Rate Cases: CUB Weighs in for Lower Monopoly Profits, More Consumer Protections

  • September 7, 2023
870 450 Tom Content

Profits for monopoly utilities in Wisconsin have been too high for too long, with customers paying the price.

That was the core message in testimony the Citizens Utility Board of Wisconsin (CUB) submitted to push back on utilities’ requests to raise rates yet again starting January 2024.

Bringing down high profits is an important step the state Public Service Commission (PSC) should take to help shield Wisconsinites from unnecessarily high utility bills, CUB said in advocating for a reduction in the profit rates, or return on equity (ROE), for Alliant Energy, Xcel Energy, and Madison Gas and Electric (MGE).

Taken together, CUB’s recommended profit rate of 9.3% would save customers more than $100 million over the next two years, $52 million in 2024 and another $51.5 million in 2025.

In testimony in the three utilities’ cases, CUB seeks stronger consumer protections to guard against excess profits and urges decision makers at the PSC to keep customers’ ability to withstand more hikes top of mind when they decide these rate cases this fall.

“Utilities don’t need such high profits to raise capital on Wall Street, and PSC commissioners need to take a fresh look at how they decide this critical issue,” said Content. “CUB is hopeful that the PSC will weigh the impact of surging costs on the people paying higher and higher bills.”

CUB’s testimony was filed as public participation in the cases is stepping up. Public comment periods are open for utility customers to weigh in, and public hearings are also taking place. The first hearing started Wednesday for MGE. Hearings are scheduled for Monday, Sept. 11 for Xcel Energy and Wednesday, Sept. 13 for Alliant Energy.

CUB seeks more savings for customers by asking regulators to consider alternatives to Alliant Energy’s request to continue to earn profits on the Edgewater coal-fired power plant in Sheboygan even after the plant shuts down. The utility plans to stop operating Edgewater by June 2025.

“Enough already. Customers are paying for premium utility investments to support the clean energy transition, and they shouldn’t also have to pay for a costly power plant that no longer contributes to keeping the lights on,” Content said. “It’s simply too much to ask for utilities to keep profiting from the power plants they’re closing for good as part of the transition.”

CUB is stressing the important role the PSC plays in the critical decision of how much profit the monopoly utilities should be allowed to earn.

While utilities lean on flawed financial analysis to churn out recommendations for high profit rates (ROEs between 9.8% to 10.25% in the utilities’ current requests), CUB chief economist Steve Kihm pointed to U.S. Supreme Court and Federal Energy Regulatory Commission (FERC) decisions emphasizing the subjective nature of regulators’ ROE decisions and requiring that regulators consider what elevated ROEs mean for consumers.

“Affordability concerns should bear directly on the determination of the fair ROE,” Kihm testified.

As utilities build more and more power plants, Kihm added, that drives up rates, “which may in turn put downward pressure on the just and reasonable ROE not for financial reasons, but because of affordability concerns. Most (utility) rate of return witnesses ignore consumer interests, suggesting that customers have to pay whatever investors demand. That is not true, and it is not the way capital markets work.”

CUB’s testimony also advances arguments to:

    • Stop utilities from raising their rates to pay for performance incentives for utility management that are triggered when utility shareholders, not customers, gain.
    • Establish or maintain earning sharing mechanisms that provide added protections for customers when utilities over-earn.
    • Develop better metrics for household energy burden and support innovative assistance programs to help low-income customers.
    • Urge utilities to communicate with homeowners and renters about the savings opportunities available and forthcoming via the Inflation Reduction Act.
    • Propose a balanced, cost-based, sustainable approach for programs that provide payments to customers who will be producing their own energy from solar panels in the years ahead.
    • Empower customers to save energy and money by having utilities notify them when market prices of energy are spiking.
    • Ensure residential and small business customers don’t bear the brunt of increases that are approved this fall.
    • Ensure that big businesses and large industrial customers pay their share of costs that are approved this fall.

“Our regulatory team is pushing on a variety of fronts to empower customers and stem the tide of ever-rising rates. Wisconsin’s power prices are 2nd highest in the Midwest and 13th highest in the nation, and it’s time for that to change,” Content said.

Customers who are unable to provide their comments live at the in-person or Zoom hearings can still make their voices heard by submitting written comments directly to the PSC here. The deadlines for public comments are Sept. 26 for MGE, Sept. 29 for Xcel. and Oct. 4 for Alliant.

Details on how to file a public comment or participate in the hearings can be found on the CUB Active Cases page , on the CUB Prints blog and the CUB Tracks podcast.