## Facts

- Madison Gas and Electric Company (MG&E), an investor-owned utility, sought PSC approval to increase electric and natural gas rates.
- The Public Service Commission of Wisconsin (PSC) used a forward-looking (future) test year to set rates intended to produce a reasonable return on MG&E’s rate base.
- MG&E projected wholesale revenues of about $8.337 million; the PSC adopted a higher forecast (about $16.341 million) based on staff and expert analysis.
- The PSC further increased the wholesale revenue forecast by an additional $1.274 million, without new expert support or detailed findings explaining the increment.
- MG&E had “excess capacity” in generating resources; the PSC allocated a portion of the costs of that excess capacity to MG&E’s shareholders rather than to ratepayers.
- The PSC’s explanation for shifting excess-capacity costs was largely conclusory (stating it was “just and reasonable”) and lacked detailed supporting findings.
- On judicial review, the circuit court set aside parts of the PSC order; the court of appeals affirmed; the PSC obtained review in the Wisconsin Supreme Court.

## Issues

1. Whether the PSC’s additional $1.274 million wholesale revenue adjustment was supported by substantial evidence in the administrative record.
2. Whether the PSC’s allocation of excess-capacity costs to shareholders satisfied statutory “just and reasonable” requirements and the obligation to provide reasoned, reviewable findings.
3. What limits judicial review imposes on courts reviewing PSC rate-making decisions under the substantial-evidence and reasoned-decision standards.

## Decision

- The Wisconsin Supreme Court affirmed the court of appeals, leaving in place the circuit court’s partial set-aside of the PSC rate order.
- The Court held the additional $1.274 million wholesale revenue increment was not supported by substantial evidence.
- The Court held the excess-capacity cost allocation to shareholders was inadequately explained and lacked sufficiently detailed findings to permit judicial review.
- The matter was remanded for further PSC proceedings consistent with these requirements, with the effect that the challenged adjustments could not be used to reduce the utility’s approved revenue requirement.

## Legal Principles

- PSC rate-making determinations must be supported by substantial evidence in view of the entire record; reviewing courts may not accept key factual inputs resting on speculation or unexplained assumptions.
- Even in policy-laden and predictive rate-making, the PSC must provide findings and a reasoned explanation linking record facts to the choices made; bare conclusions that an outcome is “just and reasonable” are insufficient.
- Use of a forward-looking test year is permissible, but it does not relax the obligations of evidentiary support and reasoned decision-making for projections and adjustments.
- Courts must defer to the PSC’s policy discretion in rate-making but must set aside components of an order when critical inputs lack substantial evidentiary support or adequate explanation.

## Conclusion

The Wisconsin Supreme Court required the PSC to ground forward-looking revenue projections and excess-capacity cost allocations in substantial evidence and sufficiently detailed findings, affirming judicial intervention where unexplained adjustments and conclusory reasoning prevented meaningful review of whether rates were lawfully set.


Madison Gas & Elec. Co. v. Pub. Serv. Comm'n of Wis., 325 N.W.2d 339 (Wis. 1982)