In a series of rulings regarding Wisconsin Electric Power Co.,

the Wisconsin Public Service Commission has directed the

utility to reduce electric charges and natural gas service rates.

In a similar ruling, the commission also has authorized Wisconsin Public Service Corp. to boost rates for natural gas, while trimming rates for electric service.

Wisconsin Electric. The commission ordered Wisconsin Electric to cut electric rates by $7.383 million. Rate of return on common equity was set at 10.8 percent. In setting charges for electric service, the commission considered the effect on rates of several large sales by the utility to customers in Illinois under a pilot retail-wheeling program initiated in that state. It rejected allegations that Wisconsin Electric was discriminating against local customers by charging lower rates to participants in the pilot program.

The commission also announced a goal of moving to a competitive model for the provision of conservation services. Under the plan, nonutility entities with no conservation goals deliver demand-side management services for the utilities or above-the line treatment of costs and revenues by the end of 1998. The commission anticipates a Public Benefits Advisory Board would administer the new DSM process.

In designing new rates for gas service, the commission allocated a $6.468-million rate decrease to Wisconsin Electric's residential, medium-commercial and partial-interruptible users only. It said that those customer classes are paying more than the cost of service. Implementing market-driven rate design reforms outlined in an earlier generic proceeding, the commission approved a new "gas supply acquisition charge." The charge functions as a separate charge for system sales customers and supports the removal of certain gas costs from the LDC's existing distribution margin rate.

The commission also approved a proposal to increase itemization on customer bills finding that the separation of charges for the natural monopoly distribution service from competitive gas supply offerings will serve to educate customers as to their service options.

Under the new rate design criteria, the commission removed approximately $12 million in gas supply related costs from distribution service charges. It noted, however, that the removal of the gas supply costs will reduce a typical transportation customer's bill by 10 percent. To avoid "a mass exodus" from sales to transportation service the commission directed the utility to require transportation users to pay half the gas acquisition charge until January 1998. Other reforms adopted by the commission include: 1) planned elimination of the partial interruptible rate; 2) development of special rate classes for gas-fired electrical generators; 3) seasonal recovery of pipeline demand charges; and 4) reforms designed to bring "true pooling options to transportation users.

Despite a series of prior rulings questioning the benefits to ratepayers of utility sales promotion

programs, the commission authorized Wisconsin Electric to recover $460,000 for the cost of an advertising program designed to inform ratepayers about electric industry restructuring. It questioned, however, whether the advertisements used by the utility represented an "objective viewpoint."

While reducing the utility's request for gas sales promotion expenses, the commission said, "If DSM and other ancillary services are to be phased out of regulatory service," then it is reasonable to examine all energy services, including gas sales promotions, for relevance and cost-effectiveness.

The commission rejected a proposal by the utility to reduce the shareholder portion of coal tar cleanup cost identified by the commission in an earlier rate ruling. The utility said the change was necessary so that it could "recover a significant portion of these expenditures before deregulation." The utility also argued the change was necessary to account for a rate freeze it had agreed to as part of a proposal to merge with Northern States Power Co. The commission said the utility should not continue to increase regulatory assets during a rate freeze period. It also ruled the utility should have already considered the effect of the freeze on the coal-tar cost-recovery plan.

Wisconsin Public Service. The Wisconsin commission has also authorized Wisconsin Public Service Corp. to increase rates for natural gas service by $5.687 million while reducing rates for electric service by $35.514 million. It set rate of return on equity at 11.8 percent based in part on positive performance by the company's management.

The commission disallowed the utility's $1.3-million request for natural gas sales promotion activities. It also rejected a second proposal by the utility to shift the promotions budget to its Area Expansion Plan surcharge, an established rate mechanism for recovery of costs associated with the construction of gas main extension is in new service territory. The commission said the utility had failed to support the need for such expenditures.

The commission also concluded that "zero-based budgeting" is appropriate in all of the utility's future rate cases unless compelling justification is provided. The commission approved rate structure updates similar to those adopted in the Wisconsin Electric Power Co. case and reviewed a "sweeping" rate redesign proposal submitted by its staff which utilized annual throughput levels rather than the LDC's current customer meter size concept in allocating costs among customer classes. Re Wisconsin Elec. Power Co., 6630-UR-109, Feb. 13, 1997 (Wis. P.S.C.); Re Wisconsin Pub. Serv. Corp., 6690- UR-110, Feb. 20, 1997 (Wis.P.S.C.).

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