Register

Analysis Prepared by the Commission

Statutory authority: ss. 196.02 (1), and (3), 196.20 (4) (d), and 227.11.

Statute interpreted: ss. 196.20 (4) and 196.192 (2) (a).

On August 16, 1984, the Commission issued an order establishing the electric fuel rules, ch. PSC 116, Wis. Adm. Code, pursuant to s. 196.20 (4) (d), Stats., that abolished use of an automatic fuel adjustment clause in Wisconsin. The order was published in the Register in October 1984, No. 346. It became effective on November 1, 1984.

The Commission determines the amount to be charged for Wisconsin retail electric rates in periodic rate case proceedings. The process includes a forecast of the utility's revenues and expenses for a representative test year when the rates will be in effect. The forecast is comprised of test year expenses and revenues that are monitored under the fuel rules, ch. PSC 116, Wis. Adm. Code, and other costs. For most forecast costs and revenues, differences between the projections and the actual amounts realized for costs will usually not cause rate changes. However, for the costs and revenues monitored under the fuel rules, a variance between forecast and actual costs can trigger a rate change. Chapter PSC 116, Wis. Adm. Code, defines the costs and revenues included in the fuel cost monitoring system and the process to determine and implement such a rate change.

An emergency revision to the fuel rules was published June 5, 2000. On June 20, 2000, the Commission issued a notice of rulemaking for emergency revision of ch. PSC 116, Wis. Adm. Code. A hearing was held on August 4, 2000. The definition of “fuel" in s. PSC 116.03 (4) was amended and s. PSC 116.04 (6), Wis. Adm. Code was created to allow investor-owned utilities the ability to incorporate the cost of voluntary curtailments of service into the cost of fuel to increase electric reliability in Wisconsin for the summer of 2000. The emergency rule changes expired on November 3, 2000.

The permanent rule amendments consider three general classifications of changes: revisions in the permanent rules to incorporate alternative sources of power, including the emergency provisions that expired November 3, 2000; a proposal for a deferral process to limit the cost risk of fuel cost volatility; and revisions to accurately reflect how the statute is being administered.

1) Retail customer tariffs under s. 196.192(2)(a), Stats., for voluntary curtailable load

Section 196.192 (2) (a), Stats., allows an electric utility to buy down firm customers' demand as a way to meet system peak demand. The firm load curtailment program provides the utility an alternative to avoid expensive fuel or purchased power costs and to make power available for other firm customers when the demand for electricity exceeds available supply.

Under the existing rules the costs of this program would be classified as non-monitored expenses or as reductions in revenue. The emergency rule change included this cost in the monitored fuel costs during the summer and fall of 2000. The emergency rule expired on November 3, 2000.

2) Air conditioner load control programs

In order to avoid expensive power purchases, utilities can pay customers to reduce the air conditioning load. This program also makes power available to other firm customers when the demand for energy exceeds the available supply. Utilities incur this cost as either a credit to the monthly fixed customer charge or as an expense per occurrence, credited to the customer's bill. The first method requires no fuel rules consideration. It may be appropriate to monitor the cost of the second method in the fuel rules. The estimate of the cost included in utility rates is based on the charge per occurrence and the number of occurrences. Each actual cost occurrence replaces a cost included in the fuel rules.

3) Short-term rental of generating facilities

Utilities sometimes rent generation facilities, such as diesel generators, as an alternative source of power. The Commission classifies the rental cost as operations and maintenance expense and the related fuel cost as part of the fuel rules. This is a satisfactory approach when a utility can accurately forecast its leased obligations. The difficulty comes between rate cases when a leased obligation is less expensive than monitored fuel costs of other alternative sources of power. Monitoring this cost in the fuel rules would afford the utility the opportunity to recover part of the additional cost if its inclusion causes fuel costs to exceed the monitored range.

4) A proposal for a deferral process to limit the cost risk of fuel cost volatility

The deferral mechanism is intended to address extraordinary changes in fuel costs, consistent with the Commission's deferred accounting procedures. While the current rate credit and surcharge mechanisms under the fuel rules would remain in place, the deferral mechanism would be a further refinement to reflect the greater volatility seen in fuel costs in recent years. The ratepayer and shareholder risk would be capped, but not eliminated.

5) Revisions to accurately reflect how the statute is being administered in practice

Terminology relating to “opportunity sales" describes those revenues from power transactions currently monitored. Opportunity sales are monitored because these transactions offset fuel costs and purchased power. The addition of wording relating to “cumulative limits" is made to reflect actual administration of the rules and to make the clauses referring to monitoring consistent with each other.

An agency shall prepare in plain language an analysis of each proposed rule, which shall be printed with the proposed rule when it is published or distributed. The analysis shall include a reference to each statute that the proposed rule interprets, each statute that authorizes its promulgation, each related statute or related rule and a brief summary of the proposed rule.

Text of Proposed Rule

SECTION 1. The note following PSC 116.02 is amended to read:

Note: These are Lake Superior District Power Co.,Lake Superior District Power Co., Madison Gas and Electric Co., Northern States Power Co., Wisconsin Electric Power Co., Wisconsin Power and Light Co., and Wisconsin Public Service Corp.

SECTION 2. PSC 116.03 (1) and (3) are amended to read:

PSC 116.03 (1) An “emergency"An “ emergency"“Emergency increase in the cost of fuel" means an increase that is extraordinary and that is caused suddenly by forces beyond the utility's control or reasonable foresight.

(3) An “extraordinary An “extraordinary “Extraordinary increase in the cost of fuel" means an increase that exceeds the range set around the utility's monthly or cumulative estimates approved by the commission that will significantly alter the cost of fuel from the base cost authorized in the utility's latest rate case.

SECTION 3. PSC 116.03 (4) is renumbered PSC 116.03 (4) (intro.) and amended to read:

(4) (intro.) “Fuel" means coal, gas, nuclear fuel, oil, and any other type of material used to generate electricity, and, and electricity purchased or sold wholesale. sold wholesale. opportunity sales of electricity as determined in a rate proceeding; and other commission-approved plans designed for the reliable provision of electricity, including:

SECTION 4. PSC 116.03 (4) (a) to (c) is created to read:

(a) Retail customer tariffs under s. 196.192 (2) (a), Stats., for voluntary curtailable load.

(b) Air conditioner load control programs.

(c) Short-term rental of generating facilities.

SECTION 5. PSC 116.03 (5) is created to read:

(5) “Opportunity sales" means those sales of electricity as defined in Wis. Adm. Code ch. PSC 117 for out of state sales and as defined by the commission in a rate proceeding for in state sales.

SECTION 6. PSC 116.04 (1) (a) and (b) 3. and 5. are amended to read:

PSC 116.04 (1) (a) In each rate proceeding the commission shall consider the costs of fuel in setting base rates and shall set ranges within which monthly fuel costs may vary from monthly estimates either on a monthly or a cumulative basis or both, and within which annual fuel costs may vary from annual estimates in terms of cost per kilowatt hour without being considered emergency or extraordinaryemergency or extraordinaryan extraordinary increase in the cost of fuel.

(b) 3. The types, quantities, and delivered costs of fuel expected to be used by the utility.

5. The possibility of sales or purchases of excess fuel or economy energy to or from other utilities or cooperatives possibility of sales or purchases of excess fuel or economy energy to or from other utilities or cooperatives cost effect of known or projected purchases of electricity or opportunity sales of electricity as determined in a rate proceeding.

SECTION 7. PSC 116.06 is amended to read:

PSC 116.06 Emergency and extraordinary increases. (1) If a utility's monthly or cumulative fuel costs exceed the ranges set in its rate proceeding, and the annual fuel costs will be affected so as to exceed the annual range, the utility may seek an emergency or extraordinary an emergency or extraordinary a rate increase in a proceeding limited in scope to the question of the emergency or extraordinary increase in the cost of fuel costs costs.

(2) After a hearing confined solely to fuel costs, an emergency or extraordinaryfuel costs, an emergency or extraordinarythe emergency or extraordinary increase in the cost of fuel, a rate increase based on an increase in an electric utility's monthly or cumulative costs of fuel may be granted only if the commission finds that the fuel cost increase will affect the utility's average yearly fuel costs so as to fall outside the established annual range.

(3) If an increase in rates is based on a hearing confined solely to fuel costs costs an emergency or extraordinary increase in the cost of fuel, the commission shall condition the increase on a refund of any excess revenues collected by the utility.

SECTION 8. PSC 116.07 is amended to read:

PSC 116.07 Decreases. (1) If a utility's monthly or cumulative fuel costs fall below the monthly ranges set in its rate proceeding, any interested person may seek a rate decrease in a proceeding limited in scope to the question of the decrease in fuel costs.

(2) A rate decrease based upon a decrease in an electric utility's monthly or cumulative cost of fuel shall be granted only if the commission finds that the fuel cost decrease will affect the utility's average yearly fuel costs so as to fall outside the established annual range.

SECTION 9. PSC 116.08 (1) is amended to read:

PSC 116.08 Initiation of hearings. (1) The commission may order an emergency or extraordinaryan emergency or extraordinary a rate increaseincrease proceeding under this chapter on its own motion or that of another interested person or or and may expand the scope of any rate proceeding held under this section section chapter to consider other issues in addition to the cost of fuel.

SECTION 10. PSC 116.09 is created to read:

PSC. 116.09 Deferrals. (1) In setting base rates for the utility, the commission shall set an amount above and below the annual fuel cost estimate as the utility's fuel cost deferral range.

(2) An electric public utility may apply for authority to defer recovery for its annual actual fuel costs in excess of the fuel costs it recovered in rates if it can show that its additional fuel costs exceeded its fuel cost deferral range and that, if granted, the deferral will not create excess revenues.

(3) The commission, after a special surcharge hearing or as part of the utility's next rate case, may grant the recovery of deferred fuel costs, if it finds that the utility's additional fuel costs exceed its deferral range and that the deferral will not create excess revenues.

(4) The commission shall consider, on its own motion, or by application of any interested person, a credit to an electric public utility's ratepayers for a reduction in annual fuel costs compared with the fuel costs collected in rates that fall below its fuel cost deferral range.

Initial Regulatory Flexibility Analysis

The proposed rule would apply to electric public utilities as defined by s. 196.20 (4) (a) (2), Stats. The proposed rule will not affect small businesses as defined in s. 227.114, Stats.

Fiscal Estimate

This rule change has no fiscal impact.

NOTICE IS HEREBY GIVEN that pursuant to s. 227.16 (2) (b), Stats., the Commission will hold a public hearing on these proposed rule changes in the Amnicon Falls Conference Room, at the Public Service Commission Building, 610 North Whitney Way, Madison, Wisconsin, on Tuesday, January 23, 2001, at 10 a.m. This building is accessible to people in wheelchairs through the Whitney Way (lobby) entrance. Handicapped parking is available on the south side of the building.

The Commission requests comments on the above issues. Any party who desires to file comments should submit an original and 15 copies as indicated at the beginning of the Notice. Members of the public need only file an original. These comments must be received by noon on Wednesday, January 17, 2000. Comments by fax are due one day earlier. Fax filing cover sheets must state “Official Filing" and include the docket number and the number of pages (limit of 20 pages). File by one mode only.

The Commission does not discriminate on the basis of disability in the provision of programs, services, or employment. Any person with a disability who needs accommodations to participate in this proceeding or who needs to obtain this document in a different format should contact the case coordinator listed below.

Questions from the media may be directed to Jeffrey L. Butson, Public Affairs Director at [phone].

Questions regarding this matter may be directed to case coordinator Sharon K. Hennings at [phone] or by email at [e-mail]. Hearing or speech-impaired individuals may also use the Commission's TTY number at [phone].

Notice of Hearing

Public Service Commission

Hearing Date:   Thursday, January 18, 2001 – 9:00 a.m.

Hearing Location:   Public Service Commission, 610 North

    Whitney Way, Madison, WI

Comments Due:     Friday, January 19, 2001 – Noon

FAX Due:     Thursday, January 18, 2001 – Noon

Address Comments to:

  Lynda L. Dorr, Secretary to the Commission

  Public Service Commission

  P.O. Box 7854

  Madison, WI 53707-7854

  FAX [phone]

The Commission proposes an order to revise ch. PSC 163 relating to telecommunications utilities price regulation.

Analysis Prepared by the Public Service Commission of Wisconsin

Statutory Authority: ss. 196.02 (3), 196.196 (1) (c), and 227.11

Statute Interpreted: s. 196.196

In 1993 Wisconsin Act 496 (Act 496), the legislature enacted a new regulatory model to manage the transition to a competitive telecommunications marketplace. Act 496 allows telecommunications utilities to elect a price regulation plan as specified in s. 196.196, Stats.

The rules in this chapter contain a process to govern implementation of the price regulation plan specified in s. 196.196, Stats. Important features of this process include:

(1) electing price regulation;

(2) mechanics of calculating prices for services covered under price regulation;

(3) rate increases or rate structure changes independent of the price cap index;

(4) price regulation review.

One objective of the proposed rule revision is to make those changes to this chapter deemed necessary as a result of the Commission's review of price regulation pursuant to s. 196.196 (1) (g), Stats., and the annual reviews of price regulation for each price-regulated telecommunications utility. These changes include the new concept of an optional infrastructure investment objectives plan (an option available once a utility has completed its initial infrastructure commitment under s. 196.196 (5), Stats.), changing the penalty and incentive mechanism table, and adding two additional service quality components approved by the Commission. An additional objective of the proposed rule revisions is to update the citations and clarify language, where necessary. Finally, two sections where a significant amount of reorganizing was done are described below.

Section PSC 163.04 (2) (c), which deals with service quality, has been reorganized into s. PSC 163.04 (2) (c) through (ct) for clarity. Many portions have just been moved to other locations in the section (for example, much of s. PSC 163.04 (2) (c) 2. has been moved to s. PSC 163.04 (2) (cd) 1., much of s. PSC 163.04 (2) (c) 5. now appears in s. PSC 163.04 (2) (c) 2., and s. PSC 163.04 (2) (c) 6. through 8. are now in s. PSC 163.04 (2) (cp)). The establishment of initial service quality components, industry-wide standards, and company-specific benchmarks is discussed separately from the ongoing revisions of components, standards, and benchmarks. A new process has been created to ensure that any revisions to service quality benchmarks are completed before the beginning of the year to which they will be applied. Two additional Commission approved service quality components have been added. Finally, the Commission's ability to vary penalties due to exceptional or unusual circumstances has been changed to more closely match the language used in other PSC administrative rule chapters.

Section PSC 163.04 (2) (d), which deals with infrastructure investment, has also been reorganized into s. PSC 163.04 (2) (d) through (dw) for clarity. Again, many portions have just been moved to other locations in the section. The establishment of initial infrastructure investment components and benchmarks is discussed separately from the ongoing revisions of components and benchmarks. This section has also been updated to include the new concept of an optional infrastructure investment objectives plan. A new process has been created to ensure that any revisions to infrastructure benchmarks are completed before the beginning of the year to which they will be applied. Finally, the Commission's ability to waive all or a portion of an infrastructure penalty due to exceptional or unusual circumstances has been changed to more closely match the language used in other PSC administrative rule chapters.

Proposed Rules

Copies of the proposed rules can be obtained by contacting Tom Ferres, [phone].

Initial Regulatory Flexibility Analysis