As part of its application WPL also requested approval to increase residential fixed monthly charges (the charge customers pay just to be connected to the utility system regardless of the amount of energy they use) from the current $7.67 month to $12 month in 2017 (a 71% increase from the current customer charge) and $18 month in 2018 (a 157% increase from the current customer charge).
CUB provided expert testimony recommending that the PSCW reject WPL’s proposed increase to the fixed customer charge for residential customers and set those charges for both 2017 and 2018 at no more than $9 month. CUB also provided testimony on certain other rate schedule changes and proposals made by WPL in its application. WPL’s proposal would inappropriately shift load-related costs to the customer charge, reduce the energy rate, and dampen price signals to customers for reducing energy usage.
The PSCW issued its final decision on December 22, 2016 and allowed WPL to increase electric rates by $9.4 million or 0.83 percent, and gas rates by $9.3 million or 5.7%. The PSCW approved an increase in the customer charge to $15 for 2017 and 2018. As part of the stipulation among the parties on revenue requirement issues, WPL’s Return on Equity (profit) was reduced over the 2017-2018 test years to 10.0%, from 10.4% (about $10 million/year). In addition, WPL agreed to an earnings sharing mechanism.
As part of the PSC’s audit process, PSC staff proposed eight adjustments to WPL’s fuel cost forecast amounting to a $6.57 million downward adjustment to fuel costs. The adjustments went uncontested. The PSC issued its rate order in December 2015 approving the uncontested adjustments, and incorporating additional adjustments to reflect WPL’s gas hedging contracts and a contract for natural gas entered into after the conclusion of PSC staff’s audit. The PSC ultimately approved a $7.05 million, or 0.63 percent, increase in WPL’s retail electric operations for the company’s 2016 fuel cost plan. The increase will be reflected in the variable charge, which is the energy portion of customers’ electric bills. WPL’s residential customer charge, which is the fixed portion of a customer’s bill, is unchanged for 2016.
WPL has been under a “base electric rate” freeze since 2013. CUB anticipates that WPL will file a full rate case in 2016 for its 2017 rates.
On May 6, 2016 the PSCW approved WPL’s Riverside project. The power plant is expected to provide service beginning in 2020.
CUB also contested WPL’s plan to increase fuel costs for 2015. CUB cross examined witnesses at the PSC hearing and submitted legal arguments opposing WPL’s request to accelerate recovery of $13.5 million of fuel costs that it under-collected from customers in 2014 and opposed $581,000 of WPL’s requested fuel cost increase for 2015.
In December 2014, the Commission issued an order agreeing with CUB’s request to not allow WPL to accelerate collection of $13.5 million of under-collected 2014 fuel costs, and to disallow $581,000 in unreasonable 2015 fuel costs.
In July 2013, Alliant requested authorization from the Public Service Commission to increase electric rates by $30.6 million, or 3.1 percent, to pay for power plant fuel costs in 2014. Alliant also proposed to offset the $30.6 million rate increase by netting against it $11.6 million of over-collected fuel costs from 2012.
CUB opposed Alliant’s proposal because it would delay the return to ratepayers of a significant amount of over-collected fuel costs.
The Commission agreed with CUB’s position and ordered Alliant to return the 2012 over-collected fuel costs to ratepayers as soon as possible. Furthermore, the Commission reduced Alliant’s proposed rate hike for 2014 by $11.2 million.
In June 2013, Alliant filed a request with the Public Service Commission for authorization to continue the “Shared Savings” energy efficiency program, which provided commercial and industrial customers with low-cost financing to make their facilities more energy efficient. Focus on Energy, the state-wide energy efficiency and renewable energy program, offers a similar program but provides grants rather than financing.
CUB intervened in the case and submitted comments to the Commission expressing concerns with the cost-effectiveness and value of Alliant’s program given its decline in usage since Focus launched its similar program. CUB requested that an analysis of Alliant’s cost-effectiveness methods and assumptions be completed before the Commission decided on the continuation of the Shared Savings program.
At an August 2013, Open Meeting the Commission expressed reservations about the costs and benefits of the Shared Saving program and directed the utility to work with Commission staff to address the concerns. In October 2013, Alliant informed the Commission that it was withdrawing its application to renew the Shared Savings program and that the program would be discontinued as of December 31, 2013.
On May 9, 2013, Alliant Energy filed an application with the Public Service Commission for permission to conduct a $19.5 million inspection and refurbishment of the Riverside Energy Center, a natural gas-fired “combined cycle” generating plant of 600 megawatts capacity located near Beloit. Alliant purchased the power plant in 2012 for $392 million.
CUB has intervened in this case to make sure the inspection is needed and that the cost is reasonable.
On August 22, 2013, the administrator of the gas and energy division at the PSC approved the project.
On July 27, 2012, Alliant Energy requested permission from the Public Service Commission to install a $450 million “dry flue gas desulfurization system” on Edgewater Unit 5, a 430 megawatt coal-fired generator located near Sheboygan. The pollution control equipment would reduce emissions of sulfur dioxide. Another type of pollution control, a “selective catalytic reduction system,” is currently being installed that will reduce nitrogen oxide emissions.
CUB has intervened in the case to make sure retrofitting the plant is in the best interest of ratepayers.
The PSC approved the installation of pollution controls on May 2, 2013.
In January 2008, Alliant Energy updated its request for permission from the Public Service Commission to install pollution controls on units 1 & 2 of the Nelson Dewey coal-fired power plant located near Cassville, which has a combined generating capacity of 220 megawatts.
Alliant announced in July 2012 that it would retire the plant by the end of 2015, most likely because it would be too expensive to add pollution controls to the 50 year-old plant.
The issue now sits before the Midwest Independent Transmission System Operator, which must determine whether improvements to the transmission system must be made before the plant can be shut down. MISO will likely make a determination by the end of 2013. CUB will continue to follow this case at MISO and the PSC.
On May 3, 2012, Alliant Energy filed an application with the PSC to freeze “base electric rates” for 2013 and 2014, and reduce gas delivery rates in 2013 and freeze those rates in 2014.
CUB and the Wisconsin Industrial Energy Group had been negotiating a settlement of this case with Alliant in the months before Alliant made its filing. Although settlements of rate cases are rare in Wisconsin, PSC staff believed that Alliant could freeze its electricity and gas rates for two years without going through the full scrutiny of a rate case.
After reviewing a focused set of information regarding Alliant’s rates, CUB and WIEG were able to agree with Alliant’s proposed rate freeze for 2013 and 2014. Electric rates could change in these years due to changing prices for fuels used to make electricity, but otherwise, electric rates will remain unchanged for 2013 and 2014. The PSC approved Alliant’s rate freeze proposal on June 15, 2012.
On November 30, 2011, Alliant Energy filed an application with the Public Service Commission to purchase Riverside Energy Center, a 600 MW primarily natural gas-fired combined cycle generating facility located in Beloit Wisconsin, for approximately $392 million.
CUB intervened in the proceeding and analyzed whether the proposed purchase was in the public interest. In general, CUB supported the purchase of the power plant, provided the PSC would review future maintenance costs for reasonableness.
The PSC approved the purchase on April 5, 2012. The PSC agreed with CUB and will review future maintenance costs for reasonableness in future rate cases.
On May 18, 2011, Alliant Energy filed an application with the Public Service Commission to increase electric rates by $13.4 million, or 1.3 percent, due to projected increases in the cost of fuel for making electricity.
Alliant updated its rate increase request to $20.0 million, or 2.0 percent, on August 17, 2011, citing additional fuel costs due to air pollution rules recently promulgated by the U.S. Environmental Protection Agency.
CUB intervened in this case, and is reviewed revenue allocation and rate design, the reasonableness of the proposed fuel cost plan, and analyzed whether Alliant’s expected costs are appropriate for complying with the Cross-State Air Pollution Rule.
The PSC issued its final decision on December 23, 2011, allowing Alliant to increase electric rates by $4.4 million, or 0.4 percent. The PSC agreed with CUB and others and rejected Alliant’s request to increase rates by $22 million to comply with the air pollution rule.
On September 10, 2010, Alliant Energy applied for permission from the Public Service Commission to offer an economic development rate to Mercury Marine, an industrial company with a plant in Fond du Lac that makes engines for boats and other watercraft.
Earlier in 2010, CUB fought Alliant’s request to offer economic development rates in another proceeding, 6680-GF-126, in which the PSC approved economic development rates for Wisconsin industrial companies that are having financial difficulties, existing industrial companies that want to expand their operations and use additional electricity, and industrial companies interested in establishing operations in Wisconsin. The PSC approved these economic development rates on June 4, 2010.
CUB opposes economic development rates because they usually force residential and small commercial customers to pay higher rates to subsidize the discounts given to industrial companies. Forcing ratepayers to pay for subsidies that go to other ratepayers is a form of “rate discrimination,” which has been prohibited by Wisconsin law for over 100 years. It’s simply not fair to force ratepayers to pay higher rates while others receive lower rates with subsidized discounts.
CUB submitted comments in the Mercury Marine proceeding on August 15, 2011, noting our concerns against rates that allow utilities to pick winners and losers. In particular, CUB raised the concern that Mercury Marine had already decided to keep operations in Wisconsin before Alliant even applied for permission to offer economic development rates in November 2009. Why should Mercury Marine receive discounts if it is no longer threatening to leave Wisconsin and has turned things around financially?
The PSC issued its final decision on October 7, 2011, in support of allowing Mercury Marine to receive the economic development rate, which will provide Mercury Marine with about $5 million in subsidies. All three commissioners said that the economic development rate was part of a package of incentives to keep Mercury Marine in Wisconsin, and therefore, Mercury Marine should get the rate. Alliant’s shareholders will pick up the cost of the discount until a future rate case.
On April 30, 2010, WPL filed an application with the PSC to re-open the rate case proceeding held in 2009. WPL requested increasing electric rates by $35.4 million (3.6%), with the new rates to take effect in January 2011.
CUB intervened in the case and challenged the intent by WPL to charge ratepayers for its Bent Tree wind farm, a 200 megawatt facility in Minnesota. As this proceeding was winding through the PSC, CUB and the Wisconsin Industrial Energy Group discovered that WPL had been hiding the fact Bent Tree would not be able to deliver power to Wisconsin customers because of congested transmission lines. WPL then tried to keep CUB and WIEG from bringing this information forward. CUB and WIEG fought to have their case heard and urged the PSC to prevent WPL from raising its rates to recover all of the costs for its Bent Tree wind farm.
In its decision on November 11, 2010, the PSC approved an electric rate increase of $8.2 million, or 0.8 percent. The PSC agreed with CUB and WIEG that WPL should be penalized for hiding the information about transmission congestion and refused to allow WPL to collect $3.2 million for Bent Tree costs from ratepayers. The PSC also noted that the utility inappropriately withheld information regarding the Bent Tree project, as CUB and WIEG had argued.
On April 2, 2009, WPL and co-owners Madison Gas & Electric and Wisconsin Public Service Corp. applied for permission to add pollution controls to the 1,000 megawatt Columbia power plant, located near Portage. The mercury and sulfur dioxide pollution controls would cost more than $627 million.
CUB intervened in this case along with Clean Wisconsin to make sure the retrofit costs were reasonable and that retrofitting these older units was the best option for customers and the environment. CUB's expert witness determined that installing mercury controls at Columbia and shutting down other smaller coal units would save ratepayers more than $680 million and reduce more pollutants than the utilities' proposal.
The PSC issued its decision on February 24, 2011, approving the request to install pollution controls for mercury and sulfur dioxide at Columbia.
On August 28, 2009, CUB and the Wisconsin Industrial Energy Group filed a lawsuit against the Public Service Commission for ignoring state law in approving a 200-megawatt wind power project called the Bent Tree Wind Farm, which is located in Minnesota.
The wind farm is now operating, and is owned by Alliant Energy, and is being paid for by Alliant’s Wisconsin customers.
CUB and WIEG contended that the PSC should have reviewed the project for a “certificate of public convenience and necessity,” or CPCN, which requires a more thorough review than projects reviewed for a “certificate of authority,” or CA. The PSC issued a CA for the project on June 30, 2009.
In filing the lawsuit, WIEG and CUB argued that the PSC ignored Wisconsin law, which states that a utility cannot build a power plant of 100 megawatts or more unless the utility has received a CPCN.
This case was of statewide importance because significantly less review by the PSC is required in granting a CA, and customer groups like CUB and WIEG may have no opportunity to provide testimony and legal opinions regarding a proposed project’s appropriateness for providing Wisconsin consumers with electricity at reasonable prices.
Though the Dane County circuit court rejected our lawsuit on September 22, 2010, the Wisconsin Court of Appeals “certified” our case to the Wisconsin Supreme Court on November 23, 2011, and the Supreme Court accepted our case on December 14, 2011. CUB general counsel Kira Loehr spoke on behalf of CUB and WIEG in oral arguments before the court on April 17, 2012.
Unfortunately, on July 11, 2012, the Wisconsin Supreme Court issued a 5-2 decision against CUB and WIEG. The court applied “due weight deference” to the PSC’s decision to use the CA statute rather than the CPCN statute for projects to be built by Wisconsin regulated utilities in other states. Justice Ann Walsh Bradley issued a dissent, joined by Chief Justice Shirley Abrahamson, and expressed concern that ratepayers could be on the hook for expensive out-of-state projects that might receive little scrutiny by the Public Service Commission or members of the public.
On November 13, 2009, WPL filed a request with the PSC for approval of an economic development rate (EDR) for industrial customers, in which certain industrial customers would be able to pay lower prices for electricity.
CUB submitted comments to the PSC noting CUB's objections to EDRs on February 17, 2010. The PSC held an open meeting on February 19, and at least two of the three commissioners seemed to support the establishment of economic development rates. On March 16, CUB requested that the PSC hold a "contested case" hearing, which usually must be held anytime rates are changed (contested case hearings allow CUB and other parties to provide expert testimony, to cross-examine witnesses, and to file legal briefs on policies and legal issues).
The PSC issued an order approving this rate on June 4, 2010. On July 2, 2010, CUB filed a lawsuit against the PSC for authorizing “economic development rates” for Wisconsin Power & Light.
CUB has long been opposed to rates with discounts, because they usually force other customers to pay for the discount. The laws that regulate utility service in Wisconsin prohibit utilities from charging rates that provide discounts to one customer that are subsidized by other customers. CUB noted many of these concerns in correspondence to the PSC dated February 17 and March 16, 2010, and in our lawsuit.
Although PSC Chairperson Eric Callisto and Commissioner Mark Meyer approved the discounted rates, Commissioner Lauren Azar voted against them, noting that subsidies for certain industrial customers may cause higher rates for residential and commercial customers. Commissioner Azar also issued a dissenting opinion on June 25, 2010, in which she called the rate “essentially a giveaway to businesses.”
On May 8, 2009, WPL filed a request to raise electric rates by $85.5 million or 9.2 percent and natural gas rates by $6.2 million or 2.6 percent starting in January 2010. On July 24, 2009, WPL updated its request to increase electric rates by $103 million or 11.0 percent and natural gas rates by $6.7 million or 2.8 percent.
CUB intervened in the case and reviewed the following issues: the utility's level of profit; cost-of-service studies, class revenue requirement allocations, and rate designs. CUB also argued that WPL should not be allowed to recover "pre-certification" and "pre-construction" costs associated with the proposed Nelson Dewey power plant, which was rejected by the PSC in November 2008.
The PSC issued its decision in this case on December 18, 2009. The PSC approved an increase in electric rates of $58.6 million (6.3 percent) and an increase in gas rates of $5.6 million (2.4 percent).
The PSC agreed with CUB and reduced WPL's rates by $18.4 million, including: a reduction of $2.6 million and $9.3 million for unreasonable pre-certification and pre-construction costs for the never-built Nelson Dewey power plant; and a reduction of $6.5 million by lowering WPL's return on equity (profits) from 10.6 percent to 10.4 percent.
The PSC also agreed with CUB to require WPL to use electric rates for residential customers with lower fixed charges and higher volumetric charges, which provide incentives to customers to save electricity. The PSC also agreed with CUB and did not increase the credit for industrial customers willing to interrupt their electricity service for emergencies.
On November 14, 2008, WPL and co-owner We Energies applied for permission from the Commission to add pollution controls to Edgewater Unit #5, a 430 megawatt coal-burner on Lake Michigan near Sheboygan. The pollution controls would cost a minimum of $153 million. CUB and Clean Wisconsin will work together in this case to make sure the cost of the retrofit is reasonable, as well as seeing if it would make more sense to shut the unit down due to the increasing costs for global warming and air pollution controls on coal plants.
On February 22, 2008, WPL filed an application to raise its electric and gas rates starting January 2009. WPL asked to raise electric rates by $144 million, or 9% in 2009 and 4% in 2010. Gas charges (excluding the cost of the gas itself) would decline by 1%. WPL stated that the electric rate increase is needed because of rising fuel costs, costs for new transmission projects, costs for a new wind farm, and costs related to the Nelson Dewey power plant (which, at the time, had not been approved, and was later rejected by the PSC. See next case below).
CUB intervened in the case to urge the PSC and the utility to reduce rates for residential customers, who have been paying too much when compared to commercial and industrial customers. CUB also urged the utility to offer new rate options so that consumers could reduce their energy use and save money on their energy bills.
Due to rapidly falling natural gas prices, WPL, CUB, and other intervenors agreed to a settlement in which rates would remain unchanged for 2009. The PSC accepted this settlement on December 23, 2008.
On February 7, 2007, WPL filed an application for a construction permit for a 300 MW coal plant at its Nelson Dewey site on the shore of the Mississippi River near Cassville. The plant and related facilities would cost at least $1.26 billion, up from Alliant's original estimate of $777 million. CUB and Clean Wisconsin worked together to oppose this power plant, because it would increase Wisconsin's emission of global warming pollution, and would threaten ratepayers with higher rates due to the likelihood that global warming pollution will be regulated in the future.
The Commission decided the case on November 11, 2008, unanimously rejecting WPL's proposed power plant. The Commission agreed with CUB and Clean Wisconsin that the plant would be too expensive and too polluting compared to alternatives, such as purchasing power from other utilities or expanding existing plants that burn natural gas. This was a huge victory for CUB and Clean Wisconsin; this was the first time the Commission rejected a utility proposal for a large power plant.
On September 13, 2006, WPL filed an application for authority to construct a 98 megawatt wind farm in Fond du Lac County. WPL wants to finance the project using a new (but not improved) option, in which the "financial parameters," such as the return on equity, are fixed for the life of the project.
This financing option, known as "fixed-financial parameters," is another assault on traditional regulation. With traditional regulation, regulators can adjust a utility's return on equity on the utility's invested capital every several years in order to maintain a balance between the interests of ratepayers and shareholders. If interest rates or equity returns change significantly, or if the utility's job performance is good or bad, regulators can reward or punish or hold harmless shareholders by adjusting the return on equity. Regulators have used this approach for at least 100 years.
CUB is opposed to this fixed financial parameters approach, which was recently passed into law despite our objections, and we are urging the commission to reject its use in this proceeding. With a ruling on May 10, 2007, the PSC ordered that WPL could use the new financing mechanism, but that the return on equity would be 10.5%, not the 12.9% requested by the utility. WPL ultimately chose to the traditional approach and put the plant in ratebase, which is the outcome that CUB wanted.
On March 17, 2006, WPL filed an application with the PSC requesting authority to increase its electric utility rates by $87.6 million, an 8.6% increase, and to increase its natural gas utility rates by $8 million, a 2.7% increase, to be effective January 1, 2007. Later in 2006, WPL revised its request and sought a $164.7 million electric increase, or a 17.8% increase.
During the case, CUB's expert witness argued that WPL was overestimating the costs for fuel for 2007. The PSC agreed with CUB and reduced WPL's request by $1.5 million.
CUB also argued that WPL should earn a rate of return (profit) of no more than 10.4%, whereas WPL was asking for 11.5%. The PSC approved a profit rate of 10.8%, which will save ratepayers $7 million from what WPL was asking for. Thankfully, the PSC has lowered WPL's profit rate over the past few years.
The PSC also supported CUB's recommendation to exclude an imputation of $119 million in the capital structure for the lease underlying new power plants built in Sheboygan Falls in 2005, for a ratepayer savings of $8 million.
On January 19, 2007, the PSC authorized an electric rate increase of $36.2 million, a 3.9% increase, and a $1.9 million rate decrease for natural gas operations, a 0.6% decrease for 2007 rates. CUB's efforts saved WPL ratepayers at least $15 million.
WPL has received 7 rate increases since December 2003 for a total $202 million, roughly a 22% increase in three years.
As part of the WPL rate case, ERCO Worldwide, Inc., which owns a chemical manufacturing plant in Port Edwards and buys electricity from WPL, asked for lower electricity rates so that they could invest in equipment that would reduce emissions of mercury from its Port Edwards facility. ERCO asked the PSC to approve a special contract with WPL to lock in a low electric rate that would only increase 4% each year, whereas ERCO's electricity rates have increased on average 10% each year since 1997. This contract would have forced WPL's residential and business customers to subsidize ERCO.
Also in this proceeding, WPL had asked the PSC to approve a special electricity rate for ERCO that would force WPL customers to subsidize ERCO by at least $23 million over the next ten years.
CUB's legal team, led by Curt Pawlisch of Cullen Weston Pines & Bach, argued that the requests for special electricity rates for ERCO would not only be illegal, but if granted, would set a bad precedent that would encourage other companies to look for handouts from ratepayers. CUB argued that it was the responsibility of ERCO's shareholders to pay for pollution control equipment, and that it would be illegal for WPL's customers to subsidize those costs.
The Commission voted unanimously to deny ERCO's request for a special utility rates and also denied WPL's proposed $23 million dollar subsidy for ERCO. CUB appreciates the PSC's decision to defend 100-year-old principles of utility regulation that protect ratepayers from discriminatory deal making between utilities and powerful companies.