A Michigan Court of Appeals on Thursday overturned a state Public Service Commission (PSC) decision to allow DTE Energy a $37 million rate increase to pay for smart meters.

According to a story in the Detroit Free Press, the court said DTE hadn’t provided enough evidence to justify the rate increase. “We will not rubber stamp a decision permitting such a substantial expenditure – a cost to be borne by the citizens of this state – that is not properly supported,” said the written opinion of the three-judge appeals court panel.

Robert Strong, an attorney who argued against the rate increase for the Association of Businesses Advocating Tariff Equity, was quoted as saying a related decision by the appeals court was even more significant. The court also denied a “rate decoupling mechanism” approved by the PSC that would have guaranteed DTE specific revenue levels even if power consumption drops.

The court didn’t stop there. It told the PSC to investigate the benefits and possible burdens of smart meters. The court said “At best, the actual evidence presented by Detroit Edison to support the rate increase was aspirational testimony describing the (smart meter) program in optimistic, but speculative terms.”

The court ruling affects a $217.4 million increase for all customers the PSC approved for the utility in 2010.

The PSC said in January that it would investigate the use of smart meters by DTE and other utilities in the state. DTE spokesman Scott Simons said he hopes the matter can be resolved by the investigation, the Free Press article said.