Protecting the bottom line with rate case interventions

WIEG’s efforts on behalf of large energy users has led to significant results: Wisconsin’s investor-owned utilities recently requested a total increase of $159 million in electric and natural gas rates. WIEG intervened in these rate cases and helped the PSC reduce the combined 2021 requests by $100 million. In the last ten years, investor-owned utility rate hike requests have been reduced by roughly 69% for a total of over $1.3 billion. In addition, WIEG has successfully advocated for new market-based industrial tariffs. In just a few years, these efforts have resulted in savings of more than $120 million versus standard industrial tariffs.

WPL 2022-2023 rate case (6680-UR-123)

WPL recently filed a rate case settlement agreement with WIEG, CUB and other consumer advocacy and environmental groups for rate test years 2022 and 2023. There are two main drivers of the rate case: 1) WPL’s plan of acquiring 1,089 MW of solar would add over $1.5 billion to WPL’s rate base; and 2) the federal tax cuts & jobs act benefits have been fully refunded and no longer offsets rate pressure. The average electric increase in 2022 would be 6.2% and no increase in 2023. The agreement aligns cost increases with savings, including from the retiring Edgewater Unit 5 coal facility, and operation and maintenance cost management. The parties have identified a creative means of addressing the recovery of Edgewater Unit 5’s remaining book value after its planned retirement in 2022. The proposed levelized recovery is like a traditional home mortgage: by spreading costs over a longer period of time, it then lowers the monthly payments (-$18 million for the two years covered in this rate case and avoids over $60 million over the next ten years). Finally, there were several rate design changes as part of the agreement that are favorable to industrial customers. If approved by the PSC, there would be a significant increase in the interruptible credit as part of a package of energy efficiency and demand response initiatives.

MGE 2022-2023 rate case (3270-UR-124)

MGE filed an application seeking approval of a rate case settlement with WIEG and other intervenors for 2022-2023. The settlement agreement of 5.16% average electric increase in 2022. Increased fuel costs, construction costs associated with the Badger Hollow Solar Farm and the expiration of the 2017 Tax Cuts and Jobs Act are the drivers of the rate increase. MGE is proposing a 2.15% average natural gas increase for 2022. MGE is proposing to address potential 2023 rate changes through an electric limited rate case re-opener and a step increase in natural gas rates of $1.8 million or 0.95% average increase. The limited reopener for test year 2023 is a placeholder, and it would include generation changes (several solar, wind and battery applications are pending PSC approval) plus any impact from potential federal corporate tax changes.

NSPW 2022-2023 Rate Case (4220-UR-125)

NSPW filed an application seeking approval of a rate case settlement with WIEG and other intervenors for 2022-2023. The settlement agreement increases electric rates by $35 million (4.9%) for 2022 and an incremental $18 million increase (2.5%) for 2023. For the natural gas utility, rates increase by $10 million (8.4%) for 2022 and an incremental $3 million (2.3%) increase for 2023. However, NSPW’s 2022 Fuel Cost Plan was just added to this rate case and as filed it would increase rates, on top of the base rates, with a 2022 ECAC surcharge of $0.00287/kWh. There are several rate design changes that support WIEG’s long-held demand response and energy efficiency goals.

WEPCO 2022 Fuel Cost Plan application (6630-ER-105)

If approved at the revised amounts, the total fuel adjustment rate will equal the sum of the 2021 to 2022 adjustment rate of $0.00180/kWh and the 2020 to 2021 adjustment rate of $0.00223/kWh for a total fuel adjustment rate of $0.00403/kWh. The total rate impact would be a 2.0% to 2.34% electric rate increase for a large customer in 2022. WEPCO’s original filing was an increase of $29.4 million in total fuel costs compared to the approved 2021 Fuel Cost Plan (6630-ER-104). With the PSC staff’s adjustments and the recent increases in commodity costs, the increase is now a projected $41.5 million in total fuel costs. The primary driver for WEPCO’s increase in monitored fuel costs is the annual price escalation in the Point Beach Purchase Power Agreement (PPA).

WPSC 2022 Fuel Cost Plan application (6690-ER-105)

If approved at the revised amounts, the total fuel adjustment rate will equal the sum of the 2021 to 2022 adjustment rate of $0.00024/kWh and the 2020 to 2021 adjustment rate of $0.00122/kWh for a total fuel adjustment rate of $0.00146/kWh. It would be a 0.7% electric rate increase for a large customer in 2022. WPSC’s original filing was a decrease of $6.3 million in total fuel costs compared to the approved 2021 Fuel Cost Plan (6690-ER-104). The primary driver for WPSC’s increase in monitored fuel costs is the rising cost of natural gas.

Other regulatory initiatives include:

WIEG successfully sought an incremental load Real Time Market Pricing (RTMP) tariff for We Energies’ customers. Following this win, WIEG successfully worked for the adoption of a similar tariff (New Load Market Pricing, or NLMP) for both WPSC and WPL customers. 

WIEG also worked with WPSC and WPL to develop nominated load real time tariffs. WIEG negotiated changes to a WPSC tariff that is also called RTMP. Under the revised RTMP tariff, customers pay a $5.50 per MWh adder, but then pay day-ahead market prices.

A similar nominated load real time program was approved for WPL’s largest customers in the summer of 2017. The Day Ahead Market Pricing rider (DAMP) is now in place for qualified customers.

Together, these new tariffs help promote economic growth and development in Wisconsin, without shifting costs to any of the utility’s other customer groups. In just a few years, these efforts have resulted in savings of more than $120 million versus standard industrial tariffs.

Click below to view recent developments regarding these innovative tariffs:

http://psc.wi.gov/apps35/ERF_view/viewdoc.aspx?docid=183769

http://www.wisconsinpublicservice.com/company/wi_tariffs/rtmp.pdf

http://apps.psc.wi.gov/vs2015/ERF_view/viewdoc.aspx?docid=327314

The PSC granted the request of WEPCO regarding a financing order to authorize environmental trust financing (6630-ET-101). The utility estimates the issuance of environmental trust bonds to securitize $100 million of the remaining investment in environmental controls at Pleasant Prairie will deliver $40 million in customer savings over time. Securitization is in some ways similar to refinancing a mortgage. It’s a process by which a utility replaces relatively high-cost debt and equity, which is charged to electricity customers, with lower-cost debt in the form of securitization bonds. This gives the utility a more favorable bond issue and saves ratepayers money. Securitization of undepreciated costs of Pleasant Prairie was a key part of the 2019 rate case settlement involving WEPCO and negotiated by consumer groups CUB and WIEG (05-UR-109).

https://madison.com/wsj/658e94dd-143a-5496-82d1-44a7fd2fb141.html 

http://www.thewheelerreport.com/wheeler_docs/files/110620cub.pdf

Recent legislative initiatives include:

Industrial RRCs & waste heat recovery/waste heat to power

Industrial customers can create and keep renewable resource credits (RRCs) in Wisconsin, including from waste heat recovery projects. WIEG was instrumental in passing two new laws to help keep energy-intensive operations competitive in Wisconsin (2013 Act 300 and 2017 Act 53). Applications are now available on the PSC’s website.

https://docs.legis.wisconsin.gov/2017/related/acts/53

https://apps.psc.wi.gov/APPS/renewable/default.aspx