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MGE customers to see 9% bill hike due to higher fuel costs; regulators approve gas plant purchase

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West Riverside

Millwrights repair the steam turbine at Alliant Energy's West Riverside Energy Center in Beloit in 2021. Regulators have authorized Madison Gas and Electric to buy a $25 million stake in the $670 million plant.

Wisconsin regulators have approved a nearly 9% rate hike for Madison Gas and Electric customers to cover higher fuel costs along with the company’s plans to buy part of Alliant Energy’s new natural gas plant in Beloit.

The average residential customer will pay about $8.20 more per month under the plan approved Thursday by the Public Service Commission.

The higher rates are primarily driven by higher natural gas prices and an estimated $25 million bump resulting from difficulties getting rail deliveries of coal to the Columbia Energy Center.

The increased revenues also include $409,000 in unforeseen “force majeure” cost increases for solar and wind farm projects stemming from the COVID-19 pandemic and subsequent supply chain constraints as well as the purchase of a $25 million share of the West Riverside Energy Center, which was completed last year at a cost of about $670 million.

The commission did not approve a companion proposal for WEC Energy Group to buy a $102 million share of the plant, which the company said it needs to ensure sufficient capacity for its We Energies subsidiary.

The $670 million plant in Beloit is Wisconsin's newest gas-fired power plant and second largest.

We Energies sought to block Alliant from building the West Riverside plant in 2015, arguing it had capacity to spare from its own $3 billion investment in new power plants. The utilities resolved the dispute after Alliant agreed to offer a share of the plant to We Energies’ sister company, Wisconsin Public Service Corporation.

PSC Chair Rebecca Valcq questioned whether the purchase would be in the public interest since Alliant would need to build additional power plants to replace the lost capacity.

According to the utilities, the transaction would save between $44 million and $135 million for We Energies customers but result in $258 million in added costs for Alliant ratepayers.

“In total it’s a $223 million loss for the state,” said Commissioner Tyler Huebner.

MGE will own a 25-megawatt share of the 725-megawatt plant, which MGE says is needed to replace its 211-megawatt share of the coal-fired Columbia Energy Center, which is scheduled to shut down in 2026.

Calling natural gas a “bridge fuel on our path toward a net-zero carbon future,” MGE says the move, combined with investments in clean energy sources, will allow it to cut 80% of its carbon emissions by the end of this decade.

While burning gas releases roughly half as much carbon dioxide as coal, the production and transportation releases methane, a far more potent greenhouse gas, negating most of the environmental advantages.

Huebner voted against the MGE purchase, arguing the money would be better spent on energy conservation, which Commissioner Ellen Nowak, the lone Republican appointee, called “the land of unicorns.”

“It’s in the public interest. It’s cost effective,” Huebner said. “Why would we approve plans that are more expensive?”

“The government can’t mandate people to use less energy. That’s why,” Nowak responded. “And the Legislature will never double (funding for) Focus on Energy.”

“We have voluntary programs,” Huebner said.

“The land of unicorns,” Nowak repeated.

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