Court Opinion

ID: 4561888
Source: CourtListenerOpinion
Date Created: 2020-09-01 13:06:38.003964+00
Date Added: 2024-06-11T11:51:45.343328
License: Public Domain

IN THE MISSOURI COURT OF APPEALS
                   WESTERN DISTRICT
IN THE MATTER OF THE          )
APPLICATION OF SPIRE          )
MISSOURI, INC., TO CHANGE     )
ITS INFRASTRUCTURE SYSTEM     )
REPLACEMENT SURCHARGE         )
IN ITS SPIRE MISSOURI EAST    )
SERVICE TERRITORY; IN THE     )
MATTER OF THE APPLICATION     )
OF SPIRE MISSOURI, INC., TO   )
CHANGE ITS                    )              WD83159
INFRASTRUCTURE SYSTEM         )              Consolidated with WD83162
REPLACEMENT SURCHARGE         )
IN ITS SPIRE MISSOURI WEST    )              FILED: September 1, 2020
SERVICE TERRITORY,            )
          Appellant-Respondent,
                              )
v.                            )
                              )
MISSOURI PUBLIC SERVICE       )
COMMISSION,                   )
                 Respondent, )
                              )
MISSOURI OFFICE OF PUBLIC     )
COUNSEL,                      )
        Respondent-Appellant. )
                 Appeal from the Public Service Commission
              Before Division Four: Cynthia L. Martin, C.J., and
                  Alok Ahuja and Thomas N. Chapman, JJ.
      Spire Missouri, Inc. appeals from a Report and Order issued by the Public

Service Commission. The Report and Order addressed Spire’s applications to adjust

the Infrastructure System Replacement Surcharge for its East and West service
territories, to reflect costs Spire incurred between October 2017 and January 2019.
The Commission granted Spire’s applications in large measure. It found, however,

that it had no jurisdiction to address part of Spire’s applications because the

applications concerned costs which were the subject of a pending appeal in this

Court. The Commission also found that certain of Spire’s claimed costs were not

eligible to be included in an Infrastructure Surcharge, because they related to

Spire’s replacement of plastic piping which was not worn out or deteriorated.

      Spire appeals. The Office of Public Counsel cross-appeals, arguing that the

Commission’s Report and Order allows Spire to include certain ineligible costs in its

Infrastructure Surcharge. We affirm.

                                Factual Background
      On January 14, 2019, Spire filed applications with the Commission in which

it requested an increase in the Infrastructure Surcharge it was permitted to charge

customers, to reflect the cost of pipeline replacement projects it had conducted in its

East and West service territories.1 Spire’s applications sought to adjust its

Infrastructure Surcharge to recover costs incurred during two separate time

periods: October 1, 2017, through June 30, 2018; and July 1, 2018, through

January 31, 2019.

      By statute, “[g]as corporations are permitted to recover certain infrastructure

system replacement costs outside of a formal rate case through a surcharge on their

customers’ bills.” In re Verified Application & Petition of Liberty Energy (Midstates)

Corp., 464 S.W.3d 520, 522 (Mo. 2015). As explained in § I of the Discussion which

follows, this Court has held that Spire is entitled to include in its Infrastructure

Surcharge only the cost of replacing worn or deteriorated cast iron or bare steel

pipes to comply with state or federal safety requirements. We held that Spire is not

      1      Spire was formerly known as Laclede Gas Company. It acquired Missouri
Gas Energy in 2013. Spire’s East service territory comprises the area formerly served by
Laclede Gas Company, while its West service territory was formerly operated by Missouri
Gas Energy.

                                            2
entitled to include in its Infrastructure Surcharge the cost for replacing newer

plastic piping which is not itself worn or deteriorated, and which is not subject to a

governmental safety mandate.

      Until approximately ten years ago, Spire replaced older cast iron or steel

pipes in a piecemeal fashion. Beginning in approximately 2010 or 2011, Spire

implemented a strategic program to redesign and replace its gas distribution

facilities on a system-wide basis. Under its new strategic replacement program,

Spire abandons existing distribution facilities on a neighborhood-wide basis, and

bypasses and replaces the existing piping with smaller-diameter plastic pipes

operating at a higher pressure than the old system. In re Application of Laclede

Gas Co. to Change its Infrastructure Sys. Replacement Surcharge v. Office of Pub.

Counsel, 539 S.W.3d 835, 837 (Mo. App. W.D. 2017) (“Spire I”) (noting the gas

utility’s new strategy “focused on replacing entire neighborhood systems at one

time”). The Commission found that, under its strategic replacement program, Spire

was replacing between 60 and 65 miles of cast-iron piping in its Missouri East

service territory per year, and approximately 120 miles of such piping in its

Missouri West territory.

      Most of the costs Spire sought to recover in its January 2019 applications
arose from its strategic replacement program. By retiring existing piping in place

and replacing it on a neighborhood-wide basis, this systematic program replaces

worn out or deteriorated cast-iron or steel pipes, and newer plastic piping, in a

single project. Because we have held that only the cost of replacing the metal

piping is eligible for inclusion in Spire’s Infrastructure Surcharge, its strategic

replacement program gives rise to cost-allocation issues.

      To comply with our prior decisions holding that the cost of replacing plastic

pipe must be excluded from the Infrastructure Surcharge, Spire supported its
January 2019 applications with cost studies for each individual project conducted

                                           3
pursuant to its strategic replacement program – 509 separate cost studies in all.

These project-specific cost studies compared the costs of retiring and replacing the

plastic pipe as part of a neighborhood-wide project, with the cost of reusing the

existing plastic pipe (while replacing only the worn out or deteriorated metal pipe).

Where one of its cost studies showed that the cost of replacing plastic piping was

less than the cost of replacing only the metal pipe, Spire sought to recover the entire

cost of the specific project through its Infrastructure Surcharge. Spire justified the

recovery of the entire project cost by arguing that replacing the plastic piping added

no incremental cost to the particular project, and actually resulted in a cost savings

for ratepayers compared to replacing the metal pipe alone. On the other hand,

when its cost analysis showed that it was more expensive to replace the plastic pipe

than to reuse the existing pipe on a particular project, Spire excluded the increased

cost from its Infrastructure Surcharge request (on the theory that the increased

incremental cost was attributable solely to the replacement of plastic components

which were not eligible for inclusion in the surcharge).

      The PSC’s Staff agreed with Spire’s cost-allocation approach. It argued,

however, that the Commission lacked jurisdiction to adjust Spire’s Infrastructure

Surcharge for costs incurred between October 1, 2017, and June 30, 2018, because
the Commission had addressed those same costs in an earlier proceeding, and the

Commission’s Report and Order addressing Spire’s prior surcharge-adjustment

request was pending on appeal in this Court. See Nos. WD82302 and WD82373.

      The Office of Public Counsel (or “OPC”) objected to Spire’s applications, and

requested an evidentiary hearing.

      The Commission held an evidentiary hearing on April 3 and 4, 2019, in which

Spire, PSC Staff, and OPC participated. Following the hearing, the Commission

ordered Staff to perform calculations allocating the costs of Spire’s strategic
replacement projects based on the relative length of the cast-iron or steel pipes

                                           4
replaced in a particular project, as compared to the length of plastic piping replaced

in the project. In its final Report and Order, the Commission explained that it

requested these percentage-based calculations because “no party had provided a

calculation as to what that party believed was the specific cost of the replacement of

ineligible plastic mains and service lines to be removed from Spire’s” surcharge-

adjustment request, “even though all parties to the case had access to the work

orders and other information necessary to identify that cost.”

      Staff filed the requested report on April 25, 2019, and a correction on April

29. Spire filed a response on April 30, 2019. While Spire disagreed that the

percentage-of-total-length methodology accurately represented the cost attributable

to replacing plastic pipe, it agreed that Staff “has accurately calculated the amounts

to be excluded from [its surcharge-adjustment] request in accordance with the

Commission’s directive.”

      The Commission entered its final Report and Order addressing Spire’s

January 2019 applications on August 21, 2019. Consistent with Staff’s

recommendation, the Commission dismissed the portions of Spire’s applications

which sought to recover costs incurred from October 2017 through June 2018. The

Commission reasoned that it had previously addressed the surcharge-eligibility of
“the same costs from the same time period”; because its earlier decision was then

pending on appeal, the Commission held that it did not have jurisdiction to hear

new evidence and make a different decision concerning those costs.

      The Report and Order then turned to the costs incurred between July 2018

and January 2019. The Commission’s Report and Order found that “[t]here was

little, if any, evidence that the non-cast iron or bare steel components (plastic

components) were in a worn out or deteriorated condition. In fact, the evidence

generally showed that the plastic pipe was not worn out or in a deteriorated
condition.” The Report and Order found that “the plastic components, whether part

                                           5
of the mains or service lines, are not being replaced because they are themselves in

worn out or deteriorated condition, but because they are part of the systematic

replacement of all the pipe.”

       The Report and Order rejected Spire’s cost studies. It found that Spire’s

analyses failed to properly allocate the costs of neighborhood-wide pipe replacement

projects between the replacement of deteriorated metal piping, and the replacement

of plastic piping.

              Spire Missouri argues that the costs to replace the plastic
       components were less than the costs of reusing the plastic components
       and, therefore, there are no incremental costs of replacing the plastic.
       However, this argument does not align with the statutory
       requirements or the Court’s interpretation of those requirements and
       is an inappropriate comparison. [¶] The ISRS [or Infrastructure
       Surcharge] was not designed to allow early recovery of system-wide
       replacement of infrastructure, only the replacement of worn out or
       deteriorated infrastructure. Plastic components that are not otherwise
       worn out or deteriorated cannot become ISRS eligible as part of a
       systemic redesign.
       Rather than employing Spire’s cost studies, the Commission determined the

plastic-related costs to be excluded from the Infrastructure Surcharge using the

percentage calculations it had ordered Staff to prepare.

       Spire’s January 2019 applications also sought to include in its Infrastructure
Surcharge certain costs it had incurred under “blanket work orders.” As explained

in the Commission’s Report and Order, “[b]lanket work orders are work orders that

cover a large number of tasks which remain open for an extended period and

contain items that are not planned replacement projects.” In order to identify the

costs incurred under blanket work orders which were eligible for inclusion in its

Infrastructure Surcharge, Spire organized the tasks performed under the blanket

work orders into categories, and determined whether particular categories of tasks

were eligible for inclusion in the surcharge. The Report and Order explained that

                                          6
            Tasks [performed under blanket work orders] that Spire
      Missouri considered ISRS eligible were mandated relocations,
      replacements due to leak repairs and corrosion inspections, and
      replacement of copper and cast iron pipe. ISRS ineligible items
      included relocations at a customer’s request, replacements due to
      excavation damage, replacement of plastic not related to a leak repair,
      and installation of new services.
(Footnotes omitted.) The Report and Order noted that “Staff agreed with Spire

Missouri’s blanket work order task categorizations” and eligibility determinations,

and that “Public Counsel also indicated several times through its attorney and

witness at the hearing that it is not challenging the blanket work orders in this

case.” The Report and Order adopted Spire’s recommended approach for costs

incurred under blanket work orders.

      Spire and OPC each appealed from the Commission’s Report and Order.

Their appeals were consolidated, and are both resolved by this opinion.

                                Standard of Review
      We review the Commission’s order pursuant to § 386.510, RSMo Cum. Supp.

2019. Appellate review under § 386.510 is “two-pronged: first, the reviewing court

must determine whether the [Commission]’s order is lawful; and second, the court

must determine whether the order is reasonable.” In re Mo.-Am. Water Co., 516
S.W.3d 823, 827 (Mo. 2017) (citation and internal quotation marks omitted). “The
[Commission]’s order is presumed valid, and the appellant has the burden of

proving that the order is unlawful or unreasonable.” Id. (citation omitted).

Appellant must show the Commission’s order is unlawful or unreasonable “by clear

and satisfactory evidence.” In re Union Elec. Co., 422 S.W.3d 358, 364 (Mo. App.

W.D. 2013).

      “The lawfulness of an order is determined by whether the [Commission] had

statutory authority to issue the order.” In re Rate Increase Request for Liberty Utils.

(Mo. Water), LLC, 592 S.W.3d 82, 87 (Mo. App. W.D. 2019) (citation and internal
quotation marks omitted). We review the lawfulness of the Commission’s order de

                                          7
novo. Id. (citation omitted). The reasonableness of the Commission’s order is

determined by whether the order is “supported by substantial, competent evidence

on the whole record; the decision is not arbitrary or capricious; and [whether] the

Commission has . . . abused its discretion.” Spire I, 539 S.W.3d at 838 (citation and

internal quotation marks omitted).

      “All factual findings of the Commission are presumed correct, and if

substantial evidence supports either of two conflicting factual conclusions, the Court

is bound by the findings of the administrative tribunal.” State ex rel. Aquila, Inc. v.

Pub. Serv. Comm’n, 326 S.W.3d 20, 22 (Mo. App. W.D. 2010) (citation and internal

quotation marks omitted).

      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.
In re Kansas City Power & Light Co.’s Request for Auth. to Implement a Gen. Rate

Increase for Elec. Serv. v. Mo. Pub. Serv. Comm’n, 509 S.W.3d 757, 764 (Mo. App.

W.D. 2016) (citation and internal quotation marks omitted).

                                     Discussion
      We first address Spire’s challenges to the Commission’s Report and Order,

and then address the single Point raised in Public Counsel’s cross-appeal.

                                           I.
      Spire’s first Point argues that the Commission’s Report and Order is

unlawful, because it failed to permit Spire to include in its Infrastructure Surcharge

costs which Spire contends are statutorily eligible for such treatment. Because we

conclude that the Commission could properly determine that Spire’s cost studies did

                                           8
not accurately identify its “costs for eligible infrastructure system replacements,”

§ 393.1012.1,2 we reject Spire’s first Point.

                                             A.
       We begin by describing the relevant statutory framework. As we discuss in

§ I.C below, the statutes governing gas utilities’ use of Infrastructure Surcharges

have been substantially amended, with an effective date of August 28, 2020. No

party to this appeal argues that the 2020 statutory amendments should apply here.

We therefore apply the statutes which were in effect at the time Spire incurred the

costs at issue, and when the Commission determined the eligibility of those costs for

inclusion in Spire’s Infrastructure Surcharge.

       As a general proposition,

       Utility rates are established periodically by proceedings before the PSC
       known colloquially within the industry as “rate cases.” Rates are
       based on the amount of revenue necessary to build, maintain, and
       operate the utility plants and associated infrastructure (referred to as
       “rate base”), plus a reasonable rate of return for utility company
       investors. Unless otherwise provided for by law, [a regulated utility] is
       not permitted to adjust the rate it charges customers until its next rate
       case. Even if [the utility] found it necessary to build [new facilities]
       years before its next rate case, unless expressly permitted to by
       statute, it would not ordinarily be allowed to recoup its expense or earn
       profit on that capital investment in the interim. This phenomenon is
       referred to as “regulatory lag.”
Union Elec. Co. v. Mo. Pub. Serv. Comm’n, 591 S.W.3d 478, 482 (Mo. App. W.D.

2019) (citation omitted).

       The statutes authorizing Infrastructure Surcharges create an exception to

this general ratemaking paradigm. Under § 393.1012.1, a gas utility is entitled to

petition the Public Service Commission, independent of a general rate case, to

establish an Infrastructure System Replacement Surcharge (or “ISRS”) to be

      2      Unless otherwise indicated, statutory citations refer to the 2016 edition of the
Revised Statutes of Missouri.

                                             9
charged to consumers “to provide for the recovery of costs for eligible infrastructure

system replacements.” The utility may change the rate of the surcharge up to twice

per year. § 393.1015.3. If the Commission determines that the utility’s application

complies with the relevant statutes, it “shall enter an order authorizing the

corporation to impose an ISRS that is sufficient to recover appropriate pretax

revenue” to recover its eligible infrastructure replacement costs. § 393.1015.2(4).

      The relevant statutes provide that, in addressing a utility’s petition to

establish or change an Infrastructure Surcharge, “[n]o other revenue requirement

or ratemaking issues may be examined.” § 393.1015.2(2). The statutes specify that

             Commission approval of a petition, and any associated rate
      schedules, to establish or change an ISRS pursuant to the provisions of
      sections 393.1009 to 393.1015 shall in no way be binding upon the
      commission in determining the ratemaking treatment to be applied to
      eligible infrastructure system replacements during a subsequent
      general rate proceeding when the commission may undertake to review
      the prudence of such costs. In the event the commission disallows,
      during a subsequent general rate proceeding, recovery of costs
      associated with eligible infrastructure system replacements previously
      included in an ISRS, the gas corporation shall offset its ISRS in the
      future as necessary to recognize and account for any such
      overcollections.
§ 393.1015.8.

      “Eligible infrastructure system replacements” are defined as
      gas utility plant projects that:
             (a)   Do not increase revenues by directly connecting the
      infrastructure replacement to new customers;
             (b)    Are in service and used and useful;
            (c)    Were not included in the gas corporation's rate base in its
      most recent general rate case; and
             (d)   Replace or extend the useful life of an existing
      infrastructure.
§ 393.1009(3). “Gas utility plant projects” is defined in relevant part as “[m]ains,
valves, service lines, regulator stations, vaults, and other pipeline system

                                          10
components installed to comply with state or federal safety requirements as

replacements for existing facilities that have worn out or are in

deteriorated condition.” § 393.1009(5)(a) (emphasis added).

                                           B.
      This is not the first time that this Court has addressed the eligibility for

inclusion in an Infrastructure Surcharge of costs incurred through Spire’s strategic

replacement program. In Spire I, 539 S.W.3d 835, we addressed Spire’s effort to

recover costs incurred between March 1 and October 31, 2016, through an

Infrastructure Surcharge. We held that the Commission erred by permitting Spire

to include in its surcharge the entire cost of replacing segments of its existing gas

distribution system (including cast-iron, steel, and plastic pipes) as part of its

strategic replacement program. We held that, under the plain language of

§ 393.1009(5)(a), costs incurred to replace plastic pipe which was not itself worn out

or deteriorated, and which was not itself the subject of a governmental safety

mandate, was not eligible for inclusion in an Infrastructure Surcharge. We

emphasized that § 393.1009(5)(a) “clearly sets forth two requirements for

component replacements to be eligible for cost recovery under ISRS: (1) the

replaced components must be installed to comply with state or federal safety

requirements and (2) the existing facilities being replaced must be worn out or in a

deteriorated condition.” 539 S.W.3d at 839.

      In Spire I, the Commission had justified Spire’s recovery of its entire

strategic replacement program costs on the theory that the plastic components of

the replaced system were “patches” which “constituted ‘an integral component of the

worn out and deteriorated cast iron and steel pipe.’” Id. We disagreed. We

emphasized that the Missouri Supreme Court “has found this [‘worn out or

deteriorated’] requirement to be mandatory and has interpreted it narrowly.” Id.
“This effort to assign ISRS eligibility to plastic pipes that are not worn out or

                                           11
deteriorated by evaluating an entire neighborhood system as a singular unit finds

no support in the plain language of section 393.1009(5)(a).” Id. (footnote omitted).

             We recognize that the replacement of worn out or deteriorated
      components will, at times, necessarily impact and require the
      replacement of nearby components that are not in a similar condition.
      Our conclusion here should not be construed to be a bar to ISRS
      eligibility for such replacement work that is truly incidental and
      specifically required to complete replacement of the worn out or
      deteriorated components. However, we do not believe that section
      393.1009(5)(a) allows ISRS eligibility to be bootstrapped to components
      that are not worn out or deteriorated simply because that are
      interspersed within the same neighborhood system of such components
      being replaced or because a gas utility is using the need to replace
      worn out or deteriorated components as an opportunity to redesign a
      system (i.e., by changing the depth of the components or system
      pressure) which necessitates the replacement of additional
      components.
Id. at 839-40 n.5.

      On remand from our decision in Spire I, Spire presented cost studies to the

Commission which it had performed on ten sample work orders. According to Spire,

those cost studies showed that, in nine of the ten projects it analyzed, the

replacement of plastic pipe as part of a neighborhood-wide project actually

decreased Spire’s total cost, as compared to replacing only the metal components

and reusing the existing plastic piping. Spire therefore contended that, in the
majority of its strategic replacement projects, it had no plastic-related costs which

were ineligible for inclusion in its Infrastructure Surcharge. The Commission

declined to adopt Spire’s approach. The Commission concluded that Spire had

analyzed “far too few work orders” to permit the Commission “to extrapolate from

those nine work orders and reach a similar result in the hundreds of work orders

that Spire Missouri did not analyze.” In re Application of Laclede Gas Co. to

Change its Infrastructure Sys. Replacement Surcharge, GO-2016-0332 & GO-2016-
0333, 2018 WL 6724346, at *9 (Mo. P.S.C. Sept. 20, 2018).

                                          12
      The Commission’s 2018 remand order also explained that Spire’s cost studies

were simply “irrelevant” to the question presented in an Infrastructure Surcharge

proceeding:

      [Spire’s] argument improperly intermixes the issue of prudency, which
      is determined in a general rate proceeding, with eligibility, which is
      the appropriate determination in an ISRS proceeding. So, Spire
      Missouri’s arguments regarding prudency, cost avoidance, and
      economic efficiency are irrelevant to the Commission’s conclusion
      in these cases.
Id. (emphasis added).

      Despite its statement that Spire’s arguments concerning relative cost were

“irrelevant,” the Commission’s 2018 remand order contained the following dictum:

             In the future, if Spire Missouri wishes to renew its argument
      that plastic pipe replacements result in no cost or a decreased cost of
      ISRS, it should submit supporting evidence to be considered, such as,
      but not limited to, a separate cost analysis for each project claimed,
      evidence that each patch was worn out or deteriorated, or evidence
      regarding the argument that any plastic pipe replaced was incidental
      to and required to be replaced in conjunction with the replacement of
      other worn out or deteriorated components.
2018 WL 6724346, at *10.

      Ultimately, in the remand proceeding the Commission adopted a

methodology proposed by Staff and Public Counsel to allocate project costs between
the surcharge-eligible replacement of worn out or deteriorated metal pipe, and the

replacement of ineligible plastic pipe. This methodology calculated the total length

of main and service lines replaced on a particular project, determined the

percentage of that total length consisting of plastic pipe, and then applied that

percentage to the total project cost. Id.

      Spire and Public Counsel appealed to this Court. In “Spire II,” we affirmed

the Commission’s rejection of Spire’s incremental-cost arguments, and its reliance

on a percentage methodology to allocate project costs between the surcharge-eligible
and surcharge-ineligible components. In re Application of Laclede Gas Co. to

                                            13
Change its Infrastructure Sys. Replacement Surcharge v. Mo. Pub. Serv. Comm’n,

593 S.W.3d 582 (Mo. App. W.D. 2019). We began our analysis by emphasizing that,

“[a]s the party that filed the ISRS applications, Spire bore the burden of proof in

this matter.” Id. at 595 (citing § 393.150.2). Spire II found that the Commission, as

fact-finder, was justified in rejecting Spire’s cost studies on the basis that they

reflected too small a sample size to be persuasive; we also noted that Spire had

presented no evidence that any of the plastic components it replaced were

themselves worn out or deteriorated, or that their replacement was incidental and

required to complete the replacement of worn out or deteriorated components. Id.

at 596.

      We also found that, in the absence of any more probative evidence concerning

the ineligible costs associated with the replacement of plastic components, the

Commission was entitled to rely on the percentage methodology advocated by Staff

and Public Counsel:

              We again stress that it was Spire’s burden to prove that some or
      all of its plastic replacements were eligible for ISRS recovery. Spire
      chose to rest on its theory that no ISRS collections should have been
      disallowed because its replacement of ineligible plastics did not
      increase ISRS costs. The PSC found that this theory was not
      supported by sufficient data. Spire did not conduct a case-by-case
      review to determine exactly which of its plastic replacements involved
      components that were in fact worn out or deteriorated. The PSC was
      therefore precluded from taking a more nuanced approach to the
      disallowance issue than the percentage-based method advocated by the
      OPC and Staff. We cannot conclude that the PSC erred in determining
      that the percentage model constituted “the best evidence of a
      methodology to calculate the costs of th[e] ineligible plastic pipe
      replacements.” Given the lack of evidence adduced by Spire, the
      percentage-based model was the only method the PSC could employ to
      calculate the cost of ISRS-ineligible replacements, and thereby
      calculate a disallowance in accordance with our opinion and mandate
      in Spire I. The PSC’s calculation of Spire’s ISRS disallowance was
      supported by substantial competent evidence and is not arbitrary or
      unreasonable.
593 S.W.3d at 597.

                                           14
                                            C.
      In this proceeding, Spire does not dispute that costs which are attributable to

its replacement of plastic components are not eligible for recovery through an

Infrastructure Surcharge, since the plastic components are not themselves worn out

or deteriorated, and no governmental safety mandate compels their replacement.

Instead, Spire contends that it presented evidence that, on many of the replacement

projects it conducted, there was no incremental cost associated with the

replacement of plastic components. Spire argues that the Commission was

therefore statutorily required to permit Spire to include the entire cost of those

projects in its Infrastructure Surcharge.

      On remand from our decision in Spire I, the Commission clearly stated its

conclusion that “Spire Missouri’s arguments regarding prudency, cost avoidance,

and economic efficiency are irrelevant to the Commission’s conclusion in” the

expedited Infrastructure Surcharge proceedings contemplated by §§ 393.1009-

393.1015. 2018 WL 6724346, at *9. It adhered to that decision in the Report and

Order under review here.

      The Commission’s conclusion that Spire’s incremental-cost analyses are not

relevant in an Infrastructure Surcharge proceeding falls within its area of expertise,
and is entitled to deference from this Court.

             Missouri courts have long recognized that when the decision
      involves the exercise of regulatory discretion, the PSC is delegated a
      large amount of discretion, and “many of its decisions necessarily rest
      largely in the exercise of a sound judgment.” “Under these
      circumstances, the reviewing court will not substitute its judgment for
      that of the PSC on issues within the realm of the agency’s expertise.”
State ex rel. Sprint Mo., Inc. v. Pub. Serv. Comm’n, 165 S.W.3d 160, 164 (Mo. 2005)

(citations omitted). This deference is applicable to decisions involving the

establishment of utility rates: “The Commission has considerable discretion in rate
setting due to the inherent complexities involved in the rate setting process.” State

                                            15
ex rel. Praxair, Inc. v. Pub. Serv. Comm’n, 328 S.W.3d 329, 339 (Mo. App. W.D.

2010) (quoting State ex rel. Office of Pub. Counsel v. Pub. Serv. Comm’n, 938 S.W.2d
339, 344 (Mo. App. W.D. 1997)). “Missouri courts long have recognized that

‘ratemaking is not an exact science,’ no methodology is statutorily prescribed or

limited, and ‘[t]he complexities inherent in a rate[-]of[-]return determination

necessarily require that the PSC be granted considerable discretion.’” State ex rel.

Office of Pub. Counsel v. Pub. Serv. Comm’n, 367 S.W.3d 91, 108 (Mo. App. S.D.

2012) (citations omitted).

      In Spire II, we applied these deferential review standards to the precise issue

we face today. We emphasized that “‘[t]his court will not substitute its judgment for

that of the Commission,’” or “‘second-guess issues that are within the

[Commission]’s area of expertise,’” and that we would accordingly “afford deference

to the [Commission]’s chosen methodology for calculating an ISRS disallowance.”
593 S.W.3d at 596 (citations omitted).

      The relevant statutes did not require the Commission to rely on Spire’s

incremental-cost analysis. The statutes specify that a utility may recover the

“costs” of eligible infrastructure replacement projects through an Infrastructure

Surcharge, without defining “costs,” or specifying how the eligible “costs” should be
determined. Section 393.1012.1 provides that a gas utility may seek Commission

approval of an Infrastructure Surcharge “that will allow for the adjustment of the

gas corporation's rates and charges to provide for the recovery of costs for eligible

infrastructure system replacements.” Similarly, § 393.1009(1)(a) and (c) provide

that the “appropriate pretax revenues” to be collected through an Infrastructure

Surcharge should provide for a rate of return on “the net original cost of eligible

infrastructure system replacements,” and for “[r]ecover[y] [of] all other ISRS costs.”

      The relevant statutes do not otherwise define the “costs” of eligible
infrastructure replacements – thus giving the Public Service Commission

                                          16
substantial discretion to select the appropriate method for determining the “costs”

which may be included in an Infrastructure Surcharge.

             The fact is that without any better indication of meaning than
       the unadorned term, the word “cost” in [a statute], as in accounting
       generally, is “a chameleon,” a “virtually meaningless” term. . . .
       [W]ords like “cost” “give ratesetting commissions broad methodological
       leeway; they say little about the ‘method employed’ to determine a
       particular rate.”
Verizon Commc’ns, Inc. v. FCC, 535 U.S. 467, 500-01 (2002) (citations omitted). In

Verizon, the Supreme Court of the United States held that use of the term “cost” in

a statute governing telecommunications rates was “simply too protean” to require

that a rate-setting agency consider historical investments in setting rates. Id. at

501.

       The Supreme Court has also recognized that issues of cost-allocation – like

the issue presented here – are discretionary determinations frequently delegated to

expert administrative agencies like the PSC. In National Association of Greeting

Card Publishers v. U.S. Postal Service, 462 U.S. 810 (1983), a statute specified that

the Postal Rate Commission should set rates for different classes of mail based on

“the requirement that each class of mail or type of mail service bear the direct and

indirect postal costs attributable to that class or type plus that portion of all other
costs of the Postal Service reasonably assignable to such class or type.” Id. at 814

n.3 (quoting relevant statute). The Supreme Court held that this statute did not

mandate that the Rate Commission use any particular methodology to determine

which costs were “attributable” to particular classes of mail, but that the Rate

Commission instead had substantial discretion to choose how to allocate costs to

different mail categories.

              The Court has observed that “[a]llocation of costs is not a matter
       for the slide-rule. It involves judgment on a myriad of facts. It has no
       claim to an exact science.” Generally, the legislature leaves to the
       ratesetting agency the choice of methods by which to perform this

                                           17
      allocation, although if the statute provides a formula, the agency is
      bound to follow it.
             We agree with the Rate Commission's consistent position that
      Congress did not dictate a specific method for identifying causal
      relationships between costs and classes of mail, but that the Act
      “envisions consideration of all appropriate costing approaches.” The
      Rate Commission has held that, regardless of method, the Act requires
      the establishment of a sufficient causal nexus before costs may be
      attributed. . . .
             ....

             [The relevant statute] requires that all “attributable costs” be
      borne by the responsible class. In determining what costs are
      “attributable,” the Rate Commission is directed to look to all costs of
      the Postal Service, both “direct” and “indirect.” In selecting the phrase
      “attributable costs,” Congress avoided the use of any term of art in law
      or accounting. In the normal sense of the word, an “attributable” cost
      is a cost that may be considered to result from providing a particular
      class of service. On its face, there is no reason to suppose that [the
      statute] denies to the expert ratesetting agency, exercising its
      reasonable judgment, the authority to decide which methods
      sufficiently identify the requisite causal connection between particular
      services and particular costs.
462 U.S. at 825-27 (citations and footnotes omitted).

      As the Supreme Court recognized, the word “cost” is a “chameleon,” which

can have multiple different meanings. On the one hand, several usages of the term

“cost” focus – like Spire’s cost studies – only on the additional increment of expense

associated with adding an additional service or unit of production onto an existing

activity. Terms like “incremental cost,” “marginal cost,” “differential cost,” or

“avoided cost” may seek to capture “cost” in this sense. On the other hand, other

well-established usages of the term “cost” determine the “cost” of a particular

activity by allocating to that activity a share of the total costs of the endeavor of

which the specific activity is a part (both fixed or sunk costs, and variable costs).

“Cost” in this sense may be reflected in terms like “total cost,” “average cost,” “full
cost,” or “absorbed/absorption cost.”

                                           18
       In its 2018 remand order, and again in this case, the Public Service

Commission has held that to determine the “costs” of plastic-pipe replacement

which must be excluded from Spire’s Infrastructure Surcharge, it is appropriate to

allocate a share of the total costs of the neighborhood-wide replacement project in

which the plastic-pipe replacement occurs. This is a well-established construction of

the term “costs.” The use of the term “costs” in the relevant statutes, without

further definition or explanation, did not prevent the Commission from adopting

this approach.3

       Several considerations support the Commission’s interpretation of the “costs”

eligible for inclusion in an Infrastructure Surcharge. First, because the

Infrastructure Surcharge mechanism is an exception to Missouri’s general

prohibition on “single-issue ratemaking,” we held in Spire I that the statutory

eligibility criteria are mandatory, and must be narrowly construed. 539 S.W.3d at

838, 839. This consideration justifies the Commission in rejecting Spire’s

incremental-cost analysis, since under Spire’s analysis, it would be able to include

in an Infrastructure Surcharge all of the costs of a project, even though that project

included substantial replacement of ineligible plastic piping.

       In Spire I, Spire argued that it was not appropriate to focus on whether
particular plastic components were “worn out or deteriorated.” Instead, it argued

“that the specific condition of the replaced plastic components is not dispositive and

         3       Spire cites to the legislature’s reference to “avoided costs” in § 393.1075.2(6),
to argue that the Commission should have applied the same concept here. But
§ 393.1075.2(6) explicitly refers to “avoided costs,” while the Infrastructure Surcharge
statutes do not. See McAlister v. Strohmeyer, 395 S.W.3d 546, 552 (Mo. App. W.D. 2013)
(“’It is a settled canon of statutory construction that, where different language is used in the
same connection in different parts of an act, it is presumed that the legislative body
intended different meaning and effect.’” (citation omitted)). Spire also cites to the
Commission’s regulations governing utility resource planning, 20 CSR 4240-22.010 to -
22.080, which rely on avoided-cost principles. But the fact that avoided-cost concepts may
be well-suited to forward-looking managerial decisionmaking does not mean that the
Commission was required to use those same principles in this very different rate-setting
context.

                                               19
that ISRS-eligibility should be determined based on the condition of the entire

neighborhood system.” 539 S.W.3d at 839. We disagreed, finding that Spire’s

“effort to assign ISRS eligibility to plastic pipes that are not worn out or

deteriorated by evaluating an entire neighborhood system as a singular unit finds

no support in the plain language of section 393.1009(5)(a).” Id. Spire’s incremental-

cost analyses essentially engage in the same “bootstrapping” as the arguments we

rejected in Spire I. Spire’s cost analyses focus on the aggregate cost of replacing “an

entire neighborhood system as a singular unit,” rather than seeking to identify and

isolate the cost of replacement of the plastic components themselves. As explained

in the Public Service Commission’s Brief, Spire’s incremental-cost analysis

“proceeds from an assumption that the entire cost to replace whole neighborhoods

can be attributed to the replacement of cast iron and steel” – even though

substantial quantities of ineligible plastic piping was replaced as part of the same

project. Spire seeks to resurrect an argument we rejected in Spire I.4

       One of Spire’s own witnesses acknowledged that some “cost” is “inherent” in

the replacement of plastic piping, even in projects where there was no incremental

cost to replacing the plastic piping at the same time as metal piping.

              Q.    Okay. And let me look here. And are you in agreement
       with what Mr. Pendergast said earlier, that basically the – the ISRS
       costs that the Company is trying to recover don’t include a cost for the
       plastic because it would have cost more if you had not replaced it – the
       plastic?

       4       In Spire I, the Commission had concluded that it was unnecessary to allocate
any cost to the replacement of plastic pipes as part of Spire’s strategic replacement
program, on the theory that the plastic piping constituted “an integral component” of a
neighborhood-wide distribution network which also included worn out or deteriorated metal
pipe. 539 S.W.3d at 839. We held that, under § 393.1009(5)(a), it was inappropriate to
“evaluat[e] an entire neighborhood system as a singular unit”; instead, the statute required
that the particular components being replaced satisfy the statutory eligibility criteria. Id.
at 839-40 & n.5. Spire I did not involve the Commission’s selection of a cost-allocation
methodology, but instead its refusal to conduct any cost-allocation whatsoever, based on an
erroneous interpretation of the governing law.

                                             20
             A.      Well, there is a cost inherent to – you know, to replacing
      all the pipe that’s involved in that. So there’s a cost involved with
      the plastic. But what we’re saying is that it is, in most cases, cheaper
      to replace it then what it would have cost us to re-use that plastic so
      there’s an avoided cost. Not that there’s no cost, but it’s – it’s a less
      cost than it would be to re-use it.
(Emphasis added.)

      While Spire’s incremental-cost analysis may be relevant in a later rate case,

the Commission could rightfully determine that it was not the appropriate analysis

in the current proceeding. As the Commission recognized in its 2018 remand order,

consideration of incremental or marginal costs may be relevant in determining

whether Spire acted prudently in replacing plastic piping (which was not itself worn

out or deteriorated, and had remaining useful life) at the same time that it replaced

the worn out or deteriorated metal pipe. But such prudence issues are not

implicated in this Infrastructure Surcharge proceeding: the relevant statutes

specify that “[n]o other . . . ratemaking issues may be examined,” in a proceeding to

approve a change to an Infrastructure Surcharge, § 393.1015.2(2), and that the

approval of an Infrastructure Surcharge “shall in no way be binding upon the

commission . . . during a subsequent general rate proceeding when the commission

may undertake to review the prudence of such costs.” § 393.1015.8.

      Finally, we note that in its most recent session, the General Assembly
enacted amendments to the Infrastructure Surcharge statutes which adopt the

result for which Spire is advocating. House Bill 2120, 100th General Assembly, 1st

Regular Session (2020), amends the definition of “gas utility plant projects” in

§ 393.1009(5), to include

      any cast iron or steel facilities including any connected or associated
      facilities that, regardless of their material, age, or condition, are
      replaced as part of a qualifying replacement project in a manner that
      adds no incremental cost to a project compared to tying into or reusing
      existing facilities.

                                          21
Under this amendment, which became effective on August 28, 2020, the cost of

replacing “connected or associated facilities” may be recoverable under an

Infrastructure Surcharge, without regard to whether the replaced piping is itself

worn out or deteriorated.

       [I]n enacting a new statute on the same subject as that of an existing
       statute, it is ordinarily the intent of the legislature to effect some
       change in the existing law. “If this were not so the legislature would
       be accomplishing nothing, and legislatures are not presumed to have
       intended a useless act.”
State ex rel. Edu-Dyne Sys., Inc. v. Trout, 781 S.W.2d 84, 86 (Mo. 1989) (citing and

quoting Kilbane v. Dir. of Dep’t of Revenue, 544 S.W.2d 9, 11 (Mo. 1976)); see also,

e.g., State ex rel. Office of Pub. Counsel v. Mo. Pub. Serv. Comm’n, 331 S.W.3d 677,

690 (Mo. App. W.D. 2011). We recognize that a later statutory enactment may not

always be a reliable guide to the interpretation of the pre-amendment statute.5

Nevertheless, the General Assembly’s amendment to the definition of “gas utility

plant projects” provides some additional support for our conclusion that, prior to

this amendment, the Commission was not required to accept Spire’s incremental-

cost analysis.

       Point I is denied.

                                            II.
       Spire’s second and third Points argue that the Commission’s rejection of its

incremental-cost studies, and its decision to instead use the percentage methodology

       5       Although the Supreme Court’s decision in Edu-Dyne System states that the
purpose of a statutory amendment is “ordinarily” to change existing law, other cases
recognize that, “‘[w]hile an amendment to a statute must be deemed to have been intended
to accomplish some purpose, that purpose can be clarification rather than a change in
existing law.’” State ex rel. Outcom, Inc. v. City of Peculiar, 350 S.W.3d 57, 65 (Mo. App.
W.D. 2011) (quoting Andresen v. Bd. of Regents of Mo. W. Coll., 58 S.W.3d 581, 589 (Mo.
App. W.D. 2001)); accord, Self v. Midwest Orthopedics Foot & Ankle, P.C., 272 S.W.3d 364,
370 (Mo. App. W.D. 2008).

                                            22
to identify surcharge-ineligible costs, was not supported by competent and

substantial evidence, and was arbitrary, capricious, or unreasonable.

       In large measure, Spire’s second and third Points repeat many of the

arguments which we have addressed in § I, above. Spire also argues in both Points

that the Commission’s decision should be reversed because, in preparing and

submitting its 509 cost studies, Spire “kept faith with the explicit guidance given by

the PSC” in the 2018 remand order, and followed the “evidentiary roadmap”

specified by the Commission. Spire goes so far as to claim that “[t]he 2018 Order

identified no flaws in Spire’s cost analyses; to the contrary, rather than criticizing

these studies, the PSC wanted more of them, i.e., one for each project.” Spire

argues that the Commission “pulled the rug out from under” Spire after it dutifully

followed the Commission’s directions, and that the Report and Order constitutes “a

complete repudiation of the guidance [the Commission] had given the parties in the

2018 order.”

      This argument rests on a highly selective reading of the Commission’s 2018

remand order. As we described above, the Commission’s order on remand from our

Spire I decision explicitly stated that the focus on incremental costs in Spire’s cost

studies was “irrelevant” to the cost-allocation issues involved in an Infrastructure
Surcharge proceeding:

      [Spire’s] argument improperly intermixes the issue of prudency, which
      is determined in a general rate proceeding, with eligibility, which is
      the appropriate determination in an ISRS proceeding. So, Spire
      Missouri’s arguments regarding prudency, cost avoidance, and
      economic efficiency are irrelevant to the Commission’s conclusion
      in these cases.
2018 WL 6724346, at *9 (emphasis added). As we recognized in Spire II, in its 2018

remand order the Commission found “that Spire had not even attempted to quantify

its ISRS costs attributable to the replacement of plastic components that were not
worn out or deteriorated, despite our previous holding that those costs were not

                                           23
ISRS-eligible.” 593 S.W.3d at 596. While the remand order may also have offered

suggestions to Spire as to how it might make its cost studies more persuasive in a

future proceeding, Spire cannot plausibly argue that the Commission explicitly

endorsed its incremental-cost approach. We see no inconsistency – much less an

inconsistency that would warrant reversal – between the Commission’s 2018

remand order, and the Report and Order now under review.

      Spire also argues at some length that the Commission acted without

substantial supporting evidence, and in an arbitrary and capricious manner, when

it determined the plastic-related costs which it would exclude from Spire’s

Infrastructure Surcharge using the percentage method. We have explained above

that the Commission acted within its authority in rejecting Spire’s incremental-

cost-based analysis. Having rejected Spire’s cost studies, the Commission found

itself in precisely the same position as in Spire II. As in Spire II, the percentage

methodology offered the only reasonably available method to determine the share of

the costs of Spire’s strategic replacement projects to allocate to the replacement of

plastic piping.

      As we explained in Spire II, “it was Spire’s burden to prove that some or all of

its plastic replacements were eligible for ISRS recovery.” 593 S.W.3d at 597.
Because of Spire’s reliance on an incremental-cost analysis which the Commission

properly rejected,

      [t]he PSC was therefore precluded from taking a more nuanced
      approach to the disallowance issue than the percentage-based method
      advocated by the OPC and Staff. We cannot conclude that the PSC
      erred in determining that the percentage model constituted “the best
      evidence of a methodology to calculate the costs of th[e] ineligible
      plastic pipe replacements.” Given the lack of [competent] evidence
      adduced by Spire, the percentage-based model was the only method the
      PSC could employ to calculate the cost of ISRS-ineligible replacements,
      and thereby calculate a disallowance in accordance with our opinion
      and mandate in Spire I. The PSC’s calculation of Spire’s ISRS

                                          24
       disallowance was supported by substantial competent evidence and is
       not arbitrary or unreasonable.
593 S.W.3d at 597.6

                                             III.
       Finally, Spire’s fourth Point argues that the Commission erroneously

concluded that it had no jurisdiction over Spire’s request to recover additional costs

for the October 2017 to June 2018 period which were not previously recovered in an

earlier Infrastructure Surcharge case.

       In Spire’s January 2019 applications, it requested to recover costs through its

Infrastructure Surcharge which it had incurred in two different time periods:

(1) October 1, 2017, through June 30, 2018; and (2) July 1, 2018, through January

31, 2019. Spire had previously requested to recover the costs from the October 2017

through June 2018 time period in an earlier Infrastructure Surcharge proceeding.

In that earlier proceeding the Commission followed the approach from the 2018

remand order, and rejected Spire’s incremental cost analyses; instead, the

Commission excluded certain of Spire’s claimed costs using the percentage-based

analysis which we upheld in Spire II. In re Application of Spire Mo. Inc. to Change

its Infrastructure Sys. Replacement Surcharge in its Spire Mo. E. Serv. Territory,

Nos. GO-2018-0309 & -0310, 2018 WL 6724358, at *12 (Mo. P.S.C. Sept. 20, 2018).
The Commission’s decision in the earlier proceeding was pending on appeal at the

time of Spire’s January 2019 applications, see Nos. WD82303 and WD82373, and

ultimately resulted in our decision in Matter of Application of Spire Missouri Inc. to

Change its Infrastructure System Replacement Surcharge in its Spire Missouri East

        6      At various points in its briefing, Spire complains that a percentage-based cost
allocation was only performed by Staff after the evidentiary hearings in this case, and in
response to the Commission’s request. While this may have been an unusual procedure,
Spire was given an opportunity to respond to the percentage-based cost analysis prepared
by Staff, and told the Commission that it had no objection to the accuracy of Staff’s
implementation of the percentage-based approach. Spire makes no argument that the
Commission was somehow legally precluded from proceeding in the fashion it did, or that
the procedures employed by the Commission could themselves somehow justify reversal.

                                             25
Service Territory v. Office of Public Counsel, 593 S.W.3d 546 (Mo. App. W.D. Nov.

19, 2019).

      Spire’s January 2019 applications again sought to recover costs it had

incurred between October 2017 and June 2018, “to the extent such costs were not

recovered in the Company’s immediately preceding ISRS proceedings . . . because of

what the Commission deemed to be insufficient evidence demonstrating their

eligibility.” Spire asserted in its applications that it “has now corrected this

deficiency using the roadmap for demonstrating eligibility provided by the

Commission in” the 2018 remand order, and repeated in its later order addressing

the 2017-18 costs. In its briefing to this Court, Spire asserts that, in the current

proceeding, it submitted to the Commission incremental-cost studies for each of “the

projects that had been subjected to the percentage method in the 2018 Case.”

      In its Report and Order, the Commission dismissed the portions of Spire’s

January 2019 applications concerning costs incurred between October 2017 and

June 2018. The Commission found that it lacked jurisdiction to reconsider the

surcharge-eligibility of these costs, while its earlier decision addressing those same

costs was pending on appeal to this Court.

      Spire argues that the Commission erred as a matter of law in concluding that
it had no jurisdiction to consider Spire’s new evidence concerning the costs it had

incurred between October 2017 and June 2018. It is unnecessary for us to address

this jurisdictional issue, however. Even if the Commission had jurisdiction to

consider new evidence concerning the October 2017 to June 2018 costs, we have

held in § I above that the Commission properly rejected Spire’s incremental-cost-

based analyses, and instead determined the amount of ineligible plastic-related

costs using a percentage-of-total-length methodology. Even if the Commission had

concluded that it had jurisdiction to reconsider its treatment of the October 2017 to
June 2018 costs, it had already applied the percentage-based methodology to those

                                           26
costs. Spire has shown no basis to justify a different treatment of the October 2017

to June 2018 costs, even if the Commission had jurisdiction to reconsider the issue.7

       Point IV is denied.

                                             IV.
       Finally, we turn to the single Point raised by the Office of Public Counsel in

its cross-appeal. Public Counsel argues that the Commission erroneously allowed

Spire to include in its Infrastructure Surcharge costs which it incurred under

blanket work orders, but which were related to plastic components which were not

worn out or deteriorated.

       Blanket work orders are general work orders covering a large variety of tasks

which are not planned replacement projects. (Thus, blanket work orders do not

govern the neighborhood-wide projects performed under Spire’s systematic

replacement program.) Spire’s January 2019 applications divided the tasks

performed under blanket work orders into categories, and asserted that the cost of

tasks in certain categories were eligible for recovery through its Infrastructure

Surcharge. The surcharge-eligible tasks included: mandated relocations of gas

distribution infrastructure; replacements as a result of leak repairs and corrosion

        7      Spire argues in its Brief that, even if we find that the Commission properly
applied a percentage-based methodology to costs incurred as part of Spire’s strategic
replacement program, a live issue still remains concerning the costs Spire incurred between
October 2017 and June 2018: the treatment of costs Spire incurred under blanket work
orders (a subject we discuss in greater detail in § IV, below). Spire argues that, in its prior
order, the Commission applied a percentage-based allocation methodology to costs incurred
under blanket work orders, but that Spire now seeks to have the Commission apply a task-
based allocation method to those costs. As noted in the text, however, Spire’s January 2019
applications sought to apply “the roadmap for demonstrating eligibility” first described by
the Commission in the 2018 remand order, to the costs Spire had incurred between October
2017 and June 2018. That “roadmap” did not involve a task-based allocation of costs
incurred under blanket work orders. See 2018 remand order, 2018 WL 6724346, at *5 ¶ 19
(noting that Staff applied percentage-of-total-length methodology to costs incurred under
blanket work orders); see also 2018 WL 6724358, at *6 ¶ 22 (noting that Staff applied the
same analysis to costs incurred between October 2017 and June 2018). We do not read
Spire’s January 2019 applications as seeking to apply a task-based allocation methodology
to costs incurred under blanket work orders between October 2017 and June 2018.

                                              27
inspections; and the replacement of copper and cast-iron pipe. Tasks which Spire

acknowledged were not surcharge-eligible included: relocations at a customer’s

request; replacements following excavation damage; replacement of plastic

components not related to leak repair; and installation of new service.

       The PSC’s Staff agreed with Spire’s task-based approach, and with its

categorization of tasks as surcharge-eligible and -ineligible. To calculate the

blanket work order costs to be included in Spire’s Infrastructure Surcharge, Staff

included 100% of the cost for surcharge-eligible tasks, and none of the costs of

ineligible tasks. Staff did so by calculating the percentage of ineligible tasks

performed under Spire’s blanket work orders, and then applying that percentage to

the total blanket work order costs.

       In its Report and Order, the Commission noted that the Office of Public

Counsel “indicated several times . . . that it is not challenging the blanket work

orders in this case,” and that Public Counsel stated in its brief and in a recent filing

“that it was choosing not to pursue this issue.” Thus, the Commission concluded

“[t]here is agreement that the gas utility plant contained in Spire Missouri’s blanket

work orders and its work orders for relocations may be considered ISRS eligible for

purposes of this case.”
       In its cross-appeal, Public Counsel argues that the Commission’s Report and

Order improperly permits recovery for surcharge-ineligible costs incurred under

Spire’s blanket work orders. Although not entirely clear, it appears that Public

Counsel challenges the use of a percentage-based methodology based on the number

of ineligible tasks performed under a blanket work order, rather than based on the

relative magnitude of the eligible and ineligible tasks (i.e., the amount of eligible

and ineligible piping replaced under the blanket work orders).8 To support this

       8      As discussed in footnote 7, above, in prior proceedings the Commission
applied a percentage-of-total-length methodology to allocate the costs of tasks performed

                                            28
argument, Public Counsel argues that the Commission erroneously permitted Spire

to recover the cost of “service[-line] renewals” in its Infrastructure Surcharge.

Specifically, it argues that it has identified ineligible service-line renewals within

the blanket work order costs which the Commission permitted Spire to recover.

       We see several flaws in Public Counsel’s argument. First, although not

argued by Spire or by the Commission itself, we note that the Report and Order

states, on multiple occasions, that Public Counsel was “not challenging the blanket

work orders in this case.” Although no other party argues that Public Counsel

failed to preserve this issue, we seriously question whether it has standing to

challenge the Commission’s treatment of costs incurred under blanket work orders,

when it apparently chose not to challenge that issue before the Commission itself.

       Even if the issue were preserved, however, Public Counsel has failed to

satisfy its burden to establish error. In the Report and Order, the Commission

states that “[a] ‘service renewal occurs when an existing service line is replaced in

its entirety with a new service line.’ Service renewals could be done at either the

request of the customer or in the course of a leak repair.” (Emphasis added;

footnotes omitted.) Thus, according to the Report and Order, service-line renewals

can be performed either at a customer’s request, or in repairing a leak. The Report
and Order also states that Spire and Staff indicated that the only blanket work

order costs for replacing plastic pipes which were included in Spire’s Infrastructure

Surcharge were the costs for “replacements due to leak repairs”; the Report and

under blanket work orders. But the Commission’s orders in the prior cases indicate that
documentation was not available to determine the relative length of plastic and metal pipe
actually replaced under the blanket work orders themselves. See 2018 remand order, 2018
WL 6724346, at *5 ¶ 19; 2018 WL 6724346, at *5 ¶ 18, *6 ¶ 22. Instead, Staff took the
relative percentages that it developed in reviewing the work performed as part of Spire’s
strategic replacement program, and simply applied the same percentages to the blanket
work order costs. Id. Public Counsel’s briefing does not make clear whether (unlike in the
prior cases) adequate documentation existed in this case to actually calculate the relative
lengths of plastic and metal pipe replaced under Spire’s blanket work orders.

                                            29
Order specifically states that “replacement of plastic not related to leak repair” was

treated as an ineligible task, and that its cost was excluded from the surcharge.

       Public Counsel’s Brief proceeds on the assumption that the costs of all

service-line renewals are ineligible for inclusion in an Infrastructure Surcharge. Its

Brief fails to address the Report and Order’s findings that service-line renewals can

be occasioned by both eligible and ineligible circumstances, and that only the costs

for plastic-pipe replacement related to leak repairs were included in Spire’s

Infrastructure Surcharge. Notably, Public Counsel concedes in its Brief that it does

“not challeng[e] the ISRS eligibility of” costs incurred under blanket work orders for

“such things as leak repairs” – yet these appear to be the only plastic-related

blanket work order costs which were included in Spire’s surcharge.

       In light of Public Counsel’s failure to challenge the Commission’s findings

that it excluded the cost of ineligible plastic-pipe replacement under blanket work

orders from the Infrastructure Surcharge, we reject Public Counsel’s cross-appeal

Point without further discussion.9

                                       Conclusion
       The Commission’s Report and Order is affirmed.

                                          _______________________________________
                                          Alok Ahuja, Judge
All concur.

       9      Spire filed a motion to strike portions of Public Counsel’s brief. That motion
is denied.

                                             30