Wisconsin fixed-charge decision a sign of more to come

©2014 E&E Publishing, LLC
Republished with permission

By Jeffrey Tomich

State regulators last week voted to nearly double fixed charges for Wisconsin Public Service Co. electric customers in a decision that opponents say will penalize seniors and other low-use customers and discourage energy efficiency and investment in rooftop solar.

Thursday’s 2-1 decision was the first of three similar cases in the state to be decided in the coming weeks. These normally routine electric rate cases have drawn national attention because of a broader ongoing debate over utilities’ response to the increasing popularity of distributed solar.

In northeast Wisconsin, only 340 of Wisconsin Public Service’s 400,000-plus electric customers have solar energy systems — one of few facts in the contentious case that was not in dispute.

But Wisconsin Public Service Commission Chairman Phil Montgomery said now is the appropriate time for regulators to enact reforms that address the issue.

The current rate design, he said, sends an “inappropriate” price signal to customers and unfairly subsidizes the few customers with rooftop solar systems at the expense of others, who end up overpaying for poles, wires and other costs of maintaining the grid.

Montgomery and Commissioner Ellen Nowak — appointees of Republican Gov. Scott Walker, who won re-election last week — said they believed the utility had proved its case to increase fixed charges by 140 percent as requested. Only the principal of “gradualism” kept Montgomery from voting to do so, he said.

“This is not an attack on wind and solar,” Nowak added during Thursday’s meeting. “It’s about fairness.”

Commissioner Eric Callisto, an appointee of former Democratic Gov. Jim Doyle, dissented.

“To the extent there is cross subsidization, it’s pennies,” he said during the meeting. He favored leaving the utility’s fixed charge unchanged but indicated that he would go along with a PSC staff recommendation of a 20 percent increase only if it were accompanied by a reduction in return on equity, reflecting the lower risk that goes along with higher fixed charges.

Callisto unsuccessfully urged the commission to undertake a broader statewide study looking at issues related to distributed generation.

The PSC’s decision, which will be finalized in a written order in the weeks to come, raises the fixed charge for Wisconsin Public Service residential customers to $19 a month — the highest of any investor-owned utility in the Midwest, according to the Citizens Utility Board, a consumer advocacy group.

Kira Loehr, the group’s executive director, said the commission’s decision sends the wrong signal — it discourages energy savings and hurts low- and fixed-income households.

“Instead of taking this opportunity to pause and consider innovative ways to handle changes in the electric industry, the decision takes the step that most helps utilities at the expense of customers,” she said.

The Citizens Utility Board and others who fought the utility’s request to raise fixed charges also concede that commissioners are likely to come to similar decisions in two other cases to be decided in the next few weeks, though outcomes in Wisconsin Energy Corp. and Madison Gas & Electric Co. cases will lean on their own evidentiary records.

In all of the cases brought before the PSC, the utilities say they simply want to more closely align customer fixed charges with fixed costs of providing electric service to all customers, including those who use very little energy or self-generate with rooftop solar systems.

In the Wisconsin Public Service case, the utility argued that a $25 monthly fixed charge is “modest based on a study that showed fixed costs of providing residential customers was about $66 a month” — a figure that opponents said wildly overstates the actual costs.

To offset higher fixed costs, kilowatt-hour rates were reduced, meaning typical residential customers (using 600 kWh per month) aren’t affected by the change. They will see bills go up by only a few dollars a month as a result of an overall 3 percent rate increase, said Lisa Prunty, a utility spokeswoman.

Utility disputes disadvantages for low-income homes

Wisconsin Public Service disputes criticism that seniors and low-income households will be harmed by the change in rate design. It said most zero-use and low-use accounts are seasonal customers — cabins, cottages and summer homes.

And a utility study of WPS customers who receive heating assistance showed that, as a group, they will come out ahead with the fixed charge increase, Prunty said.

Rob Kelter, an attorney with the Chicago-based Environmental Law & Policy Center, said that regardless of what the utility’s motive was for seeking the fixed charge increase, “what we ended up with was a big shift toward guaranteeing utility revenues and profits.”

At the same time, the decision “limits the ability of customers to control their bills.”

The decision is also a disincentive for customers who want to install rooftop solar or make energy efficiency improvements, because those customers will face longer payback periods, said Tyler Huebner, executive director of Renew Wisconsin, a Madison-based advocacy group.

“I don’t think there’s any doubt that customers look at that payback time” when making a decision, he said.

Huebner also questions why, if raising the fixed charge is so necessary, Wisconsin Public Service sought only to increase fixed charges in a recently filed Michigan rate case by one-third, to $12 from $9.

“It appears to me that they used that argument in Wisconsin because they had the commission that would buy it,” he said.

3 thoughts on “Wisconsin fixed-charge decision a sign of more to come

  1. Solar energy in northern Wisconsin!! Your reasoning for the increase insults our intelligence.

  2. I was just beginning to explore solar electric for our home. Haven’t seen any numbers yet but payback time will be hurt significantly. Might be a show stopper?
    Can I thank ant Political Party for this? Who makes up the PSC?