Wisconsin Power and Light Co. v. Public Service Commission of Wisconsin

Along with several other utilities, the Wisconsin Power and Light Company (the utility) (plaintiff) owned a power plant. To power the plant, the utility contracted with a coal company, with the price of coal increasing gradually over about 15 years. In response to the increasing coal costs, the utility increased the rate it charged its customers. These increases were done pursuant to two different procedures under Wisconsin law. Then, state officials noticed that the utility was apparently paying an unreasonably high price for the coal, which was confirmed by an audit. The utility and the coal company entered negotiations, which resulted in a lowered price of coal and extension of the contract. The coal company, however, did not reimburse the utility for the years of overpriced coal. The utility then applied to the Wisconsin Public Service Commission (commission) (defendant) for a rate increase. The commission audited the utility’s finances and learned of the overcharging and lack of reimbursement. Hearings ensued, and the commission concluded that the utility had acted imprudently in administering the coal contract by failing to notice the overcharges sooner. The commission ultimately ordered the utility to pay a penalty of $9 million in the form of credits to customers and payments to the other utilities that owned the power plant (that would in turn pass those payments to their customers). The utility petitioned a trial court for review of that decision, claiming that the commission did not have the authority to assess the penalty. The trial court reversed the commission’s order, reasoning that it was a retroactive ratemaking in violation of Wisconsin statutes. The intermediate appellate court affirmed, and the commission (along with several intervening parties) appealed.