July/August 2021 Issue

Also in this issue: Wisconsin Supreme Court Holds DNR’s Broad Statutes Provide “Explicit” Authority to Take Challenged Actions; Dissent Decries “Calamitous Decision”     |     Supreme Court Signals that Government Agencies Should Be Very Wary of Denying Exceptions to Regulatory, Licensing and Contracting Requirements that Burden the Free Exercise of Religion

PSC Dismisses Complaint Challenging Extraterritorial Sewer Service “License Fee”

Lawrie J. Kobza | 07.23.21

The City of Oconomowoc (City) provides wastewater treatment service to three extraterritorial customers — Mary Lane Area Sanitary District, the Village of Lac La Belle, and Ixonia Utility District No. 2. In 2020, these three customers filed a complaint with the Public Service Commission (PSC or Commission) challenging the ​“license fees” charged by the City. (PSC Docket 9300-SI-125.) The license fees were included in the agreements between the City and the customers, but the customers contended that that the license fees were illegal sewerage service charges and were unjust and unreasonable. The complainants asked the PSC to invalidate the license fees. The City, represented by Boardman Clark, denied the claims and responded that the license fees constituted valid consideration for the City’s agreement to provide service outside its boundaries, and that the PSC lacked jurisdiction over the complaint. 

On June 17, 2021, the PSC issued its written decision dismissing the complaint. (PSC Ref#: 413873.) The Commission concluded that it lacked jurisdiction over the agreed upon license fees. In reaching this conclusion, the Commission relied upon the following important points that other communities with intermunicipal wastewater agreements should keep in mind: 

A municipality retains discretion over whether, and under what conditions, it provides extraterritorial sewer service. 

Municipalities entering into an intermunicipal agreement are able to freely negotiate for services and over the consideration provided.

The PSC found nothing under Wisconsin law that would prohibit a municipality from negotiating a fee as consideration for providing a service. 

The intermunicipal agreements here were negotiated so that the complainants could obtain wastewater treatment service which was otherwise unavailable. 

Intermunicipal agreements in their entirety do not fall under the PSC’s complaint jurisdiction. The PSC only has jurisdiction over the specific provisions of an intermunicipal agreement that qualify as a ​“rate, rule, or practice” within the PSC complaint jurisdiction under Wis. Stat. § 66.0821(5)(a).

The fact that the agreements in this case contained a separate section for service rates (that fall under the PSC’s complaint jurisdiction) and another section for license fees indicated that the license fees at issue in this case were different than service rates and were not a rate, rule or practice subject to PSC jurisdiction. 

It was also relevant that the contracting municipality was required to pay the license fee. A payment negotiated between two municipalities is not a service charge that affect rates unless or until a utility is involved in the payment itself.

The PSC concluded that the license fees imposed in these agreements were consideration for the agreement to provide extraterritorial wastewater treatment service as opposed to the actual wastewater treatment service itself.

The fact that these agreements dealt with wastewater service did not place any additional burdens or requirements on the parties. The relationship between parties acting pursuant to an intergovernmental agreement is solely that of contracting parties.

The PSC Decision also noted that intergovernmental agreements under Wis. Stat. § 66.0301 should be ​“interpreted liberally in favor of cooperative action between municipalities,” and, that if the legislative policy behind the statute is to encourage cooperation, eliminating incentives for municipalities to provide services outside their territorial boundaries would only discourage such behavior.