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 rate case (6680-UR-122)
The PSC recently approved WPL’s one-year rate case and rate freeze for electric and natural gas rates. WPL’s “rate stabilization plan” uses regulatory/accounting modifications and lower fuel costs as part of their 2021 Fuel Cost Plan. WPL is allowed to recover about $32 million on its investment in the 150 MW Kossuth Wind Farm, which was placed in service in 2020. Those costs would be offset with about $31 million in electricity fuel savings resulting from a new coal shipping contract and from the wind farm as well as some federal tax savings. The PSC authorized fuel costs of $20.75/MWh for WPL in 2021. WPL would also collect $15 million from a project to expand natural gas service in western Wisconsin, offsetting that with $7 million in savings stemming from the 2017 federal tax changes. The $8 million difference would be treated as a regulatory asset that WPL would seek to recover, with interest, in future rates.
MGE rate case/settlement agreement (3270-UR-123)
The PSC recently approved MGE’s rate case/settlement agreement for a 0% increase for electric rates and a 4.1% increase for natural gas rates throughout 2021. Customer groups WIEG and CUB signed on in support of the settlement.
- There was one provision WIEG specifically requested as it is good for both energy efficiency efforts and economic development. The new customer baseline adjustment for MGE’s New Load Market Pricing tariff (RNL-1) removes a disincentive to businesses undertaking energy efficiency projects and participating in demand response programs.
- The electric rate settlement includes an increase in rate base primarily offset by lower fuel and purchase power costs and a one-time $18.2 million return to customers of the portion of excess deferred taxes related to the Tax Act not governed by IRS normalization rules. As part of the settlement, the fuel rules bandwidth will be set at plus or minus 1%. The PSC authorized fuel costs of $19.97/MWh for MGE 2021.
- The settlement agreement also seeks escrow accounting treatment for pension and other postretirement benefit costs, bad debt expense, and customer credit card fees. Escrow accounting treatment would allow MGE to defer to its next rate filing any difference between estimated costs in rates and actual costs incurred.
- The natural gas rate increase covers infrastructure costs and technology improvements. The natural gas rate percentage varies by the specific tariff and other factors such as firm vs interruptible.
WEPCO 2021 Fuel Cost Plan (6630-ER-104)
The PSC recently approved WEPCO’s 2021 Fuel Cost Plan application. The PSC authorized WEPCO’s fuel cost of $33.92/MWH for 2021. The PSC staff’s adjustments, supported by WIEG’s testimony, removed about $11 million from the application. As background, WEPCO originally requested an increase of $26.5 million in total fuel costs or 3.4% increase in fuel costs compared to the approved 2020 fuel cost plan. The PSC approved a 6.8% increase in WEPCO’s fuel costs over last year’s authorized plan. WEPCO stated in their cover letter that absent the annual escalation of prices in the Point Beach PPA, then their customers would have an overall decrease in fuel costs in 2021. In 2020, WEPCO’s fuel costs were authorized for $31.77/MWH and the Point Beach PPA costs $52.66/MWH (Point Beach PPA escalates to $55.82/MWH in 2021).
WPSC 2021 Fuel Cost Plan (6690-ER-104)
The PSC recently approved WPSC’s 2021 Fuel Cost Plan application. The PSC authorized WPSC’s fuel cost of $24.24/MWH for 2021. WPSC agreed to all of the adjustments made by PSC staff and one from WIEG. The PSC staff’s adjustments, supported by WIEG’s testimony, removed at least $1.7 million from the application. WPSC originally requested an increase of $1.6 million in total fuel costs or 0.54% increase in fuel costs compared to the approved 2020 fuel cost plan. The PSC approved a 5.2% increase in WPSC’s fuel costs over last year’s authorized plan. In 2020, WPSC’s fuel costs were authorized for $23.05/MWH.
NSPW 2021 Fuel Cost Plan (4220-ER-101)
The PSC recently approved NSPW’s 2021 Fuel Cost Plan application. NSPW accepted PSC staff’s adjustments, which would result in an additional net reduction in fuel costs by around $760,000. The PSC authorized fuel costs of $19.97/MWh for NSPW in 2021, which is an overall rate decrease. The ECAC will be a credit of $0.00172/kWh in 2021.
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:
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).
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.