## Facts

- Gas Service Company, a Kansas natural-gas public utility, applied to the State Corporation Commission (Commission) for a $20,310,464 rate increase.
- The Commission used a historical test year ending December 31, 1981, with adjustments, and granted a $7,693,000 increase.
- The Commission issued two orders from the rate proceeding, which Gas Service and certain industrial customer intervenors appealed under K.S.A. 66-118d.
- In setting rates, the Commission made adjustments affecting projected revenues, including treatment of sales associated with a Phillips Petroleum refinery that had permanently closed.
- The Commission categorically disallowed, as a matter of public policy, Gas Service’s claimed operating expenses for “dues, donations and charitable contributions” (e.g., charitable giving and civic/organizational memberships), without item-specific findings of unreasonableness.

## Issues

1. Whether the Commission acted lawfully and reasonably in treating test-year revenues by crediting Gas Service for sales associated with a permanently closed refinery.
2. Whether the Commission could entirely disallow a utility’s expenses for dues, donations, and charitable contributions solely on public-policy grounds, without specific findings as to which expenditures were unreasonable.
3. What level of deference and evidentiary support governs judicial review of Commission ratemaking orders under K.S.A. 66-118d.

## Decision

- The court affirmed the Commission on the refinery-sales adjustment and other challenged ratemaking determinations, concluding the orders were supported by substantial competent evidence and were not unlawful or unreasonable.
- The court reversed the Commission’s blanket disallowance of dues, donations, and charitable contributions.
- The court remanded for the Commission to evaluate the reasonableness of those expenditures and to make specific findings sufficient for judicial review.
- Overall, the Commission’s orders were affirmed in part and reversed in part.

## Legal Principles

- Judicial review under K.S.A. 66-118d is limited to whether a Commission order is lawful and reasonable and supported by substantial competent evidence; courts do not reweigh evidence.
- Ratemaking is a legislative-type function; courts generally defer to the Commission’s expertise when the agency applies the correct legal standard and supports its conclusions with adequate findings.
- Reasonable costs of a utility meeting civic responsibilities—such as organizational dues and charitable donations—may be allowable operating expenses in ratemaking, subject to Commission scrutiny for reasonableness.
- The Commission may disallow expenses it finds unreasonable, excessive, imprudent, or unrelated to utility operations, but it must make specific findings identifying what is disallowed and why; a categorical policy disallowance without item-specific analysis is improper.

## Conclusion

The court upheld the Commission’s principal ratemaking judgments, including treatment of certain test-year revenue adjustments, but required the Commission to reconsider charitable contributions and civic dues under a reasonableness standard supported by specific findings rather than a blanket public-policy prohibition.


Gas Serv. Co. v. State Corp. Comm’n, 662 P.2d 264 (Kan. Ct. App. 1983)