two thousand and seven there and which included a settlement it was a black box item on the initial rates were charged between the time they were approved and  required to file a constant revenue study this month which may result in when it happened after twenty thirteen but a big thank you it's important to remember that the benefits must be substantial and quantifiable and the comparison is the difference between the net book value and the purchase price not the purchase a speculative estimate of a hypothetical construction this comes out of the united case which is the foundational pace for inclusion of acquisition premium premiums and rights the united case only address the second the second who are you saying that the it costs more than the construction yes that's what they said and want more but you listen to determine that the proposal met the second prong of the test since the conversion would result in it was a necessarily it doesn't necessarily become a benefit that there was enough in that case and he didn't need the n f l in several cases for example in cities it was a nothing because kansas city needed more natural gas so they were either going to build a new pipeline to bring for the second prong but the purchase price was less than the cost of constructing a comparable facility so now now we have this court last saying longhorn second prong in just the way the commission is using it today is that a problem for you i don't think soon this was and then i believe rio grande is a very different case in many ways but when i think it's not under the natural gas act it's a common carrier under that and it's a commerce act and in rio grande the court carefully described there right now can procedure i mean the i c a for a common carrier and it's a quite quite a different rate making procedure it's under three forty two t isn't necessarily in this case it was not what now is your position then that is to the second prong that's a sure hand in effect what we've been discussing so far and that when you look at the cases themselves read in the factual context your case is different arguably i mean the hypothetical would be no one you serve you say you represent national guess consumers but in terms of representing the commission of the missouri public service commission it is your point that a pawing the second test simply based odd purchase price would not make any sense in a jurisdiction where there is no need and there is no  desire for war and there will be increased raids to the very consumers who are supposed to benefit it is that the type of argument you're making it's going forward you're agreeing that we have to find the test in the way you've said and that burke commission has defined the tests that way but it can't be that any time there is this price differential there is not necessarily the benefit that the second prong requires i'm saying that it and estimate that it costs more to construct when applied to the specific facts of a case because exactly what you say your honor so it must be a have been met and your brief argues well it didn't consider certain evidence that was before i guess because you think it didn't discuss it enough not at five twenty five paragraph one thirteen order or opinion five twenty five paragraph one thirteen for fact by reef why not leave refuse to consider evidence contrary to its desired result it said since we have already found that on this basis the company has met the second on that we don't have to look at contrary evidence and the evidence was that a customer received no benefits and missouri's expert this fish or let me say that this case is unique because we have operational history between the time that the acquisition premium was to be included and when it was actually considered by f this fishers testimony is clear that during the first three years of operation nate did not have any customers no customers saw benefit to using that pipeline except for an affiliate with a sixty percent discount is whether or not the customer's benefit is the question of the sort of issuance of the certificate and that when the certificate was issued in august two thousand and two disagreed that's what should have been challenged but nobody challenge the certification have at least got their response to correct that maybe their response to us yes or why isn't that the why isn't that right that the question of judge rogers points out that it is and i understood your argument so mostly that yes it's nice if the price of it is cheaper than building new pipeline but if nobody in missouri is going to use needed this additional supply of gas they needed it ok and there were two ways of providing it but there is no dispute that they needed once you know that they needed it isn't that a substantial benefit to get it at a cheaper price well you can put two things in your hypothetical that would be true if they needed it which they've shown that they did not vote but why can't they conclude in the certification proceeding that they need that they did not consider do need the additional facility because they need more gas they need need to first five supply or whatever isn't always true that the customers will benefit if the for so we can be obtained more cheaply either by their gas supply options not just any customers not people in maryland or texas but in missouri they yes yes yes i don't think we have been able to quantifiable benefit but in this case they say again from just reading a little more as we go along here again from the two thousand two decision such impacts will be outweighed by the benefits of missouri is a new pipeline that will ha monetary terms and i don't believe in hansen competition has been considered to be quantified what i think it's in bridge pay p c case for specific places that we can't quantify competition a benefit for the questions from about i think you certification of this pipeline where there was none before this is this is taking we haven't dormant pipeline there was no interstate gas pipeline providing this service before and the commission said it is required by the can public convenience as that this pipeline should be put into use but the pipeline in running across the geographic area also runs across a state that is overwhelmed with natural gas it doesn't need a drop more but it's clear from her perspective that the region needs more must the people within that jurisdiction that does not need any more also pay for something that they are claiming is absolutely no benefit to them and is increasing their their rate fisher's testimony and the report doesn't make that case she was talking about two thousand and six the merger the certification of the merger and the idea that that gas might be passed through west east in two thousand and two this pipeline was was certificate is to provide interstate service incoming only and the reason cited in that two thousand to order and i think we all agree that coming into missouri into missouri and even then i believe i remember that the relevant paragraphs  my lines the only source of gas coming into them was from a panhandler connection at the northwestern part of the state certificate in this trans mississippi line was going to make it possible to interconnect to the m r t line in illinois and bring additional supplies into the state of missouri that were needed because of the limitation on that pipeline at least of interconnection with panhandle that was the specific finding in two thousand and two going to the itself argued in its rear aggressed and in its reply brief responding to us where we had cited a few things from the benefits of the two thousand and six order that was that was our brief that was not the commissions or the commissions or consistently cited paragraph eighteen of the two thousand  order that and the reason let me explain the reason for this reason is that at the time that this pipeline is created in essence where there was no pipeline providing any kind of natural gas service under or at least you know th pipeline under the mississippi river did not exist for all practical purposes before two thousand and two the commission found that it was in the public you mean it's in the sesame to have an interstate pipeline connecting to m r t to bring additional supplies  missouri under that section seven finding you can build a pipeline and i'm a section seven finding like that and the commission i mean many many sections having pieces have that result you can build it so the logic behind the commission approach to the acquisition premium in a conversion case where there's no concern about double paying for depreciation by taking an existing gas pipeline and and changing the cost of it where it didn't exist where you had a dormant oil pipeline that you converted which the commission also said in the orders we consider to be a positive thing as in longhorn using an underutilized facility or in this case a dormant facility if you can convert it and use it for less than building a brand new one what is the answer to you in denial would have been ok yes we won't do it will be something else then you haven't saved human anybody and you benefit well in that if the pipeline decided that it wasn't worth automatically an acquisition premium will be allowed no because you don't have to show what it would have cost to construct the new one and the man i well i did seems to be going to be almost all the time if not necessarily know how often most how often would be well i think we address that distinction in that i want to see there were hearing order where it said that it was charging an incremental rate for for that new pipeline in that he says but that was the case here too in two thousand to again this certificated this pipeline is certainly has been bringing supply i mean i don't know as much about the operational history because the acquisition premium should have been decided in two thousand and two and in this in this home proceeding was decided as of two thousand the construction cost of that pipeline would be the initial rate base they would be paying for that so the logic here is that if you get that same pipeline at less than it cost to construct it that is the benefit because it and i think the reason it gets muddy is because the evidence that amarin had put in this in this proceeding was all about what happened after two thousand and six and the reason that the commission it didn't ignore their evidence in paragraph fifty pipeline and and you see in this case when it was certificate the rate payers were going to be who was whoever was paying to ship gas in from illinois into missouri from the m r t system that had not been previously available because all they consumers in another state but that the rate payers included missouri rate payers who didn't need any more would that be a different case i use it they wouldn't be paying well if they were they were you they were good it's not like it's a pipeline that doesn't have any outlets in missouri it does and they are paying some they're paying for the gas and pay up tain but they don't need any more they don't need any certainly i should add that in a certificate public means of this has to be the commission it as part of i think it's certificate policy statement does examine whether existing customers of a pipeline will be subsidising new customers now  wasn't an issue in two thousand to because there were no existing customers there wasn't paid like in two thousand and six that was a concern that misery and every one point it was just interesting i know but that was not involved in the two thousand to perceive this i can i say this is where we're getting a little muddled because of the two thousand and six proceeding that merged the pipelines into a single system and put a zone great design and everything that missouri and amber and we're talking about about how we didn't want this we don't want it folded into the rate for what used to be our his shop pipeline it was around two thousand six issues not to present to and the commission in the two thousand and six order addressed the question of whether existing customers would be subsidising  customers it specifically addressed that in two thousand and six it actually found against the pipeline and found for missouri on rehearing in that case none of that is here that is a region as you know from some of the problem early reference in a  rate base of that facility is said as of two thousand and two it didn't happen for a variety of reasons and that's why we did this proceeding and that's why all the data and most of the arguments were about two thousand in two thousand and six the for the merge system and the two thousand and two initial rate base of the one piece of it carries forward into that so then all we're arguing about we're not  arguing this is not that case the question then which was fully addressed in two thousand and six and not appeal is should we have this merger is this merger bringing these two intrastate pipelines into an interstate system that clearly some parties didn't want and that's fine the commission considered all that wasn't an appeal they all is certain parties also didn't like that the former the t m p facilities the former interstate and one of the henshaw pipelines were combined into zone one of the rate design that's a rate design issue which the commission fully considered and even found in part for them also not appealed when we're talking about what is the initial rate base of the t m p facility regard most of what happens later with merger that is that was decided separately and not appealed in that aspect and the rate design issue which also was not appealed in that aspect and which will come up again in future section fo separate issues because the question is what initial rate base did the t m piece facility bring in and what should it have brought in and that's what this is going back to look at the two thousand two certification only you know the test and i understand it's better to not have to pay for more more expensive if you can refurbish a home but in a case like this where the evidence man is so frail haven't materialized in this case why that's why they're now having to pick up the response of the pipeline not having sufficient demand well i just don't think that's the case and i believe that to intervene or to discuss more and more of the operating history as part certification order the commission did look at what missouri interstate was the company at the time what it expected in terms i think it it projected over fifty percent  capacity that they did they actually put in evidence in that proceeding of how much gas they expected to be moving and and what they thought their rate recovery would be done that and i don't remember the specifics of that but that in every certification case the commission considers that it's not going to certify one just because you say we think this would be a great idea the commission doesn't look at those things but i've always understood the acquisition premium to be a separate inquiry it's undertaken after patient to know that it's not that it's that then then why do we have all this case law why is it all why having the commission for the last twenty years and why haven't our cases for the last twenty years and why are we talking about acquisition premiums of course pension benefit because  case and many of the nine conversion cases if you come in and try to say well this is going to benefit people in these various ways it's extraordinarily hard to quantify and that's why no one has succeeded in doing it in a conversion case the logic as the commission ha explained it if we want of if you could have built a new one if we granted you a certificate that could have built a new one and you converted an underutilized facility often in the old dormant oil facilities something like that which which there is a benefit to doing we want to encourage the commission is a that's the one case where it is quantifiable because you can say here's what it cost construct like this with my comments with the word could have i suppose seven that when we when we find something to be when the commission finds something to be required by the public convenience and the stress of the number one bill is that they might refurbish you miss thing merging these things might might have made sense and the company  and the pipeline might be willing to do it at that price but the reason they want to build a new pipeline is because there wouldn't be enough to manage to subsidize the expenses of a new pipeline and so the demand relationship only supports the cost per refer baseman for using the conversion of the old one but it wouldn't support the other one is the benefit of them because they would say no we have to build a new one we're not doing so once upon a plan and if you and that can happen we can get a section seven certificate and then decide not build i guess the commission hasn't in any of these cases made a different analysis of finding out whether it is in the public think public me it's a necessity to have it and then deciding as a matter of accounting an again the reason it's quantifiable is because when you build a pipeline the construction costs or your initial rate base i mean that that's just basic so if you want to get in the pipeline for less that quantifiable differential is  its test and remember we're point commission testing commissioned interprets this task to be met when the acquisition cost is lower than the cost construction and they find that because they believe that result in lower rates and they specifically stated that in this order and they specifically stated in the rehearing order that the acquisition cost was lower than the cost construction that results in lower rates to the consumers and that is the would construct that provides economic benefits because it results in a lower rate is there another case you can point me to a comparison case where they have my version is cheaper than new pass where with all due respect in missouri of water in the national interest to protect the certificate question is actually a national question and the commission clearly has an interest in encouraging the reuse of underutilized unused facilities in lieu of moving struction especially especially when it costs less to acquire that it would have to build and here that's really undisputed mission were referred to the secular speculative evidence on cost of construction it's not speculative at all there is significant evidence in the record by the expert that was not cross examined that expert was project with a one point four million dollars differential which is you know fourteen or fifteen percent percent your other cases where on a percentage basis the differential is even smaller so i think here the commission has correctly appl so that there would be no subsidization the race that went into effect on january first two thousand and ten or part of the watch box settlement which the missouri commission was a portal so those rates are just united case the fact that it may be difficult or perhaps impossible to scavenge the dollar benefit that benefits accrue to consumers in excess of the original cost it's not the difference did not recognize the existence of the acquisition premium in two thousand and two so they could not have found benefits that resulted from the acquisition premium in the two thousand and two case there and that certificate case did not force customers to pay and they and the courts opinions did list benefits of lower cost lower rates i'm sorry lower rate we did challenge the inclusion of the acquisition premium in rights in two thousand and two in front of her which the court discussed in a three man the order and you found it arbitrary and capricious that they did not address the acquisition  decision with instructions that first consider all the evidence explained its policy changes and lowering the burden of proof and why there are special circumstances when in fact in bridge they say there are no special circumstances