Wisconsin Public Service Corp. v. Public Service Com'n of Wisconsin, 89-0532

• Decision Date: 08 May 1990
• Docket Number: No. 89-0532,89-0532
• Citation: 156 Wis.2d 611,457 N.W.2d 502
• Parties: , 115 P.U.R.4th 560 WISCONSIN PUBLIC SERVICE CORPORATION, Petitioner-Respondent-Cross Appellant, v. PUBLIC SERVICE COMMISSION OF WISCONSIN, Respondent-Cross Respondent. CITIZEN'S UTILITY BOARD, INC., Petitioner-Appellant-Cross Respondent, v. PUBLIC SERVICE COMMISSION OF WISCONSIN, Respondent-Cross Respondent.
• Court: Wisconsin Court of Appeals

Page 502

457 N.W.2d 502

156 Wis.2d 611, 115 P.U.R.4th 560

WISCONSIN PUBLIC SERVICE CORPORATION, Petitioner-Respondent-Cross Appellant, v. PUBLIC SERVICE COMMISSION OF WISCONSIN, Respondent-Cross Respondent.

CITIZEN'S UTILITY BOARD, INC., Petitioner-Appellant-Cross Respondent, v. PUBLIC SERVICE COMMISSION OF WISCONSIN, Respondent-Cross Respondent.

No. 89-0532.

Court of Appeals of Wisconsin.

Submitted on Briefs March 22, 1990.

Opinion Released May 8, 1990.

Opinion Filed May 8, 1990.

Allen A. Arntsen and Briony Jean Foy, on the briefs, Madison, for petitioner-appellant-cross respondent, Citizen's Utility Bd., Inc.

Allen W. Williams, Jr. and Michael D. Flanagan of Foley & Lardner, on the briefs, Milwaukee, for petitioner-respondent-cross appellant.

John F. Ebbott, on the briefs Sheboygan, for respondent-cross respondent, Public Service Com'n of Wisconsin.

Before CANE, P.J., and LaROCQUE and MYSE, JJ.

MYSE, Judge.

Wisconsin Public Service Corporation (WPS) appeals the trial court's affirmance of a Public Service Commission (PSC) rate-setting decision that found WPS imprudent for failing to pay its taxes under protest when other utilities challenged the constitutionality of that tax. The Citizens' Utility Board, Inc. (CUB), also appeals, contending that PSC failed to impose an adequate sanction as a remedy for WPS's imprudence. Because we conclude that PSC applied the appropriate legal standard in finding imprudence and established a reasonable rate of return on equity, we affirm the commission's determination.

In 1981, the Wisconsin Legislature repealed a tax credit previously available to state utilities. Because there was a question as to the constitutionality of the credit repeal, WPS consulted outside tax counsel for advice on the viability of challenging the repeal. Outside counsel opined that the repeal was probably constitutional, but added that WPS had a 30% to 40% chance of prevailing on a constitutional challenge.

Based on this advice, WPS decided not to challenge the legislation. Even after other Wisconsin utilities instituted a constitutional challenge, WPS declined to participate. The challenge was not resolved for three years and WPS paid its taxes without the credit, as required by statute. In 1985, the tax credit repeal was held unconstitutional, and a new tax was enacted by the legislature.

During the pendency of the constitutional challenge, WPS paid its taxes without protest. A taxpayer can pay taxes under protest to preserve its right to reclaim the tax at a later date. See Manitowoc Co. v. City of Sturgeon Bay, 122 Wis.2d 406, 362 N.W.2d 432 (Ct.App.1984). Despite the fact that a successful challenge would result in a refund if WPS paid the tax under protest, WPS did not do so. When the credit repeal was held unconstitutional, those utilities that paid under protest received full refunds on taxes paid.

WPS sought approval for a rate increase from PSC in 1986 pursuant to ch. 196, Stats. In reviewing WPS's application, PSC concluded that WPS's failure to pay its taxes under protest was imprudent because of the lawsuit brought by other utilities. Furthermore, PSC concluded that WPS could have easily, without cost, filed under protest to protect its assets in the event the challenge was successful. ¹ Prudence is a factor PSC considers in setting utility rates and can affect the allowed return on equity. See sec. 196.37, Stats. Because of WPS's imprudence, PSC ordered a rate of return on equity for a part of 1987 that was .1% less than otherwise would have been approved. This sanction cost WPS approximately $250,000 in lost revenue. The amount of taxes recoverable but forfeited due to WPS's failure to file under protest is well in excess of $250,000, though the exact amount is in dispute. ²

Our scope of review on appeal is identical to that of the circuit court. West Bend Ed. Ass'n v. WERC, 121 Wis.2d 1, 11 n. 8, 357 N.W.2d 534, 539 n. 8 (1984). We review the decision of the commission, not the court. Liberty Trucking Co. v. DILHR, 57 Wis.2d 331, 342, 204 N.W.2d 457, 463-64 (1973).

There is no dispute that WPS paid its taxes without protest and knew of the constitutional challenge to the repeal of the tax credit. PSC's finding of imprudence thus involves the application of a legal standard, prudence, to a set of undisputed facts. This is a question of law. Seep v. State Personnel Comm'n, 140 Wis.2d 32, 38-39, 409 N.W.2d 142, 144 (Ct.App.1987).

We ordinarily review questions of law de novo. Id. Because the operation of a utility is within the expertise of PSC, however, we accord deference to their findings. Beloit Educ. Ass'n v. WERC, 73 Wis.2d 43, 67, 242 N.W.2d 231, 242 (1976). Even if we did not accord deference, we will sustain an agency's conclusion of law if it is reasonable, even though an alternative view may be equally reasonable. See Robert Hansen Trucking, Inc. v. LIRC, 126 Wis.2d 323, 332, 377 N.W.2d 151, 155 (1985).

WPS alleges that PSC erred by finding imprudence in WPS's decision not to pay its taxes under protest during the pendency of the constitutional challenge. WPS claims that it made a reasoned decision not to challenge or protest the new tax levy and that it should not be penalized for paying taxes as required by statute. PSC never concluded that WPS was imprudent in refusing to challenge the repeal. Rather, it concluded that WPS was imprudent not to protest payment when the constitutionality of the repeal was being challenged by others. Essentially, PSC concluded that WPS was required, under the exercise of normal prudence, to take the "free ride" given to it by other utilities' constitutional challenge to the repeal of the tax credit. Under PSC's ruling, WPS only needed to pay its taxes under protest.

Prudence is defined as:

Carefulness, precaution, attentiveness, and good judgment, as applied to action or conduct.... This term, in the language of the law, is commonly associated with "care" and "diligence" and contrasted with "negligence."

Black's Law Dictionary 1104 (5th ed. 1979). In assessing imprudence, PSC must assess the utility's conduct without usurping the role of management. See TWA v. Civil Aeronautics Bd., 385 F.2d 648, 655-56 (D.C.Cir.1967).

PSC's determination in this instance does not usurp the role of management. PSC did not, in effect, require WPS to join the legal challenge to be prudent. PSC only required WPS to pay its taxes under protest as a reasonable precaution. Because prudence is a synonym of caution, PSC was correct in concluding that WPS failed to take reasonable steps to protect its...