WEC Energy Group utilities in Wisconsin to seek rate increase

Utilities planning ‘modest’ ask after four-year freeze

The Wisconsin utilities of Milwaukee-based WEC Energy Group will all seek approval to increase the base rates that customers pay starting in January 2020, executives said during an earnings call Tuesday.

WEC Energy Group headquarters building

WEC Energy Group’s Milwaukee corporate headquarters.

Gale Klappa, executive chairman of WEC Energy, said the request to the Wisconsin Public Service Commission would be “pretty modest.”

“I don’t see a ton of drama surrounding these particular rate cases,” Klappa said.

Kevin Fletcher, chief executive officer of WEC Energy, described the increase as “in line with inflation.”

Neither executive said exactly how much the increase would be nor did they detail what other kinds of changes the utilities would seek.

Base rates have been frozen for the last four years and Fletcher said that after accounting for fuel costs and federal tax reform, rates are lower than they were in 2015. The utilities, including Wisconsin Electric Power Co., Wisconsin Gas LLC and Wisconsin Public Service Corp., proposed the latest two-year freeze in 2017 after reaching an initial agreement with more than 20 of their largest customers. Part of the PSC’s approval of the settlement required the utilities to submit a rate case by April of this year.

“Would we have filed anyway? Maybe, maybe not,” Klappa said, adding there are some tweaks and accounting issues the utilities would like to address.

Despite the stability brought about by the rate freezes, Wisconsin energy costs are still the second highest in the Midwest behind only Michigan, according to Tom Content, executive director of the Citizens Utility Board of Wisconsin, which advocates for residential and small business utility customers.

We Energies points to a PSC report that says the bill for the average residential customer in the state has been at or below the Midwest average and Department of Energy data that puts its average electric bill $200 below the national average.

“Downward pressure on rates is something that’s overdue in Wisconsin,” Content said, noting that Madison Gas and Electric rates decreased in that utility’s most recent settlement with the help of federal tax reform.

In the case of WEC Energy Group and WE Energies, there are hundreds of million in costs to be addressed in the coming years, potentially contributing to increases in rates. Those costs include the Presque Isle Power Plant in Michigan’s Upper Peninsula, which is slated to be shut down this year, and the Pleasant Prairie Power Plant, which was shut down last year.

Content said in the case of Pleasant Prairie there is around $650 million in costs to be accounted for at a plant that is no longer generating power. He said utilities around the country are running into challenges as they transition away from coal-powered plants to natural gas and renewable energy sources.

WEC Energy Group, for example, is trying to reduce its carbon dioxide emissions to 40 percent below its 2005 emission levels by 2030, and wants to reduce its emissions to 80 percent below its 2005 levels by 2050. The company is involved in major solar projects in Iowa County and in Two Rivers and proposed two other pilot programs for solar projects. Klappa said the company could also seek approval for a major solar project in the We Energies service area in the near future.

Content noted that while renewable energy advocates want to see utilities move quickly away from coal, the stranded costs of shutting down plants can cause problems for ratepayers.

“The challenge is that it’s not a simple transition when you’ve got these added costs,” Content said. “When you pay off an old power plant, it’s a lot of money.”

Klappa said the commission would likely take a close look at the real-time pricing program the utilities use for large commercial and industrial customers. The 2017 settlement requires a full-review of the costs and benefits of the program for the 2020 rate case.

The programs give large users access to market-based or wholesale pricing. While those lower costs can help encourage companies to expand in the state, Content said there are questions about the fairness and equity of the program.

“The rest of us aren’t getting those kinds of breaks,” he said.

The Wisconsin utilities of Milwaukee-based WEC Energy Group will all seek approval to increase the base rates that customers pay starting in January 2020, executives said during an earnings call Tuesday.

WEC Energy Group headquarters building

WEC Energy Group’s Milwaukee corporate headquarters.

Gale Klappa, executive chairman of WEC Energy, said the request to the Wisconsin Public Service Commission would be “pretty modest.”

“I don’t see a ton of drama surrounding these particular rate cases,” Klappa said.

Kevin Fletcher, chief executive officer of WEC Energy, described the increase as “in line with inflation.”

Neither executive said exactly how much the increase would be nor did they detail what other kinds of changes the utilities would seek.

Base rates have been frozen for the last four years and Fletcher said that after accounting for fuel costs and federal tax reform, rates are lower than they were in 2015. The utilities, including Wisconsin Electric Power Co., Wisconsin Gas LLC and Wisconsin Public Service Corp., proposed the latest two-year freeze in 2017 after reaching an initial agreement with more than 20 of their largest customers. Part of the PSC’s approval of the settlement required the utilities to submit a rate case by April of this year.

“Would we have filed anyway? Maybe, maybe not,” Klappa said, adding there are some tweaks and accounting issues the utilities would like to address.

Despite the stability brought about by the rate freezes, Wisconsin energy costs are still the second highest in the Midwest behind only Michigan, according to Tom Content, executive director of the Citizens Utility Board of Wisconsin, which advocates for residential and small business utility customers.

We Energies points to a PSC report that says the bill for the average residential customer in the state has been at or below the Midwest average and Department of Energy data that puts its average electric bill $200 below the national average.

“Downward pressure on rates is something that’s overdue in Wisconsin,” Content said, noting that Madison Gas and Electric rates decreased in that utility’s most recent settlement with the help of federal tax reform.

In the case of WEC Energy Group and WE Energies, there are hundreds of million in costs to be addressed in the coming years, potentially contributing to increases in rates. Those costs include the Presque Isle Power Plant in Michigan’s Upper Peninsula, which is slated to be shut down this year, and the Pleasant Prairie Power Plant, which was shut down last year.

Content said in the case of Pleasant Prairie there is around $650 million in costs to be accounted for at a plant that is no longer generating power. He said utilities around the country are running into challenges as they transition away from coal-powered plants to natural gas and renewable energy sources.

WEC Energy Group, for example, is trying to reduce its carbon dioxide emissions to 40 percent below its 2005 emission levels by 2030, and wants to reduce its emissions to 80 percent below its 2005 levels by 2050. The company is involved in major solar projects in Iowa County and in Two Rivers and proposed two other pilot programs for solar projects. Klappa said the company could also seek approval for a major solar project in the We Energies service area in the near future.

Content noted that while renewable energy advocates want to see utilities move quickly away from coal, the stranded costs of shutting down plants can cause problems for ratepayers.

“The challenge is that it’s not a simple transition when you’ve got these added costs,” Content said. “When you pay off an old power plant, it’s a lot of money.”

Klappa said the commission would likely take a close look at the real-time pricing program the utilities use for large commercial and industrial customers. The 2017 settlement requires a full-review of the costs and benefits of the program for the 2020 rate case.

The programs give large users access to market-based or wholesale pricing. While those lower costs can help encourage companies to expand in the state, Content said there are questions about the fairness and equity of the program.

“The rest of us aren’t getting those kinds of breaks,” he said.

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