Retail Rates UpdateRetail Rates Update

WIEG Board MeetingWIEG Board MeetingMay 6, 2010May 6, 2010

Presented by:Presented by:Kavita Maini, PrincipalKavita Maini, Principal

KM Energy Consulting, LLCKM Energy Consulting, LLC

Protecting Your Bottom LineProtecting Your Bottom Line

Main Objective

Interest in new We Energies, WPL rates? Other rate design ideas?

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Economic Development Rates

Approved in 2010 WPL’s Experimental Economic Development

Program Rider WEPCO Charter Steel

Main reason: Significant demand destruction

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WPL’s Experimental Economic Development Program Rider Eligibility

Applicable to load expansions and attracting new load in service area; could also apply to existing load that is at risk of leaving the state (PSCW approval needed for this instance)

Must meet several pre-conditions to qualify

Rate Floor: 105% of marginal costs Ceiling: Existing Applicable Tariff Declining discount phased to applicable tariff over 5 years

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WPL’s Experimental Economic Development Program Rider

Open Meeting Oral Decisions Commission denied WPL’s deferral accounting

treatment Existing customers are unaffected in between rate

cases During a rate case, increased sales will help spread

costs over larger MWh volumes Two year experiment

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WEPCO’s Charter Steel Contract Filed on Feb 18, 2010 and Commission Order on

May 3, 2010 Two part real time pricing rate design

Existing load under existing rate that is a combination of firm and non firm (Cp-FN)

Incremental load under day ahead LMPs +20% Incremental load based on comparison with threshold load shapes

developed using Nov08-Oct09 Incremental load on day ahead LMPs not subject to demand

charges, fuel adjustment, point beach credits

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WEPCO’s Charter Steel Contract If Curtailment initiated, incremental load must

comply Charter Steel contract expires Dec 31, 2011 WEPCO proposed a 30 day cancellation

provision at any time Can switch back all load to existing rate after

contract expiration

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WEPCO’s Charter Steel ContractCommission issued Order on May 3rd

Customer must receive market benefits and take market risks – Lower energy prices allow for benefits; change cancellation provision to require Charter Steel to a minimum of 1 year contract term for balancing market risk and removing what it considered to be a “hold harmless” clause

Utility Shareholders and utility customers will not be harmed – Defer portion of WEPCO revenues associated with incremental usage in 2011 to match up with costs that will be known in 2012 for 2011 (transmission costs)

Charter incremental usage and costs to be deducted from Fuel Rules Calculations to avoid double counting

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Real Time Pricing Variants WEPCO Charter Steel – Could be considered three tiered with firm,

interruptible and increments @ LMP although firm and interruptible portion form the threshold load shapes

WEPCO Approach (existing RTP rate) – Two Tier with a Customer Baseline tied to firm service and deviations to be settled @ LMP plus adders; WEPCO is open to introducing an interruptible component

WPSC Approach (subject to change) – Also two tier though firm portion tied to existing rate and non firm @ LMP plus adders

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