Commissioner Lauren Azar Speech to WIEG FEBRUARY 6, 2008
Today’s Talk 1. Rate Update 2. MISO Update 3. WIEG’s Role at the Commission
Rate Update
PRIMARY RATE DRIVERS NOW 1. FUEL Commodity Cost Commodity Cost Transportation Cost Transportation Cost 2. CONSTRUCTION CYCLE Generation Generation Transmission Transmission
MONTHLY INDEX OF NATURAL GAS Average of ANR Louisiana/ANR Oklahoma Wellhead Prices January 1992 – January 2008
GENERATION Recent Additions 4,105 MW Developer Location / Description YearSizeFuel LS Power / CoGenTrix Whitewater Co-Gen MW Gas MGE Rosier Wind Farm MW Wind MPU Custer CT MW Gas Sky Gen (Purchased by WPSC) DePere Phase I CT MW Gas WEPCO Concord CT Inlet Coolers MW Gas WEPCO Paris CT Inlet Coolers MW Gas WPSC Lincoln Wind Farm MW Wind MGE West Marinette #34 CT MW Gas Southern Energy (Purchased by Alliant) Neenah CT MW Gas WEPCO Germantown CT Inlet Coolers MW Gas WEPCO Germantown #5 CT MW Gas Polsky / Sky Gen Rock Gen – Christiana CT MW Gas DPC Elk Mound CT MW Gas Badger Wind Power Iowa County Wind Farm MW Wind WPSC Pulliam CT MW Gas Wisconsin River Power Corp. Petenwell CT MW Oil WPPI Kaukauna CT MW Gas Calpine Riverside CC MW Gas Sheboygan Power, LLC Sheboygan County CT MW Gas MGE Walnut St – Madison CC MW Gas Fox Energy (Calpine) Kaukauna CC (Unit 1) MW Gas WE Power Port Washington CC (Unit 2) MW Gas Fox Energy (Calpine) Kaukauna CC (Unit 2) MW Gas Manitowoc Public Utilities Manitowoc CFB MW Coal
DeveloperLocation/DescriptionYearSizeFuel WPS Weston 4 SCPC MW Coal WE Power Port Washington CC (Unit 1) MW Gas WEPCO Calumet County MW Wind WPL Fond du Lac County MW Wind Forward Energy LLC Dodge/Fond Du Lac Counties MW Wind WE Power Oak Creek SCPC (Unit 1) MW Coal WE Power Oak Creek SCPC (Unit 2) MW Coal GENERATION Under Construction 2,776 MW
Developer Location / Description YearSizeFuel MGE Worth County, Iowa MW Wind Calpine – (Active) Fond du Lac CC MW Gas WPPI (ownership in Prairie States Energy Center) (Cancelled) Washington County, IL N/A 99 MW Coal Rainy River -- (Cancelled) Superior CT N/A 170 MW Gas Mirant fka SEI -- (Cancelled) Plover CC + CT N/A 930 MW Gas Badger Gen. Co. (Cancelled) Pleasant Prairie CC N/A 1,050 MW Gas GENERATION Approved 2,811 MW
Developer Location / Description YearSizeFuel WPL Cassville or Portage MW Coal Marshfield Utilities Marshfield, Wood County MW Gas WPS Howard County, Iowa MW Wind GENERATION Applications Filed 454 MW
TRANSMISSION $ 1.2 Billion spent through $ 2.84 Billion expected before 2018
FUTURE RATE DRIVERS Carbon Other Environmental Controls Global Warming Task Force Issues
Cost of Electricity Resources (Source: ACEEE 2006 & EPRI 2006)
RATE CASE PROCESS Utility estimates expenditures & income Utility estimates expenditures & income PSCW audits & adjustments PSCW audits & adjustments Projected revenue shortfall Projected revenue shortfall Cost of service for customer classes Cost of service for customer classes Allocation of shortfall to customer classes Allocation of shortfall to customer classes Hearing held Hearing held Commissioners review record Commissioners review record
COMMISSION DISCRETION IN RATE CASES Projected Costs & Revenues Projected Costs & Revenues ROE ROE Capital Structure Capital Structure Deferrals Deferrals Allocation among customer classes Allocation among customer classes
Requested vs. Authorized Revenue Changes Electric & Gas 14-Year Summary Total IncreaseTotal Year Requested by UtilitiesAuthorized by PSCW 1995 $ 38,644,000 $ (26,755,000) 1996 $ 2,663,000 $ (43,971,000) 1997 $ 116,844,000 $ (47,115,000) 1998 $ 230,184,000 $ 183,994, $ 82,548,000 $ 52,612, $ 74,900,000 $ 65,590, $ 92,016,000 $ 73,585, $ 244,434,000 $ 162,742, $ 140,252,000 $ 127,983, $ 255,168,000 $ 154,052, $ 315,681,000 $ 227,024, $ 547,370,000 $ 421,417, $ 354,852,000 $ 149,024, $ 367,343,000 $ 188,925,000 Sum $ 2,862,899,000 $ 1,689,107,000
COSTS Executive Compensation 1997 Top 3 Executives for WEPCO, WPL, WPS, & MGE 1997 total executive costs: $ 4.01 M 1997 total executive costs: $ 4.01 M 1997 executive cost in rates: $ 2.37 M 1997 executive cost in rates: $ 2.37 M % of 1997 total executive cost in rates = 59% % of 1997 total executive cost in rates = 59% 2004 top 3 Executives for WEPCO, WPL, WPS, & MGE 2004 total executive costs: $ M 2004 total executive costs: $ M 2004 executive cost in rates: $ 3.20 M 2004 executive cost in rates: $ 3.20 M % of 2004 total executive costs in rates = 23% % of 2004 total executive costs in rates = 23%
ACTUAL ROE - AVERAGE WEPCO, WPL, WPS, MGE, NSP YEARYEARYEAR % % % % % % % % % % % % % % % % %
Wisconsin Rates Compared with Other States About 19 states have higher rates for both residential and industrial classes (YTD 9/07) U.S. Average (Cents/kwh) Wisconsin Average (Cents/kwh) Industrial Residential All classes
Allocation ’07-’08 – Rate Changes Utility Type Bill Type Bill '07 to '08 '07 to '08 MG&E MG&E Residential Residential5.8% MG&E MG&E Commercial Commercial6.5% MG&E MG&E Industrial Industrial10.1% NSPW NSPW Residential Residential9.1% NSPW NSPW Commercial Commercial8.4% NSPW NSPW Industrial Industrial10.5% WEPCO WEPCO Residential Residential5.2% WEPCO WEPCO Commercial Commercial2.4% WEPCO WEPCO Industrial Industrial0.7% WP&L WP&L Residential Residential2.1% WP&L WP&L Commercial Commercial3.1% WP&L WP&L Industrial Industrial3.3% WPSC WPSC Residential Residential2.0% WPSC WPSC Commercial Commercial3.2% WPSC WPSC Industrial Industrial2.7%
Conclusion on Rate Update Full Rate Cases in ’08: WPS & WPL Full Rate Cases in ’08: WPS & WPL Reopeners in ’08: MGE & NSP Reopeners in ’08: MGE & NSP Continuous evaluation on reducing rates Continuous evaluation on reducing rates Fuel Rule Revisions? Fuel Rule Revisions? Statutory Changes? Statutory Changes? Environmental Trust Funding Environmental Trust Funding
MISO Update
HOT MISO ISSUES 1. End-User Focus Group 2. Resource Adequacy and Module E 3. Demand Response 4. ASM 5. Stakeholders Recommendations
WIEG’S Role At PSCW
The End