City of Oak Creek v. Public Service

• Decision Date: 21 March 2006
• Docket Number: No. 2005AP741.,2005AP741.
• Citation: 2006 WI App 83,716 N.W.2d 152
• Parties: CITY OF OAK CREEK, by its WATER AND SEWER UTILITY COMMISSION, Petitioner-Appellant,<SMALL><SUP>†</SUP></SMALL> v. PUBLIC SERVICE COMMISSION OF WISCONSIN, and City of Franklin, by its Board of Water Commissioners, Respondents-Respondents.
• Court: Wisconsin Court of Appeals

716 N.W.2d 152

2006 WI App 83

CITY OF OAK CREEK, by its WATER AND SEWER UTILITY COMMISSION, Petitioner-Appellant,^† v.PUBLIC SERVICE COMMISSION OF WISCONSIN, and City of Franklin, by its Board of Water Commissioners, Respondents-Respondents.

No. 2005AP741.

Court of Appeals of Wisconsin.

Submitted on Briefs January 3, 2006.

Opinion Filed March 21, 2006.

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On behalf of the petitioner-appellant, the cause was submitted on the briefs of Boardman, Suhr, Curry & Field LLP by Lawrie J. Kobza and Matthew D. Weber, Madison.

On behalf of the respondent-respondentPublic Service Commission of Wisconsin, the cause was submitted on the brief of Edward S. Marion, Madison.

On behalf of the respondent-respondentCity of Franklin, by its Board of Water Commissioners, the cause was submitted on the brief of Piper & Schmidt by Joseph M. Wirth and Jon D. Monson, Milwaukee.

Before WEDEMEYER, P.J., FINE and CURLEY, JJ.

¶ 1WEDEMEYER, P.J

The City of Oak Creek, by its Water and Sewer Utility Commission(Oak Creek) appeals from a decision of the circuit court affirming a July 26, 2004 final decision and order of the Public Service Commission(PSC) requiring Oak Creek to reconvey to the City of Franklin, without compensation, title to certain contributed water utility infrastructure used by Oak Creek to service City of Franklin retail water customers.¹Because the PSC's order comports with its statutory authority and the basis for Oak Creek's claims of error is not more reasonable than the basis for the PSC's order, we affirm.

BACKGROUND

¶ 2 Franklin and Oak Creek are two adjacent municipalities located in southern Milwaukee County.Franklin is located in southwestern Milwaukee County, while Oak Creek is located in the southeastern part of the county along Lake Michigan.In the 1970's, Franklin quickly developed from a rural setting to a suburb.Whereas, historically, the city's residents had relied on private wells for water consumption, the need for additional sources for water became obvious.Franklin began negotiating with adjacent municipalities to fulfill its needs.It entered into two retail sales agreements with Oak Creek to obtain water for some of its residents in newly developing subdivisions.On October 8, 1973, the PSC approved a thirty-year agreement enabling Oak Creek to provide water for Franklin's Southwood East subdivision.By the terms of the agreement and order of approval, Franklin was to construct the water mains and appurtenances (infrastructure or assets).Pursuant to PSC policy that a water utility shall provide retail water service over facilities which it owns, part of the order required Franklin to convey ownership of the infrastructure to Oak Creek.The order did not require Franklin to repurchase the infrastructure or address any issue of compensation related to reacquiring the assets at the expiration of the agreement.

¶ 3 On March 21, 1979, Franklin and Oak Creek entered into a second agreement to supply retail water to another newly developed Rawson subdivision in Franklin.The terms and conditions were basically the same as the agreement for the Southwood East subdivision except for the dates.The PSC approved the Rawson agreement on May 10, 1979.

¶ 4 In the mid-1980's, Franklin experienced additional well water quality problems and, as a result, began to negotiate with the City of Milwaukee and the City of Oak Creek for a wholesale source of Lake Michigan water.On April 4, 1994, Franklin reached a wholesale agreement with Oak Creek.As part of the negotiations, the Rawson agreement was amended so that its expiration date was the same as the Southwood East agreement, i.e., October 8, 2003.When Franklin petitioned for approval of the wholesale agreement, Oak Creek quite naturally supported approval of the agreement.The City of Milwaukee, however, objected to approval on the basis that it was not reasonable under WIS. STAT. § 196.49(1993-94).²A contested proceeding

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ensued, during which the relative cost factors of the wholesale and wholesale-retail combinations were examined as presented in the various proposals.On December 28, 1994, the PSC approved the Franklin/Oak Creek wholesale agreement and the amendment to the Rawson agreement.

¶ 5The December 28, 1994 decision specifically required that: "[A]ll of the approximately 1,000 customers in Franklin who are currently receiving retail water service from Oak Creek, will be transferred so that all of these residents become retail water customers of Franklin within 10 years or sooner as allowed by the agreements between these two municipalities."

¶ 6 Within the agreements and order of approval, there was no determination of the methodology for transferring the customers or the infrastructure back to Franklin.As the termination date for the retail water agreements drew near, no accommodation was reached as to the transfer of the customers and infrastructure.

¶ 7 As a consequence, on July 29, 2003, Franklin filed a petition with the PSC requesting that Oak Creek be ordered to transfer customers and contributed assets on October 8, 2003, at no charge.In doing so, it requested the PSC, under the power vested in it by WIS. STAT. § 196.30(2003-04)³ and more particularly pursuant to WIS. STAT. §§ 196.39and196.37(2),⁴ to amend and alter its orders of October 8, 1973, and December 28, 1994, to effectuate the request.After a contested hearing and the lengthy submission of evidence, the PSC ordered Oak Creek to transfer all of its Franklin retail customers and the related contributed water utility infrastructure at no cost to Franklin.It based its decision upon its general supervisory authority as contained in WIS. STAT. ch. 196, principles of contract, and the application of judicial estoppel to foreclose any claim by Oak Creek for compensation for the return of assets.Oak Creek petitioned the circuit court of Milwaukee County to review the decision of the PSC.The circuit court affirmed the decision of the PSC.Oak Creek now appeals to this court.

ANALYSIS

¶ 8 Oak Creek's challenge to the propriety of the PSC decision and order essentially consists of three claims: (1) the PSC exceeded its authority in concluding that the December 28, 1994 order required Oak Creek to transfer the donated water utility infrastructure to Franklin at no cost, there being no language in the 1994 order that addressed the issue of transferring the infrastructure assets; (2) Oak Creek never agreed to transfer the assets back to Franklin at no cost; and (3) it is not barred from asserting a claim for compensation by judicial estoppel.We shall address each issue raised by Oak Creek as appropriate for the disposition of this appeal.

STANDARDS OF REVIEW AND APPLICABLE LAW

¶ 9 The Franklin and Oak Creek Water Utilities are regulated public utilities as defined under WIS. STAT. § 196.01, and thereby subject in their operations to all the pertinent rules, regulations, and orders promulgated under WIS. STAT. ch. 196.Water utilities that operate under the jurisdiction and supervision of the PSC are deemed to be cognizant of the commission's authority.

¶ 10 Although this is an appeal from a circuit court decision, we review the decisions of an administrative agency, in this case the PSC, not those of the trial court.SeeWisconsin Pub. Serv. Corp. v. Public Serv. Comm'n,156 Wis.2d 611, 616, 457 N.W.2d 502(Ct.App.1990).On review, we shall separately address disputed issues of agency procedure, interpretations of law, and determinations of fact or policy within the agency's exercise of delegated discretion.WIS. STAT. § 227.57(3).

¶ 11 An agency's findings of fact are conclusive on appeal if they are supported by credible and substantial evidence.SeeWIS. STAT. § 102.23(6).Credible evidence is that evidence which excludes speculation or conjecture.SeeBumpas v. DILHR,95 Wis.2d 334, 343, 290 N.W.2d 504(1980).Evidence is substantial if a reasonable person relying on the evidence might make the same decision.SeeBucyrus-Erie Co. v. DILHR,90 Wis.2d 408, 418, 280 N.W.2d 142(1979).

¶ 12 In reviewing the PSC's findings of fact, we ought not look to see whether substantial evidence supports alternative findings that the court would make or that the PSC may have failed to make.SeeGraebel Moving & Storage of Wis. v. LIRC,131 Wis.2d 353, 356, 389 N.W.2d 37(Ct.App.1986).We need only look to see what substantial evidence supports the decision actually made.Seeid.

¶ 13 The credibility of the witnesses and the persuasiveness of their testimony are for the commission, not for the courts, to determine.L & H Wrecking Co. v. LIRC,114 Wis.2d 504, 509, 339 N.W.2d 344(Ct.App.1983)."In applying the credible evidence test to findings of the [commission], a reviewing court does not weigh conflicting evidence to determine which should be believed."Id."If there is credible evidence to sustain the finding, irrespective of whether there is evidence that might lead to the opposite conclusion, a court must affirm."Id.

¶ 14 When reviewing conclusions and statutory interpretations of the PSC, there are three different levels of deference that may be applied depending upon the appropriate circumstances.Harnischfeger Corp. v. LIRC,196 Wis.2d 650, 659-60, 539 N.W.2d 98(1995).The highest—"great deference"—will be accorded an agency's decision when: (1) the agency is charged with the administration of the particular statute at issue; (2) its interpretation is one of long-standing; (3) it employed its "expertise or specialized knowledge" in arriving at its interpretation; and (4) its interpretation will provide "uniformity and consistency in the application of the statute."Id. at 660, 539 N.W.2d 98."Where great deference is appropriate, the agency's interpretation will be sustained if it is reasonable—even if an alternative reading of the statute is more reasonable."Barron Elec. Coop....