## Facts

- Wisconsin Power & Light Co. (WPL), a regulated utility, operated the Columbia generating station, jointly owned with other utilities.
- In 1972 WPL entered a long-term coal supply contract to fuel the plant; coal prices increased substantially over time.
- WPL recovered fuel costs through customer rates approved under Wisconsin ratemaking procedures.
- After concerns and audit findings that WPL paid excessive coal prices, WPL renegotiated the contract for lower future prices but obtained no reimbursement for prior payments.
- In a later rate proceeding, the Public Service Commission of Wisconsin (PSC) found WPL had imprudently administered the coal contract by failing to act earlier on allegedly excessive prices.
- The PSC attributed the alleged imprudence to customer overcharges during earlier periods and ordered WPL to pay $9 million to be returned via customer credits and payments to co-owner utilities for pass-through to their customers.
- WPL sought judicial review; the circuit court reversed the PSC order as impermissible retroactive ratemaking, and the court of appeals affirmed.

## Issues

1. Whether the PSC had statutory authority to impose a lump-sum monetary penalty on a utility based on past imprudent management in a rate case.
2. Whether an order requiring a utility to make customer credits and related payments for amounts previously collected under approved rates constitutes impermissible retroactive ratemaking.

## Decision

- The Wisconsin Supreme Court affirmed the court of appeals, leaving the circuit court’s reversal in place.
- The court held the PSC lacked statutory authority to impose the $9 million lump-sum penalty based on past imprudence.
- The court held the PSC’s order functioned as a retrospective recoupment of revenues collected under previously approved rates and therefore constituted prohibited retroactive ratemaking.
- The court recognized the PSC may review prudence for ratemaking purposes but limited remedies to prospective ratemaking adjustments rather than retrospective monetary sanctions absent explicit statutory authorization.

## Legal Principles

- An administrative agency has only those powers expressly conferred or necessarily implied by statute; general supervisory or ratemaking authority does not imply power to impose punitive, lump-sum monetary penalties.
- Ratemaking is generally prospective; once rates are approved and amounts are collected under those rates, the regulator may not later require refunds or equivalent monetary recoupment based solely on a later finding of managerial imprudence, absent specific statutory authorization.
- Prudence review is permitted as part of setting future rates, including prospective disallowance of costs deemed imprudently incurred, but it does not authorize retrospective penalties that remove past revenues from the utility after-the-fact.

## Conclusion

The court invalidated the PSC’s $9 million order because it exceeded the PSC’s statutory authority and operated as retroactive ratemaking by requiring WPL to return amounts tied to electricity charges collected under previously approved rates.


Wisconsin Power & Light Co. v. Public Serv. Comm’n of Wis., 511 N.W.2d 291 (Wis. 1994)