Wisconsin Approves Performance Incentive Mechanisms

Fortnightly Magazine - February 15 1995
This full article is only accessible by current license holders. Please login to view the full content.
Don't have a license yet? Click here to sign up for Public Utilities Fortnightly, and gain access to the entire Fortnightly article database online.

While lowering current rates for electric gas and water services provided by Wisconsin Power & Light Co., the Wisconsin Public Service Commission (PSC) has also approved a series of gas and electric incentive mechanisms for the utility.

The ratemaking modifications include a natural gas procurement incentive that works through the company's adjustment clause and includes a link to spot commodity prices for gas supply as well as a sharing mechanism to allocate the risk of cost changes between ratepayers and shareholders. The new mechanism retains automatic recovery of certain fixed pipeline costs and other items, such as reliability premiums paid to producers.

On the electric side, the PSC approved a sulfur-dioxide emissions control cost-incentive mechanism, but rejected the utility's proposed sharing plan for power procurement costs. Instead, the PSC decided to reduce the electric revenue requirement in the case by an additional $4 million, while also eliminating the electric fuel cost reconciliation rules. It said eliminating the rules would probably benefit the company because ratepayers have had no increase, only refunds, since the rules were put in place. The PSC added that the additional rate reduction was appropriate in light of expected cost-cutting requirements needed to respond to competition. According to the PSC, the approved emissions incentive links performance-based ratemaking to environmental objectives and also moderates the effect of eliminating the fuel-cost rules by discouraging the utility from using less expensive high-sulfur coal. Re Wisconsin Power & Light Co., No. 6680-UR-109, Dec. 8, 1994 (Wisc.P.S.C.).

This full article is only accessible by current license holders. Please login to view the full content.
Don't have a license yet? Click here to sign up for Public Utilities Fortnightly, and gain access to the entire Fortnightly article database online.