CUB Sues PSC for Unfairy Targeting Electric Customers

In April 2013, We Energies requested authorization from the PSC to make major modifications to the Menomonee Valley Power Plant at a cost of $80 million, and to charge the majority of the cost to electric customers.  Valley is located in downtown Milwaukee and is relied on by 450 large businesses to provide steam for heating and industrial processes.

CUB intervened in the case and filed expert testimony showing that We Energies’ plan would almost exclusively benefit steam customers, and not residential electric ratepayers.  CUB argued that electric customers should not have to pay the vast majority of the costs for a plant they do not need and will not use.  However, the PSC approved We Energies’ plan, as well its proposed allocation of construction and electric uneconomic dispatch costs to residential customers.

CUB has challenged the PSC’s decision by filing a lawsuit to stop residential ratepayers from subsidizing big business interests.  The case is currently before the Dane County Circuit Court. A decision is due in May 2015

The Menomonee Valley power plant provides steam for heating and industrial purposes to nearly 450 business customers in downtown Milwaukee. In January 2014 the PSC approved We Energies' request to convert the downtown Milwaukee Menomonee Valley power plant from coal to natural gas.

But, The PSC's decision calls for We Energies electric customers across the state to pay 92 percent of the capital costs, or $74 million, to convert the Valley plant, while only 8 percent of the project's costs, or $6.4 million, would be paid by downtown Milwaukee steam customers.

Furthermore, the PSC also says We Energies can charge electric customers all of Valley's uneconomic electric dispatch costs, estimated to be $185 million over the life of the plant. Those costs are caused solely by the need to provide steam service to steam customers, not electricity to electric customers.

A fundamental principle of electric utility regulation is that customers should only have to pay for things they need and use to keep the lights on. 

The PSC's decision is unjust, unreasonable, and unduly discriminatory:

CUB's lawsuit asks the court to issue an order vacating the PSC's decision allocating 92 percent of Valley's conversion costs and 100 percent of the plant's uneconomic dispatch costs to We Energies' electric customers. CUB also asks the court to declare the PSC's decision arbitrary, capricious, an abuse of discretion, a departure from established practice and policy with insufficient explanation, and unsupported by the administrative record.

 

CUB makes its case before the Wisconsin Supreme Court on the Bent Tree Wind Farm

In August 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 to be built in Minnesota, owned by Wisconsin Power & Light, and paid for by WPL’s Wisconsin customers.

CUB and WIEG contend 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.

In filing the lawsuit, WIEG and CUB contend 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 is 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 in September 2010, the Wisconsin Court of Appeals “certified” our case to the Wisconsin Supreme Court in November 2011, and the Supreme Court accepted our case in December.

On Tuesday, April 17, 2012, CUB general counsel Kira Loehr made oral arguments before the Wisconsin Supreme on CUB’s position on the Bent Tree wind farm case. You can watch the arguments on both sides at Wisconsin Eye archives (click on the little TV set. The judges start at about 2 minutes in).

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.  

 

Economic Development Rates

On July 2, 2010, CUB filed a lawsuit against the Public Service Commission for authorizing "economic development rates" for Wisconsin Power & Light. WPL applied with the PSC on November 13, 2009 for permission to offer an economic development rate that would provide certain large industrial customers with discounts on electricity service. The PSC issued an order approving this rate on June 4, 2010.

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."

CUB filed this lawsuit to protect residential and small business customers from subsidizing large, politically powerful companies. The job of the PSC is to set electric rates that are fair, just, and reasonable, and the economic development rate approved by the PSC violates these legal principles.

Unfortunately, the court rejected our lawsuit on February 11, 2011. The court said that because the PSC has not yet required other ratepayers to pay higher rates to cover the subsidies, ratepayers have not been harmed, and therefore CUB?s lawsuit was premature. However, the court said that our lawsuit may have merit if or when the PSC decides to force other ratepayers to pay for the subsidies. This could happen sometime in 2011, when the PSC decides whether to increase rates for WPL.