Rate Case Roundup: Wisconsin

In a combined electric, natural gas, and water rate proceeding, the Wisconsin Public Service Commission authorized a net increase in revenue of $2.5 million for the utility, an amount that was nearly 94% of the company's original request.

The utility, Superior Water, Light & Power Company, had initially asked for net additional revenues of $2.667 million. However, both the utility's request and the commission's rate order actually reflected a decrease in the company's natural gas rates, but an increase in the rates for the other two sectors. Superior's tendered rate plan was premised on rate hikes of $2.106 million and $760,000 for its electric and water operations, respectively, as offset by a reduction in its natural gas rates of $199,000.

Ultimately, however, the commission concluded that the company should receive greater rate relief for both its electric and water services, while it found that the decrease in the utility's natural gas revenues should be substantially more than that contemplated by Superior. The commission therefore directed the utility to reduce its natural gas rates by $765,000. At the same time, though, the commission held that Superior could increase its electric rates by $2.329 million and its water rates by $937,000.

According to the commission, those dollar amounts translate into a 3.81% increase in electric rates, a 9.75% increase in water rates, and a 9.6% decrease in natural gas revenues. In explaining its decision, the commission cited company ledgers indicating that the utility was earning a 13.97% return on its natural gas rate base, a value the commission deemed clearly excessive. Based on a finding that such return should be only 9.25%, the commission said that Superior's revenue requirement for its natural gas division must be lowered to a level commensurate with the 9.25% return. Invoking the same 9.25% targeted return on rate base for the utility's electric and water services, the commission noted that neither of those divisions was bringing in revenue sufficient to meet that return. The commission reported that Superior's current return on the electric side was a mere 4.53% while its water operations had a 7.12% return. Consequently, the commission told the company that it may increase both its electric and water rates to a level capable of reaching the 9.25% return level.

As to a reasonable rate of return on equity for the utility, the commission declared a 10.5% ROE to be appropriate. That was slightly below the 10.9% ROE last approved for the company, a level which Superior wanted to retain. According to the commission, though, improvements in the local economy since the company's last rate case and an investment outlook for the utility that denoted less risk convinced it that a slight decline in the company's authorized ROE was warranted instead.

The commission observed that earlier in the year, Superior had embarked upon a territory-wide meter replacement program through which to install automated metering infrastructure (AMI) in place of standard analog meters. While applauding the move, the commission conceded that the AMI project will involve the premature retirement of some existing meters, in turn giving rise to an overall loss on the conventional meters.

The commission accepted the utility's estimate that the loss will come to a total of a little more than $2.38 million, with the water meter portion accounting for almost 45% of that sum. The commission said that it would be reasonable for the company to recover the loss over a fiveyear amortization period. The commission added that while the retirement loss is unfortunate, it is anticipated that the benefits of AMI will eventually outweigh such losses. Re Superior Water, Light & Power Co., 5820-UR- 114, Aug. 9, 2017 (Wis.P.S.C.).