Wisconsin's Environmental Decade, Inc. v. Public Service Commission
| Decision Date | 03 January 1978 |
| Docket Number | No. 76-478,76-478 |
| Citation | 81 Wis.2d 344,260 N.W.2d 712 |
| Parties | WISCONSIN'S ENVIRONMENTAL DECADE, INC., Petitioner-Respondent, v. PUBLIC SERVICE COMMISSION of Wisconsin, Respondent, Wisconsin Electric Power Company, Appellant. |
| Court | Wisconsin Supreme Court |
Larry J. Martin and Robert H. Gorske, Milwaukee (argued), for appellant; Elwin J. Zarwell, Robert H. Diaz, Jr., Andrew M. Barnes, Quarles & Brady, Milwaukee, on the brief.
Steven M. Schur, Chief Counsel, Madison (argued), with whom on the brief were Bronson C. La Follette, Atty. Gen., and Steven Levine, Asst. Chief Counsel, Madison, for Public Service Commission of Wis.
Kathleen M. Falk, Madison, for Wisconsin's Environmental Decade, Inc.
On January 17, 1974, Wisconsin Electric Power Co. (WEPCO) applied to the Public Service Commission (PSC) for increases in electric rates. WEPCO sought by this application to be made whole, that is, to be enabled to earn a rate of return which had previously been authorized as just and reasonable, but which WEPCO had been unable to earn as a result of increasing costs.
After public hearing, the PSC filed an interim order on July 18, 1974, and a final order on January 27, 1975. Both of these orders authorized WEPCO to insert in its rate schedules an expanded adjustment clause. 1 As authorized, the expanded adjustment clause included such items as purchased power, fuel, labor, supplies, steam, electric expenses, and supervision.
Wisconsin's Environmental Decade, Inc. (WED) intervened in the proceedings before the PSC and opposed the expansion of the adjustment clause. After WED's application for rehearing was rejected as to this issue, WED petitioned for review of the PSC orders pursuant to sec. 227.15, Stats. On October 22, 1976, Circuit Judge Torphy filed a memorandum decision reversing the orders of the PSC and remanding the case to the PSC. 2 Judge Torphy held that the expanded adjustment clause violated sec. 196.20(2), Stats., 3 in that it circumvented the public hearing requirement imposed by that statute. Judgment was filed on January 21, 1977, and it is from this judgment that WEPCO appeals.
Since the enactment of Laws of 1931, ch. 183, sec. 2, sec. 196.20(2), Stats., has required that there be a public hearing before a change in schedules which constitutes an increase in rates may go into effect. Until that time, the statute required only that notice be given to the commission ten days before the change in rates was to go into effect.
Adjustment clauses have been used by utilities in Wisconsin at least since 1918. Milwaukee Electric Railway & Light Co., 21 W.R.C.R. 749 (1918). During the early days of utility regulation, adjustment clauses which included such items as labor costs were occasionally approved. Milwaukee Electric Railway & Light Co., 21 W.R.C.R. 749 (1918); Wisconsin Gas & Electric Co., 25 W.R.C.R. 191 (1920); Milwaukee Electric Railway & Light Co., 26 W.R.C.R. 288 (1922). With the exception of these early cases, however, adjustment clauses have traditionally been of a much more limited scope than the clause involved in this case. Typically, these clauses have provided for automatic adjustment of rates for changes in the price of purchased fuel, such as coal, oil, or natural gas, or adjustment for the price of power which the utility itself purchases from another utility and then resells. Limited adjustment clauses have also been the general rule in other states. Trigg, Escalator Clauses in Public Utility Rate Schedules, 106 U.Pa.L.Rev. 964, 987 (1958).
Adjustment clauses of this more limited variety, which may be called "fuel adjustment clauses," have been widespread since World War I, and they are currently in use in more than forty states. 18 Ariz.L.Rev. 454, 454-55 (1976). The validity of fuel adjustment clauses, however, is not an issue in this case, and we express no opinion as to the permissibility of these clauses under the Wisconsin regulatory scheme. This case concerns only the validity of the expanded adjustment clause approved by the PSC, which authorizes adjustment for such factors as purchased power, fuel, labor, supplies, steam, electric expenses, and supervision.
Utilities have found expanded adjustment clauses to be desirable because of recent economic conditions. Inflationary costs have resulted in unstable utility earnings. West & Eubank, Automatic Cost of Capital Model, 95 Pub.Util.Fort. no. 11, p. 27, 30 (1975). Rate hearings are now seen by many utilities as being too time consuming and costly, and utilities find themselves engaging in virtually continuous rate cases. Public Service Co. of New Mexico, 8 P.U.R. 4th 113, 120 (1975); Consumers Organization for Fair Energy Equality, Inc. v. Department of Public Utilities, Mass., 335 N.E.2d 341 (1975). Expanded-adjustment clauses have appeared attractive as the solution to the problem of "regulatory lag," or the period of delay between changes in costs and the reflection of those changed costs in the rate schedules of the utilities. Trigg, supra, 106 U.Pa.L.Rev.[81 Wis.2d 349] at 967; West & Eubank, supra, 95 Pub.Util.Fort. no. 11, at 31-2.
On the other hand, it is argued that expanded adjustment clauses result in an effective decrease in the quantum of regulatory control. WEPCO asserts that the statutorily required public hearing is provided when the adjustment clause is adopted in the first place. It argues that the mechanical application of the fixed adjustment clause formula when one of the component prices changes is not a "change in schedules which constitutes an increase in rates" within sec. 196.20(2), Stats., so that no new hearing is required. However, it is clear that the practical effect of the use of expanded adjustment clauses is to defuse, in part, public awareness of changes in utility rates, and to reduce public scrutiny of these changes. The very point of using these clauses is to reduce the volume of rate hearings, and to conserve the time of the regulatory agency. Foy, Cost Adjustment in Utility Rate Schedules, 13 Vand.L.Rev. 663, 668 (1960).
Expanded adjustment clauses have also been criticized because they involve, typically, one or more factors, such as labor, the cost of which is subject to partial control by the utility. Automatic adjustment of rates to reflect changes in the cost of these partially controllable factors tends to result in the elimination of incentive of the utility to economize on these items and to seek greater efficiency. Foy, supra, 13 Vand.L.Rev. at 664.
However, it is not up to this court to strike the appropriate balance between public participation and simplicity in rate proceedings. That determination is for the legislature. The determinative issue in this case is whether, giving sec. 196.20(2), Stats., a fair construction, the legislature has authorized the PSC to permit the use of expanded adjustment clauses. We hold that expanded adjustment clauses have not been so authorized.
In construing a statute, the primary source used is the language of the statute itself. Nekoosa-Edwards Paper Co. v. Public Service Commission, 8 Wis.2d 582, 591, 99 N.W.2d 821 (1959). When a statute is ambiguous, it is permissible to look to the legislative intent, which is to be found in the language of the statute in relation to its scope, history, context, subject matter, and object intended to be accomplished. State ex rel. Arnold v. County Court, 51 Wis.2d 434, 439-40, 187 N.W.2d 354 (1971). A statute is ambiguous if, looking at the language of the statute, a well informed person could have become confused. The ambiguity, however, may arise from the interaction of separate statutes. Czaicki v. Czaicki, 73 Wis.2d 9, 14, 242 N.W.2d 214 (1976). In this case, all of ch. 196, Stats., should be considered...
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