Tim Ryan, tryan@shawanoleader.com
Two large industrial customers would bear a third of the load of a proposed electric rate increase if Shawano Municipal Utilities’ request for a rate hike goes forward as proposed.
Representatives from Aarrowcast and the Shawano Paper Mill voiced their concerns about the increase Thursday at a public hearing held via teleconference between the Wisconsin Public Service Commission and SMU staff.
SMU is looking for a rate of return that would generate an additional $610,000 a year. How those additional costs are allocated among SMU customers is determined by the PSC.
In the past, many of those rate increases were split 60-40 between industrial and residential customers, respectively. This time around a PSC rate analysis concluded large commercial and industrial customers needed to pay an even greater share.
Their bills would go up anywhere from 2 to 6.6 percent, depending on size.
Residential customers would not be affected by the increase.
Michael Gorman, an attorney for Aarrowcast, 2900 E. Richmond St., argued in favor of returning to the old allocation formula.
Ron Thiry, vice president and general manager of Little Rapids Corp., which operates the Shawano mill at W7575 Poplar Road, said industrial customers had been encouraged to reduce their electric consumption through energy-efficiency programs.
“Actions such as this sure make it seem like we’re in some ways penalized for doing what we’ve been asked to do,” he said.
Thiry estimated the increase would cost the company an additional $80,000 a year.
The paper mill and Aarrowcast are the only two customers in the CP-4 category of SMU’s large industrial companies, which would see a total increase of $208,000 a year in their electric bills. That works out to an increase for Aarrowcast of about $128,000 per year.
Thiry estimated the CP-4 customers make up about 44 percent of SMU revenue.
“It’s important to consider the impact to everyone involved if, for some unfortunate reason, those operations were curtailed or lost from the entire revenue stream,” he said.
All parties in the case still have until May 16 to file final arguments with the PSC, which will then convene to either make a decision or recommend changes to the proposed allocation of the rate increase.
Brian Knapp, SMU general manager and city administrator, said it’s hoped there will be authorization to put a rate increase in effect by July 1.
SMU originally requested an increase that would allow for a 5.5 percent rate of return in net revenue, with hopes that a rate increase would be in place by the end of last year.
Delays in the approval process led PSC to suggest the utility request a 6.25 percent rate of return, which the SMU Commission voted to support.
SMU last increased its rates in 2010 after being given approval for a 4 percent rate of return, but revenue has fallen short since then due to a decrease in industrial power use and higher labor costs.
The utility had a rate of return of only 1.07 percent for 2013, compared to 3.21 percent in 2012.
Because of the economic conditions at the time, the SMU Commission had mixed feelings about its 2010 rate hike and initially debated asking for a 6 percent rate of return before settling on a request for 4 percent.
However, some commissioners felt it was inevitable the utility would have to come back and ask for more.