Automatic utility rate increases stall

Automatic utility rate increases stall

Aug 30 - McClatchy-Tribune Regional News - Thomas Content Milwaukee Journal Sentinel

A plan to make rate increases for utilities more automatic when natural gas and coal prices soar won't be in place by year's end, a victory for customer groups that opposed the change.

Wisconsin's five investor-owned utilities have sought changes to state Public Service Commission rules that would let them recoup more of their costs when fuel prices rise.

They claim they should not be penalized financially over the price of fuel -- something local utilities do not control. The issue became a concern for utilities when natural gas prices escalated dramatically in 2005 after Hurricanes Katrina and Rita curtailed production.

During conference calls with investment analysts this summer, executives at several Wisconsin utilities said the changes could benefit shareholders and customers by reducing volatility.

Customer groups, including the Wisconsin Industrial Energy Group and Citizens Utility Board, said the plan developed by the Public Service Commission was too much of a "rubber stamp" for utilities and raised those concerns with key legislators.

"The problem was that more risk was being transferred to the ratepayers from the shareholders, and if that's the case, then that's a bit of an increase for customers," said Todd Stuart, executive director of WIEG. "There needed to be more things in there to offset that pain."

But Stuart and utility representatives said they expect more work on the fuel-cost issue to take place in 2009.

To utilities, the plan developed by the commission was less appealing than the "automatic" fuel cost adjustment than they were seeking.

Of the proposed rule, "This would be a step in the right direction in terms of a more reasonable set of fuel rules," said We Energies Chief Financial Officer Allen Leverett during the company's quarterly conference call on July 31.

So far this year, We Energies customers have seen two increases on their electric bills because of rising fuel costs, adding more than $3 a month to the bill for a typical residential customer.

Even with those increases, Leverett said the company could see income reduced by $20 million to $40 million this year because of fuel costs that it couldn't recoup from customers. If the new rules were already in place, the company would still see income reduced by up to $20 million, he said.

We Energies spokesman Brian Manthey said Friday the utility isn't disappointed that the matter has been delayed until 2009, since the company still expects work to continue on a plan to change how fuel charges can be altered. The company would be more concerned if the commission were backing off altogether from changes to the fuel rules, he said.