In a 2-1 vote, state energy regulators authorized an 83% increase in the fixed charge for customers of Wisconsin Public Service Corp., siding with the Green Bay utility and against solar and consumer advocates.
The Public Service Commission voted to raise the customer fixed charge to $19 a month from $10.40. The utility had sought a 140% increase to $25 a month.
The case is the first of several expected to be voted on this month by the PSC, which has similar proposals pending from Milwaukee-based We Energies and Madison-based Madison Gas & Electric Co.
The increase approved for Wisconsin Public Service is in line with the 82% increase being requested by the Madison utility and slightly more than the 75% increase sought by We Energies. MG&E is proposing to increase its fixed charge to $19 a month, while We Energies wants its raised to $16.
The two commissioners appointed by Gov. Scott Walker, who won re-election Tuesday, agreed with utilities' arguments that a higher fixed charge is justified, and that it would eliminate a subsidy paid by customers that don't generate their own power to customers that do.
The fixed charge increase would be accompanied by a drop in the energy charge, so the overall 2015 increase approved Thursday would raise residential customers' rates by about 3%, or $25 million, Commissioner Ellen Nowak said. Rates for large factories in northeastern Wisconsin would go up by 3.6% on average, while small-business customers would see a decrease of 0.5%.
A typical utility residential customer uses 600 kilowatt-hours of electricity per month and would see a $3.40 monthly increase in electric bills come January, PSC spokesman Nathan Conrad said. Because of the change in the customer charge, customers who use less energy than the average would see a bigger-than-average increase, while customers who use more energy would see a smaller increase, he said.
The fixed-charge proposal was challenged by customer groups including the Environmental Law and Policy Center, Renew Wisconsin and the Citizens' Utility Board.
Also protesting the higher fixed charge were advocates for the elderly and the poor including AARP Wisconsin and the Wisconsin Community Action Program.
Wisconsin Public Service is a subsidiary of Integrys Energy Group Inc., a Chicago-based energy company that Milwaukee-based Wisconsin Energy Corp. is proposing to acquire.
In deciding the issue, Commission Chairman Phil Montgomery and Nowak said it is reasonable for utilities to collect a greater portion of their fixed costs, such as poles, wires and utility equipment, through the fixed charge.
They agreed that now is the time to make a change before it becomes a bigger issue as more customers start generating their own power.
"This is not an attack on wind and solar," Nowak said. "It's about fairness."
WPS had sought an increase of 140%, which would have increased the fixed charge to $25 a month for residential customers.
"Only the principle of gradualism gives me pause from suggesting we adopt the Pub Service proposal in its entirety," Montgomery said, using a common nickname for the utility.
Commissioner Eric Callisto, who was appointed by Gov. Jim Doyle, said the commission should have frozen fixed charges for all the utilities seeking increases this year, and ordered a statewide study of fixed charge and customer-sited generation.
"It is the key issue in this rate case season and one that has given the utilities in this state and this commission national attention," said Callisto of the fixed charge controversy.
The commission should only consider an increase in the fixed charge if it reduces the profit rate, or return on equity, that utilities earn below the 10.2% that the PSC approved Thursday, Callisto said.
"If the company's customer charge is increased, there is reduction in financial risk to the utility," he said. "That is not in dispute."
The PSC also approved a 4.3% decrease in local natural gas charges for WPS natural gas customers. The $15.4 million decrease also includes a rate restructuring that will increase the fixed charge on monthly bills. For natural gas customers, that will raise the fixed charge by 76%, from $10.25 to $18 a month.
The decision penalizes customers who don't use very much energy and means that WPS will have the highest fixed charge in the Midwest, said Kira Loehr, executive director of the Citizens' Utility Board, a utility watchdog group.
"Today's decision goes in the wrong direction," she said. "Instead of taking this opportunity to pause and consider innovative ways to handle changes in the electric industry, the decision takes the step that most helps utilities at the expense of customers. Increasing fixed charges hurts our most vulnerable low and fixed income households and frustrates residential and small business customers' ability to lower their bills by using less energy."
WPS spokesman Kerry Spees said the utility would wait until the commission formalizes Thursday's votes in a written decision to react to the decision.
Of the fixed charge increase, he said, "We thought our initial request was warranted, but this rate structure change is a big step in the right direction of getting our fixed costs better aligned with the fixed charge."
WPS says that more than half of the accounts that are low energy users are for seasonal customers such as cabins, cottages and summer homes in northern Wisconsin.