## Facts

- The Public Service Commission of Wisconsin (PSC) is the state agency that regulates Wisconsin public utilities.
- Wisconsin Public Service Corporation (WPSC) is a regulated electric utility that provides retail electric service in Wisconsin.
- WPSC offered the Pg-4 tariff, a net-energy billing program for customers with on-site renewable generation that allowed customers to offset electricity they purchased from WPSC and, at times, deliver excess electricity back to WPSC’s system.
- Under Pg-4, customers’ “net” energy use was calculated over a monthly netting period.
- Pg-4 originally applied to customer-generation systems up to 20 kilowatts (kW).
- In 2011, the PSC increased the Pg-4 eligibility limit to 100 kW.
- In March 2013, WPSC applied to the PSC to reduce the Pg-4 generation-system capacity limit from 100 kW back to 20 kW.
- Renew Wisconsin, Inc. (RENEW), a nonprofit representing renewable-energy companies and individual electric ratepayers, intervened in the PSC proceeding.
- RENEW asked the PSC to keep the 100-kW limit and to change the tariff’s netting period from monthly to annual.
- The PSC issued a final decision granting WPSC’s request to reduce the capacity limit to 20 kW and denying RENEW’s request for annual netting (thus retaining monthly netting).
- The PSC explained that it chose a “conservative approach” because of concerns about WPSC’s recovery of fixed costs that were built into retail rates.
- The PSC was concerned that customers with substantial self-generation could receive Pg-4 credits that offset not only variable usage charges but also fixed costs of service, shifting costs to other customers who bought more electricity from WPSC.
- WPSC presented an example of at least one self-generating customer whose bill was reduced to $0.53.
- A PSC policy analyst estimated that annual fixed-cost-recovery losses could be between $93,000 and $117,000.
- RENEW sought judicial review in circuit court, arguing the PSC’s decision lacked a sufficient explanation and factual basis and was arbitrary and capricious; the circuit court remanded to the PSC for further factual findings.
- The PSC and WPSC appealed the circuit court’s remand order.

## Issues

1. Whether the PSC’s final decision reducing Pg-4 eligibility from 100 kW to 20 kW and retaining monthly netting was reasonable, based on substantial evidence in the record, and supported by an adequate explanation.
2. Whether the PSC’s decision was arbitrary and capricious, including in its treatment of fixed-cost recovery and alleged cross-subsidies among customers.
3. Whether the circuit court erred by remanding for further findings rather than affirming the PSC’s final decision.

## Decision

- The Wisconsin Court of Appeals reversed the circuit court’s remand order.
- The court affirmed the PSC’s final decision reducing the Pg-4 capacity limit to 20 kW and retaining monthly netting.
- The court held the PSC provided a sufficient explanation tying its concerns about fixed-cost recovery and cost shifting to its choice to limit the tariff to smaller generators and to keep monthly netting.
- The court held substantial evidence supported the PSC’s concerns, including the near-zero bill example and the analyst’s estimate of annual fixed-cost-recovery losses.
- The court rejected RENEW’s arbitrary-and-capricious arguments, concluding the PSC made a reasoned choice on this record and was not required to resolve all possible rate-design or subsidy questions in this single tariff decision.

## Legal Principles

- On review under Wis. Stat. ch. 227, courts review the agency’s decision rather than the circuit court’s reasoning.
- An agency’s findings of fact are upheld if supported by substantial evidence—evidence that a reasonable person could accept as adequate to support the conclusion.
- A reviewing court does not reweigh evidence or choose among competing inferences when the agency’s inference is reasonable and supported by the record.
- Agency action is arbitrary or capricious only if it lacks a rational basis; the agency must connect the facts it relies on to the choice it makes.
- The agency’s explanation need not be lengthy, but it must allow a reviewing court to follow the agency’s reasoning and confirm that the decision rests on record evidence and reasoned decisionmaking.

## Conclusion

The Wisconsin Court of Appeals reversed the circuit court’s remand and upheld the PSC’s final decision modifying WPSC’s Pg-4 net-energy billing tariff by reducing the eligible system-size cap from 100 kW to 20 kW and retaining monthly netting, concluding that the PSC’s fixed-cost-recovery and cost-shifting concerns were supported by substantial evidence and that the PSC gave an adequate, rational explanation for its conservative policy choice.


Renew Wisconsin v. Public Service Commission of Wisconsin, 370 Wis.2d 787 (2016)