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We Energies customers will pay a larger fixed charge on their monthly electric bills, and the utility will pay less for the power that customers generate with solar panels, state regulators decided Friday.

The increase in the fixed charge from about $9 to $16 a month was justified, the Public Service Commission decided in a 2-to-1 vote.

The decision, which will be finalized next month, came as the three PSC commissioners met in Madison to decide the Milwaukee utility's request to raise rates in January.

The preliminary bottom line for residential customers: a 1.8% increase in bills on average, though bills will rise more for customers who use less energy, PSC spokesman Nathan Conrad said. Bills will go up by another 0.8% in 2016.

Business customers will see a slight decrease in electric bills in 2015, the commission decided. Business customers would see an increase of about 1% in 2016, said Jeff Ripp, the commission's deputy administrator.

Chairman Phil Montgomery and Commissioner Ellen Nowak said they supported the utility's move to raise the fixed charge, offset somewhat by a lower energy charge. They made a similar decision a week ago when they approved an increase for Green Bay-based Wisconsin Public Service Corp.

We Energies said the higher fixed charge was a matter of fairness so that the non-energy portion of its bills more accurately reflects the cost of poles, wires and the like. But the proposal drew opposition from groups including the Citizens' Utility Board, the Environmental Law and Policy Center and energy efficiency advocates, while the lower solar payments were criticized by solar companies and advocates.

The groups say the higher fixed charge will weaken incentives for customers to conserve energy and will harm low-energy using customers such as apartment dwellers.

The current fixed charge, Montgomery said, "sends ratepayers a signal that the cost to be on the grid is a lot less than it really is, and that the cost of energy is a lot more than it really is."

Commissioner Eric Callisto said changing the fixed charge in the name of promoting fairness in the design of rates is "silly" because it creates a burden for customers who use little energy.

"We're guaranteeing that the folks who use the least amount of energy are going to pay more," he said.

"There were a lot of giveaways from the commission today," said Kira Loehr, CUB executive director, after the vote. "The commission could have held all customers' rates stable. Instead, the commission increased residential customers' rates in order to give big business customers a rate decrease."

Nowak said the overall increase approved Friday is very small.

Though existing customers' solar projects would be grandfathered from the changes for 10 years, the proposals are tantamount to a 40% reduction in the value of what customers receive from a solar project, said Tyler Huebner, executive director of the advocacy group Renew Wisconsin, after the vote.

"This decision is bad for job creation, bad for energy independence, bad for the environment, and bad for customers," he said. "Today our supposedly conservative commissioners approved a new tax, killed jobs and restricted energy choice in Wisconsin."

After the PSC finalizes its decisions, the Alliance for Solar Choice plans to file suit in court to overturn the solar rulings the PSC made Friday, said Bryan Miller, vice president of the solar company SunRun, a company that's part of the alliance.

"Phil Montgomery and Ellen Nowak became the first commissioners in the country to tax rooftop solar companies out of business, and that decision will not stand," Miller said. "It will certainly be their political legacy, but the decision will not stand."

We Energies was pleased with the decisions. The utility will need to review the final written order by the PSC once it's issued, said Brian Manthey, a We Energies spokesman. "Based on today's initial discussion, however, we believe the commission took a significant step forward in sending the proper electric rate price signals to all of our customers," he said.

Also Friday, the commission:

■ Rejected the utility's proposal to bar customers from leasing their panels from solar power developers, a small win for solar companies including the Alliance for Solar Choice and Pewaukee-based Sunvest Solar.

■ Rejected a proposal that would have resulted in the Milwaukee Metropolitan Sewerage District facing a 20% increase in its utility charges, which it estimated at $1 million to $1.5 million a year.

The utility was instructed to work with the sewerage district before submitting a revised proposal two years from now.

■ Rejected calls for a refund to customers tied to an Upper Michigan power plant, saying the utility wasn't enjoying a windfall from fees it collected this year to run the plant.

Customer groups had said We Energies was collecting twice for the Presque Isle power plant because it received funding in its rate case two years ago — and then began receiving payments from the Midwest Independent System Operator this year to operate the plant.

The same double-recovery argument has been raised by some of We Energies' former customers and competitors in Michigan.

The Upper Peninsula power plant is in flux because We Energies' largest customer, the operator of iron ore mines, left the utility last year in favor of another power supplier under Michigan's electricity deregulation law.

We Energies responded by seeking to suspend operations at the power plant, but was barred from doing so by the operator of the Midwest power grid.

Despite the added revenue, the utility has continued to lose money this year on operating the power plant, Montgomery said. He said it would be unfair to make the utility repay customers the $42 million it's received this year for Presque Isle.

Commissioner Nowak supported Montgomery, while Callisto disagreed.

"These are ratepayer dollars, plain and simple. And what the utility wants is double recovery, plain and simple," said Callisto. "This is a $42 million gift" to the utility.

The commission, however, agreed to use revenue We Energies will collect for the Michigan power plant in 2015 to offset part of its proposed 2015 rate increase.

■ Approved $3.1 million in funding for We Energies projects to improve water quality in Lake Michigan. The Fund for Lake Michigan was created after environmental groups challenged the water intake structure that the utility built in the lake to serve the Oak Creek plant.

■ Denied We Energies' bid to collect $3.5 million from customers in 2016 for a solar project it sought to build. The utility committed to build the solar project as part of the same settlement.

■ Voted 2-to-1 to approve a return on equity, or profit rate, of 10.2% for We Energies' electric utility in 2015 and 2016. That's down from 10.4% in 2014. Wisconsin Gas' return on equity was set at 10.3%, down from 10.5% this year.

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