In the
 United States Court of Appeals
              For the Seventh Circuit
                        ____________

No. 02-2618
ALLIANT ENERGY CORPORATION and
WISCONSIN POWER AND LIGHT COMPANY,
                                         Plaintiffs-Appellants,
                              v.

AVE M. BIE, BURNEATTA BRIDGE and ROBERT M.
GARVIN, in their official capacities as Commissioners
of the Wisconsin Public Service Commission,
                                        Defendants-Appellees.
                        ____________
          Appeal from the United States District Court
             for the Western District of Wisconsin.
           No. 00 C 0611—John C. Shabaz, Judge.
                        ____________
    ARGUED DECEMBER 4, 2002—DECIDED MAY 29, 2003
                   ____________


  Before FLAUM, Chief Judge, and COFFEY and WILLIAMS,
Circuit Judges.
  FLAUM, Chief Judge. This case involves various stat-
utes regulating public utilities and public utility holding
companies in Wisconsin. The plaintiffs challenge the
constitutionality of the statutes under the Commerce and
Equal Protection clauses of the United States Constitution.
The district court granted summary judgment in favor of
the defendants. The plaintiffs appeal. For the reasons
stated herein, we affirm in part and reverse in part.
2                                                No. 02-2618

                       I. Background
    i. The Parties
   The plaintiffs in this case are Alliant Energy Corporation
(“Alliant”) and its subsidiary, Wisconsin Power and Light
Company (“WPLC”).1 Alliant is incorporated in Wisconsin
and functions as a Wisconsin public utility holding com-
pany. Under WIS. STAT. § 196.795 (1)(h)(1)(a) that means
that Alliant owns or controls more than 5%—in this case
100%—of the outstanding voting securities in a Wisconsin
public utility, namely WPLC, a Wisconsin corporation that
provides utility services in Wisconsin. Alliant has two
other subsidiaries: Interstate Power and Light Company,
which provides utility services in Iowa, Minnesota and
Illinois; and Alliant Energy Resources, Inc., which owns
Alliant’s nonutility holdings. Alliant is subject to regula-
tion by the Minnesota Public Utilities Commission, the
Iowa Utilities Board, the Illinois Commerce Commission,
the Securities and Exchange Commission, and most rele-
vantly the Wisconsin Public Service Commission (“PSC”).
WPLC is also regulated by the PSC.
  This is a suit against the PSC (the named defendants
in this case, Ave Bie, Burneatta Bridge and Robert M.
Garvin, are sued in their official capacities as commis-
sioners of the PSC).


    ii. The Statutory Provisions
  There are numerous provisions of Wisconsin law that are
challenged in this appeal, and two other provisions that,
though unchallenged, are relevant to our analysis. The
relevant unchallenged provisions are as follows:



1
  For convenience, we will generally refer to the arguments as
belonging to Alliant.
No. 02-2618                                                 3

    Ch. 180:2 This chapter provides the rules for incorpora-
    tion within Wisconsin. Both Alliant and WPLC are
    incorporated under ch. 180. Alliant is seeking to rein-
    corporate in another state.
    § 196.795(2): This is the section specifically provid-
    ing for and authorizing the formation of utility hold-
    ing companies. It is by virtue of this provision that
    Alliant is authorized to exercise ownership and con-
    trol over WPLC; to put it another way, without this
    provision Alliant would not exist at all as a holding
    company.
The challenged provisions are as follows:
    § 196.53: “No license, permit or franchise to own, oper-
    ate, manage or control any plant or equipment for
    the production, transmission, delivery or furnishing of
    heat, light, water or power may be granted or trans-
    ferred to a foreign corporation [with some exceptions].”
    § 196.795(5)(L) (“in-state incorporation provi-
    sion”): This provision requires that a public utility
    holding company be incorporated in Wisconsin, under
    WIS. STAT. CH. 180.
    § 196.795(3) (“the takeover provision”): This pro-
    vision requires PSC approval before a person can
    acquire more than 10% of the outstanding voting se-
    curities of a public utility holding company.
    § 196.795(6m)(b) (“the asset cap”): This provision
    limits the extent to which a public utility holding com-
    pany may invest in non-utility businesses.
    §§ 196.195(5)(a) and (7)(a), 201.01(2), and 201.03(1)
    (“the securities regulation provisions”): These


2
  All of the laws listed are Wisconsin statutes and so we list
only chapter or section number.
4                                                 No. 02-2618

     provisions provide that PSC may regulate the issuance
     of securities by “public service corporations.” The pro-
     visions also define the application of the term “public
     service corporations.”3
The in-state incorporation provision, the takeover provision,
the asset cap, and the securities regulation provisions
are all part of the Wisconsin Utilities Holding Company
Act (WUHCA).


    iii. The Challenge
  Alliant and WPLC challenge the constitutionality of
the in-state incorporation provision, the takeover provi-
sion, the asset cap, and the securities regulation provi-
sions as well as §196.53. Alliant argues that these provi-
sions violate the Commerce and Equal Protection clauses
of the United States Constitution.4 The district court found
that the provisions are not unconstitutional and alterna-
tively that Alliant is estopped from challenging the provi-
sions in the first place. Accordingly, the district court
granted summary judgment in favor of the defendants.




3
   The definition is broad enough that the PSC might deem Al-
liant to be a “public service corporation.”
4
  The district court originally dismissed the case for lack of
standing. In a prior appeal we reversed, holding that if Alliant
can show that they intended to make investment purchases
and sales in violation of the provisions and to reincorporate
outside of Wisconsin, they could establish standing to challenge
the provisions. Alliant Energy Corp. v. Bie, 

(7th
Cir. 2002). Alliant has done this and therefore standing is no
longer an issue.
No. 02-2618                                                 5

                      II. Discussion
   Alliant presents its arguments generally as to all chal-
lenged provisions with few distinctions between them. The
issues of this case cannot be meaningfully analyzed in
such a manner. The provisions of the statute have very
different purposes and effects. We therefore deal with the
provisions in three distinct categories: the first category
is simply the in-state incorporation provision requiring
that a holding company be incorporated under Wisconsin
law; the second category is § 196.53, the provision requir-
ing that licenses, permits and franchises for local utilities
not be granted or transferred to foreign corporations;
and the third category is made up of the remaining pro-
visions, which regulate the financial structure and activ-
ities of the holding company (hereinafter “the structural
provisions”).


a. Constitutional Estoppel and Severability
   The district court found that Alliant was estopped
from challenging the constitutionality of the Wisconsin
statutes. The district court reasoned that because Alliant
is authorized to exist as a holding company by virtue of
WUHCA, in provision § 196.795(2), it cannot then chal-
lenge the constitutionality of other parts of the act. The
district court based its holding on Fahey v. Mallonee, 

(1947). The Supreme Court in Fahey explained, “It
is an elementary rule of constitutional law that one may not
retain the benefits of the Act while attacking the con-
stitutionality of one of its important conditions.” 

(quotations and citations omitted). As elementary as the
rule may have been, the “doctrine has unquestionably been
applied unevenly in the past, and observed as often as not
in the breach.” Arnett v. Kennedy, 

, 153 (1974);
accord Brockert v. Skornicka, 

, 1380 (7th Cir.
1983). We therefore view the rule as one to be applied on a
6                                                No. 02-2618

case-by-case basis. See Kadrmas v. Dickinson Pub. Sch., 

, 456-57 (1988) (“[W]e doubt that plaintiffs are
generally forbidden to challenge a statute simply because
they are deriving some benefit from it.”). It is also impor-
tant to recognize the close tie between the rule of estoppel
and the question of severability of statutory provisions. The
question of severability was essential to the decision in
Fahey:
    In the name and right of the Association it is now being
    asked that the Act under which it has its existence
    be struck down in important particulars, hardly sever-
    able from those provisions which grant its right to
    exist. Plaintiffs challenge the constitutional validity of
    the only provision under which proceedings may be
    taken to liquidate or conserve the Association for the
    protection of its members and the public. If it can
    hold the charter that it obtained under this Act and
    strike down the provision for terminating its powers
    or conserving its assets it may perpetually go on,
    notwithstanding any abuses which its manage-
    ment may perpetuate.

. As the challenged provision
was “hardly severable” from the provision that allowed
the plaintiffs in that case to exist, it made sense to estop
them from making the challenge. If the plaintiffs were
allowed to challenge a non-severable provision, the re-
sult would be strange indeed—a victorious plaintiff would
have litigated itself out of existence.
  The defendants argue that the challenged provisions, as
part of WUHCA, are not severable from the other provi-
sions of that act, especially WIS. STAT. § 196.795(2), the
provision under which Alliant is authorized to exist as a
holding company. In making this argument the plaintiffs
must overcome the presumption in Wisconsin of severabil-
ity of statutory provisions. Wisconsin Statute § 990.001(11)
provides,
No. 02-2618                                               7

   The provisions of the statutes are severable. The
   provisions of any session law are severable. If any
   provision of the statutes or of a session law is invalid,
   or if the application of either to any person or circum-
   stance is invalid, such invalidity shall not affect other
   provisions or applications which can be given effect
   without the invalid provision or application.
This presumption can only be overcome by showing that
the legislature, intending the statute to be effective only
as an entirety, would not have enacted the valid part of
the statute by itself. State v. Hezzie R., 

,
863-66 (1998).
  The merit of the defendants’ argument that the provi-
sions are not severable from § 196.795(2) is different for
each of the three categories of challenged provisions. For
the group we refer to as the structural provisions the
defendants have a strong argument. These provisions
were part of a larger legislative compromise. Wisconsin
clearly has an interest in policing its public utilities to
protect the welfare of ratepayers. The existence of a hold-
ing company creates the opportunity and incentive for
deceptive practices such as cross-subsidization from the
regulated public utility to a non-regulated subsidiary. It
is not surprising that when Wisconsin finally decided to
authorize the existence of public utility holding com-
panies they accompanied that authorization with stat-
utory provisions allowing for government control of the
financial structure and activities of such companies. It
is not at all clear that Wisconsin would have authorized
the formation of public utility holding companies had it
not been for these protective controls. It therefore ap-
pears improper to sever the structural provisions from
§ 196.795(2).
  The fact that the structural provisions are probably not
severable from § 196.795(2) suggests that the reasoning
8                                              No. 02-2618

of Fahey would apply to estop Alliant here. On the other
hand, Alliant argues that if a holding company is not
allowed to challenge the provisions then they might go
unchallenged because prospective entrants to the hold-
ing company market would have difficulty establishing
standing to sue. Though we question whether Alliant’s
standing argument is persuasive, we need not resolve
the issue today, because, as discussed below, we con-
clude that even if Alliant can challenge the structural
provisions the challenge must fail.
  As to the in-state incorporation provision, we conclude
that Alliant is not estopped. Again we begin with the
presumption of severability. The defendants have pro-
vided no rationale for why this provision should be inextri-
cably tied to § 196.795(2). In fact, as will be shown later,
the defendants cannot provide any rationale for the exis-
tence of this statute. As the provision serves no valid
legislative purpose, it is difficult to see why Wisconsin
would have made its inclusion an integral condition in the
legislative compromise to allow public utility holding
companies. The defendants have shown no evidence that
Wisconsin would not have authorized the formation of
public utility holding companies in the absence of the in-
state incorporation provision, nor have they provided
any logical explanation for why a State would want to
condition the authorization of public holding companies
on an in-state incorporation requirement.
  As far as we can tell, and as far as the defendants’
argument leads us, the provision was tacked on as an
insurance measure in case the structural provisions
could not stand on their own. Since those provisions can
stand on their own, the insurance measure is unneces-
sary. The result would be quite ironic if defendants were
right and the in-state incorporation provision was non-
severable: the non-severable provision, inserted to protect
the constitutionality of the statute, would threaten the
No. 02-2618                                                9

constitutionality of the entire statute, which otherwise
has no constitutional failings at all. We therefore hold
the in-state incorporation provision to be severable from
the rest of the statutory provisions. That being the case,
Alliant is not estopped from pursuing its challenge to
the constitutionality of the provision.
  Finally, as to § 196.53, the defendants do not argue
that Alliant, or WPLC, is estopped from challenging
this provision. There is little or no connection between
that provision and the authorization of public utility
holding companies. § 196.53 prohibits the granting or
transferring of a public utility license, permit or franchise
to a foreign corporation. This deals with the actual provi-
sion of the utility and not the financial structure of the
utility holding company. Alliant is not estopped from
challenging § 196.53.


b. Commerce Clause Analysis
  While the Commerce Clause, U.S. CONST. art. I § 8, cl. 3,
explicitly grants Congress the authority to regulate com-
merce among the States, it has long been understood that
it also directly limits the power of the States to discrim-
inate against or burden interstate commerce. Gov’t Sup-
pliers Consol. Servs., Inc. v. Bayh, 

, 1276
(7th Cir. 1992); Oregon Waste Sys., Inc. v. Dep’t of Envtl.
Quality of the State of Oregon, 

, 98 (1994). This
“negative” aspect of the Commerce Clause is often referred
to as the “Dormant Commerce Clause” and is invoked to
invalidate overreaching provisions of state regulation of
commerce. If a party seeking to invalidate a statute can-
not show any burden on interstate commerce, then the
Dormant Commerce Clause is not implicated and the
statute will not be invalidated. For those cases where
interstate commerce is burdened, the Supreme Court has
adopted “what amounts to a two-tiered approach” to
10                                             No. 02-2618

determining the validity of the statute. Brown-Forman
Distillers Corp. v. New York State Liquor Auth., 

, 578 (1986). The first tier is often referred to as the
“virtual per se” rule. This rule is applied when a statute
“directly regulates or discriminates against interstate
commerce, or when its effect is to favor in-state economic
interests over out-of-state interests.” 

In such
cases the Court has “generally struck down the statute
without further inquiry.” 

thing that can
save a statute under this analysis is a showing by the
State that the law “advances a legitimate local purpose
that cannot adequately be served by reasonable nondis-
criminatory alternatives.” Oregon Waste 

(internal quotations and citations omitted). But
this showing must “pass the strictest scrutiny” and “[t]he
State’s burden of justification is so heavy that facial
discrimination by itself may be a fatal defect.” 

quotations and citations omitted).
  The second tier is for cases where a statute “has only
indirect or incidental effects on interstate commerce and
regulates evenhandedly”; in such cases “the statute will
be upheld ‘unless the burden imposed on such commerce
is clearly excessive in relation to the putative local ben-
efits.’ ” Gov’t 

(quoting Pike v.
Bruce Church, Inc., 

, 142 (1970)). This test
has become known as the Pike balancing test. In deter-
mining which tier to apply, the rule of thumb is that
essentially any statute that facially discriminates against
out-of-state commerce will fall subject to the per se rule,
and all other statutes that have an effect on interstate
commerce will be analyzed under the Pike balancing test.
Nonetheless, the Court has “recognized that there is no
clear line separating the category of state regulation that
is virtually per se invalid under the Commerce Clause,
and the category subject to the Pike v. Bruce Church
balancing approach.” Brown-Forman Distillers, 476 U.S. at
No. 02-2618                                                    11

579. “In either situation the critical consideration is the
overall effect of the statute on both local and interstate
activity.” 

framework in mind we turn now to the three
categories of statutory provisions challenged by Alliant.


    i. In-State Incorporation of Holding Company
  It is important to understand that the requirement that
the holding company be incorporated in-state must be
analyzed separately and distinctly from the §196.53
requirement that a licence, permit or franchise to operate
as a utility company only be granted or transferred to a
Wisconsin corporation. The source of this distinction is
the difference in kind between the commerce being regu-
lated by each provision. The provision of public utilities
within Wisconsin is intrastate commerce.5 An invest-
ment opportunity in a Wisconsin utility is, on the other
hand, an article of interstate commerce. Cf. Lewis v. BT Inv.
Managers, Inc., 

(1980). If ownership of a
Wisconsin utility company must lie with a Wisconsin
Corporation, a potential article of interstate commerce, i.e.,
the investment in the utility, is stopped at the border.


5
   Of course, if a utility were provided to Wisconsin users from
an out-of-state source—by this we mean that the generation
facilities are located out-of-state, not the corporate entity—that
would be interstate commerce. See Middle South Energy, Inc.
v. Arkansas Pub. Serv. Comm’n, 

(8th Cir. 1985).
Likewise, if a facility located in Wisconsin were providing a util-
ity to users in other States, that too would be interstate com-
merce. See New England Power Co. v. New Hampshire, 

(1982). Such provision of utilities is controlled by federal
regulation and presumably exempted by the terms of § 196.53;
and in any event such scenarios are beyond the scope of this
appeal.
12                                              No. 02-2618

Section 196.53 simply says that if you are going to produce
an article of commerce within Wisconsin and sell it within
Wisconsin then Wisconsin has the right to regulate your
activities, whereas the in-state incorporation provision
says that an article of commerce produced in Wisconsin is
prohibited from being sold anywhere other than Wisconsin.
This is a fundamental distinction. See Eli Lilly & Co. v.
Sav-On-Drugs Inc, 

(1961).
  Not only is it clear that the in-state incorporation provi-
sion regulates interstate commerce, but that the burdens
produced by that regulation could be substantial. The
requirement that a holding company be incorporated in
Wisconsin requires that ultimate ownership lie in a Wis-
consin corporation. To comply with this requirement a
corporation could not just create a subsidiary; instead it
would have to reincorporate the parent corporation in
Wisconsin. If every State adopted this rule there would
be no interstate investment in public utilities at all. No
holding company parent could own public utility com-
panies in more than one State. Section 196.53 in contrast
does not create this balkanization between the States
because a foreign company that wants to get involved in
Wisconsin utility provision need only create a subsidiary
and incorporate it in Wisconsin.
  Determining that the Wisconsin provision burdens
interstate commerce is only the beginning of the analysis.
We must then apply either the rule of virtual per se in-
validity or the Pike balancing test. The parties disagree
about which tier of analysis should be applied to this
provision. We think that the provision falls under the per
se rule, but it is not necessary for us to make this determi-
nation as the provision is clearly invalid under the Pike
test. See 

(not deciding whether
legislation is per se invalid when the Court was con-
vinced that the legislation was invalid under the balancing
test); Bendix Autolite Corp. v. Midwesco Enter., Inc., 486
No. 02-2618                                              

, 891 (1988) (choosing to conduct a Pike balanc-
ing even where the statute “might have been held to be
a discrimination that invalidates without extended in-
quiry”).
  The Supreme Court applied the Pike balancing test to
invalidate a nearly identical statute in Lewis. The only
difference in that case was the type of holding company.
There the statute prohibited out-of-state holding com-
panies from owning companies in Florida that sold invest-
ment advisory services; here the statute prohibits out-of-
state holding companies from owning companies in Wis-
consin that provide public utilities. The defendants argue
that this distinction is dispositive. They essentially argue
that the importance of local regulation of public utilities
creates an exemption from normal Commerce Clause
analysis. We do not question the importance of regulat-
ing public utilities and surely we should take the impor-
tance of public utilities into account in balancing the
burdens on interstate commerce against the local benefits
of the regulation; nonetheless, the importance of such
regulation does not trump Commerce Clause analysis. In
Lewis the Supreme Court noted the importance of local
regulation of investment practices: “[F]inancial practices
are essential to the health of any State’s economy and to
the well-being of its people.” 

. Still
the Court conducted a full Commerce Clause inquiry. The
Court explained that just because local regulation is
important “it does not follow that these same activities
lack important interstate attributes.” 

ulations that burden interstate activities are just as sub-
ject to Commerce Clause analysis as any other regulations.
  As we apply the Pike balancing test, we note that the
defendants have given us no legitimate local benefits to
balance against the burden on interstate commerce. While
they have told us that regulating public utilities is impor-
tant, they have failed to provide any argument to show that
14                                             No. 02-2618

the in-state incorporation provision contributes to any
meaningful regulatory scheme. The only rationale the
defendants provide to save the in-state incorporation
provision is the argument that in-state incorporation is
necessary to save the constitutionality of the structural
provisions. The defendants want us to assume that the
structural provisions, standing alone, are unconstitutional.
Of course, they attempt to refute this same proposition
later when arguing for the constitutionality of the struc-
tural provisions themselves; but for the meantime they
want us to accept the assumption. If the structural provi-
sions are unconstitutional, the defendants argue, it is only
because without in-state incorporation they affect the
structure and financial activities of out-of-state holding
companies. Recognizing this assumed constitutional weak-
ness, Wisconsin has circumvented the problem by requir-
ing that all holding companies be incorporated in Wiscon-
sin. The in-state incorporation requirement, the argument
goes, although otherwise unconstitutional is therefore
saved by the fact that it is itself necessary to save the
structural provisions, thus promoting regulation of the
financial activities and structure of local utilities. One
unconstitutional provision combines with another uncon-
stitutional provision to create a constitutionally valid
scheme. We have serious reservations as to the merits
of this sort of constitutional bootstrapping. But the struc-
tural provisions, as we discuss below, are fully valid. And
beyond the above argument of the defendants, they have
provided no alternative rationale for us to consider. Given
the validity of the structural provisions, the stated pur-
pose of the in-state incorporation provision is moot: there
is no need for an otherwise unconstitutional provision to
save the constitutionality of an otherwise constitutional
provision. This makes any balancing under Pike fairly
effortless: no legitimate local interest has been presented
to justify the burden the in-state incorporation provision
has on interstate commerce.
No. 02-2618                                               15

  The fact that Wisconsin could have prohibited the
existence of any holding company outright does not
change the outcome. A State may prohibit the local produc-
tion of certain commerce, but as soon as such commerce
is produced the State may not prevent it from crossing
state lines. The landfill cases provide an example. States
may choose not to zone land for dumping, but once the
land is opened up for trash it must be opened up for all
refuse, no matter where it originates. See, e.g., Oregon
Waste Sys., 

; City of Philadelphia v. New Jersey,

(1978). The same is true of all items of
commerce, including investment opportunities such as
ownership in a public utility company.


  ii. Section 196.53
  Alliant, through its subsidiary WPLC, challenges WIS.
STAT. § 196.53, which provides, in relevant part, as follows:
    No license, permit or franchise to own, operate, manage
    or control any plant or equipment for the production,
    transmission, delivery or furnishing of heat, light,
    water or power may be granted or transferred to a
    foreign corporation.
It is not exactly clear what Alliant is challenging with
respect to this provision. A cite to the statutory provision
doesn’t even show up in their opening brief’s list of au-
thorities, although it miraculously appears as one of the
most cited provisions in their reply brief. Alliant’s argu-
ment seems to be that whatever logic applies to the in-state
incorporation provision must also apply to § 196.53. That
cannot be the case. The in-state incorporation provision,
requiring that a holding company be incorporated in
Wisconsin, deals with interstate financial transactions
whereas § 196.53 deals with intrastate provision of public
utilities—this distinction was discussed more extensively
above. Other than this piggybacking of arguments, we glean
16                                             No. 02-2618

from the briefs and the record that Alliant claims that
§ 196.53, in prohibiting the “transfer” of licenses, permits
or franchises to foreign corporations, precludes WPLC
from selling any of its utility assets to a foreign corpora-
tion. This result occurs because the assets are useless
without the license, permit or franchise to operate a public
utility within Wisconsin. Alliant is not challenging the
statutes prohibition on “granting” the licenses, permits
or franchises to a foreign corporation.6 Nonetheless, a
holding that invalidates the prohibition on “transferring”
would render the prohibition on “granting” practically
meaningless—a foreign corporation seeking to provide pub-
lic utilities within Wisconsin could simply enlist a Wiscon-
sin corporation to transfer to it the permit, license or
franchise to provide the utility. Wisconsin’s purpose of
keeping public utilities incorporated in-state would be
unprotected and the only thing keeping foreign corporations
from providing the utility would be a relatively small
transaction. As such we must view Alliant’s challenge to
§196.53 as one to the entire provision—a challenge that
asks us to invalidate Wisconsin’s prohibition both on
granting and on transferring licenses, permits or franchises
for Wisconsin public utilities to foreign corporations.
  The position is a dramatic one that would alter signifi-
cantly the present law of utility regulation. For similar
and longstanding statutes see N.H. REV. STAT. ANN.
§ 374:24 and OHIO REV. CODE ANN. § 4905.62. One would
have expected a more comprehensive argument when a
party is asking a court to so conclude. We are unper-
suaded by Alliant’s challenge. The provision of public
utilities that are generated, distributed, and consumed in




6
  They would likely lack standing to directly challenge that
aspect of § 196.53.
No. 02-2618                                                    17

Wisconsin is an inherently local and intrastate business.7
It is well-established that a State is free to regulate com-
merce that is intrastate in nature. See Eli Lilly, 

; Union Brokerage Co. v. Jensen, 

, 211
(1944); Ry. Express Agency, Inc. v. Virginia, 

(1931); Kansas City Structural Steel Co. v. Arkansas, 

(1925). Furthermore, the fact that an entity is
involved both in intra- and interstate commerce does not
exempt that entity from compliance with the intrastate
regulations. Eli 

(“Lilly could not
escape state regulation merely because it is also engaged
in interstate commerce.”). Thus, even if WPLC provided
electricity both intrastate to Wisconsin users and inter-
state to foreign users, this would not constitutionally
exempt it from local regulation of its intrastate operations.
  The Supreme Court has left unanswered the question
of whether this approach allows a State to require local
incorporation as a condition of doing business in local
markets. 

; but see Railway 

(State may require a foreign corporation to
take out a local charter prior to being granted a permit
to conduct local business). In addressing this question
under the Pike balancing test we can assume, because
Alliant has not argued otherwise, that a local incorpora-
tion requirement has a minimal burden on interstate
commerce and serves a legitimate and important state


7
   If Alliant is instead resting their challenge on the notion that
§196.53 is unconstitutional because it prohibits foreign corpora-
tions from using WPLC’s assets for interstate generation and
transmission of power—generating the power in Wisconsin and
shipping it out, or using WPLC’s distribution lines to bring
in power generated outside of Wisconsin—they have not pre-
sented this argument in their briefs. And it is not clear that
the statute even has such an affect, or that Alliant would have
standing to bring that challenge.
18                                              No. 02-2618

interest in regulating intrastate commerce. Cf. Eli 

(legitimate state interest served by re-
quirement of certificate of authority to do business as a
prerequisite to participation in intrastate commerce); Union

(same). At best Alliant’s implied
argument, if there is one, boils down to a claim that by
requiring local incorporation of intrastate business Wis-
consin is burdening interstate commerce in the assets of
intrastate business. Such a position is not sustainable. If
a piece of equipment is only useful in providing a utility
in Wisconsin, the sale of the equipment is not an inter-
state transaction, even if the buyer is a foreign corpora-
tion. If WPLC sells a power plant located in and im-
moveable from Wisconsin to any buyer, that is an intrastate
transaction. No item of commerce crosses state-lines. The
sale of a piece of moveable equipment that might be useful
outside of Wisconsin is of course interstate commerce; but
Alliant has not argued that such a sale is affected by
§ 196.53. Ultimately, Alliant has shown no excessive burden
on interstate commerce and explained no reason why a
State cannot require local incorporation as a condition
of doing local business in local markets. Based on these
sparse arguments we cannot conclude that §196.53 vio-
lates the Constitution.


  iii. Structural Provisions
  The remaining provisions (the takeover provision, the
asset cap, and the securities regulations provisions) regu-
late the financial structure and activities of a holding
company that owns a Wisconsin utility. None of these
provisions discriminates on its face against out-of-state
economic interests. All three treat in-state activity equally
with out-of-state activity: the asset cap limits a utility
holding company’s ownership of non-utility assets regard-
less of where those assets are located; the takeover provi-
No. 02-2618                                               19

sion requires PSC approval prior to the sale of more than
10% of the holding company’s stock no matter where the
involved parties are located or incorporated; and the
securities regulation provisions likewise require approval
of the PSC prior to issuance of securities by a public ser-
vice corporation without regard to whether the securities
are entering into interstate commerce. None of the pro-
visions imposes a burden on interstate commerce that
they do not impose on intrastate commerce as well. But
these provisions do all have effects on interstate com-
merce. In fact, given the invalidation of the in-state incor-
poration provision, some transactions regulated by these
provisions may occur entirely outside of Wisconsin. For
example, an Illinois corporation that owns a Wisconsin
utility would be subject to Wisconsin regulation if it
wished to sell 10% of its stock to an Indiana corporation or
if it decided to diversify and purchase non-utility assets
located in various States that amounted to greater than
25% of its worth. Such transactions are no doubt inter-
state in nature. See Edgar v. Mite Corp., 

(1982).
  Provisions like these, that are facially neutral but
indirectly burden interstate commerce, must be analyzed
under the Pike balancing test. Alliant argues that no
such balancing is necessary because the provisions bur-
den extraterritorial commerce. We have no doubt that
the provisions do in fact impact extraterritorial commerce
(see our examples above); but we disagree with the prop-
osition that this renders the provisions per se invalid. To
support its argument Alliant directs our attention to the
opinion of Justice White in Edgar v. Mite. In that case,
where the majority of the Court struck down an Illinois
statute requiring registration and approval of the Secre-
tary of State of Illinois for any tender offer involving a
corporation in which Illinois residents own 10% of the
stock, Justice White wrote: “[I]f Illinois may impose such
20                                                 No. 02-2618

regulations, so may other States; and interstate commerce
in securities transactions generated by tender offers
would be thoroughly stifled.” 

Justice White
went on to note: “The Commerce Clause also precludes the
application of a state statute to commerce that takes
place wholly outside of the State’s borders, whether or
not the commerce has effects within the State.” 

43. This language, if controlling, would mean victory for
Alliant; the only problem is that the language, appearing
in part V-A of Justice White’s opinion, did not draw sup-
port from a majority of the Court and is therefore not
the opinion of the Court.8
   In part V-B, which did garner the support of a majority
of the Court, Justice White applied the Pike test to the
Illinois statute, and therefore we do the same for the
Wisconsin provision in question here. 

also
Southern Union Co. v. Missouri Pub. Serv. Comm’n, 

(8th Cir. 2002) (rejecting the plaintiffs per se
claim and applying the balancing test to provisions regulat-
ing the financial activities of public utilities). The burden
on one side is, as we have stated, the effect the statute
has on interstate financial transactions. This is no small
impact. Certain interstate financial transactions of non-
Wisconsin parties are subject to approval of the PSC
while other such transactions are banned outright. This
places a high, sometimes prohibitive, transactions cost
on these dealings. Cf. 

(“The effects of
allowing the Illinois Secretary of State to block a nation-
wide tender offer are substantial.”). The benefit on the
other side is the regulation of local public utilities. This is


8
  Justice White delivered a five part opinion, with Part V
separated into V-A and V-B. The Justices split along many
different lines, and in the end only Parts I, II and V-B received
support from a majority of the Court—different majorities as
to each part.
No. 02-2618                                                 21

an important interest. Arkansas Elec. Coop. Corp. v.
Arkansas Pub. Serv. Comm’n, 

, 377 (1983)
(“[T]he regulation of utilities is one of the most important
of the functions traditionally associated with the police
power of the States.”); accord Southern 

; Baltimore Gas & Elec. Co. v. Heintz, 

, 1424 (4th Cir. 1985). This interest is served well by
the structural provisions because they help to prevent
such abuses as cross-subsidization and deceptive report-
ing of cost allocation. Cross-subsidization occurs when a
firm uses the revenues from the sale of one product to
subsidize the sale of a another product. In a free-market
system cross-subsidizing is not profit-maximizing and
there are few incentives to do it. But regulation can distort
free market incentives. The cost allocation and cross-
subsidy problem can be illustrated by the following exam-
ple. A firm sells products X and Y, where the market for
X is regulated and the market for Y is unregulated. The
regulation on X provides that a firm can charge a price
that results in a fixed rate-of-return on its capital invest-
ment in X. Profits are dictated as a percentage of capital
investment. The larger the investment in X, the greater
profit the firm is authorized to collect. The price of Y is
determined by free-market forces and not directly af-
fected by the cost of capital investments. The firm has an
incentive to allocate as much of its costs as possible as
capital investments in the production of X. A less-than-
honest firm may report certain costs attributable to prod-
uct Y as investments in product X. Thus the consumers
of product X cross-subsidize product Y by paying—through
the regulated rate-of-return pricing—part of the costs in
producing Y. The more products a firm is responsible for,
the easier it is for the firm to misreport the allocation of its
costs. This danger can be tempered by limiting the public
utility holding company’s involvement with and owner-
ship of businesses and assets unrelated to providing the
public utility. See, e.g., Southern 

22                                             No. 02-2618

(“Rate regulation is a complex process. A public utility’s
investments in other companies can affect its regulated
rate of return, if investment losses are allocated to the
regulated business.”).
   In arguing that the balancing proves invalidity here,
Alliant again points to Edgar v. Mite—this time to part V-B
where the majority invalidated the statute in question
because Illinois had no interest in regulating the internal
affairs of foreign corporations and “[i]nsofar as the Illi-
nois law burdens out-of-state transactions, there is noth-
ing to be weighed in the balance to sustain the 

. This was true because the law affected the
sale and purchase of stocks that might never involve any
Illinois shareholders. The Court also noted that where
the law did apply to transactions involving Illinois share-
holders, the Court was “unconvinced that the Illinois
Act substantially enhances the shareholders’ positions.” 

analysis in Edgar v. Mite can be distinguished
from the instant case. Wisconsin has a strong interest—
namely the protection of the welfare of ratepayers—to be
weighed against the burden the statute places on inter-
state trade. The need to prevent abuses made possible
by the presence of a holding company is extremely impor-
tant and imperative for the proper functioning of any
regulatory scheme. The dangers inherent in the mere
existence of utility holding companies render a great need
for structural regulation of those companies. A State is
entitled to regulate the financial structure and invest-
ments of companies that control utilities in that State;
otherwise it would lose considerable power to police the
rates charged for the provision of utility service. The bur-
den on interstate commerce, however significant it may be,
is not enough to outweigh this interest.
 We are not alone in this assessment. The Eighth and
Fourth Circuits have both found this interest to be of
No. 02-2618                                              23

sufficient importance to outweigh the burden similar
provisions placed on interstate commerce. The Eighth
Circuit in Southern Union, applied the Pike test and up-
held a law that required approval by the Missouri Public
Service Commission before any utility doing business in
Missouri purchased stocks or bonds issued by another
utility because the importance of regulating utilities
and ratepayer welfare outweighed the burden placed on
extraterritorial interstate stock transactions. Southern

. A similar analysis and outcome
were reached in the Fourth Circuit in Baltimore Gas &
Electric where the challenged statute prohibited non-
public service corporations from acquiring more than 10%
of a Maryland public utility, and required that even public
service corporations seek approval before acquiring 10%
of a Maryland public utility. 

. The court
applied the Pike test and upheld the statute because of
the importance of preventing deceptive practices inher-
ently available to utility holding companies. 

ducting the balancing test the court recognized that “[a]
necessary adjunct to ensuring the protection of consumers
is the authority to regulate the corporate structure of pub-
lic utilities” and that
    holding companies provide the occasion for deceptive
    financing practices, nondisclosure of important corpo-
    rate accounts, and the manipulation of various “service
    charges” by the holding companies which increase
    the utility’s costs and the ultimate charge to the con-
    sumer.

  Alliant also argues that these structural provisions are
invalid because they are redundant of other regulations.
These other regulations are laws that prohibit deceptive
practices. This argument must fail. A State is serving a
legitimate purpose when it passes structural regulations to
24                                              No. 02-2618

serve as a back up to prohibitions. The Fourth Circuit
explained in Baltimore Gas & Electric:
     That the state has enacted a complex regulatory
     structure with overlapping provisions, more than one
     of which may serve ultimately to control suspect
     activity, does not vitiate the state’s otherwise legiti-
     mate interest in curbing such suspect activity. The
     state may regulate the rates utilities charge con-
     sumers either directly, by requiring commission ap-
     proval of rate increase, or indirectly, by controlling
     certain investments and attempts at diversification by
     the utility. That is, the state may choose one or more
     means to a particular end, and the legitimacy of the
     end—the state interest served by the particular reg-
     ulation—is not vitiated when the state chooses several
     means of achieving that 

.
  We therefore conclude that the structural provisions in
question pass the Pike test.


 c. Equal Protection Analysis
  The Equal Protection question is obviously moot for the
in-state incorporation provision, which we have already
found unconstitutional under the Commerce Clause analy-
sis. As for the other provisions, the Equal Protection
analysis would require a rational basis test. If Wisconsin
can show that the provisions are rationally related to a
legitimate state interest, then the provisions do not vio-
late the Equal Protection Clause. In our Commerce Clause
analysis, we have already held that the provisions serve
a legitimate state interest. Therefore the Commerce
Clause analysis answers the Equal Protection question
as well. The structural provisions and § 196.53 do not vio-
late the Equal Protection Clause.
No. 02-2618                                              25

                    III. Conclusion
  For the foregoing reasons we conclude that WIS. STAT.
§ 196.795(5)(L), the in-state incorporation provision, vio-
lates the Commerce Clause of the Constitution; that
the arguments presented by Alliant regarding WIS. STAT.
§ 196.53, the provision prohibiting the transfers of li-
censes, permits and franchises to foreign corporations, do
not establish that § 196.53, as applied to WPLC, is uncon-
stitutional; and finally that the remaining provisions—
§ 196.795(3) (the takeover provision), § 196.795(6m)(b) (the
asset cap), and §§ 196.195(5)(a) and (7)(a), 201.01(2),
and 201.03(1) (the securities regulation provisions)—do
not violate the Constitution. Accordingly, we REVERSE the
district court’s grant of the defendants’ motion for summary
judgment and denial of the plaintiff’s motion for summary
judgment with regard to WIS. STAT.§ 196.795(5)(L), and
AFFIRM the district court’s grant of the defendants’ mo-
tion for summary judgment and denial of the plaintiff’s
motion for summary judgment with regard to all other
challenged provisions and this case is REMANDED for fur-
ther proceedings consistent with this opinion.

A true Copy:
      Teste:

                        ________________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit




                   USCA-02-C-0072—5-29-03