Madison Gas & Electric
Rates for 2013
Docket 3270-UR-118
On March 23, 2012, Madison Gas & Electric applied with the Public Service Commission to raise electric rates by $22 million, or 5.8 percent, starting January 1, 2013. MGE also requested to increase the rates for natural gas service by $4.3 million, or 2.6 percent.
Regarding electric rates, MGE said the main drivers for the increase are the new coal-fired power plants at Oak Creek, south of Milwaukee, in which MGE has a small ownership share along with We Energies and WPPI Energy. Other drivers include new pollution controls being installed at the Columbia power plant near Portage and additional costs for transmitting power from power plants to substations.
CUB intervened in this case and investigated MGE’s attempt to dramatically increase a residential customer’s “customer charge,” the part of the electric bill that more or less stays the same each month, and doesn’t change based on usage (the other part of the electric bill is the “energy charge,” which changes based on usage). When customer charges make up more of a bill, they dampen the cost savings customers can realize by saving energy. CUB is opposed to higher customer charges because they can reduce a customer’s incentive to save energy.
On December 14, 2012, the PSC issued its final decision on this case, allowing MGE to raise its electric rates by $14.9 million, or 3.8 percent. Though CUB challenged MGE’s attempt to raise the “customer charge” by 40 percent, the PSC still decided to increase the charge by 20 percent. This means that customers that use less electricity than average will pay higher rates, and customers will also have less incentive to save energy. CUB also dug through hundreds of pages of utility paperwork and found a math error, saving customers more than $500,000.
Madison Gas & Electric
Re-opener of Rate Case for 2011 Rates
Docket 3270-UR-117
On May 4, 2011, MGE filed a request with the PSC to raise electric rates by $17.9 million, or 4.9 percent. MGE provided an update of its proposed rate hike on August 26, 2011, to $21.5 million, or 5.9 percent. If approved, the new electric rates would take effect on January 1, 2012.
MGE said that the main drivers for the electric rate increase are projections of higher costs for fuel to make electricity, and higher costs to purchase electricity for re-sale to its customers.
CUB intervened in the case to determine whether MGE’s projection of fuel and purchased power costs were appropriate.
The PSC issued its final decision on December 15, 2011, and allowed MGE to increase electric rates by $15.6 million, or 4.3 percent. The PSC agreed with CUB and others and rejected MGE’s request to increase rates by $14 million to comply with the Cross-State Air Pollution Rule.
Unfortunately, the PSC decided to raise the rates for residential and commercial customers in part to pay for a discount to Airgas Merchant Gases, an industrial customer of MGE that distributes industrial, medical, and specialty gases. Airgas will receive about $100,000 in subsidies through lower electric rates.
MGE Electricity Rate Increase Request Slashed by $25 Million
Madison Gas & Electric Co. Rates for 2011
Docket 3270-UR-117
On April 22, 2010, MGE filed an application with the PSC to increase electric rates by $32.8 million (9.4%), with the new rates to take effect in January 2011.
CUB intervened in the case and argued against several proposals made by MGE.
The PSC issued its decision in this case on December 22, 2011: electricity rates for MGE's customers were increased by about $8 million, or 2.3 percent. Here are some of the outcomes of CUB intervention in the case.
MGE proposed to increase the customer charge for residential service from the current rate of $8.70 per month to $9.50, an increase of 9.2%. The PSC agreed with CUB and kept the customer charge at the current rate of $8.70 per month; keeping the customer charge at the current level will provide more appropriate price signals to customers, and mitigate rate impacts for customers that use modest amounts of electricity.
MGE tried to have its customers pay for producing electricity at the West Campus Cogeneration Facility when it was not economical to do so. This situation arises when MGE is required to provide steam to the UW, but the electricity that is also produced has to be sold at a loss. The PSC agreed with CUB and reduced rates by $1.8 million, which will protect customers from paying for these uneconomic costs of producing electricity.
Finally, at CUB's urging, the PSC reduced MGE's return on equity (profits) to 10.3 percent, which reduced rates by $500,000.
Altogether, CUB's intervention reduced rates by about $2.3 million.
Madison Gas & Electric
Rate Case for 2010
Docket 3270-UR-116
On April 29, 2009, MGE filed a request to raise electric rates by $15.9 million or 4.5 percent, and natural gas rates by $4.4 million or 2.3 percent. The rate increases would take effect in January 2010.
CUB intervened in this case and reviewed the utility's level of profit and the design of rates for residential customers.
The PSC issued its decision in this case on December 22, 2009. The PSC approved an increase in electric rates of $11.9 million (3.3 percent) and a decrease in gas rates of $1.5 million (0.74 percent). The PSC agreed with CUB and reduced MGE's return on equity (profits) from 10.8 percent to 10.4 percent, a savings to customers of $2 million. In addition, the PSC also agreed with CUB and reduced rates by $78,000 for lobbying expenses that were incorrectly charged to ratepayers. The PSC also agreed with CUB to require MGE to use electric rates for residential customers with lower fixed charges and higher volumetric charges, which provide incentives to customers to save electricity.
Madison Gas & Electric
Rate Case for 2008 & 2009 Rates
Docket 3270-UR-115
On May 7, 2007, MGE applied to the Commission for an electric rate increase of $19.6 million, or 5.75%, and a natural gas rate increase of $9.1 million, or 3.73%. The proposed rate increase totaling approximately $29 million would go into effect in 2008. CUB sought the development of alternative rate options that would allow a customer to better control their electric energy costs while also reducing the cost drivers for the utility. Improved rate designs are especially important given increasing utility costs as well as future cost drivers such as peak growth and global warming.
The Commission issued its order on Dec. 14, 2007, in which it instructed MGE to continue working with CUB to develop alternative rate designs. Regarding 2008 rates, the Commission approved electric rate increases of $16.2 million, or 4.8 percent; and natural gas rate increases of $7.8 million, or 2.8 percent.
In a follow-up to this rate case, CUB consultants worked with MGE on alternative rate designs, which would encourage customers to use less electricity.
Madison Gas & Electric
Fixed Financial Parameters for the Top of Iowa Wind Project
Docket 3270-CE-126
On January 19, 2007, MGE applied to the Commission for an order approving of the use of "fixed financial parameters" at the proposed Top of Iowa Wind farm. This was the second instance of a utility asking to use this mechanism of financing for the construction of a generation unit (the first was Wisconsin Power & Light).
"Fixed-financial parameters," is an assault on traditional regulation. In traditional regulation regulators can adjust a utility's return on equity on the utility's invested capital every several years in order to maintain a balance between the interests of ratepayers and shareholders. If interest rates or equity returns change significantly, or if the utility's job performance is good or bad, regulators can reward or punish or hold harmless shareholders by adjusting the return on equity. Regulators have used this approach for at least 100 years.
CUB intervened in the MGE proceeding to review the potentially negative impacts to ratepayers of using fixed financial parameters at the Top of Iowa project, since once in place, the parameters could not be changed for the life of the generation project. On May 4, 2007, in recognition of the Commission's decision regarding fixed financial parameters for WPL's Cedar Ridge Wind project, MGE withdrew its application to use fixed financing.
Madison Gas & Electric
Rate Case for 2006 Rates (Reopened)
Docket 3270-UR-114
In late June, 2006, MGE requested permission to "reopen" its rate case for 2006 rates, so that it could update forecasts for the cost of natural gas, and for other items. New prices would go into effect on January 1, 2007.
The PSC issued its decision on Dec. 26. MGE allocated the increase associated with costs for its share of the Oak Creek Power Plants using non-coincident class demands. CUB argued that the use of a mix of demand and energy allocators for production-related costs is appropriate for spreading the Oak Creek costs to the customer classes. The Commission agreed and found that using a 60/40 mix of coincident demand and energy allocators is the most reasonable way to allocate production related costs like the Oak Creek costs.
