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City calls on Public Service Commission to reject We Energies' proposed rate increases

Karl Ebert
Milwaukee Journal Sentinel

The City of Milwaukee on Monday weighed in on We Energies' proposal to increase electric rates next year, calling the 10% profit margin on which the rates are based "extraordinarily high."

We Energies is asking the Public Service Commission of Wisconsin to approve a 13% increase in residential electric rates and increased gas rates of 13.8% for Wisconsin Electric Gas operations customers and 10.7% for Wisconsin Gas customers. Prior to a partial settlement with a majority of intervenors in the rate case, the utility had said it aimed to limit the impact on residential customers, proposing to increase residential electric rates 5.4% and about 10% for gas customers.

Small business customers would pay 11.7% more for electricity next year, while large commercial and industrial user's rates would go up 6.4%

In comments submitted to the PSC on Monday, the city argued the rate increases would unduly burden thousands of low-income residential customers and create new budget challenges for the city.

"Limited dollars that go to fund We Energies’ excessive profits take away money to pay cops and firefighters, make our roads safer, and keep our libraries open," the city said in comments filed by Assistant City Attorney Thomas Miller. The Milwaukee Common Council authorized Miller in September to object to the increases on its behalf.

The city argues the PSC could provide relief for both the city and its residents by reducing the utility's proposal to continue to earn a 10% return on equity, or profit, calling a reduction "just, reasonable and overdue." The city did not suggest how much that profit should be reduced.

The partial settlement addresses the utility's rate requirement, the amount of money that it needs to cover it's operating costs, but not the profit it is allowed to make.

Related: How a Milwaukee neighborhood organization is trying to change the debate on electric, gas rates in southeast Wisconsin

Related: We Energies' revised electric rate proposal shifts more costs to residential customers, while cutting industrial rate hike

The Citizens Utility Board of Wisconsin has proposed reducing the utility's profit margin to 9%, which it argues would result in more than $100 million in savings for ratepayers. Tom Content, CUB's executive director, said the reduction would bring We Energies in line with the national average of a 9.5% return on equity.

WEC Energy Group, We Energies' parent company, said in a filing that its proposal "involves a balancing of investors and consumers interest," that is consistent with PSC decisions in other rate cases.

In the filing, the company argued that a reduction on the scale proposed by CUB could affect its credit rating, resulting in increased borrowing costs for the company's investments in solar and wind generation, while making its stock less attractive to investors.

"Lowering (returns on equity) at this time would introduce real risk of financial harm to the companies through reduced stock prices and downgraded credit ratings at a time when markets have deteriorated with inflation at a 40-year high and increased interest rates," the company stated in its filing.

PSC staff has recommended a more modest reduction of the company's profit margin to 9.8% for 2023.

Also on Monday, the PSC added an additional week to the public comment period, which was scheduled to end Monday evening. The extension to Nov. 14 followed a letter from Democratic state Sens. Tim Carpenter of Milwaukee and Bob Wirch of Kenosha stating their opposition to the proposed rate hikes and asking commissioners to extend the deadline beyond Tuesday's election.

The lawmakers said many customers are only now becoming aware that We Energies' proposed a reallocation of its proposed revenue in October that more than doubled the rate increase for residential elecric customers. An average residential electric bill would be about $175 more next year, under We Energies' proposal.

"Based on communications we have already received to our offices, and the number of comments that continue to roll into PSC today, we anticipate that many more residents will want to provide their opinions once their attention turns from the election to the impending winter cold," they wrote.

As of Monday afternoon, the PSC had received nearly 500 written comments about the rate hikes, the majority in opposition, and dozens more spoke at in-person hearings in Milwaukee last week.

Content said he's encouraged that two of the three commissioners attended the in-person hearings last week and agreed to extend the comment period.

"It tells me that they're going to take the concerns of the residential customers and small business cutomers into account when they make their decsion," he said.

Contact Karl Ebert at kebert@gannett.com. Follow him on Twitter at @karlwebert.