This is a duplicate of issue4626.

Here, the content is correctly decoded with cp1252, then passed to
compile(); but compile() works on the internal utf-8 representation, and
tries to decode it again with cp1252!

Yes, the error message is overwritten. If I remove the code that sets
the "unknown encoding" exception, I get:

>>> compile(open("c:/temp/t1252.py", encoding="cp1252").read(),
"t1252.py", "exec")
SyntaxError: 'charmap' codec can't decode byte 0x9d in position 35:
character maps to <undefined>

The 0x9d explains easily:
>>> b"\x94".decode('cp1252').encode('utf8')
b'\xe2\x80\x9d'