We Energies seeks electric rate increase

Rates have been frozen for the last four years

WEC Energy Group headquarters building
WEC Energy Group's Milwaukee corporate headquarters.

We Energies is seeking rate increases for its electric, gas and steam utilities serving southeastern Wisconsin, including 2.9 percent increases to retail electric rates in 2020 and 2021.

WEC Energy Group headquarters building
WEC Energy Group’s Milwaukee corporate headquarters.

The utility, a subsidiary of Milwaukee-based WEC Energy Group Inc., submitted its application for a rate increase to the Wisconsin Public Service Commission on Thursday. The proposal calls for Wisconsin Electric to make up around $163 million in revenue in the next two years. The utility’s revenue requirement shortfall is actually higher, but it is proposing to use $111 million in tax reform benefits to help mitigate the rate increase.

A typical residential customer would see a roughly $3 per month increase on electric bills in 2020 and another $3 increase in 2021, according to the company.

“Absent three drivers outside of its control, Wisconsin Electric would have been able to keep its electric base rates frozen through 2021,” Scott Lauber, chief financial officer of WEC Energy Group, said in prepared testimony. Rates have been frozen since 2015.

Executive directors from two organizations representing ratepayers said they are reviewing the utility’s proposal. Tom Content, executive director of the Citizens Utility Board of Wisconsin, said the rate case would be the first time since 2014 the PSC has done “a top to bottom review of We Energies finances.”

“The filing is the utility’s opening bid and the coming months will allow the PSC and CUB to ask questions and analyze the proposal,” Content said. His organization represents residential and small business ratepayers. “It is definitely time to take that close look and, we hope, find ways to make electricity rates more competitive for small businesses, homeowners and renters.”

Todd Stuart, executive director of the Wisconsin Industrial Energy Group Inc., which represents the state’s 30 largest companies, said his organization is willing to work with the utility, the PSC and other stakeholders.

“We need rate relief to remain cost competitive in global markets,” Stuart said. “At a minimum our rates should be competitive with other states.”

Content and Stuart both identified the recovery of costs related to the closed Pleasant Prairie Power Plant as potential key issue in the rate case. The plant was closed in 2018 and We Energies still has around $645 million in costs to recover from the facility.

“Our members are asking us how a utility can earn a 10 percent profit on a plant that has nothing to do with keeping the lights on in Wisconsin,” Content said.

The Pleasant Prairie plant first began operations in 1980 and the utility had invested more than $1.4 billion in it over the years. The company says the investments made in the power plant were prudent decisions at the time. It has been recovering the costs, with a return on its investments, in current rates.

But the plant was shut down years ahead of schedule after We Energies determined it was no longer economical to operate it. The decision was the result of a decrease in industrial demand during the Great Recession, increased energy efficiency by users and falling prices for alternative energy.

We Energies estimates rate payers will realize a net savings of around $2.5 billion by not having to pay for operations, maintenance and capital expenditures at the plant for the next 20 to 25 years.

“Cost recovery is something the commission is going to have to take a really hard look at this year,” Stuart said.

We Energies officials say rising costs for energy transmission, a built-in structural deficiency from the 2015 rate case and price increases for energy from the Point Beach nuclear plant are the main drivers of the electric rate increase.

In 2013, the PSC capped Wisconsin Electric’s ability to recover transmission costs at $250 million with costs exceeding that amount escrowed for future recovery. The idea of the cap – set at 2010 levels – was to benefit customers in the wake of the Great Recession. While the utility has paid off the escrow amounts through other sources, the cap remains in place and 2020 transmission costs are forecasted to be $333 million. We Energies is proposing it be allowed to recover the full amount of costs through rates instead of escrowing the costs beyond $250 million.

In the utility’s 2015 rate case, the PSC assumed Wisconsin Electric would be receiving a $91 million system support payment for keeping a power plant in the Upper Peninsula of Michigan open. Those payments never fully materialized after the mines the plant supports returned as regular customers. The result is $186 million in escrowed costs the utility is proposing to make up over the next six years.

Rising prices for energy from the Point Beach nuclear plant in Two Rivers is the third driver We Energies points to in support of its increase. The utility sold the plant in 2007 and used nearly $1 billion to reduce rates. Wisconsin Electric also agreed to purchase power from the plant and the deal included annual increases, including a $27 million increase in 2020 alone.

In addition to increases for Wisconsin Electric, We Energies is also seeking a $14.7 million or 3.9 percent increase for Wisconsin Electric-Gas Operations, $11 million or 1.8 percent for Wisconsin Gas and $1 million or 4.5 percent for Wisconsin Electric’s downtown Milwaukee steam utility.

$300 million and $500 million in capital investments made since the last rate case drive the gas operations and Wisconsin Gas increases respectively. Falling natural gas prices, operational and maintenance savings and tax reform benefits help offset those costs, Lauber said in his testimony.

The steam increase is largely the result of infrastructure investments and increasing operational and maintenance costs.

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Arthur Thomas
Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He spent also five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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