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Legislative Update

The 2017-18 Legislature convened its first regular session in January of this year.
In February, Governor Walker introduced his Biennial Budget proposal (AB 64/SB 30)
which governs the state’s taxing and spending for the next two years beginning in July
2017. The Legislature’s Joint Finance Committee has begun its review of the proposal
and the Budget is expected to occupy most of the Legislature’s time and attention until
the bill finally passes in late June.

Of significant interest to utility shareholders, legislation has been introduced by Senator
Stroebel and Representative Ott (SB 115) that will allow the Wisconsin Public Service
Commission (PSC) to retroactively modify or terminate, existing and previously approved,
leased generation contracts. Currently, under such contracts, public utilities are able to
lease electrical generating facilities from their affiliates. This type of financing arrangement
has been used in Wisconsin to facilitate the investment of billions of dollars in new generation
facilities in recent years.

Under current law, the PSC may modify or terminate such contracts only as specified in the
contract itself, or the original order approving the original contract. Under the provisions of
SB115, the Public Service Commission could unilaterally invalidate or modify these contracts
which could significantly impact a utilities rate of return and dividend payout.

The sponsors of the bill believe that modifying these existing contracts will force a
reduction in electric rates. However, the current rates are necessary to generate a fair rate
of return for utility shareholders based on the recent investments Wisconsin utilities have
made in new electric generation.

If this proposal makes investment in Wisconsin utility stock less attractive for many small
investors, it will become more difficult for Wisconsin utilities to raise the necessary capital
to maintain and upgrade our electrical system. In the long run, this hurts consumers
who will have to pay even higher rates to finance the additional borrowing and internally
generated capital needed to replace their equity investment.

Investors seeking stability and reliability have the choice of investing in a wide range
of electric utilities across the country. To the extent that Wisconsin utilities become a
less attractive investment option, shareholders can go elsewhere, while consumers in
Wisconsin are simply left with higher electric rates.

Wisconsin utilities, WUI and many key legislative leaders have already expressed concern
over this bill. You can add your voice of opposition by attending WUI’s Legislative Day in
Madison on May 24, 2017.

ROBERTS APPOINTED PSC COMMISSIONER

Gov. Scott Walker recently announced that Department of Financial Institutions (DFI) Secretary Lon Roberts will replace current Public Service Commissioner Phil Montgomery whose term on PSC ends next month. Montgomery had served 12 years in the Wisconsin Assembly before his six-year term on PSC.  Roberts, Montgomery’s replacement, was a partner and president at a law firm in Wausau and served as chair of the State of Wisconsin Investment Board before becoming DFI secretary in February 2016.

MGE Files Rate Changes for 2017

Madison Gas and Electric has filed an application with the Public Service Commission of Wisconsin to increase electric and natural gas rates in 2017.

Rate changes at a glance:
• MGE requests 1.7% increase in electric rates for 2017.
• MGE requests 3.7% increase in natural gas rates for 2017.
• MGE is not requesting any increase to the fixed charge for residential and small business customers in 2017.
• Primary driver for rate increase is infrastructure improvements to ensure continued reliability and safety of electric grid and natural gas system.
• Average annual increase in MGE’s rates from 2013-2017 remains lower than the projected increase in Consumer Price Index.

The request would increase overall electric rates by 1.7% in 2017. It also would increase overall natural gas rates by 3.7%. If approved, the typical residential electric bill would increase by $1.50 a month, and the typical natural gas bill would increase by $1.70 a month. The proposed changes would take effect January 1, 2017. MGE is holding to its commitment under its Energy 2030 framework and not requesting any increase to the fixed charge for residential and small business customers in this filing.

The primary reason for the rate request is continued reliability:
• Transmission infrastructure improvements to ensure the continued reliability of the electric grid. MGE continually ranks among the top utilities in the country for electric service reliability. In 2015, 73% of MGE customers did not experience an outage.
• Natural gas system infrastructure improvements to ensure the continued reliability and safety of the natural gas system.

In the filing, some increases in electric operating expenses are offset by decreases in fuel costs. With this proposed rate increase, the average annual increase in MGE’s electric rates from 2013 through 2017 will equal 0.5% while the average annual increase in MGE’s natural gas rates also will equal 0.5%. In comparison, the projection for the Consumer Price Index for the same period is an average of 1.4% per year.

COURT RULES AGAINST MILWAUKEE IN UTILITY RELOCATION CASE

The City of Milwaukee will have to pay the $10 million to
$25 million cost for utility relocation linked to the Milwaukee
streetcar project under a circuit court decision. Milwaukee
County Circuit Judge William Sosnay said it was
unreasonable to require utility companies to pay any part
of the costs for relocating or modifying their lines to
accommodate the streetcar.

The ruling agreed with an earlier decision by the Public
Service Commission of Wisconsin in the utility dispute,
which said the city — not utilities and their ratepayers —
should pay for moving underground utility lines along
the streetcar route.

Legislative and Energy Policy Update by James Buchen, WUI Executive Director

James Buchen, WUI Executive Director

The Wisconsin Legislature is
moving at a frenzied pace to
wrap up the 2015-16 session.
They were originally scheduled
to adjourn in April but the
leadership has indicated they
plan to take final action on
pending bills by the end of
February.  As a result things
are moving quickly by
legislative standards with as
many as a dozen hearings a
day on 40 or more bills.

 

There has been relatively little by way of energy policy
discussed in the Capitol this session. The utilities have
pursued a number of minor policy changes such as
legislation that would allow utility vehicles to exceed
seasonal weight limits on highways when responding to
a power outage and a bill that would extend utility aid
payments to counties and municipalities for 5 years, after
a property tax exempt generating facility is shut down.
There was little opposition to these measures and they
passed both houses and were signed into law by the
Governor.

One issue that has received more attention this session
is a bill that would repeal the virtual moratorium on the
construction of nuclear power plants in Wisconsin. With
concerns over global warming and carbon dioxide emissions
from coal fired power plants growing, there is renewed
interest in nuclear power as a zero emission option.  While
no company has proposed building a nuclear facility in
Wisconsin, passage of this bill would eliminate one legal
hurdle, if such a proposal emerged in the future. The bill
passed the State Assembly in January and is awaiting a
vote in the State Senate.  Perhaps the biggest energy policy
issues facing Wisconsin, as well as the rest of the country,
is implementation of the Federal Clean Power Plan, which
requires Wisconsin utilities to reduce carbon dioxide
emissions by 41 percent by the year 2030. Carbon dioxide
is a natural by-product of burning fossil fuels.  Utility CO2
emissions in 2012 amounted to 1996 lbs. per megawatt
hour of power generation.  As a result, achieving reductions
of this magnitude will be a daunting task.

Under the federal regulation the specific plans on how to
achieve reductions of this magnitude is left to the states.
Wisconsin utilities are looking to the Department of Natural
Resources to develop a plan so they can begin their planning
process to achieve compliance by the various deadlines in
the federal rule. The rule has triggered lawsuits from the
various states and could be affected by the outcome of the
Presidential election. This promises to remain a contentious
energy policy issue in the years ahead.

SETTLEMENT REACHED…

IN ALLIANT ENERGY’S RIVERSIDE ENERGY CENTER CASE

Alliant Energy’s plans to build a combined cycle natural gas-fueled generating facility near Beloit, WI, took a major
step forward as the company reached settlement with two key intervenors in the case, We Energies and Wisconsin
Public Service Corporation. The agreement creates mutual opportunities for the parties to invest in joint-ownership
generation projects and contemplates a joint-development agreement for renewable resources among other items.
Alliant Energy has filed the agreement on the Public Service Commission of Wisconsin’s (PSCW) website in docket no.
6680-CE-176.

“We’ve been able to work cooperatively with our neighboring utilities to find a solution that makes sense for energy
customers across Wisconsin,” said Patricia Kampling, Alliant Energy Chairman, President and CEO. “Along with
the modernized Riverside Energy Center, we believe this agreement will help control energy costs for Wisconsin
customers for years to come.”

Alliant Energy filed for regulatory approval of the proposed 650 megawatt natural gas-fueled plant with the PSCW in
May 2015. Technical hearings before the PSCW began December 21, 2015.

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