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Wis. regulator agrees to 2-year base rate freeze for WEC Energy utilities

The Wisconsin Public Service Commission on Aug. 10 approved with conditions a freeze on the base rates of three subsidiaries of WEC Energy Group Inc. through 2019.

The commission conditionally approved a proposal that WEC Energy's subsidiaries filed on April 4. Wisconsin Electric Power Co. and Wisconsin Gas LLC, which together do business as WE Energies, and Wisconsin Public Service Corp. sought approval of a settlement agreement negotiated with large industrial and commercial customers to hold base rates flat in 2018 to 2019. The PSC expects a final order encapsulating the commission's decision and any conditions of the settlement in about a month, commission spokeswoman Elise Nelson said by email. During the Aug. 10 meeting, the PSC also ordered the utilities to file full base rate cases in April 2019, with new rates to take effect by January 2020.

"We appreciate and are encouraged by the commission's thorough discussion regarding our proposal to freeze customer rates for an additional two years. The discussion confirmed the reasonableness our settlement agreement's framework. We look forward to reviewing the proposed conditions adopted during the discussion and will make a final decision about our next steps after receiving the written order next month," WE Energies spokeswoman Cathy Schulze said by email on Aug. 14. WE Energies serves about 1.1 million electric customers and 1.1 million gas customers in the southern and western parts of Wisconsin. Wisconsin Public Service has about 450,000 electric customers and 326,000 natural gas customers across central Wisconsin and upper Michigan.

The original settlement agreement has four main parts. The first deals with leaving electric and gas rates unchanged through 2019. That means Wisconsin Electric Power's rates would be flat for a total of four years because it last changed its base rates in 2016, according to a July 19 PSC memo. The second part of the agreement proposes to have Wisconsin Public Service, whose parent company was acquired by WEC Energy in 2015, adopt a similar earnings cap and revenue sharing mechanism as the other two subsidiaries. The earnings sharing mechanism requires that a certain amount of excess earnings above a commission-approved rate of return be shared with ratepayers. For instance, under existing rates, Wisconsin Electric is allowed a 10.2% authorized return on equity. If it were to earn above that rate of return, it would have to share a portion of the excess earnings with ratepayers and use the excess to help offset the costs of certain transmission investments. The current authorized rates of return for Wisconsin Gas and Wisconsin Public Service are 10.3% and 10%, respectively.

A third part requires Wisconsin Electric and Wisconsin Public Service to provide options for real-time, market-based pricing to large industrial and commercial customers. In their April 4 application, the utilities said these options give large customers the ability to expand their businesses and manage energy costs. The fourth part of the agreement deals with Wisconsin Electric's proposal to offset certain escrowed costs through the use of accelerated tax benefits, commission staff said in the memo. The escrowed costs are expected total about $500 million by the end of 2017 and contain "reasonable and prudent costs," which the commission allowed the utilities to recover their rates, according to the application.

The request to freeze base rates through 2019 comes as residential, small business and large customers are concerned about the increased cost of energy, the utilities said in their application. The utilities said in the application the proposed rate freeze and the expansion of real-time pricing options for large customers "will improve Wisconsin's business climate and put the state on more solid footing to participate in the anticipated growth of the national economy."

The rate freeze does not pertain to electric utility fuel costs for both Wisconsin Electric and Wisconsin Public Service, according to the memo. (Wisconsin PSC Cases 5-UR-108, 6690-UR-125)