We Energies Can Keep Windfall; Nearly $52 Million Could Have Gone Back to Customers

Nov 11 - Milwaukee Journal Sentinel

State energy regulators missed an opportunity to give customers relief from rising energy costs, customer groups said Thursday.

At issue before the state Public Service Commission: Should We Energies be entitled to keep $51.7 million in savings it achieved following its acquisition of the parent company of Wisconsin Gas five years ago?

The commission decided that the power company may retain the merger-related savings under the terms of a decision the commission made in March 2000. That decision approved the $1.2 billion acquisition of Wicor Inc., then parent of Wisconsin Gas, by We Energies' parent company, Wisconsin Energy Corp.

From 2001 to 2003, the commission staff estimated, We Energies received $51.7 million in earnings, over and above its allowed profit return of 12.2%, that were linked to merger-related savings.

That money need not be returned to customers because the commission, in 2000, decided that Wisconsin Energy should be allowed to retain those savings as an incentive to cut costs and be more efficient, commissioners said.

"The commission couldn't provide those synergy savings to customers because it was already decided in a prior order that that money had been given to the company," commission spokeswoman Linda Barth said.

In 2000, the commission denied a request by the two utilities to have customers of Wisconsin Gas pick up $478 million of the $1.3 billion price tag for acquiring Wisconsin Gas' parent company, commission lawyer David Gilles said.

Customer groups say Thursday's decision gave the commission a chance to return money to customers at a time when electricity and natural gas heating costs are rising. Other commission decisions require utilities to refund excess profits, the groups said.

"We're very discouraged by this because this is not the time for utilities to be getting extra profits on top of what they're already able to get, which is high to begin with," said Charlie Higley, executive director of the Wisconsin Citizens' Utility Board.

Nino Amato, president of the Wisconsin Industrial Energy Group, a coalition of manufacturers, said the group will review the commission's written decision to determine whether there is a legal basis to challenge it in court.

Amato said the decision was "disturbing" in light of rising costs faced by customers of We Energies and other state utilities in recent years. Rates in Wisconsin are higher than most other states in the Upper Midwest, he said.

As a result of Thursday's decision, the commission approved a slight increase in the size of a rate increase that took effect earlier this year. That increase is designed to help We Energies recoup the rising cost of natural gas amid higher use of natural gas- fired power plants this year.

The price of natural gas has risen sharply because of Hurricanes Katrina and Rita. As a result, the $115 million increase approved in March by the Public Service Commission was raised by another $6.5 million on Thursday.

For the typical residential customer, whose bill went up 4.8%, or $3.34 a month, in March, Thursday's change is likely to add another 19 cents to monthly bills, as soon as next week. Also Thursday, the commission authorized increases of $1.7 million for Madison Gas & Electric customers, or about $2.27 a month for a typical customer. And for customers of Xcel Energy's Eau Claire utility, customers will face an increase of $8.8 million, which should result in an increase of about 89 cents a month for a typical residential customer.

Increase hearings

Public hearings on a We Energies' request to raise electric rates by 11% on Jan. 1 have been scheduled for 1:30 p.m. and 6 p.m. on Tuesday at four locations: Milwaukee Area Technical College in Milwaukee, Waukesha County Technical College in Pewaukee, Gateway Technical College in Racine and the Public Service Commission in Madison.