Advocates want We Energies customers to get savings from closing Pleasant Prairie power plant

Three groups that represent customers of We Energies have asked state regulators to set aside the money that the utility will save from shutting down the Pleasant Prairie power plant to ensure the savings go to customers and not stockholders.

The Citizens Utility Board, the Wisconsin Industrial Energy Group and the Wisconsin Paper Council also question whether We Energies knew that it planned to close the power plant — and save almost $50 million a year in operating costs — when it proposed freezing rates for two years.

The three groups want the Public Service Commission to set aside the money included in rates for the power plant until We Energies’ next rate case.

The Pleasant Prairie power plant, which could generate 1,200 megawatts of electricity, was shut down last week.

We Energies projected that the operations and maintenance cost of running the Pleasant Prairie plant would be $47.7 million this year, while the PSC staff estimated the cost at $49.3 million, according to the three groups.

It works out to a potential windfall of more than $80 million, excluding costs associated with shutting down the plant, for We Energies.

We Energies rates won’t change until Jan. 1, 2020, under a two-year rate freeze proposed by the utility last year and approved by the commission in September.

"To deliver on that promise and maintain our financial integrity, we said repeatedly that we would need to cut costs," We Energies said in a statement. "We looked at a wide range of alternatives, and we concluded that the best alternative was closing one of our older, less efficient coal-fired plants."

"We’re doing exactly what we said we would do — keeping our promise to customers and maintaining the financial health of the business," the statement said.

But Thomas Content, executive director of the Citizens Utility Board, said customers and not stockholders should get the savings from shutting down the plant.

“The commission needs to look at this issue closely,” he said.

The Citizens Utility Board, which represents residential and small business customers, and the other groups want the issue addressed in We Energies' next rate case.

"If the PSC does not order the deferral, customers will get none of the non-fuel cost savings associated with shutting down the plant through 2020," Todd Stuart, executive director of the Wisconsin Industrial Energy Group, said in a statement.

We Energies’ decision to shut down the Pleasant Prairie power plant makes clear the extent that the utility and its customers have been saddled with unneeded generating capacity.

The generating capacity at the Elm Road Generating Station in Oak Creek, which came on line in 2010 and 2011, can generate 1,268 megawatts of power, with 83% of the electricity for We Energies customers and the remainder sold to two other utilities.

The 1,052 megawatts allocated for We Energies customers is less than the 1,200 megawatts of generating capacity at Pleasant Prairie that has been shut down.

Cathy Schulze, a spokeswoman for We Energies, noted that when the two new generating units were built, the state was facing the prospect of energy shortages and the PSC had told utilities to prepare for the future demand for electricity.

"Hindsight is 20/20 now," Schulze said. "There was a need for that capacity when we built it, and that was verified by the commission with the approvals."

Predicting power demand 10 to 15 years out is difficult and may be impossible. Public utilities also must ensure that they will have enough generating capacity to keep the lights on.

The new units at Oak Creek also came on line as the state was recovering from the worst recession since the Great Depression — an event that no one could have foreseen when the PSC approved the building of the power plant and when We Energies began planning for it.

In addition, the market for wholesale power sold to other utilities didn’t evolve as expected because of the growth in wind power and the sharp drop in natural gas prices.

We Energies’ excess capacity, though, is one of the reasons its rates are among the highest in the Midwest.

The operations and maintenance costs of Pleasant Prairie power plant are only one part of its costs included in customers' rates.

We Energies also will earn a return, or profit, on its remaining investment — roughly $681.3 million — in the plant.

The return, which is included in rates, is estimated at $36.2 million this year, according to the Citizens Utility Board, the Wisconsin Industrial Energy Group and the Wisconsin Paper Council.

The groups also want that money set aside until the next rate case when the commission can determine if the full cost of We Energies stranded investment in Pleasant Prairie should be passed on to customers.

The groups also raise the question whether We Energies knew that it planned to shut down the plant when it proposed freezing rates for two years.

In December, three months after the PSC approved the rate freeze, We Energies sought approval from the Midcontinent Independent System Operator Inc. to shut down the Pleasant Prairie power plant.

MISO, a regional transmission organization, oversees the generation and flow of electricity across 15 U.S. states and the Canadian province of Manitoba.

“The timing raises a lot of questions,” said Content of the Citizens Utility Board.