Summarizing our Wisconsin 2013-14 rate change request

We filed a rate request with the Public Service Commission of Wisconsin today to increase electric and steam rates and to decrease natural gas rates for 2013 and 2014.

Our base electric rates and fuel costs for 2012 will not be affected. Customers will continue to pay the same base rates that they have paid since 2010. Any increase approved in today’s filing would not be effective until 2013.

Primary reasons for proposed changes in 2013-14

Electric: Currently, our base rates are frozen at 2010 levels, and we have delivered on our promise made more than a decade ago to keep increases in base rates, excluding fuel costs, to less than 4 percent a year despite large-scale projects necessary to meet evolving environmental regulations and to comply with Wisconsin’s renewable energy mandate. Although our normal day-to-day operational costs have not increased since 2010, we are asking for an increase in base electric rates in 2013 and 2014 mostly for the $1.3 billion being spent on air quality controls on the older units at Oak Creek and for the recently completed wind farm – Glacier Hills Wind Park. These projects were designed to strengthen reliability and to meet environmental regulations and state renewable energy requirements.

Natural gas: Our requested decrease in natural gas rates is tied to a reduction in bad debt.

Steam: Our requested increase in steam rates is associated with increased water rates from the city of Milwaukee and increased staffing levels required by the Occupational Safety and Health Administration.

Specifics and impact of our rate request will be detailed May 1.

Natural gas business customers express satisfaction

According to J. D. Power and Associates, we improved our service in the eyes of natural gas business customers over last year. The 680-point score is 61 points higher than last year, placing us in the second quartile in the Midwest region and nationally, and above the national average. We were in the fourth quartile regionally and nationally in 2011.

Our increase was surpassed by just two other utilities in the study – New Mexico Gas (up 90 points) and Kansas Gas (up 64 points). The national average was 674 points, an increase of 23 points from 2011.

Our top areas of performance included:

• Second-place tie nationally with 53 percent of customers saying they were not transferred when calling the company. We tied National Fuel Gas and were only one point behind the leader, Philadelphia Gas Works. 
• Third place for billing and payment in the Midwest Region. 
• Among national leaders for customers recalling they received communications from their utility. 
• Among national leaders for communicating specific high-value topics such as safety, reliability, corporate citizenship, environmental issues and system upgrades. 

Now in its seventh year, the J.D. Power study measures business customer satisfaction with gas utilities in East, Midwest, South and West regions. Satisfaction is measured by examining these factors:

• Billing and payment 
• Corporate citizenship 
• Price 
• Communications 
• Customer service 
• Field service 

Peregrine falcon nesting season begins

The countdown is on for new feathered friends to arrive at many of our power plants. Within the next couple of weeks, resident peregrine falcons are expected to produce eggs at several power plant nesting boxes. Our website visitors can view hourly webcam images of the nest boxes.

Since we began our peregrine falcon recovery program in 1997, 155 hatchlings have been produced at our nest boxes. That’s remarkable when you consider the bird was nearly extinct. About 20 percent of the peregrine falcons born in Wisconsin have hatched at our power plants.

Chick after banding last season.

This year, students at Pleasant Prairie Elementary School are following the nesting activity at our Pleasant Prairie Power Plant.

Wildlife expert Greg Septon recently visited Diane Epping’s fifth grade class to teach students about Wisconsin’s peregrine falcon recovery effort.

As part of their lesson, students will get to see the new chicks up close when they’re banded at the power plant later this spring.

Nest box webcams

Winter heating costs 18% less than last winter

We are lowering our forecast for residential customers’ heating bills this winter. Based on normal winter weather for the remaining six weeks of winter and the price of natural gas remaining where it is today on the spot market, we expect the average residential customer to pay approximately $540 in total winter heating costs.

This would be:

• 18 percent ($120) less than the average residential customer paid last winter ($660).
• 29 percent ($223) less than the most recent five-year average ($763).
• 38 percent ($338) less than the cost of the most expensive winter (2007-08 - $878).
• Less than any of the previous nine winters.

The average residential customer has paid $391 in winter heating costs through February, which is:

• 20 percent ($100) less than the costs for the November through February time period last winter ($491).
• 33 percent ($192) less than the most recent five-year average through February ($583).
• 41 percent ($269) less than the cost of the most expensive November through February time period. (2008-09 - $660). 
• Less than any of the previous nine November through February time periods.

Executive salaries: why they are what they are

Executive compensation is often the subject of news stories when companies such as Wisconsin Energy, the parent company of We Energies, publish their annual reports and proxy statements for stockholders.

Executive compensation at Wisconsin Energy is determined by members of the board of directors who are elected by the stockholders. The board’s policy is to target the middle of the pay range for individuals in similar positions in similar companies nationwide. In other words, don’t overpay, but don’t underpay either. The same policy applies to all positions in the company.

Only a portion of executive base pay is included in rates. For example, just 15 percent of the chief executive officer’s total compensation is covered in rates. The rest is paid stockholders or by other business lines that are part of Wisconsin Energy. The total cost of the senior executive team in 2011 was about $2.50 per customer.

Incentive compensation – paid entirely by stockholders – is tied to objectives set by the board of directors. No performance means no bonus. Incentive compensation was paid for 2011 because the company met or exceeded goals.

The board considered the financial and operational performance for the year, including:

• Record earnings from continuing operations. 
• Total shareholder return over the past three years that exceeded returns of the S&P 500, Dow Jones Industrials, NASDAQ or peer group of regulated utilities. 
• Highest earnings per share in company history. 
• WEC common stock trading at an all-time high of $35.38 on Dec. 30, 2011. 
• Dividend increase of 30 percent. 
• Highest customer satisfaction since Wisconsin Electric and Wisconsin Gas merger. 
• Most reliable utility in the Midwest recognition for seventh time in past 10 years. 
• Best safety record in company history. 
• Successful completion of Unit 2 at Oak Creek Expansion project.

WDNR issues notice of violation in bluff collapse incident

The Wisconsin Department of Natural Resources (WDNR) has issued a notice of violation concerning the bluff collapse at our Oak Creek Power Plant site on Oct. 31, 2011.

The WDNR noted that a combination of factors contributed to the bluff collapse and that it is difficult to arrive at a definitive conclusion based on currently available information. We will participate in a follow-up conference with WDNR officials to discuss the matter.

Susan Martin, our executive vice president, general counsel and corporate secretary, said, “We agree with the DNR report that a combination of factors contributed to the bluff collapse. We believe water from a number of sources, which seeped through layers of soil in the area, was the major reason for the bluff failure.”

In the violation notice, the WDNR notes that a detention pond built for the flue gas desulfurization process “appears to have the greatest potential to impact groundwater recharge and flow to the bluff collapse area. Even at low seepage rates, a significant volume of water would have discharged through the basin bottom over the three-year period since the basin was constructed.”

Martin said the detention pond built in 2009 was not built above the coal ash deposits. As noted in the WDNR’s findings, small ash deposits were found during excavation for the pond. We removed the deposits and replaced them with suitable soil before the detention pond was completed.

There was no threat to the health or safety of the public before the bluff collapse or as a result of the collapse. No one was injured in the incident, and we restored the area within a month of the event. Should any fines result, they would not be paid by customers.

M7 reports progress in bringing new jobs to region

Gale Klappa

Gale Klappa, chairman, president and chief executive of Wisconsin Energy Corporation, reported yesterday that the Milwaukee 7 regional economic development initiative helped create 799 jobs in 2011 and is working with prospects that would add thousands of additional jobs in the region. 

“In this economy, that’s truly an accomplishment to be proud of,” said Klappa, M7 co-chair, who met with business, government and education officials at a meeting in Cedarburg. He said the new jobs pay well, with an average starting wage of $60,000 per year. 

Since 2010, the M7 has been involved with recruitment or expansion of employers in southeast Wisconsin that have added 4,911 jobs. According to Pat O’Brien, M7 executive director, the M7 staff is working with prospects and advanced leads for prospects that potentially would attract another 7,100 jobs.

The M7 will increase its outreach in northern Illinois this year, especially in food and beverage manufacturing, which the group has identified as a growth platform.

Klappa is one of the founding members of the Milwaukee 7, which was launched in September 2005 to create a regional, cooperative economic development platform for the seven counties of southeast Wisconsin: Kenosha, Milwaukee, Ozaukee, Racine, Walworth, Waukesha and Washington. Its mission is to attract, retain and grow diverse businesses and talent.