Objections from industrial customers might shift some of the burden of a proposed hike in electric rates to smaller customers, despite initial projections that they wouldn’t be affected.
The state Public Service Commission held a review July 2 of Shawano Municipal Utilities’ request for a rate increase and decided to split the increase 60-40 between industrial and smaller customers.
That means small businesses and residential users would also see an increase if the split goes forward.
SMU is looking for a rate of return that would generate an additional $610,000 a year. The PSC determines how those additional costs are allocated among SMU customers.
Though a 60-40 split has been traditional for many rate increases, a PSC rate analysis initially concluded large commercial and industrial customers needed to pay a greater share this time. Their bills would have gone up anywhere from 2 to 6.6 percent, depending on their size.
That was before a hearing in May at which representatives from Aarrowcast and the Shawano Paper Mill voiced their concerns about the increase.
The paper mill and Aarrowcast are the only two customers in the CP-4 category of SMU’s large industrial companies, which would have seen 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.
Shawano Paper Mill estimated the increase would cost the company an additional $80,000 a year.
The companies advocated using the traditional 60-40 allocation instead.
Brian Knapp, SMU general manager and city administrator, said it’s likely now that small commercial users and residential customers would see an increase “as a result of large customer intervention” in the rate case.
Knapp said the 60-40 split is consistent with past practices and an argument could be made that it’s reasonable.
Knapp said he hasn’t yet seen the new PSC rate analysis and doesn’t yet know what the impact will be.
SMU has until Monday afternoon to respond to the new analysis, but it’s still unknown what that response will be.
“We’re calculating the impact of the change,” Knapp said.
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.