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We Energies Rate-Freeze Plan Wins Regulatory Approval

We Energies and Wisconsin Public Service Corp. won final state regulatory approval for a proposal to freeze business and residential rates for two years in what the company calls its response to complaints from industrial customers that electric rates in Wisconsin are too high.

The public utility companies owned by WEC Energy Group Inc. filed a proposed settlement in April to avoid the cost and effort of a full review by the Public Service Commission of Wisconsin.  At the time, the companies said 21 industrial customers signed statements backing the rate proposal.

The rate freeze adds two years to an existing two-year flatrate period that runs through 2017. The settlement also makes permanent cheaper wholesale rates that large industrial customers pay for expanded use of power from We Energies. The Public Service Commission has approved a draft order approving the company proposal for 2018 and 2019. The commission in August had voted to support the plan from the WEC Energy companies.

The PSC draft order determined that freezing We Energies base rates through 2019 was reasonable and in the public interest. The order also states that it’s reasonable to authorize We Energies to
extend and expand the market-based pricing for electric service at large commercial and industrial customers.

A WEC Energy spokeswoman said company executives are pleased with the commission’s action.

PSCW APPROVES RATE FREEZE FOR WE ENERGIES, WPS CUSTOMERS

The Wisconsin Public Service Commission has approved a two-year rate freeze for We
Energies’ and Wisconsin Public
Service’s electric and natural gas customers. The rate
freeze was part of a settlement proposed by WEC Energy Group,
the utilities’ parent
company, and supported by 24 of its largest customers. The two-year rate freeze means
that We
Energies’ electric rates — excluding fuel costs, which fluctuate — will remain
unchanged for four years. Six years also
will have passed since the utility’s last significant
increase in electric rates. In accepting the proposed settlement, the
commissioners made
clear that the commission will need to address several issues involving deferred costs that
have not
been included in We Energies rates. Those costs were projected to reach almost
$500 million by the end of the year.

WUI MEMBERS TRAVEL TO MADISON FOR DAY AT THE CAPITOL

Over 100 WUI members from across the state travelled to Madison to meet with their legislators during a critically important budgetary crunch time at our capitol. Members caught busses en-route from Green Bay and Milwaukee and also drove from points West and locally. Legislators from 16 Senate districts and 33 Assembly districts were visited. Each legislator was briefed on who Wisconsin utility shareholders are, how WUI represents a shareholder’s interests, and more specifically regarding the Wisconsin Utility Investor opposition to Senate Bill 115 and Assembly Bill 198 which seeks to nullify existing leased generation contracts.

Thank you to all who attended, braving the wet weather and construction! WUI is also very grateful for our wonderful guest speakers, Commissioner Mike Huebsch and Senator Scott Fitzgerald, for their unique insights into the regulatory and budgetary processes.

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.

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