- WE Energies Cases
Purchase of Montfort Wind Farm
In August 2012, We Energies applied for permission from the Public Service Commission to purchase the Montfort Wind Farm for $27 million. NextEra Energy Resources is the current owner of the 30 megawatt facility.
CUB intervened in the case and submitted comments to the PSC, asking the PSC to deny We Energies request to purchase the wind farm. CUB asserted that We Energies failed to show the benefits to ratepayers of buying the wind farm rather than continuing to purchase the power from NextEra.
Unfortunately, the PSC approved We Energies request to purchase the facility on December 6, 2012.
Rates for 2013 and 2014
On March 23, 2012, We Energies filed a request with the Public Service Commission to raise electricity rates by $99 million, or 3.6 percent, starting January 1, 2013, and another increase of $100 million, or 3.6 percent, starting January 1, 2014.
We Energies also requested to decrease rates for natural gas service by $17.1 million, or about 2.5 percent, starting January 1, 2013. We Energies is not requesting any other adjustments for rates for natural gas service for 2014.
We Energies has asked to increase steam rates $2.3 million, or about 6.5 percent, for 2013, with a similar increase in steam rates for 2014.
Regarding electric rates, We Energies said the main drivers are the new coal-fired power plants at Elm Road, new pollution controls being installed at the Oak Creek power plants, the new Glacier Hills wind farm, and the new biomass-fired power plant being built in Rothschild, near Wausau.
CUB intervened in this case and investigated the cost overruns of $182 million for the two new coal-fired power plants at Oak Creek, which cost over $2.3 billion to build. CUB also raised questions about the Valley Power Plant, a two-unit coal-fired power plant that produces electricity and steam for downtown Milwaukee customers. Not only does the Valley plant pollute near-by neighborhoods with toxic emissions, the plant is very expensive to run, and the rates paid by steam customers are heavily subsidized by electric customers.
On December 21, 2012, the PSC issued its final decision, and allowed We Energies to raise its electric rates for 2013 by $114.8 million, or 4.2 percent. Ratepayers will be hit with another increase of $73 million, or 2.6 percent, when 2014 rates start next January.
The PSC agreed with CUB on a number of issues, and reduced the rate increases by $42 million. Noteworthy reductions include $24 million for converting the new Oak Creek plants to burn western coal: We Energies can’t recover this cost from ratepayers until the plants are actually able to burn western coal. Other reductions in the rate increase totaling about $12 million were for costs related to building the Oak Creek plants that exceeded the 5 percent “collar” for cost overruns. Typically, utilities get 10 percent cost-overrun collars, but CUB successfully argued in 2003 for a 5 percent collar, saving consumers millions in rate increases.
Unfortunately, the PSC allowed We Energies to increase the “facilities charge” on a consumer’s bill by 20 percent. A facilities charge (also known as “customer charge”) is one part of the electric bill that more or less stays the same each month, and doesn’t change based on usage, whereas the other part of the electric bill is the “energy charge,” which changes based on usage. CUB argued for no increase in the facilities charge, since higher facilities charges force customers who use less electricity to effectively pay higher rates, and higher facilities charges reduce the incentive for customers to save electricity.
CUB also argued to end the subsidies paid by electric customers that keep the steam flowing from the Valley plant to downtown businesses. Electric customers pay between $5 million to $35 million more each year to subsidize the production of steam at Valley. Unfortunately, the PSC decided not to end these subsidies charged to electric ratepayers.
Rates for 2012
On May 26, 2011, We Energies filed a request with the PSC, seeking no rate increase for 2012 if the Commission would allow various delays in charging ratepayers for some of the costs of providing electric service.
CUB intervened in the case, and argued that it would be better if the PSC conducted a “full rate case,” in which all the projected revenues and costs of providing electricity service are reviewed, so that rates are set as accurately as possible. CUB was concerned that the request by We Energies for a zero rate increase would keep rates higher than they should be, especially in 2013 and after. The Wisconsin Industrial Energy Group also intervened and raised similar concerns.
On August 11, 2011, the PSC accepted We Energies offer of a zero rate increase for 2012, but ordered a hearing that took place on August 24 to determine if the We Energies request should be modified, as determined by a “mini-audit” conducted by PSC staff. At the hearing, CUB and WIEG argued that rates could be lower in future years if modifications were made to We Energies request.
Unfortunately, Chairman Phil Montgomery and Commissioner Ellen Nowak supported We Energies request on October 6, 2011, with Commissioner Eric Callisto dissenting. Montgomery and Nowak were swayed by We Energies contention that its proposal will result in no increase in “base” electric rates, even though We Energies will likely raise electric rates in early 2012 due to rising costs for fuel to make electricity. Callisto dissented because the process used in this proceeding failed to accurately determine the appropriate rates for We Energies.
Two-Part Real Time Pricing Rate
On October 28, 2010, We Energies asked the Public Service Commission for permission to offer a “real-time pricing” rate to its industrial customers.
A real-time pricing rate would allow an industrial customer to pay marginal costs for electricity, but not the fixed costs, resulting in a roughly 40 percent discount on electricity rates. This means that an industrial company paying the real time rate would receive a 40 percent discount compared to another industrial company that is paying the full rate for electricity. Worse yet, no residential or small commercial customer is eligible for the discount. CUB opposes these types of rates because they provide discounts to certain customers while other customers pay higher rates, which is illegal under state law.
Despite CUB’s opposition to the real-time pricing rate, the Commission approved it on August 11, 2011. Commissioner Eric Callisto voted against the rates, but Chairman Phil Montgomery and Commissioner Ellen Nowak supported them. In his dissent, Callisto noted that the approved real-time pricing rate for We Energies “is an open door to discounted electricity for a poorly defined and potentially limitless class of large energy users, selected at the sole discretion of the utility.”
Rates for Charter Steel
On May 3, 2010, the PSC approved a request by We Energies to offer “market-based rates” to Charter Steel, which operates an electric arc melting furnace and hot rolling mill in Saukville. On April 6, 2011, We Energies applied for permission to extend the contract with Charter Steel regarding market-based rates by four years, and the PSC approved this request on August 24, 2011.
CUB intervened in this proceeding to make sure the rates paid by Charter Steel would not be subsidized by other customers, as required in Wis. Stat. § 196.192, which allows utilities to offer market-based rates to customers.
Market-based rates allow a customer to purchase electricity at current prices offered in the electricity market run by the Midwest Independent Transmission System Operator. Current prices are “locational marginal prices,” or LMPs, which are the lowest marginal prices bid by generators in the MISO market, which spans a 12-state region in the upper Midwest. Since LMPs are based on marginal costs of producing electricity, they do not include fixed costs, which are typically 60 percent of the cost of producing electricity. Therefore, a customer paying market-based rates, which are based on LMPs, do not have to pay for the substantial fixed costs of producing electricity.
With a surplus of electricity in the MISO market, LMPs are very low, so Charter Steel is receiving considerable benefits for the electricity it purchases under market-based rates. Specifically, Charter is able to buy electricity at “LMPs + 20 percent” for electricity consumption above a threshold. For electricity purchased under the threshold, Charter pays regular rates.
In approving the extension of the rate contract between We Energies and Charter, the PSC determined that the rates being paid by Charter will not force other customers to pay higher rates. Indeed, the PSC required We Energies to file a report by January 2013 that shows that other ratepayers are not paying higher rates because of the market-based rates paid by Charter. CUB will review this report and will challenge the use of these rates if there is any indication that other ratepayers are subsidizing Charter’s rates.
And the Rich Get Richer...
WE Energies Fuel Rules
On October 7, 2010, the PSC asked CUB and others for comments on whether WE Energies should be required to issue refunds to ratepayers due to lower-than-expected costs for purchasing fuel to make electricity. At stake was a refund to customers of about $53 million.
CUB and the Wisconsin Industrial Energy Group submitted joint comments on October 21, 2010, noting that customers should get a substantial refund from We Energies.
One issue was whether WE Energies could keep about $53 million instead of giving it back to ratepayers. The $53 million is based on the amount of bonuses WE Energies paid its executives during 2008 and 2009. CUB and WIEG argued that WE Energies should not be allowed to manipulate the rules and force ratepayers to pay $53 million for executive bonuses.
Typically, the PSC prevents the utilities from charging ratepayers for executive bonuses. However, on February 24, 2011, PSC Chairman Eric Callisto and Commissioner Mark Meyer sided with the utility, and will allow WE Energies to keep $53 million instead of refunding it to customers. Commissioner Lauren Azar dissented, saying that the $53 million should be given back to ratepayers. In addition, she said that the $40+ million that WE Energies has given its executives as bonuses each year since 2008 are inappropriate, especially since Milwaukee (served by WE Energies) has the 4th highest poverty rate in the U.S. CUB wholeheartedly agrees with Commissioner Azar.
Renewable Projects Must Be Economic - This one isn't.
WE Energies Biomass Power Plant
On March 15, 2010, WE Energies asked the PSC for permission to build and own a 50-megawatt cogeneration power plant that would burn wood and produce steam as well as electricity. Domtar Corporation, a paper company located near Wausau, would use the steam produced by the plant.
WE Energies proposed this project in part to comply with Wisconsin's "renewable portfolio standard," or RPS, which requires electric utilities to sell at least 10 percent renewable electricity by 2015.
CUB submitted testimony in opposition to the plant, because of its very high costs of nearly $5,000 per kilowatt. In addition, CUB pointed out that Domtar would get a sweet-heart deal on the steam purchased from WE Energies, with WE Energies' ratepayers paying hundreds of millions of dollars in higher rates that should be paid by Domtar.
This case awaits a decision by the PSC.
Fuel Rules for 2010
On February 19, 2010, WE Energies filed an application with the PSC to increase electric rates by $60.5 million (2.8%) for increases in the cost of fuel to make electricity. The PSC approved an "interim surcharge" on March 24, 2010, with the surcharge subject to refund pending the PSC's full review, hearing, and final determination regarding WE Energies' request.
CUB's experts reviewed and assessed the changes, inputs, and assumptions used by WE Energies in developing its forecast of fuel costs for the remainder of 2010.
This case awaits a decision by the PSC.
Rate Case for 2010-2011
On March 13, 2009, WE Energies (WE) filed an application with the PSC to increase electric rates by 2.8 percent and natural gas rates by 4.6 percent, with the new rates taking effect on January 1, 2010. On July 3, 2009, WE Energies modified its request to raise electric rates by a total of $127 million, or 4.9 percent.
CUB intervened in the case and reviewed WE Energies' requests for recovery of costs related to burning excess coal, costs associated with the Midwest Independent Transmission System Operator (MISO), WE Energies' off-balance sheet obligations, rate allocation and design, and whether WE Energies had too many power plants on-line, which could unnecessarily cause electric rates to be higher than reasonable.
The PSC issued its decision regarding rate increases for WE Energies on December 18, 2009. The PSC approved an increase in electric rates of $85.8 million (3.4 percent) and a decrease in gas rates of $2.1 million (0.35 percent).
The PSC agreed with CUB and reduced WE Energies rates by $17.3 million, including: a reduction of $2.3 million for unnecessarily burning excess coal; a reduction of $3.8 million for extra costs associated with MISO; and a reduction of $11.2 million by lowering WE Energies' return on equity (profits) from 10.75 percent to 10.4 percent.
The PSC also agreed with CUB and will open an investigation to address the fact that Wisconsin utilities have too many power plants on-line, a situation known as "excess capacity."
On November 5, 2008, WE Energies submitted a request for a "declaratory ruling" by the Commission to approve plans and future costs associated with meeting Wisconsin's requirement for renewable electricity. CUB is intervening in this docket, and will challenge WE Energies request for a declaratory ruling, which if granted, would provide WE Energies with a "blank check" for meeting renewable electricity requirements.
Glacier Hills Wind Farm
On June 18, 2008, WE Energies submitted a request to the Commission for authorization to build a 200 megawatt wind farm at an expected cost of $450 million in Columbia County.
The PSC approved the project on January 22, 2010. The PSC agreed with CUB that going forward, WE Energies will need to use a more thorough process for evaluating proposed wind projects developed by the company and competing proposals developed by others. The goal of this improved selection process is to make sure the best and lowest cost wind projects are selected for providing wind power to the customers of WE Energies.
Addition of Pollution Controls to the Oak Creek Power Plant
On June 21, 2007, WE Energies applied for permission from the PSC to install pollution control devices on the Oak Creek Power Plant. The utility estimated that the pollution control devices would cost $820 million, which was about the same cost as a new power plant.
CUB and the environmental group Clean Wisconsin intervened in this case together, to explore whether WE Energies looked at reasonable alternatives to installing pollution control equipment on an old power plant. These alternatives included retiring the Oak Creek Power Plant and, instead, making investments in energy efficiency or renewable energy.
CUB and Clean Wisconsin also examined the assumptions used by WE Energies to estimate the costs of the pollution control equipment, and whether the equipment would allow WE Energies to comply with clean air requirements.
Based on our analysis, WE Energies did not provide enough evidence to support placing pollution controls on the Oak Creek plant. CUB and Clean Wisconsin urged the PSC to reject WE Energies' application.
The PSC decided the case on June 27, 2008, and ruled in favor of WE Energies. Pollution controls will be added to all four boilers.
Rate Case for 2008 & 2009 Rates
On May 7, 2007, WE Energies applied to the PSC to raise its electric rates by $712 million or 28 percent in 2008, the largest single-year increase in the utility's history. The utility had also requested to raise its natural gas rates by about 4 percent for 2008.
In its request, WE Energies asked for permission to collect higher rates to cover costs from increases in the price for fossil fuels used to produce electricity, for higher costs to transmit power on high-voltage transmission lines, and to pay for higher costs caused by the regional electricity marketplace operated by the Midwest Independent Transmission System Operator (MISO).
Once the sale of the Point Beach Nuclear Plant was completed, WE Energies reduced the electric rate increase to 7% in 2008 and 7% in 2009.
CUB challenged many aspects of WE Energies' request to increase rates, and urged the PSC to require WE Energies to offer innovative rate designs so that its customers can use electricity more efficiently.
On January 17, 2008, the PSC issued its written order. The PSC approved an increase in 2008 electric rates of 3.4% and gas rates of 2.2 percent. The PSC agreed with CUB that WE Energies was responsible for causing an outage of Point Beach to last longer than it should have. The lengthy outage forced WE Energies to purchase $22 million in electricity, and therefore, WE Energies was not allowed to recover the $22 million from ratepayers. The PSC also agreed with CUB that WE Energies could not keep $70 million in proceeds from the sale of Point Beach for contingencies.
Proposed Sale of Point Beach Nuclear Power Plant
On December 20, 2006, WE Energies proposed to sell Pt. Beach to FPL Energy, a subsidiary of a Florida-based utility holding company. CUB opposed the sale because of concerns that rates would go up for WE Energies' customers, and that Wisconsin would lose jurisdiction over a nuclear power plant located in Wisconsin. On September 5, 2007, in a 2 to 1 vote, the Commission approved the sale of the plant to FPL.