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WPL Regulatory Update
Scott R. Smith
Director, Regulatory Affairs
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Today’s Agenda
1. WPL 2010 Fuel Case
2. WPL 2011 Rate Case
3. WPL’s Economic Development Rate Proposal
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2010 Fuel Case
Filed WPL’s request on 4/30 Electric retail revenue requirement of $8.8 million
0.9% average increase Small / residential – 0.7% Large / industrial – 1.1%
Approximate effective date Interim rates (subject to refund) – June
2010 Final rates – before year end
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What are the Major Differences in Fuel Costs from Monitoring Levels?
Actual Fuel Costs – January – March$2,077,773
Delivered Cost of Fuel $4,413,819
Natural Gas Price ($2,939,725) Market Energy Price Changes
$5,214,457 Total $8.8
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WPL 2010 Fuel Case – Rough Timeline
Apr 30 WPL files
May Hearing on interim rates
Jun Interim rates effective
July Audit complete
Aug Staff / Intervenors file
Sep Hearing
<YE Final Order
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WPL 2010 Rate Case – Limited Request
Filed WPL’s request on 4/30 Electric only retail revenue requirement of
$35.4 million when compared to current rates Bent Tree $41.0 Expiring deferral credits $4.7 Lower fuel costs $(10.3)
Request includes items already approved by the PSCW or for which there is precedent
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WPL 2010 Rate Case – Limited Request
Does not suggest changes to: Return on equity Sales volumes UR-117 Furlough Inclusion
No Increase in Natural Gas
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Rate Impact
3.6% average increase when compared to current rates 2.7% if fuel case approved in total
WPL rate design proposal Allocate the revenue requirement increase to customer
classes based on the percentage increases approved by the Commission in 6680-UR-117
Approach generally maintains the current revenue allocation
relationship to COSS results
Small / residential – 4.2% increase from current Large / industrial – 2.4% increase from current
Anticipated effective date – 1/1/2011
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WPL Rate Case Rough Timeline
Apr 30WPL files May-Jun Revenue Requirement audit Jul Pre-hearing conference Jul-Aug Rates audit Sep Staff / Intervenors file Oct Hearings Nov Oral decision Dec Final order Jan 1 Rates effective
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Economic Development Rate - Background
Proposed to Commission in November, 2009
Economic downturn severely affected WPL service territory through the loss or reduction of energy demand from WPL’s industrial and commercial customers.
Loss of sales increased rates – smaller number of units to spread fixed costs
Increase sales that would not have occurred organically occurred
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Rationale
Decreased load has resulted in rate increases by shifting recovery of fixed costs to remaining customers.
Increasing load will spread fixed costs to more customers thereby reducing rate pressures on existing customers.
As long as the incremental load covers more than the marginal incremental costs, existing customers will benefit.
Other states have similar programs. Wisconsin needs this type of program to remain competitive.
Program is designed to provide the most benefit at the “start up” of development thereby aiding the potential for success and then moves the incremental load to full rates to ensure all customers benefit and are treated equitably.
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Economic Development Rate – Customer Requirements
Customers must meet several significant requirements. Must have also received governmental
economic development assistance of $500k or more.
Must sign an affidavit that “but for” the economic development rate and governmental assistance the increase (or retention) of load would not have occurred.
Discounts are subject to reimbursement if load drops during discount period.
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Economic Development Rate Overview
Rate Rider for CP-1(Industrial at distribution) and CP-2 (Industrial at transmission) Allows for discounts to a level that maintains rate
coverage 105% of WPL’s marginal costs Temporary and declining discount levels for a
maximum of 5 years Applicable to incremental load
New customers Expansion
Possible applicability to retain customers, subject to PSCW approval
Requirements to invest in “economically viable” energy efficiency
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Example:
Before New Customer After
Load 10,000,000 100,000 10,100,000
Revenues From Existing Customers 1,000,000$ (250) 999,750$ Decreased Rates to Existing CustomersRevenues From New Customers 0 5,250 5,250 New Revenues 1,000,000$ 5,000$ 1,005,000$
Marginal Cost 500,000$ 5,000$ 505,000$ Fixed Costs 500,000$ 500,000$ Total Costs 1,000,000$ 5,000$ 1,005,000$
Total Costs Per Unit 0.1000$ 0.0995$ Decreased average cost for all customers
Marginal Costs Per Unit 0.0500$ 0.0500$ Fixed Costs Per Unit 0.0500$ 0.0495$ Decreased average fixed cost for all customers
Note: The revenues from the new customer will increase with each year during the programas the level of discounts decrease.
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Status
Waiting on formal PSCW Order to Implement.
Will likely need to re-file updated tariff sheets with the PSCW to reflect PSCW Order requirements.
Currently anticipate that the tariff will be available on July 1, 2010.