Wisconsin Industrial Energy Group v. PSC

1 printed pages contain little extracted OCR body text; searchable legal-body completeness has not been established for those pages.

OCR transcription for search; preserved printed pages are authoritative

Appeal No. 2010AP2762 Cir. Ct. No, 2009CV4313

WISCONSIN COURT OF APPEALS
DISTRICT IV

WISCONSIN INDUSTRIAL ENERGY GROUP, INC. AND

CITIZENS UTILITY BOARD,

PETITIONERS-APPELLANTS,
Vv.

PUBLIC SERVICE COMMISSION OF WISCONSIN, FILED
RESPONDENT-RESPONDENT, NOW 23, 2011

WISCONSIN ELECTRIC POWER COMPANY AND ae og Cork of

WISCONSIN POWER AND LIGHT COMPANY, Suprene Court
INTERVENORS-RESPONDENTS,

WISCONSIN PUBLIC SERVICE CORPORATION,

INTERVENOR.

CERTIFICATION BY WISCONSIN COURT OF APPEALS

Before Lundsten, P.J., Higginbotham and Sherman, JJ.

We certify to the Wisconsin Supreme Court the question whether a
statute goveming the Public Service Commission’s review and approval of a
proposed large electric generating facility applies when a Wisconsin public utility
proposes to build an out-of-state facility.

This case involves a Wisconsin public utility's proposal to build a
wind farm in Minnesota to supply electricity to the utility’ s Wisconsin consumers.

No. 2010AP2762
2
We are told by the parties that the costs associated with building the facility would
be borne by Wisconsin ratepayers. The Public Service Commission of Wisconsin
approved the wind farm by applying WIS. STAT. § 196.49.1 Groups representing
energy consumers sought review in the circuit court, arguing that the PSC should
have applied a more demanding large-facility approval statute, WIS. STAT.
§ 196.491. Three Wisconsin public utilities intervened, including the company
that seeks to build the wind farm in Minnesota, Wisconsin Power and Light
Company. The circuit court affirmed the PSC, and the consumers appealed.
For purposes of this certification, we adopt the shorthand used by the
parties. They refer to the statute the PSC did apply, WIS. STAT. § 196.49, the
Certificate of Authority statute, as the “CA statute.” The parties refer to WIS.
STAT. § 196.491, the more demanding Certificate of Public Convenience and
Necessity statute, as the “CPCN statute.”
It is undisputed that, if the large-scale wind farm at issue here were
to be built in Wisconsin, the CPCN statute would apply. The question is whether
the CPCN statute applies even though the facility is to be built in Minnesota.
It is the position of the PSC and the utilities that the CA statute, not
the CPCN statute, applies to such out-of-state facilities.
Both the CA statute and the CPCN statute provide criteria to be
applied by the PSC when deciding whether to approve a new facility. The statutes
are similar in that both contain criteria that seemingly are designed to protect
1 All references to the Wisconsin Statutes are to the 2009-10 version unless otherwise
noted.

No. 2010AP2762
3
Wisconsin ratepayers from having to pay for unnecessary or inefficient new
facilities. For example, under both statutes, the criteria include whether a
proposed project would, “[w]hen placed in operation, add to the cost of service
without proportionately increasing the value or available quantity of service.” See
WIS. STAT. § 196.49(3)(b)3.; WIS. STAT. § 196.491(3)(d)5. (by cross-reference);
see also GTE N. Inc. v. PSC, 176 Wis. 2d 559, 568, 500 N.W.2d 284 (1993)
(“The primary purpose of the [chapter 196] public utility laws in this state is the
protection of the consuming public.”).
The dispute here stems from a number of differences between the
two statutes.
First, the CPCN statute applies only to large facilities, namely, a
“large electric generating facility,” defined as having an operating capacity of 100
megawatts or more. See WIS. STAT. § 196.491(1)(e) and (g). There is no dispute
that the wind farm here would be a “large” facility under this definition. The CA
statute does not indicate whether a facility’s size matters to its application.
Second, although both statutes allow consideration of the effects on
ratepayers, the CPCN statute appears to contain more meaningful ratepayer
protection. For example, the CPCN statute requires the PSC to apply ratepayer
protection criteria. See WIS. STAT. § 196.491(3)(d)2. (allowing approval “only if,”
for example, “[t]he proposed facility satisfies the reasonable needs of the public
for an adequate supply of electric energy”); cf. WIS. STAT. § 196.49(3) (in the CA
statute, providing that the PSC “may refuse to certify a project” if criteria are not
met). The CPCN statute also requires a public hearing, § 196.491(3)(b), whereas
the CA statute does not.

No. 2010AP2762
4
Third, and as we explain in more detail below, the CPCN statute
incorporates the CA statute’s criteria,2 and then adds significant additional criteria.
There are other differences, but we do not attempt to list them all here.
With this general background in mind, we describe the dispute in
this case.
In support of applying the CPCN statute, the energy consumers
begin with the correct observation that the CPCN statute is not expressly limited to
in-state facilities. The CPCN statute contains no express language suggesting a
geographical limit. Instead, so far as the CPCN statute explains, the key feature
that makes the statute applicable is the size of the proposed facility. See WIS.
STAT. § 196.491(3)(a); § 196.491(1)(e) and (g). Further, some of the requirements
in the CPCN statute appear to apply regardless of location. See, e.g.,
§ 196.491(3)(d)2. (limiting approvals to where “[t]he proposed facility satisfies the
reasonable needs of the public for an adequate supply of electric energy”).
2 The CA statute provides that “[t]he commission may refuse to certify a project if it
appears that the completion of the project will do any of the following”:
1. Substantially impair the efficiency of the service of
the public utility.
2. Provide facilities unreasonably in excess of the
probable future requirements.
3. When placed in operation, add to the cost of service
without proportionately increasing the value or available
quantity of service unless the public utility waives consideration
by the commission, in the fixation of rates, of such consequent
increase of cost of service.
WIS. STAT. § 196.49(3)(b). By cross-reference, WIS. STAT. § 196.491(3)(d)5. incorporates this
criteria into the CPCN statute’s mandatory requirements applicable to public utilities.

No. 2010AP2762
5
The PSC and the utilities take the position that the consumers’
interpretation of the statute is unreasonable because some parts of the CPCN
statute are incompatible with out-of-state applications. The PSC points to the
following examples:
• The CPCN statute requires a determination that “[t]he proposed facility
will not unreasonably interfere with the orderly land use and
development plans for the area involved,” see WIS. STAT.
§ 196.491(3)(d)6., but the orderly use of out-of-state land is a concern of
the people of the other state, not the people of Wisconsin.
• The CPCN statute provides: “If installation or utilization of a facility
for which a [CPCN] has been granted is precluded or inhibited by a
local ordinance, the installation and utilization of the facility may
nevertheless proceed,” see § 196.491(3)(i), but Wisconsin authorities
have no power to override such out-of-state local ordinances.
• The CPCN statute provides: “The commission shall hold a public
hearing on an application … in the area affected,” see § 196.491(3)(b),
but it is obvious that our legislature did not contemplate holding public
hearings in other states.
The CPCN statute contains other apparent misfits, but a further listing is
unnecessary for purposes of this certification.
The CA statute, on the other hand, does not contain these same
apparent misfits. One seemingly minor exception is that the CA statute requires a
determination that “brownfields … are used to the extent practicable.” See WIS.
STAT. § 196.49(4). By cross-reference to the definition in WIS. STAT.
§ 560.13(1)(a), we know that brownfields are “abandoned, idle or underused
industrial or commercial facilities or sites.” Seemingly, the legislature would not
have intended that the PSC make this determination for out-of-state sitings.

No. 2010AP2762
6
It is the PSC’s view that looking at the statutes in terms of fits and
misfits appears to lead to the conclusion that the CA statute is a better fit and,
therefore, what the legislature intended. But this view has its own problem.
The consumers point out that, under the PSC’s view, an otherwise
identical facility, presumably with identical potential impacts on Wisconsin
ratepayers, is treated differently based on its location. That is, assuming that the
PSC and the utilities are correct that the CA statute applies, rather than the CPCN
statute, this means that fewer criteria apply to an otherwise identical out-of-state
facility. More importantly, although both statutes have ratepayer-protection
criteria, application of the ratepayer-protection criteria is mandatory only in the
CPCN statute. It is the consumers’ position that ratepayer-protection criteria is
mandatory in large facility approval situations because large facilities inherently
have a greater potential to significantly affect ratepayers. Thus, the question arises
whether the legislature intended to give the PSC the discretion to approve a large
facility without considering ratepayer-protection criteria. It is apparent that the
energy consumers are concerned about this scenario. They argue that there is no
apparent reason why ratepayers should lose this mandatory safeguard when a large
facility is built out of state, rather than in state.
Thus, to summarize, we are left with two problematic
interpretations. One view would apply the CPCN statute to the wind farm because
the wind farm is sufficiently large, but that would bring into play some specific
CPCN requirements that cannot be literally applied to an out-of-state facility. This
view would treat similar facilities the same way for purposes of ratepayer
protection, regardless of a facility’s location. The contrary view would avoid
misfits in the CPCN statute’s subsections, but would deprive ratepayers of

No. 2010AP2762
7
mandatory protections and would produce a seemingly illogical distinction based
on the location of a facility.
We note that, in this particular case, it appears that the PSC did more
than necessary under the CA statute, but less than required under the CPCN
statute. The PSC argues that, if it was error to not apply the CPCN statute, that
error was harmless because the PSC did everything it would have done had it
applied the CPCN statute, considering the out-of-state location of the facility. Our
review of this issue suggests that the PSC’s argument falls short. For example, the
consumers point out that the PSC did not comply with the CPCN statute
requirement that the PSC deem the application complete under WIS. STAT.
§ 196.491(3)(a)2. A supreme court opinion strongly suggests that this is a
significant step in the procedure under the CPCN statute. See Clean Wisconsin,
Inc. v. PSC, 2005 WI 93, ¶¶57-96, 282 Wis. 2d 250, 700 N.W.2d 768 (explaining
that “the filing of the CPCN application and the PSC’s determination that the
application is complete are the first two steps in the process leading up to the
ultimate issuance of the CPCN,” id., ¶57; holding that a completeness
determination is “subject to judicial review,” id., ¶58; and proceeding to determine
whether a completeness determination was proper). Thus, it appears to us that the
legal issue presented cannot be avoided by a harmless error analysis. And,
regardless whether this case could be resolved on the basis of harmless error, it
appears to us that the supreme court should resolve the legal issue to avoid delays
and legal battles over the next large out-of-state project.
Finally, we note that the representation of interests in this case
favors granting the certification. Two Wisconsin public utilities have submitted
briefs in support of the PSC’s position. On the other side, both large industrial
consumers and residential and other smaller-scale consumers are represented.

No. 2010AP2762
8
Because it appears that all of the major interests are represented in this case, and
because the parties are in agreement that the issue is likely to recur, this is an
appropriate case for supreme court review.

No. 2010AP2762
9