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REGULATORY ENVIRONMENT
6 Months Ended
Jun. 30, 2011
REGULATORY ENVIRONMENT  
REGULATORY ENVIRONMENT

NOTE 14—REGULATORY ENVIRONMENT

 

Wisconsin

 

2012 Rate Reopener

 

On May 2, 2011, we filed a rate reopener with the PSCW for limited items.  We requested an electric rate increase of $33.7 million and a natural gas rate increase of $1.1 million, to be effective January 1, 2012.  We subsequently agreed to withdraw our request for a natural gas rate increase.  The proposed electric rate increase is primarily driven by higher fuel and purchased power costs, higher transmission costs, and increased Focus on Energy payments in 2012.  In response to the final EPA CSAPR issued in July 2011, we are reviewing the fuel cost amounts submitted in this filing, as they are expected to increase as a result of this new rule.  We do not expect this to delay the PSCW’s final ruling on this matter.

 

2011 Rates

 

On January 13, 2011, the PSCW issued us a final written order authorizing an electric rate increase of $21.0 million, calculated on a per unit basis.  However, the rate order assumed declining sales volumes, a lower authorized return on common equity, lower rate base, and other reduced costs, which results in lower total revenues and margins.  The $21.0 million included $20.0 million of recovery of prior deferrals, the majority of which relates to the recovery of the 2009 electric decoupling deferral.  The $21.0 million excluded the impact of a $15.2 million estimated fuel refund (including carrying costs) from 2010.  The PSCW rate order also required an $8.3 million decrease in natural gas rates, which included $7.1 million of recovery for the 2009 decoupling deferral, resulting in lower natural gas revenues and margins.  The new rates reflect a 10.30% return on common equity, down from a 10.90% return on common equity in the previous rate order, and a common equity ratio of 51.65% in our regulatory capital structure.

 

The order also addressed the new Wisconsin electric fuel rule, which was finalized on March 1, 2011.  The new fuel rule is effective retroactive to January 1, 2011.  It requires the deferral of under or over-collections of fuel and purchased power costs that exceed a 2% price variance from the cost of fuel and purchased power included in rates.  Under or over-collections deferred in the current year will be recovered or refunded in a future rate proceeding.  As of June 30, 2011, a $4.1 million refund for fuel and purchased power over-collections was deferred as a short-term regulatory liability.

 

2010 Rates

 

On December 22, 2009, the PSCW issued us a final written order, effective January 1, 2010.  It authorized an electric rate increase of $18.2 million, offset by an $18.2 million refund of 2009 and 2008 fuel cost over-collections.  It also authorized a retail natural gas rate increase of $13.5 million.  Based on an order issued on April 1, 2010, the remaining $10.0 million of the total 2008 and 2009 fuel cost over-collections, plus interest of $1.3 million, was refunded to customers in April and May 2010.  The 2010 fuel cost over-collections were made subject to refund as of that date.  As of June 30, 2011, the balance of the 2010 fuel cost over-collections to be refunded to customers throughout 2011 was $7.7 million, which was recorded as a short-term regulatory liability.