' means that the 
adequacy of the evidence in the record before the court to support a particular finding of 
fact shall be judged in light of all the relevant evidence in the record cited by any party 
that detracts from such finding as well as all of the relevant evidence in the record, . . . 
cited by any party that supports such finding, including any determinations of veracity by 
the presiding officer who personally observed the demeanor of the witness and the 
agency's explanation of why the relevant evidence in the record supports its material 
findings of fact. In reviewing the evidence in light of the record as a whole, the court 
shall not reweigh the evidence or engage in de novo review." K.S.A. 77-621(d). 
 
When conducting the factual analysis, subsection (d) requires a reviewing court to 
assess the evidence both supporting and contradicting the agency's findings, examine the 
agency's credibility determinations, and review the agency's explanation as to why the 
16 
 
 
 
evidence sustains its findings. Atkins, 308 Kan. at 97. And even though subsection (d) 
demands a reviewing court look at contradicting evidence and assess the agency's 
credibility decisions, it nevertheless instructs that "the court shall not reweigh the 
evidence or engage in de novo review." (Emphasis added.) K.S.A. 77-621(d). See 
generally Frick Farm Properties, L.P. v. State Dep't of Agric., Div. of Water Res., 289 
Kan. 690, 709, 216 P.3d 170 (2009) ("An appellate court views all the evidence in a light 
most favorable to the prevailing party, and it does not reweigh competing evidence or 
assess the credibility of witnesses. This court must accept all evidence and inferences that 
support or tend to support the findings as true, and this court must disregard all 
conflicting evidence."). 
 
Finally, Kansas courts "recognize that an agency ruling within its area of expertise 
is entitled to some deference." Wasson v. United Dominion Industries, 266 Kan. 1012, 
1018, 974 P.2d 578 (1999). But see Ft. Hays St. Univ. v. University Ch., Am. Ass'n of 
Univ. Profs, 290 Kan. 446, 457, 228 P.3d 403 (2010) (agency's statutory interpretation "is 
not afforded any significant deference on judicial review"). This deference to expertise, 
however, must be employed cautiously so as not to violate the express statutory standard 
of review mandated by K.S.A. 77-621. 
 
Discussion 
 
As quoted above, K.S.A. 66-1,205(a) defines the circumstances under which the 
Commission may review a complaint about a natural gas public utility's rates or practices. 
And if the Commission finds unreasonable, unfair, or unjust rates or practices, K.S.A. 66-
1,206(a) authorizes it to take action, providing in relevant part: 
 
"If after investigation and hearing the rates or rules and regulations of any natural 
gas public utility governed by this act are found unjust, unreasonable, unfair, . . . the 
17 
 
 
 
commission shall have the power to establish, and to order substituted therefor, such 
rates or rules and regulations as the commission determines to be just, reasonable and 
necessary. If it is found that any regulation, practice or act, relating to any service 
performed or to be performed by such natural gas public utility for the public is in any 
respect unreasonable, unjust, unfair, . . . the commission may substitute therefor such 
other regulations, practice, service or act as it determines to be just, reasonable and 
necessary. . . ." (Emphases added.) K.S.A. 66-1,206(a). 
 
The panel interpreted both K.S.A. 66-1,205(a) and K.S.A. 66-1,206(a), holding 
that "unreasonable" means "'[n]ot guided by reason; irrational or capricious'"; "unjust" 
means "'[c]ontrary to justice; not fair or reasonable'"; and "unfair" means "'[n]ot honest, 
impartial or candid; unjust.'" Hanson, 58 Kan. App. 2d at 95. The panel held:  
"Regardless of the rates included in TKO's contracts, the company's billing practice 
meets these definitions. TKO's calculations caused the company to inform its customers 
they were using—and to charge them for—9.5% more MMBTUs of gas than they 
actually received. This practice was neither honest nor fair." (Emphasis added.) 58 Kan. 
App. 2d at 95. And we note K.S.A. 66-1,207 requires the statutory provisions applicable 
to this controversy and all statutory grants of power, authority, and jurisdiction to the 
Commission "shall be liberally construed, and all incidental powers necessary to carry 
into effect the provisions of this act are expressly granted to and conferred upon the 
commission." 
 
We look then to how the panel and district court came to a different conclusion 
than the Commission. As previously explained, the Commission gave a detailed 
justification as to why TKO's practice was lawful while giving at least seven reasons for 
rejecting the Irrigators' complaint. And under the KJRA, a reviewing court must examine 
those rationales within K.S.A. 77-621's boundaries. See K.S.A. 77-621(a)(2) ("[T]he 
validity of agency action shall be determined in accordance with the standards of judicial 
review provided in this section.").  
18 
 
 
 
 
TKO claims the Commission's "order, its factual findings, and its subject matter 
expertise regarding a complex area of public utility law" deserve judicial deference. The 
Irrigators, on the other hand, contend deference is unwarranted in this instance because 
the evidence does not support the agency's outcome. The Irrigators have the better 
argument. To arrive at its decision, the Commission explicitly considered:  (1) Hanson's 
testimony, (2) Haynos' testimony, (3) the contracts, (4) the 34,856-U Docket Rule, (5) 
TKO's consistent use of a 13.45 psia pressure base in its Kansas operations, (6) TKO's 
revenue requirement, and (7) the reasonableness of the rates charged. Of those, the 
Commission considered the first three a substantial evidentiary basis to rule against the 
Irrigators. 
 
First, the Commission noted, "Hanson explicitly stated that there is no requirement 
that a utility such as TKO must use the same pressure base as their supplier." (Emphasis 
added.) But when viewed in full, his testimony actually undermines the Commission's 
rationale. He testified: 
 
"[A. Hanson]. . . . The problem with TKO's calculations is they are using 13.45 
as a pressure base for calculating the actual standard cubic feet of volume, but they are 
applying a Btu factor of 14.73 to that gas, which inflates the total MMBtu's by 9.5 
percent. 
  
"[Q.] Is there any requirement or standard for TKO to use the same pressure base 
as the supplier? 
 
 
"[A.] No, there is no requirement. The only requirement is the requirement to use 
the same pressure for the volume calculation and the Btu per cubic foot.  
 
. . . . 
 
 
19 
 
 
 
"[A.] . . . [T]hat is the reason that most people adopt the pressure base of their 
supplier because the supplier will have the Btu calculation at their pressure base. And so 
generally . . . the company receiving gas from that supplier will go ahead and adopt that 
same pressure base, not necessarily, but it just makes it easier because you don't have to 
convert the Btu cubic foot that way. 
 
 
. . . . 
 
 
"[A.] . . . The meter measures the actual cubic feet at whatever pressure it goes 
through at. And then you convert it to your standard pressure base and that is generally 
14.73. However, you could have whatever pressure base you really want to. . . . [P]eople 
use the pressure base of their supplier because they have already got the Btu's from their 
suppliers at that—whatever pressure base it is for their supplier." (Emphasis added.) 
 
In essence, Hanson's testimony established that although there was no requirement 
to use the same reference pressure as the suppliers, there was a need to use the same 
pressure base for both the volume factor and the energy factor. Otherwise, a different 
pressure base would inflate or deflate the heat content—MMBtu—that is measured in 
volume. He said, "[P]eople use the pressure base of their supplier," because it is easier. 
So when considered in context, the Commission's reliance on Hanson's isolated statement 
that there was no requirement to use the same number as the supplier misses the mark. 
 
A similar problem occurred when the Commission considered Haynos' testimony 
that "it does not matter what pressure base one uses so long as that pressure base is 
disclosed in the tariff or contract." This, of course, does not support the Commission's 
order because TKO's contracts did not disclose any pressure base. And the Commission 
seemed to recognize this in its final order when stating "the actual violation here is that it 
was not disclosed." Its reasoning that no error occurred because the contracts were silent 
about the pressure base, therefore, makes little sense in light of the problem, which is not 
what pressure base TKO used to measure the delivered gas but how TKO manipulated it 
when invoicing customers. 
In its order, the Commission also emphasized TKO "negotiated its contracts with 
[the Irrigators] with the price term established therein without reference to any pressure 
base for measurement; that TKO has not changed its method of calculating its customer 
bills over the time in question; and that the [Irrigators] accepted these terms until filing 
their Complaint." This implies the Commission believed the Irrigators somehow caused, 
or acquiesced in, TKO's use of an energy content per Mcf measured at a higher pressure 
as the amount of energy contained in each Mcf of the customers' usage metered at the 
lower 13.45 psia pressure base. But again the record contradicts this. 
To begin with, nothing in the record supports a reasonable belief the Irrigators 
negotiated contract terms. Kirk Heger testified for Circle H Farms. He said he did not 
have a written contract with TKO until 2011. And even though Heger intervened in 
TKO's certificate proceedings as the Southwest Kansas Irrigation Association's president 
and conceded he did not object at that time, he noted TKO had not "disclosed to the 
Commission or to [him] that [it was] using a different pressure base to measure volume 
than [it] used to calculate the Btu factor." Tron Stegman, as a representative of Stegman 
Farms, agreed that he started paying TKO's invoices in 2007. But he also noted they did 
not have a written contract until September of 2011 and that contract did not explain how 
the MMBtu would be calculated.  
The agency's final order correctly notes:  "(1) Rome Farms' agreement does not 
appear to have been completed or executed"; (2) "Circle H Farms was unable to locate or 
produce an original contract assumed by TKO at the time of transfer of service"; and (3) 
Stegman Farms "did not have a contract with TKO prior to 2011 and had no contract with 
TKO's predecessor." But then the Commission incongruously suggested the parties 
20 
21 
 
 
 
negotiated their contracts. That is not supported by the record. And the fact TKO 
consistently used 13.45 psia for invoicing purposes throughout its time doing business in 
Kansas does not excuse its unilateral and arbitrary tampering with the energy amount it 
charged the Irrigators for without disclosing what it was doing. Haynos testified: 
 
"[A. Haynos]. . . . [I]t's really about Btu per given volume. . . . When you use a 
pressure base as a reference point, if you are going to use 13.45, fine, you can use 
whatever you want for a reference point provided you use the same data or reference 
points throughout all of your calculation. If you don't, you have two different reference 
points, you can't get it to be fungible. 
 
. . . . 
 
"Q. If the contract between TKO and its customers had a pressure base of 13.45, 
would we have a dispute here? 
 
 
"A. Not necessarily . . . . [Y]ou can't just apply it to your volume. You have to 
apply it to your Btu value as well. That's the problem." (Emphasis added.) 
 
Haynos also testified, "If you have no mention of a pressure base in your . . . 
contract . . . , we believe it goes back to the only requirement that would be there, the 
standard, which would be the old 1961 docket." But the Commission determined this rule 
was inapplicable because "[w]hat the reading of the 34,856-U Docket Rule and the 
testimony suggests is that there is not necessarily a violation for using a different pressure 
base" and decided "the 34,856-U Docket Rule is [not] a hardline rule on what pressure 
base shall be utilized . . . ." Admittedly, neither party seems to disagree about this 
conclusion, but again the evidence suggests—as well as the Commission's own 
findings—that "the actual violation here is that it was not disclosed." (Emphasis added.) 
And it is undisputed TKO never disclosed its use of a different pressure base. 
 
22 
 
 
 
As to TKO's revenue requirements, the Commission noted the parties' agreements 
authorized TKO to use a billing method that would meet its revenue requirement "to 
support the business of providing sufficient and efficient service of a natural gas public 
utility." August Ankum, who testified for TKO, said that given its revenue requirements, 
TKO should have received the same aggregate amount of money from its customers, 
even if it followed the Irrigators' preferred billing practice, so the parties' disagreement 
over pressure base "in no way means that [the Irrigators] have been overbilled." From this 
perspective, all TKO would have had to do was adjust its rates to meet its revenue 
requirement, leaving the customers no better or worse off because the customers' invoices 
would be the same. 
 
But Haynos countered Ankum's analysis, noting TKO does not have a 
Commission-established revenue requirement. Rather, TKO set its own revenue 
requirement when negotiating contracts with its customers. And TKO could have 
negotiated to satisfy its revenue needs while telling its customers about the pressure base 
discrepancy that altered the energy content of the gas it sold to them. 
 
Lastly, the order appears partially based on the Commission's factual finding that 
TKO's ultimate price remained reasonable despite its nondisclosure. That finding is 
supported by Haynos' second staff report:  "TKO gas sales rate even with the misapplied 
BTU adjustment may be a reasonable rate." But this leaves it necessary for judicial 
review purposes to decide whether that alone was enough to support rejection of the 
Irrigators' complaint about TKO's unlawful billing practice. We think not given the broad 
statutory directive. See Hanson, 58 Kan. App. 2d at 95. 
 
Considering the record as a whole, significant aspects of the Commission's factual 
basis are not supported by the evidence in the agency record. This is not simply because 
contradictory evidence exists, but because supporting evidence is lacking. At the same 
23 
 
 
 
time, the more important facts are undisputed. The Commission appears to have recast 
the testimony from Hanson and Haynos on which it chiefly relied, while ignoring the 
relevant points about how the pressure base alteration affected customers. This 
combination of contradictory evidence and lack of supporting evidence discredits the 
order's validity and justifies judicial relief from the agency action under the KJRA. 
 
In its opinion, the panel appropriately interpreted K.S.A. 66-1,205(a) by giving 
effect to its plain language. See Hanson, 58 Kan. App. 2d at 95. And its ultimate decision 
reversing the Commission's ruling is correct. The Irrigators met their burden of proving 
TKO engaged in a billing practice that was unreasonable, unfair, or unjust because the 
utility unilaterally lowered the pressure base for the volume factor without adjusting the 
energy factor to account for the pressure base difference, and did not disclose what it was 
doing to either its customers or the Commission. TKO billed the Irrigators at a contract 
rate based on energy consumed but charged them for more energy (MMBtu's) than they 
received—regardless of whether the final amount the customers paid was reasonable. 
And even if we accept TKO's representation in its brief that MMBtu measurement is 
inherently imprecise, its billing practice stealthily injected an additional imprecision into 
its customer charges. TKO's calculating method constitutes an unlawful practice.  
 
Of the seven considerations the Commission provided to support its decision, only 
the reasonable rates finding has a modicum of evidentiary support, but this is insufficient 
to carry the day on a billing practice complaint in light of the remaining uncontroverted 
evidence and statutory requirements. The Commission erred when it concluded the 
undisclosed "pressure base" practice did not violate K.S.A. 66-1,205(a) and K.S.A. 66-
1,206(a). And despite TKO's argument to the contrary, remand is not required for the 
Commission to consider again the legal question of whether this undisclosed and material 
pricing practice violated state law. See State v. Wilson, 308 Kan. 516, 527, 421 P.3d 742 
(2018) ("[T]he record is fully developed with respect to the narrow question of law 
24 
 
 
 
presented, and the parties do not dispute the relevant facts. For these reasons, a remand is 
unnecessary."). We affirm the panel's decision reversing the Commission on this point. 
 
REMEDY 
 
When the district court found TKO's billing practice unlawful, it remanded the 
case "to the Commission to calculate and order that TKO make refunds to its irrigation 
customers based on the 9.5% overbilling from the date TKO first began operations in 
Kansas in 2007 to the present." (Emphasis added.) The panel held K.S.A. 66-1,206(a) 
grants the Commission the authority to initially craft an appropriate remedy when faced 
with a utility's unlawful practice under K.S.A. 66-1,205(a), rather than the district court. 
Hanson, 58 Kan. App. 2d at 96-97. We agree with the panel.  
 
But that is not the precise question advanced by TKO in this court. The 
Commission ruled it "only had [administrative] jurisdiction over TKO from April 12, 
2010 to the present." And the panel did not reach TKO's alternative argument that the 
district court ignored the Commission's jurisdictional finding by ordering a refund dating 
back to 2007. Hanson, 58 Kan. App. 2d at 97 ("Because we are reversing the court's 
refund order, we need not decide whether the timeframe of the previously ordered 
refunds—from 2007, not 2010—was also erroneous."). Here, TKO resurrects its 
jurisdictional question and asks us to give the Commission direction about its 
jurisdictional reach if we agree with the panel to remand for imposition of a remedy, 
which we do. 
 
Like the panel, we fail to see why this should be considered now. This 
jurisdictional issue is either not ripe since the Commission has yet to craft an appropriate 
remedy, or moot since the panel reversed the district court's refund order. See State ex 
rel. Morrison v. Sebelius, 285 Kan. 875, 896, 179 P.3d 366 (2008) (courts do not consider 
25 
 
 
 
issues that are not ripe); State v. Roat, 311 Kan. 581, 586, 466 P.3d 439 (2020) (generally 
courts do not address moot issues). This is a fatal defect in achieving further judicial 
review at this juncture. See Sierra Club v. Mosier, 305 Kan. 1090, 1102, 391 P.3d 667 
(2017) ("Kansas courts do not consider issues unless the issues are ripe, meaning they 
have 'taken fixed and final shape rather than remaining nebulous and contingent.'"). We 
decline to address this anticipatory question.  
 
Judgment of the Court of Appeals affirming in part and reversing in part the 
district court is affirmed on the issues subject to review. Judgment of the district court is 
affirmed in part and reversed in part. The case is remanded to the Kansas Corporation 
Commission with directions.