Rate Case Roundup: Wisconsin

In reviewing a combined electric and natural gas utility’s application for higher rates, the Wisconsin Public Service Commission determined that the utility, Northern States Power Company-Wisconsin, should be allowed to raise its electric rates by $9.4 million and its natural gas rates by $9.9 million. The company had initially sought $24.7 million in additional electric revenues and $12 million in additional natural gas revenues. While the dollar amounts of rate relief are similar for both electric and natural gas operations, the percentage increases are quite different, at only 1.35% for electric service but 8.29% for natural gas service.

Upon examining the utility’s operating data, the commission determined that the utility was underearning with respect to both its electric and natural gas services. The commission expounded that whereas the company had been authorized an overall return of 7.56% for both service divisions, its actual rate of return on electric operations was only 7.09%. Moreover, the utility had been earning a mere 3.25% overall return on the natural gas side, a level the commission deemed to be clearly inadequate. Thus, in order to give Northern States a better chance of achieving its authorized return, the commission held that the utility was entitled to a proportionately greater increase for natural gas service than for electric service.

Staying on the topic of return levels, the commission ruled that Northern States should be authorized an ROE value no higher than 9.80%. That marked a reduction from the 10.0% ROE adopted for the company in its last rate case in December of 2016. The utility had asked in its rate application that the same 10.0% ROE be retained for the rate-effective year. In denying that request, the commission said that an improving local economy coupled with a continued trend toward lower ROEs on a national basis had convinced it that a reduction in ROE was called for this time.

Besides ROE, one other matter upon which the commission and Northern States disagreed was the treatment of the costs of an annual incentive pay (AIP) program administered by the company. While the utility asserted that such bonus packages were critical to attracting competent and talented executive-level employees, the commission found that the company’s AIP awards were weighted too heavily toward attainment of financial goals as opposed to improvements in service reliability and operational efficiency. Consequently, the commission rejected inclusion of the AIP program in rates, declaring that shareholders rather than customers should shoulder the costs of the plan since it was aimed strictly at financial gains. Re Northern States Power Co.-Wisconsin, 4220-UR- 123, Dec. 21, 2017 (Wis.P.S.C.).