In May 2015, Northern States Power – Wisconsin (NSPW) filed an application with the Public Service Commission (PSC) to increase electric rates by $27.4 million, or 3.9 percent, and natural gas rates by $5.9 million, or 5.0 percent, starting January 1, 2016. Additionally, NSPW requested authority to increase the single-phase residential and small business electric customer charge from $8.00 per month to $18.00 per month, an astonishing 125% increase.
CUB intervened in the case and filed expert testimony challenging the proposed electric customer charge increase because the proposal would shift costs to the customer charge that are more appropriately recovered through energy charges. That shift will likely distort price signals, frustrate investments in energy efficiency and distributed resources, and disproportionally burden low-usage customers. For instance, CUB’s expert determined that NSPW’s proposed $18 monthly customer charge exceeded the incremental costs to connect a residential customer by a factor of two, and that the change in rates would likely undue about three years of residential energy-efficiency savings in NSPW’s service territory. CUB recommended that the PSC leave the customer charge unchanged.
In December 2015 the PSC issued its rate order. The PSC declined to raise the customer charge as much as NSPW requested, and set the single-phase residential and small business customer charge at $14.00 per month.
CUB also filed expert testimony challenging NSPW’s proposed return on equity (ROE). An authorized ROE is the allowed rate of profit to shareholders for a regulated company, and should reflect the market-based cost of capital for a regulated firm. NSPW proposed a 10.20 percent ROE. CUB’s witness presented evidence regarding the currently low costs of capital, and undertook financial modeling using market data for similarly situated utilities to calculate an appropriate ROE for NSPW. CUB recommended an 8.75 percent ROE.
Consistent with testimony presented by CUB and other intervenors identifying downward trends in authorized ROEs, the PSC decided to reduce NSPW’s authorized ROE to 10.00 percent, which reduces NSPW’s revenue requirement by approximately $1.5 million.
CUB advocated for or supported other downward adjustments to NSPW’s requested revenue and rate increases, and the PSC declined to approve the full increases sought by NSPW, approving an electric rate increase of $7.6 million, or 1.08 percent, and a natural gas rate increase of $4.2 million, or 3.60 percent.
In April 2014, CUB worked with Northern States Power Company - Wisconsin (NSPW) to limit the amount and scope of NSPW’s rate case for 2015. As a result of the discussions NSPW agreed to an earnings cap at its currently authorized return on equity level of 10.2%, meaning it has to refund earnings it receives above 10.2% to customers in 2015. NSPW also agreed not to increase its fixed monthly customer charges for residential and small business customers in 2015. As a result, CUB agreed that NSPW’s electric rate case could focus on production and transmission costs that flow through the Interchange Agreement and updates to fuel and purchased power costs.
Subsequently, in May 2014, NSPW requested PSC authority to increase its Wisconsin retail electric rates by $20.6 million, a 3.2 percent increase, and keep natural gas rates unchanged for 2015. In December, 2014 the Commission issued an order authorizing an increase in electric rates of $14.2 million, a 2.2 percent increase, and no change in natural gas rates.
In June 2013, Xcel Energy requested authorization from the Public Service Commission to raise electric rates by $40 million, or 6.5 percent, and natural gas rates by $4.7 million, or 3.5 percent, starting January 1, 2014.
CUB intervened in the case and filed expert testimony in opposition to Xcel’s proposed increase of residential electric rates. CUB also opposed Xcel’s requested profit level, request for ratepayers to pay for employee incentive compensation packages, and collection of cost overruns associated with the Monticello power plant uprate project.
In December 2013, the Commission ordered a $19.5 million electric rate increase, or 3.11 percent, and no change to natural gas rates. The Commission’s decision results in a $20.5 million savings to Xcel’s customers on electric bills, and a $4.7 million savings on natural gas bills in comparison to what the utility requested.
On June 1, 2012, Xcel Energy filed an application with the PSC to raise electric rates by $39.1 million, or 6.7 percent, starting January 1, 2013. The utility is also seeking to increase rates for delivering natural gas by $5.3 million, or 4.9 percent.
Xcel said the main drivers for the large increase in electric and gas rates are new transmission lines, major work on its two nuclear plants in Minnesota, restoration of a contaminated site in Ashland, other maintenance projects, and general inflation.
Xcel also needs to clean up a site in Ashland where manufactured gas was made between 1885 and 1947. The site, which is on the shore of Lake Superior, is on the U.S. Environmental Protection Agency’s “national priorities list,” which is part of the Superfund program to clean up contaminated areas. The site was also used for many other industrial and municipal purposes, and clean-up costs are estimated to be at least $100 million.
On August 9, 2012, Xcel announced a settlement with the U.S. Department of Justice and other agencies regarding the Ashland project, and will pay about $40 million to clean the land-portion of the site. CUB investigated Xcel’s proposal to charge ratepayers for this clean up. Costs to clean the lake-portion of the site will be investigated in future proceedings.
CUB also tried to reduce the size of the increase in electric and gas rates by questioning the costs charged to customers for fuel to make electricity, the allocation of utility costs between residential and industrial customers, and the design of residential rates.
On December 27, 2012, the PSC issued its final decision, allowing Xcel to increase electric rates by $36 million, or 6.1 percent. Natural gas delivery rates increased by $2.7 million, or 2.5 percent. The PSC agreed with CUB and reduced the rate increases by about $5 million: Xcel can’t charge ratepayers for incentive pay for management-level employees, and costs for cleaning up the Ashland Superfund site will be collected over more years. CUB also successfully kept electric customers from having to pay for cleaning up the Ashland site, though the burden now falls completely on gas customers.
On June 1, 2011, Xcel Energy filed an application with the PSC to raise electric rates by $21.9 million or 3.8 percent. On June 15, Xcel increased its rate hike request to $29.2 million or 5.1 percent.
Xcel said that the proposed increase in electric rates is due to improvements made to various power plants, transmission lines, and the distribution system. Xcel also expects higher costs for fuel for making electricity in 2012. If rates are changed by the PSC, the new rates would take effect on January 1, 2012.
CUB intervened in the case and suggested ways to reduce the rate increase by having Xcel change “equivalent forced outage rates,” develop appropriate estimates of market prices for electricity, defer compliance costs with the U.S. Environmental Protection Agency’s Cross-State Air Pollution Rule, and the use of appropriate “production capacity allocators.” CUB also recommended ways to allocate costs between residential and industrial customers so that all pay their fair share; Xcel’s proposal would have industrial customers paying lower rates at the expense of higher rates for residential customers.
The PSC issued its final decision in the case on December 22, 2011. The PSC agreed with CUB regarding the appropriate estimates of market prices for electricity, reducing the rate increase by $1.0 million. The PSC also agreed with CUB and reduced Xcel’s return on equity (profit) to 10.4 percent from Xcel’s request of 10.75, resulting in a savings of $2.6 million.
Finally, the PSC agreed with CUB and Xcel that customers should receive $13 million from a settlement with the U.S. Department of Energy, regarding the federal government’s failure to take possession of nuclear waste from Xcel’s nuclear reactors in Minnesota. Xcel customers will receive the settlement proceeds through a one-time credit on an upcoming electric bill.
On February 23, 2009, Xcel filed an application to add a biomass gasifier to one of the units at the Bayfront facility near Ashland so that it could burn biogas instead of coal.
CUB intervened to make sure the cost of the project was reasonable. During the proceeding, CUB discovered a study written by a consultant hired by Xcel that concluded that the proposed project may not work at the size and scope envisioned. CUB also unearthed information indicating that Xcel had underestimated the cost for the project. CUB brought these concerns to light in legal briefs submitted to the PSC.
The PSC approved the project on December 22, 2009. Although the PSC determined that the project was technically feasible, the PSC agreed with CUB to limit the cost-overrun collar to 10 percent, rather than 20 percent sought by Xcel.
In addition, the PSC agreed with CUB and did not provide Xcel with a guarantee of cost recovery should the project cost more than the approved amount or should it not function properly. These actions protected ratepayers from paying millions of dollars for cost overruns for a project that may not work.
In May 2010, Xcel informed the PSC that the cost of the proposed project had increased from $58 million to $79.5 million. The utility canceled the project in November 2010 due to these higher than expected costs. CUB saved ratepayers more than $58 million on this too-expensive project.
On June 1, 2007, Northern States Power (also know as Xcel Energy) applied to the PSC for permission to raise 2008 electric rates by $67 million, or 14.3 percent and increase 2008 natural gas rates by $5.3 million, or 3.3 percent.
According to Xcel, the utility asked for the rate increase because of higher prices for fossil fuels used to generate electricity, higher costs for transmitting electricity, and investments in its existing nuclear plants in Minnesota and new wind power plants.
CUB intervened in this case at the PSC, and urged Xcel to develop new rates for utility customers so that they can take steps to reduce their electric bills. CUB also asked the PSC to make sure costs are being fairly split between residential, commercial, and industrial customers.
Given the magnitude of the rate increase proposed by Xcel 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 prescriptive rate designs. CUB also investigated how residential customers should receive the value of the Company's proposed use of automated meter reading within a reasonable timeframe. Automated meter reading, if used for the benefits of customers, could allow ratepayers to receive accurate price signals regarding their electric energy consumption and change their usage accordingly to lower their utility bills.
CUB submitted testimony from its experts to the PSC in October 2007, and filed legal briefs.
On January 8, 2008, the PSC issued its written order and allowed Xcel to increase its 2008 electric rates by $39.4 million (8.1%) and natural gas rates by $5.3 million (3.3%). The PSC ordered Xcel to work with CUB on rate designs.
In its first rate case since 1998, NSP requested a $48 million increase in electric and natural gas rates (revised by the PSC to a total of $51.2 million).
CUB filed briefs arguing for a lower return on equity, improved load management goals and to reject NSP’s revenue allocations between residential, commercial and industrial customers.
The PSC approved rate increases totaling $43 million and ordered NSP to work with commission staff to develop goals for load management programs.