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As millions of residential and business customers of We Energies and Wisconsin Public Service (WPS) brace for the prospect of yet another rate hike, many consumer advocates and advocacy groups are questioning the legitimacy of a rate structure which has more than doubled customers’ bills over the last two decades while giving shareholders returns which one advocacy group says are 71% higher than the stock returns of a typical utility. WEC Energy Group, which owns both utilities, submitted rate increase applications with the Wisconsin Public Service Commission (PSC) in April. The requests call for about $800 million in rate increases over the next two years.
An application for WE Energies seeks a 6.9% hike in electricity prices in 2025 and another 4.6% in 2026. The application also includes proposed rate increases for the two natural gas utilities which WE Energies operates, one calling for a 10% hike in 2025 and 5.1% in 2026 and the other for an 8.2% percent jump next year and 3.6% the following year. If approved by the PSC, the company’s steam customers in Milwaukee would also see an 8.4% rate increase in 2025 but none in 2026.
An application for WPS seeks an 8.5% rate increase in electricity rates for 2025 and 4.9% in 2026. The company also wants to increase gas customers’ rates by 6.8% next year and 3.9% in 2026.
Rising Rates
Calculations by the Citizens Utility Board (CUB), a utility customer advocacy organization, show that a typical WE Energies customer would see their monthly electricity bill jump from $128 to $152 if the full rate request is approved. Small business customers would see theirs go from $172 to $188. Average WPS electricity customers would see monthly charges rise from $105 to $127 while its small business customers would see bills increase from $146 to $168. The rate increase applications come on the heels of significant price hikes in the previous two years. WE Energies says its electric rates went up by 9.2% in 2023 and 2.3% this year.
“We definitely have concerns about the magnitude of the increases and how they will affect the ability of customers to pay their bills,” said CUB Executive Director Tom Content. “Especially those customers who are already struggling to make ends meet.”
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Content told Shepherd Express that the company’s position as a publicly regulated utility requires government oversight which prioritizes a proper balance between affordability and shareholder profits. But, he said, that balance has been skewed in recent years toward investors rather than toward the customer base which is guaranteed to the company by virtue of its monopoly. “The whole thing is that we don’t have a choice,” he said.
“Over the past 20 years, the parent company of WE Energies and WPS has done exceedingly well. The rate of return for its investors is something like 800 percent, a much higher rate of return than for other companies in the utility sector. Meanwhile, customers’ bills have more than doubled and have increased much more than the rate of inflation,” Content said.
Nudging the Numbers
When a utility seeks a rate increase with the PSC, the agency can set limits on its profit margin but Content said it’s a “subjective call” with no hard and fast mathematical formula by which to set utility profit rates. “There has been some progress in the last few rounds in which the PSC has lowered the allowable profit rate from 10.2% to 9.8% and from 10% down to 9.8%. That might not seem like much but it’s millions and millions of dollars in favor of ratepayers every time they (the PSC) nudge those percentages down,” Content said. “We want to see that progress continue and even accelerated. The PSC could be bolder, and it wouldn’t hurt the utility’s ability to raise capital to fund its operations.”
WEC spokesman Brendan Conway said the company’s rationale for increased rates is focused on three key priorities: reducing customer power outages, building infrastructure needed to support jobs and economic growth in Wisconsin and meeting new Environmental Protection Agency rules. “The majority of the filing is to recover costs of renewable and low-carbon power plants the PSC has already approved, including the Pairs Solar Energy Center in Kenosha County and Darien Solar Energy Center in Rock and Walworth counties. Both are under construction and are expected to be in service this year,” Conway said.
He also cited other priorities which include “storm hardening and grid resiliency” to account for the increasing frequency of major weather events in Wisconsin. Although Conway didn’t mention it, climate scientists attribute much of the increase in severe weather storms to global warming. Conway said WEC is “proposing to bury hundreds of miles of power lines over the next decade and increase tree trimming to remove dead ash trees outside the company's trim zone.”
Millions in Savings?
Conway said the proposed rate increases also account for millions of dollars in savings from the closure of old coal units at the Oak Creek Power Plant and more than $100 million in customer savings due to federal tax credits and lower fuel costs from new renewable energy facilities to replace coal-fired power plants.
Ratepayer advocates like the CUB point to the utility’s retirement of coal-fired power plants as one way in which electricity customers are being forced to pay for poor planning and bad decisions by the company. Under current rules, the utilities still earn up to a 10% profit on those plants, all coming from the rates customers pay, even for years and decades after they are shut down and no longer producing electricity.
“Rather than use company profits to pay for it when a coal-fired plant is shuttered years before its life expectancy has been reached, the utility tacks those costs onto ratepayers,” Content said. “They’re still earning profits on power plants that no longer exist and aren’t producing any electricity.”
Content said a partnership of what he calls “strange bedfellows,” which includes the CUB, some environmental organizations, the business association Wisconsin Manufacturers and Commerce, AARP and even the conservative Koch brothers-founded political advocacy group Americans for Prosperity, is working to stop the practice of allowing utilities to continue to profit on closed plants long after they stop contributing to energy generation in the state. Content said he is hopeful that the state legislature, currently under GOP control, will act on the issue. “Some of those groups, like Americans for Prosperity, have lots of pull in the Republican Party,” he said.
Excessive Compensation
Utility companies like WEC have come under criticism from consumer groups for paying what they call excessive and exorbitant compensation to executives. Base salaries can reach nearly a million dollars but total compensation for WEC’s top two executives, which can include bonuses and stock options, reached more than nine million dollars each last year according to several industry analysts and consumer watchdog groups. However, Conway said compensation packages for WEC executives is in line with the industry average. Further, only the base salaries are included when the PSC calculates allowable profit margins and sets rates.
Other critics say utilities like those operated by WEC spend far too much on funding a powerful lobby at the state legislature. But Conway says rules are in place to protect ratepayers. “Political spending and incentive compensation for executives is specifically excluded from rates by the Public Service Commission of Wisconsin and has no impact on the price customers pay for energy,” he said.
While customers don’t directly pay for it via their monthly bill, Content says the system which provides bonuses and stock option incentives for top executives still impacts ratepayers because the additional compensation is based on how well their leadership has served to increased profits and shareholder returns. “They’re rewarded for convincing the PSC to approve higher profit rates and for delivering higher returns to investors, so they seek higher and higher rates to charge customers,” he said. “From our point of view, executives of publicly regulated monopolies should be rewarded instead for doing things the customers want to see in terms of reliability and affordability.”
Content said the Citizens Utility Board is studying the applications from WE Energies and WPS and preparing a report which it will submit to the Public Service Commission when it opens its public comment period, likely sometime in October. “We’re definitely going to ask that these rate increases be pared back but we don’t have the exact numbers yet,” he said. “We’re also waiting on the PSC to conduct its own audit of the rate requests.” He also encourages WE Energies and WPS customers to get involved by submitting comments online or by attending a hearing in person or by Zoom. “The more people who participate, the more the voice of the people is heard and the better the outcomes we’ll see,” he said.
