Nebraska Pub. Advocate v. Nebraska Pub. Serv. Comm.

Nebraska P ublic advocate , aPPellee aNd cross -aPPellaNt,
v. Nebraska P ublic service commissioN, aPPellee aNd
cross -aPPellaNt, aNd source Gas distributioN llc
aNd kNiGht, iNc., formerly kNowN as
kiNder morGaN, iNc., aPPellaNts
aNd cross -aPPellees.
779 N.W.2d 328
Filed March 5, 2010. 	No. S-09-600.
1. Administrative Law: Judgments: Appeal and Error. In an appeal under the
Administrative Procedure Act, an appellate court may reverse, vacate, or modify
the judgment of the district court for errors appearing on the record.
2. Judgments: Appeal and Error. An appellate court reviews questions of law
independently of the lower court’s conclusion.
3. Judgments: Collateral Attack. When a judgment is attacked in a manner other
than by a proceeding in the original action to have it vacated, reversed, or modi-
fied, or by a proceeding in equity to prevent its enforcement, the attack is a col-
lateral attack.
4. Judgments: Jurisdiction: Collateral Attack. When the court has jurisdiction
over the person and subject matter, a party to the proceeding will be bound by
the judgment in the case when collaterally attacking it, even though the judgment
was irregularly or erroneously entered.
5. Judgments: Collateral Attack. Until a judgment is rendered void in a proper
proceeding and set aside, it remains valid and binding for all purposes and cannot
be collaterally attacked.
6. Res Judicata. Res judicata extends not only to matters actually determined in a
prior action, but also to other matters which could properly have been raised and
determined therein.
Appeal from the District Court for Lancaster County: JohN
a. colborN, Judge. Affirmed in part, and in part reversed and
remanded with directions.
Stephen M. Bruckner and Russell A. Westerhold, of Fraser
Stryker, P.C., L.L.O., and Mark A. Fahleson and Troy S.
Kirk, of Rembolt Ludtke, L.L.P., for appellant SourceGas
Distribution LLC.
Steven G. Seglin, of Crosby Guenzel, L.L.P., for appellant
Knight, Inc.
Roger P. Cox and Jack L. Shultz, of Harding & Schultz,
P.C., L.L.O., for appellee Nebraska Public Advocate.
NeBRASKA PUB. ADvOCATe v. NeBRASKA PUB. SeRv. COMM. 	543
Cite as 279 Neb. 543
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/01/2026 04:48 AM CST

Jon Bruning, Attorney General, and L. Jay Bartel for appel-
lee Nebraska Public Service Commission.
heavicaN, 	c.J., 	wriGht, 	coNNolly, 	G errard, 	stePhaN,
mccormack , and miller-lermaN, JJ.
heavicaN, c.J.
INTRODUCTION
SourceGas Distribution LLC (SourceGas) and Knight, Inc.,
formerly known as Kinder Morgan, Inc. (KM), appeal the deci-
sion of the Lancaster County District Court. Both the Nebraska
Public Service Commission (Commission) and the Nebraska
Public Advocate (Public Advocate) cross-appeal. We affirm in
part, and in part reverse and remand with directions.
FACTUAL BACKGROUND
On 	June 	2, 	2006, 	KM 	filed 	an 	application 	with 	the
Commission requesting a general increase in its annual reve-
nue requirement. In other words, KM asked for permission to
raise the rates charged to its customers. The Public Advocate,
an entity created by the Nebraska Legislature and appointed
by the Commission to represent the interests of Nebraska
citizens in matters such as the one at issue in this case,1
intervened. At the time KM filed the application, KM was a
jurisdictional utility under Nebraska law. On or about April 1,
2007, KM sold its retail distribution assets and transferred its
Nebraska certificate of convenience to SourceGas. Since that
time, SourceGas has been a jurisdictional utility within the
meaning of state law.
extensive discovery was had by the Public Advocate con-
cerning this rate case. On September 1, 2006, while its appli-
cation was still under consideration, KM properly placed into
effect, subject to refund, interim rates.
On November 28, 2006, KM and the Public Advocate
entered into a settlement regarding the rate application. That
settlement entitled KM to recover an increase of $8.25 million
in its annual revenue requirement beginning January 1, 2007.
The Public Advocate agreed that the rates in the settlement
1 Neb. Rev. Stat. § 66-1830 (Reissue 2003).
544 	279 NeBRASKA RePORTS

were “just and reasonable,” that KM’s interim rates were
“established at an overall revenue level that is less than the
revenue increase” set forth in the settlement, and that “no
refund [was] required.” The settlement was silent as to whether
KM would be required to prorate its billing when implement-
ing the new rates.
Approximately 1 month later, on December 27, 2006, the
Commission approved the settlement. That order specifically
concluded that “no refund [was] due” because “the interim
distribution rates paid by customers were lower than the settled
and approved rates” and “[KM] did not earn more than [it]
should have during the interim rate period.” This order was
also silent as to whether KM was required to prorate its billing.
There was no appeal taken from this order. The order became
final and the time to appeal ran on January 26, 2007.
In the meantime, however, on January 5, 2007, the direc-
tor of the Commission’s natural gas department e-mailed KM,
inquiring as to whether KM would be prorating its billing when
implementing the new rates. A KM representative replied to the
Commission on January 9, stating that KM would not be doing
so. The representative explained that such was “consistent with
[KM’s] tariff, past practices and implementation of rates, as
they have changed over time, including the implementation
of interim rates back on September 1[, 2006] in [the] rate
proceeding.” The Public Advocate received copies of both the
January 5 and January 9 e-mails.
On July 6, 2007, the Public Advocate filed a formal com-
plaint with the Commission. In that complaint, the Public
Advocate contended that KM failed to prorate when imple-
menting its interim and final rates in the 2006 rate case.
According to the Public Advocate, the effect of the failure to
prorate billing was that depending upon the customer’s bill-
ing cycle, a customer might have been billed at the new rates,
which were effective January 1, 2007, for gas service rendered
prior to that date. The Public Advocate requested that KM be
required to provide refunds to customers who were charged in
this manner.
The Commission dismissed the Public Advocate’s complaint,
contending that it was an impermissible collateral attack on
NeBRASKA PUB. ADvOCATe v. NeBRASKA PUB. SeRv. COMM. 	545
Cite as 279 Neb. 543

the December 27, 2006, order approving the settlement. The
Commission concluded:
The Formal Complaint . . . was not filed by the [Public
Advocate] as a direct challenge to the Commission’s final
Rate Case Order . . . . The [Public Advocate] has tried
to make a distinction between the . . . Formal Complaint
and the . . . rate case proceeding. [It] asserts the issue is
one of the legality of the method employed by [KM] to
implement interim and final rates under the provisions
of the [State Natural Gas Regulation Act]. However, the
practical effect of the Formal Complaint is to have this
Commission, outside of the proceedings in the . . . rate
proceeding, go back and re-examine the Stipulation and
Settlement Agreement, and the actions of [KM] in rela-
tion to the . . . rate proceeding and order.
Neither 	the 	[State 	Natural 	Gas 	Regulation 	Act],
Commission rules and regulations, nor the . . . Rate Case
Order specifically requires proration to be used when a
utility implements a rate change as the [Public Advocate]
suggests. Reasonable interpretations of the [State Natural
Gas Regulation Act] provisions could differ on the issue
of proration and our rules and regulations and [the] Rate
Case Order are silent on the implementation method
required for the rate changes. In the absence of a specific
rule or order, such a requirement would need to be estab-
lished in the context of the rate case proceeding. For this
Commission to make the determinations sought by the
[Public Advocate] in the above-captioned proceeding, we
would have to reconsider and re-scrutinize the . . . rate
case proceeding and all the issues involved with that pro-
ceeding. To do so, in our opinion, would be a collateral
attack of an earlier order.
The Public Advocate appealed to the Lancaster County
District Court, which concluded that the Public Advocate’s
complaint was a collateral attack with respect to the interim
rates, as the settlement notes that no refund was needed.
But as to the final rates, the district court found no collat-
eral attack:
546 	279 NeBRASKA RePORTS

The court notes that the Settlement and Rate Case
Order does not include any specific language regarding
the method of implementing the final rates that became
effective on January 1, 2007. In the absence of a spe-
cific agreement, the implementation of final rates is gov-
erned by [the State Natural Gas Regulation Act] and
other applicable Nebraska law. . . . Although the analysis
may necessitate reference to the terms and conditions of
the Settlement and Rate Case Order, it does not require
the Commission to modify, second guess, or evaluate the
legality of the terms of either of those documents.
The court then remanded the case to the Commission for
a determination of whether KM was required to prorate its
billing.
ASSIGNMeNTS OF eRROR
On appeal, SourceGas assigns that the district court erred
in (1) determining that the Public Advocate’s complaint was
not a collateral attack on the order ending the 2006 rate
case; (2) failing to affirm the Commission’s dismissal because
Nebraska law does not require the prorating of billing upon
the implementation of rate changes; (3) failing to affirm the
Commission’s dismissal because KM’s Commission-approved
tariff required nonprorated implementation; (4) failing to affirm
the Commission’s dismissal because the Commission lacks the
authority to grant the retroactive relief sought; and (5) failing
to determine that KM, now known as Knight, was respon-
sible for any refunds that might be owed to customers. Knight
assigns that the district court erred in failing to determine the
Commission lacked subject matter jurisdiction over it.
On cross-appeal, the Commission assigns that the district
court erred in not finding the Public Advocate’s complaint to
be an impermissible collateral attack. Also on cross-appeal,
the Public Advocate assigns that the district court erred in (1)
affirming the Commission’s conclusion that the complaint as
to the interim rates was a collateral attack and (2) failing to
conclude that KM could not charge interim rates for service
rendered prior to September 1, 2006.
NeBRASKA PUB. ADvOCATe v. NeBRASKA PUB. SeRv. COMM. 	547
Cite as 279 Neb. 543

STANDARD OF RevIeW
[1] In an appeal under the Administrative Procedure Act, an
appellate court may reverse, vacate, or modify the judgment of
the district court for errors appearing on the record.2
[2] An appellate court reviews questions of law indepen-
dently of the lower court’s conclusion.3
ANALYSIS
Impermissible Collateral Attack.
In its first assignment of error, SourceGas argues that the
district court erred in reversing the decision of the Commission
dismissing the Public Advocate’s complaint. SourceGas con-
tends that the Public Advocate’s complaint was an imper-
missible collateral attack on the 2006 rate case and should
be dismissed.
[3-5] When a judgment is attacked in a manner other than
by a proceeding in the original action to have it vacated,
reversed, or modified, or by a proceeding in equity to prevent
its enforcement, the attack is a collateral attack.4 When the
court has jurisdiction over the person and subject matter, a
party to the proceeding will be bound by the judgment in the
case when collaterally attacking it, even though the judgment
was irregularly or erroneously entered.5 Until such judgment is
rendered void in a proper proceeding and set aside, it remains
valid and binding for all purposes and cannot be collater-
ally attacked.6
In order to resolve the question of whether the Public
Advocate’s formal complaint was an impermissible collateral
attack, this court must determine whether the issue of prorated
billing upon implementation of a rate change is negotiable in
a rate case. If the issue was negotiable, the Public Advocate
could have raised it, but failed to raise it, at the time of the
2 Neb. Rev. Stat. § 84-918(3) (Reissue 2008).
3 R & D Properties v. Altech Constr. Co., ante p. 74, 776 N.W.2d 493
(2009).
4 State v. Keen, 272 Neb. 123, 718 N.W.2d 494 (2006).
5 Id.
6 Id.
548 	279 NeBRASKA RePORTS

rate case and is now precluded from bringing this action. The
resolution of this question requires an examination of the State
Natural Gas Regulation Act7 and relevant Commission rules
and regulations, and it is a question of law, which this court
reviews de novo.
The Public Advocate directs us to several statutes and regu-
lations in support of the argument that prorated billing is
required by the State Natural Gas Regulation Act and therefore
non-negotiable. In particular, the Public Advocate suggests that
charging different customers different rates for the same gas
service is a violation of § 66-1825(1), which requires rates to
be “just and reasonable,” and § 66-1825(2), which further pro-
hibits a utility from “grant[ing] any unreasonable preference
or advantage to any person or subject[ing] any person to any
unreasonable prejudice or disadvantage.” The Public Advocate
maintains that KM’s charging different rates based upon a
billing cycle advantaged some customers while disadvantag-
ing others.
The Public Advocate further suggests that § 66-1838(10)(b)
does not permit rates to be “placed into effect” until 90 days
after the adoption of final rates and that such “placed into
effect” provision means those rates cannot be charged for
service rendered prior to that time. The Public Advocate also
notes that the Commission’s own regulations with regard to
billing state that “‘[b]ills will be rendered monthly at the rates
shown in the Company’s tariff’”8 and that the rates at issue
do not change until the date set in the rate order case. The
Public Advocate further contends that the settlement between
it and KM specifically indicated that the final rates would not
become effective until the date in the settlement, January 1,
2007. Other than the language of the statute and the regulation,
the Public Advocate directs us to no authority in support of
its argument.
We are not persuaded by the Public Advocate’s argument.
As was noted by the Commission, none of the statutes or
7 Neb. Rev. Stat. §§ 66-1801 to 66-1857 (Reissue 2003).
8 Brief for appellee Public Advocate at 22. See 291 Neb. Admin. Code,
ch. 9, § 015.01 (2006).
NeBRASKA PUB. ADvOCATe v. NeBRASKA PUB. SeRv. COMM. 	549
Cite as 279 Neb. 543

regulations to which the Public Advocate directs us evinces a
clear indication that a utility company, upon implementing a
rate change, is required to prorate its billing. Nor is there any
specific mention of such a requirement in the State Natural Gas
Regulation Act or in any of the Commission’s regulations.
The crux of the Public Advocate’s argument, as noted above,
is that under § 66-1838(10)(b), a rate cannot be charged for
service rendered prior to the time that a rate is “placed into
effect.” However, we find that this language is susceptible to
differing interpretations. We agree with SourceGas that the
“placed into effect” language of § 66-1838(10)(b) could also
mean simply that the rate in effect at the time of billing is the
rate to be charged.
Nor do we agree with the Public Advocate’s assertion that
charging certain customers different rates violates the require-
ment of “just and reasonable”9 rates and that in being so
charged, certain customers are “grant[ed an] . . . unreasonable
preference or advantage.”10 We do recognize that the over-
arching basis of the Public Advocate’s complaint in this case
is that KM’s customers should be treated equitably and that
the failure to prorate billing may result in the appearance of
some customers being treated differently from others. While
the Public Advocate’s goal is an admirable one, we note that
prorated billing is also imprecise and can result in the differing
treatment of individual customers.
The amount due for gas service is determined by a reading
of a gas meter. Such reading normally cannot provide details as
to a customer’s gas usage on any given day. Thus, where bills
are prorated, the amounts billed at the old and new rates are
simply averaged and not necessarily an accurate representation
of the gas used by the customer at any given rate. We therefore
conclude that to the extent some customers might be granted a
preference where billing is not prorated, that preference is not
“unreasonably preferential or discriminatory” within the mean-
ing of § 66-1825(1), nor does it mean that the rates charged
were not “just and reasonable.”
9 § 66-1825(1).
10 § 66-1825(2).
550 	279 NeBRASKA RePORTS

Finally, we note that the record demonstrates that for
decades, KM; its predecessor, K N energy; and its successor,
SourceGas, have not prorated billing upon the implementation
of a rate increase. The Public Advocate argues that this his-
tory is irrelevant, as it refers to a prior act regulating natural
gas service. While we acknowledge that the State Natural Gas
Regulation Act was adopted in 2003, we disagree that such
history is irrelevant. We further note that the record shows that
several rate filings were made and implemented on a nonpro-
rated basis subsequently to the 2003 passage of the act now
in effect.
We conclude that as a matter of law, the issue of whether a
utility must prorate its billing upon the implementation of new
rates is not addressed by the applicable statutes, rules, or regu-
lations and is therefore a proper subject of negotiation during a
rate case proceeding.
[6] We also agree with SourceGas that the Public Advocate’s
complaint is an impermissible collateral attack. This court
has noted on more than one occasion that the doctrine of
res judicata
“‘is much broader in its application than a determination
of the questions involved in the prior action; the conclu-
siveness of the judgment in such case extends not only
to matters actually determined, but also to other matters
which could properly have been raised and determined
therein. The rule applies to every question relevant to
and falling within the purview of the original action, in
respect to matters of both claim or grounds of recovery,
and defense, which could have been presented by the
exercise of diligence.’”11
The issue of whether prorated billing was necessary could have
been discussed and agreed upon at the time of the 2006 rate
case. We conclude that the failure to do so precludes the raising
of that issue now.
11 State v. Keen, supra note 4, 272 Neb. at 129-30, 718 N.W.2d at 500.
Accord Norlanco, Inc. v. County of Madison, 186 Neb. 100, 181 N.W.2d
119 (1970).
NeBRASKA PUB. ADvOCATe v. NeBRASKA PUB. SeRv. COMM. 	551
Cite as 279 Neb. 543

We therefore agree with the Commission’s dismissal of the
Public Advocate’s complaint, and reverse the decision of the
district court with respect to the final rates and remand this
cause with directions to reinstate the Commission’s dismissal
of the formal complaint.
Remaining Issues on Appeal and Cross-Appeal.
Because we dismiss the Public Advocate’s complaint, we need
not address the remainder of SourceGas’ assignments of error.
Nor do we need to reach the Commission’s cross-appeal.
In its cross-appeal, the Public Advocate contends that the
district court erred in concluding that its complaint was a col-
lateral attack as to the interim rates. The interim rates in this
case were implemented on a nonprorated basis on September
1, 2006. The final settlement in the rate case was reached on
November 28, nearly 3 months after the interim rate implemen-
tation. Given that the rates had been implemented for several
months prior to the settlement and the approval of that settle-
ment, we determine, in conformity with the above analysis,
that the Public Advocate should have known that the interim
rates were not implemented on a prorated basis. Because the
Public Advocate should have known this, we conclude that the
complaint as to the interim rates was also an impermissible
collateral attack and should also be dismissed. We therefore
affirm the district court’s dismissal of the Public Advocate’s
complaint with respect to the interim rates.
CONCLUSION
The Public Advocate’s formal complaint was an impermis-
sible collateral attack on the 2006 rate case order and should
be dismissed. Accordingly, we affirm in part, and in part
reverse the decision of the district court and remand this cause
with directions to reinstate the Commission’s dismissal of
the complaint.
affirmed iN Part, aNd iN Part reversed
aNd remaNded with directioNs.
552 	279 NeBRASKA RePORTS