Of the many strategies utilities across the country use to exert influence with state regulators, a Wisconsin utility's latest alleged move may qualify as the most creative.
The Wisconsin state legislature’s Joint Committee on Finance (JCF) just voted to curtail support for the Citizens Utility Board (CUB), a ratepayer-funded utility consumer advocate, and other consumer organizations while leaving in place similar funding to the state’s utilities.
“CUB has an important role to play in representing the ideology and interests of its members before the [Wisconsin Public Service Commission (PSC)]," wrote Metropolitan Milwaukee Association of Commerce (MMAC) Government Affairs Vice President Steve Baas in an op-ed acknowledging his organization had petitioned for the defunding.
“CUB is only one in a cacophony of diverse voices," Baas wrote. "Yet only CUB has enjoyed the benefit of special funding from ratepayers. We believe that is fundamentally unfair.”
Of the 50 states, 41 have consumer advocates that are funded by taxpayers or ratepayers, according to National Association of State Utility Consumer Advocates Executive Director Charles Acquard. Critics say Wisconsin's major utility is working through MMAC to eliminate Wisconsin's advocate.
While CUB operates with 4 employees and a budget under $1 million per year, the average state consumer advocate has a staff of 10 and a budget of $2 million, he told the Milwaukee Sentinel-Journal.
Following the money
Specifically, MMAC's proposed that the $300,000 annual grant for operational expenses available to any ratepayer advocacy organization in Wisconsin be eliminated. MMAC also called for halving the $750,000 fund for qualified PSC expert intervenors, from which CUB obtained an additional $175,000 last year, explained CUB Executive Director/General Counsel Kira Loehr.
For their 2014 investment in CUB of $475,000, Wisconsin ratepayers got help in PSC proceedings that saved them $161 million, she said.
“CUB has every right to bring its members' voice to debates over utility rate cases, but that voice should not be singled out for preferential treatment via a special financial arrangement from the state,” MMAC’s Baas wrote.
Loehr says Baas is misrepresenting the situation.
“It absolutely is not taxpayer money from the state budget,” Loehr explained. “Those funds come from ratepayers. The commission assesses the utilities for the money and the utilities recover it from ratepayers in the same way the utilities recover funds for their own advocacy.”
Ratepayers pay millions of dollars per year for utility lawyers and experts and consultants, she added.
Baas insisted the JCF motion was only about CUB’s funding and he offered no explanation for why utilities should be reimbursed by ratepayers for commission activities. “Ask the utilities,” he told Utility Dive when asked who utilities represent in rate cases.
Loehr had no explanation for MMAC’s attack and the JCF’s one-sided decision. “I’m still trying to figure out where this came from.”
How the vote happened
It is not apparent that CUB’s work at the PSC would give MMAC, a business group, any reason to attack them. But, as the Milwaukee Journal-Sentinel wrote in an editorial, “Gale Klappa, chief executive officer of We Energies, the state's largest utility, is vice-chairman of the MMAC board. The MMAC argument is little more than an empty rationale for clearing the field for the utilities in rate cases.”
Wisconsin’s three dominant investor owned utilities told the Milwaukee Sentinel-Journal they are not involved in the defunding effort. We Energies wasn't involved in developing the drafting of the proposal and had no position for or against it, utility spokesman Brian Manthey told the Journal-Sentinel.
When reached for comment by Utility Dive, We Energies reiterated that the utility had nothing to do with the MMAC proposal or the the defunding vote. The company stands by its comments to the Journal-Sentinel, a spokesperson said.
“We Energies or had no role in making the proposal and Gale Klaapa had no prior knowledge of it,” Baas told Utility Dive. “The [MMAC] board approves the organization’s agenda, not specific actions.”
Democrats on the Joint Committee on Finance are skeptical of that position.
“We Energies could well have been the driving force behind this,” said Democratic Representative Chris Taylor, a member of the JFC who tried to stop the CUB defunding. “And why would the Chamber of Commerce be involved?”
The motion came very fast, at the end of a very long hearing, and as a total surprise to the Democratic side, she said. “But the Republicans knew what they were doing.”
Senator Alberta Darling and Representative John Nygren, the GOP leads on the JCF, declined Utility Dive's requests for interviews.
Taylor does not think it is a coincidence the defunding was done right after controversial rate cases in which We Energies, Wisconsin Public Service Corporation (WSPC), and Madison Gas and Electric won significant fixed fee increases despite strong opposition from CUB and others. “Who would believe that We Energies didn’t know about this?”
Three We Energies face-offs with CUB
In fact, critics point out, We Energies has had three very important run-ins with CUB in recent months.
First, Baas argued that CUB is irresponsibly using ratepayer funds to support its appeal to the Circuit Court of a PSC decision in a We Energies case. In the case We Energies was allowed to allocate the $80 million cost to retrofit a Milwaukee co-generation plant to 1.1 million electricity customers, rather than, as CUB argued, to the 450 industrial steam heat users of the facility.
If the $80 million and the utility’s profit are allocated to the 1.1 million electricity users, the rate increase would be relatively small and might go more or less unnoticed, Loehr acknowledged. If 450 big customers are asked to pay, the rate increase would be more significant and those customers might very well raise questions about spending loudly. We Energies might not want that.
Second, the push from Wisconsin's utilities, including We Energies, to increase fixed charges on ratepayers attracted national attention, in part because of the CUB's unrelenting opposition. Despite the advocate's efforts, the state's major utilities all won fixed charge increases from regulators last year.
“Some people apparently don’t want the public to have full and fair representation at the Wisconsin commission,” Environmental Law and Policy Center (ELPC) Attorney Bradley Klein, who was an intervenor in the landmark PSC proceedings on fixed fees, told Utility Dive. “CUB is effective. I imagine that’s why they’re being targeted.”
ELPC covers Klein’s expenses but it has limited resources. “That’s why groups like CUB are so important. They have an ongoing, consistent presence at the commission and they rely on intervenor funds from the commission to be able to do that.”
“We fought the fixed charge increases in the We Energies and the [Wisconsin Public Service Corp. (WPSC)] rate cases,” Loehr said. “I do think our advocacy has upset someone and that can only be due to our effectiveness.”
Third, We Energies now wants to acquire WPSC. “CUB strongly opposed the acquisition and wrote a stern reply brief to the proposal that was filed on April 6, 2015, just 9 days before the Joint Finance Committee voted to gut CUB’s funding,” Loehr said.
Money and the balance of power
MMAC’s advocacy for the JCF decision “is fueled by our belief that all ratepayer voices matter, and that the public interest is served best when all of them are given the opportunity to speak up for their interests without the state playing favorites by subsidizing only one of them,” Baas argued in his op-ed.
“The commission is presented with a massive amount of information and evidence from the utility side,” Loehr responded. “The utilities declare they will spend so many millions in the coming year for attorneys and consultants. That gets built into rates. The Joint Committee on Finance did not touch that. Ratepayers will continue paying for the utilities’ advocacy.”
“Utilities can literally spend millions of dollars on rate cases,” said former consumer advocate and former Federal Energy Regulatory Commission Chair Jon Wellinghoff, now with Stoel Rives. “Intervenors trying to protect consumers may only have one-tenth of that.”
But regulators’ ability to make decisions depends on the quality of the evidence on the record, Wellinghoff said.
“If intervenors do not have the funding to put the evidence on the record, the decision cannot be made in their favor. It’s that simple.”
Editor's Note: This post has been updated to reflect comments from MMAC's Steve Baas.