WE Energies Launches Assault on
Distributed Generation
Rate Filing Aims to Drive Small
Renewables Out of SE Wisconsin
August 2014
In its current rate filing, We Energies unveils a punitive
package of terms and conditions for owners of distributed
generation, planned to take effect on January 2016. If
approved by the Public Service Commission, these measures
would throttle the distributed energy marketplace in WE
territory and bring it to a standstill.
These following slides document the rates, charges and
penalties proposed by We Energies to squeeze small-scale
electricity producers. Their aim is clear: to preserve its
generation monopoly at all costs, even if it means denying
customers the ability to self-generate with clean energy.
Warning!
This filing could be contagious
Should the Public Service Commission approve WE’s
harsh measures, you can be sure that other
Wisconsin utilities will propose similar terms in their
2017-2018 filings.
A Three-Pronged Assault on CustomerSited Renewables
In a nutshell, WE proposes to:
 Impose hefty capacity charges on all net metered customers
and stand-by charges on larger self-generators
 Change the terms of service to diminish returns on existing
renewable energy investments by one-third
 Deny net metering service for leased and third-party owned
solar systems
New Terms of Service
Beginning January 2016, all distributed generators
(under 15 MW) interconnected to WE will be placed in
one of four new categories of customer generation.
1.
2.
3.
4.
COGS-NM (net metering)
COGS-NP (non-purchase)
COGS-DS (direct-sales)
Cp-4/Cg-4 (stand-by service for large self-generators)
Breaking Down COGS-NM
1.
2.
3.
4.
5.
6.
Two-tiered rate structure (in place)
Two meters w/ extra charge for second meter (new)
Monthly netting instead if annual netting (new)
Capacity demand charge (new)
Capacity limit set at 300 kW (new)
Customer must own system (new)
COGS-NM Rates and Charges
Revenue from Generation
Offset Consumption
Above Consumption
Retail energy rate
Avoided energy rate
13.9 cents/kWh
~4.2 cents/kWh
Note: As of 1/1/2016, the net will be calculated each month
New WE charges
Capacity demand charge
Facilities charge (2nd meter)
$3.79/kW or $8.60/kW
2-10 cents/day
Note: the lesser of the capacity demand charges would apply to solar and
wind systems. All other customer generators would be subject to the higher
charge, unless they are demand-metered.
Case study of 4 kW solar system
installed in 2013
Assumptions
 Annual household consumption is 6,000 kWh
 PV system produces 80% of household use
(4,800 kWh)
 Current return –> 4,800 x 13.9 cents/kWh =
$667/yr ($55.60/month)
Economics of same system in 2016
Assumptions
Of the 4,800 kWh produced each year, 400 kWh is credited at
avoided cost rate (excess over consumption)
 Energy value – 4,400 x 13.9 cents + 400 x 4.2 cents = $628 or
$52.33/month
 Capacity demand charge – 4kW x $3.79/kW = $15.96/month
 Facilities charge - $0.65 cents/month
Result
$52.33 - $15.96 – $0.65 = $36.72/month
Quantifying the Hit to This
PV System Owner
Year
Average monthly
return
2014
2016
$55.60
$36.72
Difference ($)
Difference (%)
$18.88
34.3%
How Radical Is this Proposal?
Does any other WI utility impose (or plan
to impose) demand-based penalties on
customer generators?
No
Does any other WI utility require customer
ownership of net metered systems?
No
Does We Energies Provide Any
Numbers to Support the Need for
Additional Charges and Penalties?
No
Comparing Net Metering Costs to We
Energies Own Plants
Generation
Source
Fuel source
Size
(in MW)
2013 Production Costs
(cents/kWh)
Elm Road*
Coal
1275
14.76
Valley
Coal
280
10.0
Port
Washington
Natural Gas
1150
7.3
Net metered
Renewables
Solar, Wind
4
13.9
Sources: We Energies 2014 Report to the PSCW, RENEW
Note: In 2012, Elm Road’s all-in production costs were 22.3 cents/kWh
Numbers That Matter
Anticipated We Energies purchase price of Integrys
Energy Group
$9.1 billion
Elm Road – Monthly and annual lease payments from
We Energies customers to We Power (plant owner)
$19.33 million
$233 million
We Energies CEO Gale Klappa’s compensation in 2012
$13 million
Aggregate solar capacity interconnected to We Energies
7.5 megawatts
Anticipated revenues in 2016 from demand penalties
assessed on solar system owners
$30,000/month
$360,000/year
*Subject to check: not yet confirmed
Schools powered by renewable energy that
will be hurt by these changes
School
MATC - Milwaukee
Menomonie Falls North M.S.
Lakeshore Technical College
MATC – Oak Creek
MATC – Ft. Atkinson
Waukesha County Tech. College
Kettle Moraine Lutheran H.S.
Purdy Elementary – Ft. Atkinson
Fort Atkinson H.S.
Lake Country School
Random Lake H.S.
Lawrence University
Fox Valley Lutheran H.S.
Shorewood School District
Lakeside Lutheran H.S.
WI Lutheran College
UW-Whitewater
UW Milwaukee
UW- Parkside
HOPE Christian Schools
WI Lutheran H.S.
MKE Fairview School
Concordia Univ.
MKE Cooper School
Faith communities powered by renewable
energy that will be hurt by these changes
House of Worship/County of Location
Atonement Lutheran - Milwaukee
St. Paul’s (Ixonia) Jefferson
St. Paul’s Lutheran -Waukesha
Church of the Resurrection - Waukesha
Garden Homes Lutheran - Milwaukee
Lake Country Unitarian - Waukesha
Fox River Christian Church - Waukesha
Good Shepherd Lutheran - Washington
Risen Savior Lutheran - Waukesha
Pilgrim United - Ozaukee
Crown of Life Lutheran - Dodge
First Congregational Church - Ozaukee
St. Marcus Lutheran - Milwaukee
Ascension Lutheran - Shawano
Racine Dominicans EcoJustice Center - Racine
Lake Park Lutheran Church - Milwaukee
Bethlehem Evangelical Lutheran - Waukesha
E&R United Church of Christ - Waukesha
Morning Star Lutheran - Washington
Cross Lutheran Church - Milwaukee
Elm Grove Lutheran – Waukesha
Local governments powered by renewable
energy that will be hurt by these changes
Local government
City of Racine (City Hall)
City of Whitewater
Outagamie County (ATW)
Town of Greenville (Outagamie)
City of Milwaukee (Public Library)
City of Wauwatosa (Fire Dept.)
Town of Menasha (Winnebago)
City of Brookfield (Safety Building)
MMSD (Milwaukee)
Businesses powered by renewable energy
that will be harmed by these changes
Business
Johnson Controls
JJ Keller
Kohl’s Dept. Stores (3 stores)
American Transmission Co.
GE Health Care (3 locations)
Full Circle Farm
SCA Tissue
Osborn Nursery
Preder Farm
Werner Electric
Menasha Corp.
WAGO Corporation
Potawatomi Bingo Casino
Bergstrom Mini
Cedar Lake Rehabilitation
UW Milwaukee
What’s Different about COGS-NP?
The trade-off here is: the non-purchase
service would allow customer-generators
to keep their existing meter and avoid the
facilities charge. However, any generation
that is exported to the grid is effectively
donated to WE.
Amazingly enough …
Those who elect this service option
would still be subject to the capacity
demand charge, even though they
receive no credit for exported
electricity.
Which Begs the Question …
What is the difference between cutting
one’s bill in half through conservation
measures vs. self-generation whose costs
and benefits are fully internalized within
the customer? Put another way, why
does self-generation warrant a capacity
penalty but not conservation?
How is this not discriminatory?
What is COGS-DS?
This service is planned to be mandatory for generators
between 300 kW + 15 megawatts. Most biogas
generators fall into this range. When current contracts
between owners of biogas generation and WE expire,
WE will move the generators to this rate.
What is WE’s proposed rate for purchasing electricity
under this service?
~$4.2 cents/kWh.
Are There Other Penalties in Store for
Self-Generators?
Yes. WE is proposing to levy stand-by charges
on customer-generators who meet the
following requirements:
1. Have 300+ kW of generating capacity
2. Supply a minimum of 35% of their usage
from their own generating units
Example: SC Johnson’s Waxdale plant
How much are the stand-by charges?
3 cents/kWh on-peak
2 cents/kWh off-peak
Basically, the utility is looking to force
these self-generators to pay WE for
every kWh produced and consumed
on-site.
About the Ownership Requirement
Provision
Neither Wisconsin law nor the PSC’s
interconnection rules (PSC 119) preclude utility
customers from entering into lease agreements
or energy purchase agreements with third party
owners of distributed generation.
Meanwhile, in Iowa
Culminating a legal fight that lasted 2 ½ years,
the Iowa Supreme Court ruled that companies
and customers can legally enter into contracts
for energy produced behind the customers’
meter.
Iowa’s electric utilities are regulated much like
Wisconsin.
What Is the Magnitude of the “Problem”
Triggering This Array of Punitive Measures?
From We Energies’ filing:
“The magnitude of this problem has been
negligible as long as the amount of customerowned generation has been relatively small, but
as the number of these systems grow, so too will
this problem.”
Direct-WEPCO/WG-Rogers-54
Note: Emphasis supplied by RENEW
What Overall Effect Will These
Punitive Measures Have on DG?
We Energies knows fully well that clawing back
one-third of a system owner’s return on
investment will permanently shut down the
local clean energy marketplace. Problem solved.
Stand Up to We Energies!
The utility’s proposal to shut down distributed
generation in its territory is on a fast track! The Public
Service Commission has started its review, and will
issue its decision in December.
How to post a comment: Go to the PSC's web site
(http://psc.wi.gov), and click on Public Comment, then search for
WE 2014 rate case (Docket No. 5-UR-107). The public comment
page will stay open until September 23, 2014.
AND …
Broaden Your Reach!
Send copies of your comments to:
The Governor’s office
Both state legislators
County executive
County supervisor
Local govt. executive
Local govt. councilperson
You neighborhood association
Your local newspaper
Michael Vickerman
Program and Policy Director
608.255.4044
mvickerman@renewwisconsin.org
www.renewwisconsin.org
http://renewwisconsin-blog.org/