WEPCO Cases

WEPCO
Addition of Pollution Controls to the Oak Creek Power Plant
Docket 6630-CE-299

On June 21, 2007, WEPCO applied for approval from the PSC to install pollution control devices on the Oak Creek Power Plant.  WEPCO is proposing to install the pollution control equipment to meet the requirements of an EPA Consent Decree and new sulfur dioxide and nitrogen oxide air emission requirements.  The utility estimates that the pollution control devices will cost $830 million, which is about the same cost as a new power plant.

CUB and the environmental group Clean Wisconsin are intervening in this case together to explore whether WEPCO looked at reasonable alternatives to installing pollution control equipment on an old coal power plant.  These alternatives include retiring the Oak Creek Power Plant and, instead, making investments in energy efficiency and renewable energy.

CUB and Clean Wisconsin will also examine the assumptions used by WEPCO to estimate the costs of the pollution control equipment, and whether the equipment will allow the utility to comply with air pollution regulations.

Economic Impact Issues

• Has WEPCO properly modeled the capital costs and future O&M costs of the Oak Creek units with and without the installation of the Environmental Facilities in its economic justification of the proposed investment?
• Did WEPCO include appropriate costs for future environmental compliance at the Oak Creek units and other WEPCO units in its economic evaluations?
• Has WEPCO accurately determined the impact of the proposed Environmental Facilities on the operation of the WEPCO plants in the MISO energy markets?
• What is WEPCO's outlook for the supply and demand balance for electric capacity annually over the planning horizon?  Are the Oak Creek units needed to meet the needs of electric consumers in Wisconsin?
• Is WEPCO planning future capacity additions that could affect the value to the Oak Creek units to WEPCO's customers?  Has this new capacity been properly modeled?  What other capacity assumptions have been made by WEPCO over the planning horizon?
• Did WEPCO appropriately consider alternatives to investing in the Environmental Facilities, including, but not limited to, the retirement of these units and replacement with newer, more efficient capacity or investments in energy efficiency?
• Has WEPCO appropriately considered the implied costs and value of future emissions in its economic evaluations?

Environmental Impact Issues

• Has the Company chosen the best solution(s) for compliance with the provisions of the Consent Decree that relate to Oak Creek Power Plant?
• Will the installation of the proposed Environmental Facilities comply with the current environmental regulations and the Consent Decree?
• Are the capital and future operating costs of the proposed Environmental Facilities reasonable?
• What additional measures beyond the proposed Environmental Facilities will be required at Oak Creek Power Plant to comply with future environmental regulations?
• What is the expected timing and costs of these future measures?

WEPCO
Rate Case for 2008 & 2009 Rates
Docket 05-UR-103

On May 7, 2007, WEPCO applied to the PSC to raise its electric rates by $712 million or 28 percent in 2008, the largest single-year increase in the utility's history.  The utility also requested to raise its natural gas rates by $12 million for Wisconsin Electric's gas operations, and $36 million for Wisconsin Gas natural gas operations. 

In its request, WEPCO asked for authority to collect higher rates to cover costs from increases in the price for fossil fuels used to produce electricity, for higher costs to transmit power on high-voltage transmission lines, and to pay for higher costs caused by the regional electricity marketplace operated by the Midwest Independent Transmission System Operator (MISO).  CUB challenged many aspects of WEPCO's request to increase rates, and urged the PSC to require WEPCO to offer innovative rate designs so that its customers can use electricity more efficiently.

Fuel Costs

The proposed increase in total fuel costs, excluding the Point Beach power purchase agreement with FPLE, is $46 million.  CUB investigated the reasons why WEPCO proposed to increase fuel costs rather than decrease fuel costs in 2008.  Reasons why fuel costs should be decreasing include the fact that the Company has brought on line a large, new efficient generation unit, the Port Washington gas plant, that will displace less efficient generation, and that natural gas prices have decreased by 31% from the last time WEPCO's fuel costs were established.

Are the Results of PROMOD Reasonable?

For the first time in a rate case WEPCO projected power costs through use of a PROMOD model to estimate its fuel costs and both prices and quantities of hourly net purchases from MISO.  The accuracy of WEPCO's PROMOD projections is critical since fuel costs are such a large component of the overall costs of operating a utility.  CUB investigated whether WEPCO's modeling exercise was unbiased and accurate by taking an in depth look at how the Company tested the model, and how the results of the model during the recent past compared to actual fuel costs WEPCO has incurred.


Rate Designs to Assist Residential Customers to Lower Their Utility Bills

Given the magnitude of the rate increase proposed by WEPCO it is especially important to develop alternative rate options that allow residential customers to better control their electric energy costs while also reducing the cost drivers for the utility.  CUB proposed residential rate designs ranging from inverted rates with a critical peak pricing element to improved time-of-use rate designs, as well as improved load management opportunities for small customers. 

Collection for Deferred Costs

WEPCO proposed to begin collection of a large assortment of previously deferred expenses.  The rate increase request includes $120 million to pay for these expenses.  CUB investigated whether any or some of the deferred expenses should be collected in current rates.  CUB reviewed whether deferred costs were prudently incurred.  For example, WEPCO requested $22 million in rates for deferred replacement power costs incurred during the 2005 spring outage of the Point Beach nuclear plant.  CUB argued that the replacement power costs were not prudently incurred because the outage was extended by an additional 50 days while the Company waited to receive regulatory approval to replace a major component of the plant.  CUB provided evidence showing that the Company failed to comply with regulatory requirements in a timely manner and violated federal regulations, forcing the plant to remain shutdown for nearly two extra months.

Sale of the Point Beach Nuclear Plant

Now that the sale of the Point Beach plant has been completed, WEPCO reduced the electric rate increase. WEPCO requested that rates increase by 7% in 2008 and 7% in 2009.  WEPCO has proposed a complex treatment of the net proceeds of the sale of Point Beach.   CUB investigated WEPCO's proposal to withhold $70 million of the revenue from the sale for what it called contingency provisions.  CUB submitted evidence that this $70 million should be immediately returned to ratepayers rather than be kept by shareholders.

CUB filed the testimony of our expert witnesses in October 2007, and our legal briefs in November 2007.

CUB's Expedited Motion to Compel
Direct Testimony of Lee Smith
Direct Testimony of George Edgar and Wayne DeForest
Rebuttal Testimony of George Edgar and Wayne DeForest
Surrebuttal Testimony of George Edgar and Wayne DeForest
Surrebuttal Testimony of Lee Smith
CUB's Initial Brief
CUB's Reply Brief

On January 17, 2008, the PSC issued its written order approving an increase of 3.4% in electric rates and a 2.2% increase in gas rates.  The PSC accepted CUB's contention that WE Energies was responsible for causing an extended outage at Point Beach in 2005 and denied the Company's request to increase rates by $22 million to cover costs caused by the outage.  The PSC also agreed with CUB that WEPCO cannot keep $70 million in proceeds from the sale of Point Beach for contingencies.

Wisconsin Electric Power Company
Proposed Sale of Point Beach Nuclear Plant to FPL
PSC Docket 6630-EI-113

On January 5, 2007, WEPCO applied to the Commission for authority to sell the Point Beach nuclear plant to FPL, a subsidiary of an out-of-state holding company.  If approved, WEPCO would enter into a purchase power agreement with FPL granting it the right to purchase the output of Point Beach either for the remaining life of Point Beach's federal nuclear licenses, which expire in 2030 for Unit 1 and 2033 for Unit 2, or for a term of 16 years for Unit 1 and 17 years for Unit 2.  The proposed sale represents the continuing attempt by Wisconsin utilities to get out from under state regulation.  If the sale is approved, Point Beach will be operated as a merchant power plant.  The state would lose its ability to determine whether Point Beach's nuclear reactors should be part of the state's generation mix, an issue of great importance because of the inherent safety and environmental risks associated with nuclear power production.  When the purchase power agreements terminate FPL will be able to sell Point Beach's output to the highest bidder.  In other words, a nuclear power plant could be operated in Wisconsin while the power it produced could be sold out of state.  Wisconsin's citizens and environment bear the risk of accident and storage of high level radioactive waste, while out of state customers get the power produced by the plant, and while FPL's shareholders reap the profits.  This potential scenario is completely different than when Point Beach was licensed by the state to operate in 1967.  The Commission authorized the construction of Point Beach to serve the energy interests of Wisconsin's ratepayers.  Wisconsin shouldered the risk of nuclear plant operation, but it also received the power produced by the plants.  CUB will intervene in the proceeding to review the terms of the proposed sale including the sale price; the purchased power agreement; the treatment of the decommissioning trust funds; and the proposed conditions that WEPCO and FPL have offered to gain approval of the sale.

CUB's Confidential Reply Brief (Redacted) 7-13-07

CUB's Confidential Initial Brief (Redacted) 6-29-07

Direct Testimony 5-4-07 and Surrebutal Testimony 6-5-07

Direct Testimony of David Schlissel is confidential
David Schlissel Exhibit 1
David Schlissel Exhibit 2
David Surrebuttal Testimony (Redacted)
David Schlissel Exhibit 3 Surrebuttal Testimony

Direct Testimony of Michael Mullett
Michael Mullett Exhibit 1
Michael Mullett Surrebuttal Testimony (Redacted)

Direct Testimony of Ralph Smith
Ralph Smith Exhibit 1
Ralph Smith Exhibit 2
Ralph Smith Exhibit 3
Ralph Smith Exhibit 4
Ralph Smith Surrebuttal
Ralph Smith Exhibit 5 Surrebuttal Testimony