CUB Fights High Utility Profits, Secures Wins in Rate Settlement

  • October 4, 2022
870 450 Tom Content

The Citizens Utility Board and other groups have reached an agreement with two Wisconsin utilities on a partial rate case settlement that provides important wins for residential utility customers while allowing CUB to press its case against exorbitant utility profits.

The rate case settlement, filed in two utility cases involving subsidiaries of WEC Energy Group on Monday, secures a commitment for savings on retired coal plants, reduces the fixed customer charge on utility customers’ bills, and extends and expands programs to assist low-income households who are struggling the most in a period of rising energy costs.

“This settlement not only provides customers with tangible benefits but also preserves CUB’s ability to fight hard to bring down excessive utility profits,” said Tom Content, executive director of the Citizens Utility Board of Wisconsin.

To that end, CUB’s expanded regulatory team, including regulatory director Corey Singletary and regulatory strategist Steve Kihm with the assistance of general counsel Cara Coburn Faris, provided evidence that the current double-digit earnings of We Energies, Wisconsin Public Service and Wisconsin gas, should be reduced. CUB’s experts have recommended that the profit rates drop to 9% from 10% for We Energies; 9% from 10.2% for Wisconsin Gas; and 9.1% from 10% for WPS. This marks the first time in more than a decade that the PSC will do an in-depth evaluation of profits for We Energies and Wisconsin Gas.

“Our advocacy is supported by new research from economists who have analyzed regulatory proceedings around the country, and found that U.S. utility customers have overpaid by $2 billion to $8 billion per year based on decisions of state commissions that saddled customers with higher rates to pay for unnecessarily high profits,” Content said.

A press release describing that study was issued Monday by the Energy Institute at the Berkeley Haas School of Business. The findings are significant, with Energy Institute researchers suggesting that state regulators need to scrutinize utilities’ high returns more carefully.

“We worry about regulators over-compensating shareholders because the costs are paid through higher utility rates, which disproportionately hurt the poor,” the Energy Institute said Monday.

In the Wisconsin case, CUB is presenting arguments that the utilities deserve a fair return but that a fair return should be set well below current levels. This is particularly striking as utility stocks have seen gains while the broader stock market has fallen.

CUB is seeking substantial reform in the way utility profit rates are determined. CUB asks that the PSC respect the dictates of the U.S. Supreme Court and include consumer interests in that evaluation, something that has been largely absent for many years. CUB is building a coalition with other affected parties, with CUB leading the charge in terms of reducing the profits each of us as consumers must pay to support utility investors.

In the two Wisconsin rate cases, CUB is also fighting to make sure that residential customers aren’t shouldering too much of the burden from rate increases proposed by We Energies and WPS for 2023.

CUB wants the PSC to make sure residential and small business customers see smaller than average increases, but that puts CUB at odds with big corporations that want a break to keep their rate increases low.

Some highlights of the settlement, if approved by the Public Service Commission:

  • Refinancing of coal plant costs: We Energies plans to refinance $100 million of costs tied to the pending retirement of the original Oak Creek Power Plant. The refinancing removes this amount from the utility’s books and reduces the interest rate attached to that balance. A similar refinancing two years ago with the Pleasant Prairie Power Plant saved customers tens of millions of dollars.
  • COVID-19 disconnection cost savings: Customers would see nearly $34 million in savings over two years because utility customers won’t be asked to pay for the late fees and other costs associated with keeping customers connected during the height of the COVID-19 pandemic.
  • Reduced fixed customer charges: CUB has been working for several years to bring down high fixed customer charges that penalize customers who take steps to cut energy use. As part of the settlement, the Wisconsin Public Service customer charge will drop from $21 a month to $19 a month. We Energies’ monthly electric customer charge will drop to $15 in 2023 from $16.
  • Progress for low-income customers: The Low Income Forgiveness Tool that We Energies and WPS introduced last year will be extended for two years, with potential modifications. In addition, the utilities will collaborate with CUB and other interested groups to develop a Percent of Income Pilot, a low-income discount on utility bills. The utility’s shareholders will also contribute $4 million to the Keep Wisconsin Warm Fund.
  • Bring Your Own Device pilot: Building on a program launched by Madison Gas & Electric, We Energies and WPS have agreed to introduce a “bring your own device” pilot program to help provide relief to the electric grid during periods of peak energy use. MGE’s program, MGE Connect, provides discounts to customers with smart thermostats who allow the utility to control their air conditioner on hot summer days.

Add it all up and utility customers will see a variety of tangible benefits if the settlement is approved. The size of the actual rate increase tied to the settlement is still to be determined by the PSC.

Customers could see tens of millions of dollars of savings (in the form of a smaller price increase) if the PSC sides with CUB on the fundamental issues of reining in high utility profits and preventing price breaks for large manufacturers.

“Keeping the size of the increase down for homeowners, renters and small business owners is paramount at a time when customers are seeing the effects of inflation and forecasts of significantly higher home heating costs this winter,” Content said. “We hope the Commission takes this opportunity to bring down profit levels, which have been well above the national average for too long.”

The PSC is expected to vote on the settlement in November. The agency is holding hearings on the case this week. In addition, there are multiple opportunities for public comment. In-person hearings are scheduled for Nov. 1 at the Neville Public Museum in Green Bay for WPS customers, and Nov. 3 at the Washington Park Senior Center in Milwaukee for We Energies customers. In addition, written public comments are being accepted through the PSC’s website. WPS customers can comment here between now and Nov. 3. We Energies customers can comment here between now and Nov. 7.

More on the settlements is available from the PSC website in dockets 6690-UR-127 for WPS and 5-UR-110 for We Energies. See details on the WPS case here. See details on the We Energies case here.