WEC Energy Group/We Energies

WEC Energy Group is the corporate holding company for electric and gas utility companies operating in Illinois, Michigan, Minnesota, and Wisconsin. We Energies is WEC Energy Group’s largest subsidiary. Based in Milwaukee, We Energies serves 2.2 million total customers.

The company is working to restrict the growth of rooftop and third-party solar energy in Wisconsin and is also proposing to increase the fixed monthly fee on all residential customers, which can reduce incentives for energy efficiency measures and hurt low-income customers.

Rate increases

We Energies and WEC Energy Group’s other electric and gas utility operating in the state – Wisconsin Public Service (WPS) – filed for a rate increase in March 2019.

We Energies has asked utility regulators at the Public Service Commission to raise rates so it can collect $223 million more from customers in 2020, but the utility proposed to keep $94 million in tax reform benefits that have already been paid for by customers to mitigate its 2020 increase on customers.

Meanwhile, WPS seeks to increase its rates and collect an additional $102 million in 2020 and then increase rates again to receive $49 million more in 2021. Similar to We Energies, WPS has proposed to keep tax benefits and fuel credits, which decrease the revenue requirement request to $49 million in 2020 instead of $102 million.

Weeks before We Energies and WPS filed rate cases, WEC Energy Group chairman Gale Klappa said the rate increase requests would be “pretty modest,” and he doesn’t expect “to see a ton of drama surrounding these particular rate cases.” However, several contentious issues have emerged in the rate case.

Solar fees

We Energies also has asked regulators to allow it to charge customers with solar $3.53 per kilowatt they generate. If approved, the fee will force residential solar customers to pay about $180 more a year. Commercial customers and small businesses owners with solar will have to pay over $4,000 a year. In April, the Michigan Public Service rejected a similar solar charge proposed by DTE Energy as “unreasonable.”

We Energies attempted to add a solar fee on customers in 2014. The PSC voted in favor of the solar charge, including Commissioner Ellen Nowak – one of three current regulators due to her reappointment back to the commission in December 2018. However, the fee was later rejected by a circuit court judge because the utility did not have sufficient data to support the charge.

We Energies spokesman Brendan Conway said, “it’s just about fairness.”

Many reports have rebutted the industry’s cost-shift and ‘fairness’ talking points; one from the Environment America Research & Policy Center analyzed 16 studies and concluded that solar customers do not have a negative effect on non-solar customers. A 2017 report from the Lawrence Berkeley National Laboratory (LBNL), a Department of Energy science lab managed by the University of California, offered additional evidence that the utilities’ cost shift argument is, for the most part, a self-serving myth. The report found that “for the vast majority of states and utilities, the effects of distributed solar on retail electricity prices will likely remain negligible for the foreseeable future.”

Fixed costs

We Energies and WPS have asked the PSC to approve an increase in fixed monthly fees on all residential customers. According to the Wisconsin State Journal, We Energies is proposing a $17.65 monthly fee, and WPS is seeking a $24 fixed fee.

Most electric customers generally pay two basic charges on their monthly bill: a “fixed charge” levies a fee for the cost of connecting the customer to the grid, and is the same every month. An “energy charge” is tied to how much electricity the customer uses; if the customer uses more, they pay more.

Utilities face the problem that they are increasingly collecting less money from customers as people and businesses become more efficient in their use of electricity and begin adopting rooftop solar power. Many utilities initially responded by trying to collect more money via fixed charges, but those efforts have proven politically unpopular. In 2017, regulators only approved 6 out of 84 proposals for higher customer charges.

A 2016 report prepared for Consumers Union by Synapse Energy Economics concluded that low-usage and low-income customers are hit hardest by mandatory fixed fee hikes. Fixed charges also reduce the incentives for energy efficiency measures and distributed solar generation.

The National Association of State Utility Consumer Advocates, National Consumer Law Center, and AARP all agree that increasing fixed costs is bad public policy. In 2016, Connecticut regulators issued a decision that reduced United Illuminating’s fixed charge on customers from $17.25 to $9.64. But the utility industry continues to propose increasing fixed costs.

Shareholder profits

Both utilities have also requested to increase their allowed rate of equity to 10.35% – which would make it one of the highest ROEs in the region. According to Citizens Utility Board of Wisconsin (CUB), We Energies is among the top performing utilities on Wall Street because of its existing high ROE.

The ROE is the part of the revenue requirement that utilities retain as profit. An NRDC rate case primer explains that only the capital investment portion – money spent on infrastructures and physical equipment – can earn the utility a profit.

Collect profits on closed, uneconomical coal plant

We Energies still has near $1 billion in costs it wants to collect over the next two decades from customers stemming from the closure of the Pleasant Prairie coal-fired power plant in April 2018. Unlike other states, Wisconsin does not require its regulated utilities to get permission to shut a power plant down. CUB has questioned whether We Energies should earn its 10% ROE on the closed power plant, which totals over $350 million. The utility contends that operating and maintaining the coal plant was no longer economical, and customers will save $2.5 billion because of the decision.

Louis Fortis, editor and publisher of the Shepherd Express, recently noted in an op-ed column that Milwaukee used to have some of the lower electric power rates in the Midwest but that it all changed when We Energies began to build large coal-fired power plants in the 1990s and 2000s:

The Shepherd Express and others were promoting limited-size natural gas plants for the needed consistent and reliable source of energy as alternative energy sources grew and improved. The natural gas proponents felt it was clearly a better choice than coal. It turned out as many predicted: Natural gas plants would have been a much smarter choice being both less expensive and much, much cleaner. Today, our utility bills would be lower, and our business climate would be much stronger as companies look at utility costs as one factor in the plant location selection process.

Coal is the dominant fuel source for WEC Energy. (Source: M.J. Bradley & Associates)

Fighting solar

In addition to fighting rooftop solar, We Energies is also working to restrict the growth of third-party solar in its monopoly territory. The City of Milwaukee attempted to partner with a private solar installer, Eagle Point Solar, to connect approximately 1 megawatt of solar systems on its public buildings to the grid. We Energies denied the third-party ownership interconnection requests, citing a Wisconsin law that bans anyone other than monopoly utilities from “providing retail electric service.”

The third-party ownership model has been especially important for public entities like cities and school districts since they do not pay taxes but can’t take advantage of federal or state tax credits for solar power. In the third-party ownership model, the private installer gets those tax credits and passes them onto the customer as savings.

Milwaukee city councilors did not want to do business with We Energies and its new “rent a roof” program because it preferred to reduce its electricity consumption through third-party solar installation. Councilors have also been frustrated with the utility because of a controversy regarding the relocation of utility lines during the construction of streetcar tracks. According to Midwest Energy News, We Energies was supposed to pay, but a new law forced the city to pay.

Instead, the city is only able to pay to construct up to .21 megawatts of solar systems on three of the city’s libraries out of a contingency fund as it awaits for Eagle Point Solar to make its case to the PSC to force We Energies to connect its systems to the grid. Eagle Point won a similar ruling with the Iowa Supreme Court in 2014, and the company’s owner has said if the PSC rejects the deal with the city he will go to the courts.

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Posted by Energy and Policy Institute