Take Five with MG&E: Commitment to renewables remains firm

Madison Gas & Electric is one of three Wisconsin energy utilities proposing to restructure utility rates for 2015, and all three proposals are controversial and subject to approval by the Public Service Commission of Wisconsin. Reaction from renewable energy advocates has been strongly negative, as opponents charge the plan would substantially increase costs for businesses, reduce incentives for homeowners to conserve energy, and harm the state’s solar industry.

For residential customers, MG&E’s proposal would establish a new monthly grid connection charge of $4, increase the existing fixed monthly charge from $11 to $15, and reduce the monthly residential energy use rate from 14.4 cents per kilowatt-hour to 13.3 cents.

A large majority of MG&E’s commercial customers are billed the same as residential customers, but there are four other commercial customer classifications, each with different changes proposed. For these customers, the 2015 rate-restructuring proposal also increases the fixed charge, reduces the electricity rate, and adds a new grid-connection charge. Their bill has a customer charge and an electricity (kWh) rate, and the bill goes up as more power is used.

In this Take Five interview, IB addresses these issues with Steve Kraus, manager of media relations for MG&E. Here are excerpts.

IB: What is MG&E’s justification for this rate-restructuring plan?

Kraus: What we’re doing is pretty consistent with a national discussion with other utilities around the country on how the [electrical] grid is changing and how its use is changing. Our rate proposal, and others across the country that are similar, looks at changing the ratio between the fixed part and the energy [use] part. The purpose of it is to make sure that we move forward, that the grid stays reliable. That’s important.

Steve Kraus

The other issue that’s important is that as these renewable energy sources — solar, wind, biogas, manure digesters — as more of that comes onto our system, we want to make sure that when it comes onto our system, the grid still works the same way and that it’s reliable. It’s obvious that the digital age we’re in, and have been in for some time, has required utilities to have much more reliable service. Years ago, a blip on the line didn’t make any difference. Today, it affects computers to the point where you have to start all over again.

So the system has to continue to be more and more reliable, and as these local renewable energy sources come on, you have to be sure that they are integrated effectively and that the charges for energy coming on and energy going out to the customers, that those rates are fair to all customers.

IB: One of the criticisms is that your proposal would penalize small and medium-sized businesses, especially ones that have taken steps to improve energy efficiency.

Kraus: The incentives for saving energy are exactly the same. If you save energy, you’re going to save money. Our company is going to stay firmly committed to energy conservation, to seeing that renewable energy sources expand in our area because local generation is important. It’s a very important part of meeting customers’ needs. But as far as the conservation effort is concerned, our efforts are going to stay as strong as they have always been. We will continue to work with customers in reducing bills, in using energy more effectively.

IB: Another criticism has to do with the impact on alternative forms of energy, especially solar and your customers’ incentives to install solar, but you’re saying that customers who have already installed renewable energy systems could have their existing rates grandfathered in, so they can preserve the benefits of their investments. Is that correct?
Kraus: Yes, and on that very note, there are two groups of people who will be grandfathered. The first group is comprised of people who have already installed and are operating solar systems, as an example. The second group is anybody, from now until the end of the year, that submits an application and gets a signed interconnection agreement with us. They also will be grandfathered. So for 15 years going forward, you will have the existing rates that you have.

Now the question has come up many times, “Why are you doing that?’ The reason is these folks have made an investment, they have counted on the return they are going to get on that investment, and in fairness to them, by grandfathering them, they can look forward for the next x-number of years, with the same energy plan they had put in place, there will be no interruption in that.

IB:  How does it affect future installations?
Kraus: There is a two-way energy flow. The energy from the solar systems comes onto our grid, and they have a net metering system where they are getting credit back on their bill when the sun is shining and they are making electricity. When the electric rate drops, which it will [if the rate-restructuring proposal is approved], there is still a very strong incentive. Their payback for these systems still stays very high, but it changes because the energy rate is being reduced. The energy rate is being reduced because, obviously, on the other end, the fixed charge and the grid connection charge raises that end of the bill.

But when you net it out, when you take a typical customer that we have — they use about 550 kilowatt-hours per month — with the changes we have proposed, there is virtually no effect on their bill because the rate comes down and the fixed charge comes up. So that incentive for them to pay back their system still stays very strong. The length to pay back the system goes up slightly, but there still is a very strong incentive to have people put in solar and other renewable sources.



IB: MG&E has also committed to deploying more local renewable energy sources in the future. What more can you say about that in terms of the forms it will take?
Kraus: We’ve been part of the manure digester, which next month the county executive is going to officially cut the ribbon on. We’re one of the linchpins in that project getting off the ground [on a farm] in the town of Springfield. Of course, we have wind commitments, not here locally but where there are strong wind resources. We’ve got wind farms in Iowa and we’ve built the largest one east of the Mississippi up in Kewaunee, which is still operating there. We have a contract with Dane County for the methane gas coming off the Rodefeld Landfill, where they sell the electricity back to us. We have a long-term agreement with them, so our commitment to renewable energy speaks for itself.

IB: Finally, how would you handicap your chances of getting this plan approved, in its existing form, by the PSC?
Kraus: I never bet on days that end with a ‘y.’ However, it is anticipated the PSC will complete their work on our case this year to have the new rates effective Jan. 1, 2015. We’re going to engage our customers after the first of the year, whatever the [PSC] decision is. We’re going on a very comprehensive engagement with our customers to find out how these changes affect them, ask for some guidance on how we should move forward, and explain our case and explain how the grid is changing and how rates will change along with it. Whether or not we get exactly what we’re asking for, or some modification of that, engaging our customers throughout the next year is something we’ve already announced that we’re going to do.

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