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.

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