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Water vapor billows from MGE’s Blount Street power plant. 

Madison citizen groups offered mixed response to the state Public Service Commission‘s preliminary vote this week on Madison Gas & Electric’s rate case. But one says a renewable energy proposal by the Madison utility could be a good step forward.

The three-member PSC tentatively agreed to a plan that would raise electric rates for residential customers by 0.46 percent, or about 40 cents a month for the average household, while commercial and industrial customers will see their electric rates fall by as much as 1.94 percent, according to initial PSC figures.

Overall, the result would be a 0.33 percent rate reduction for all ratepayers combined, or a $1.4 million cut in electric revenues for the Madison utility company, starting in January, the PSC said.

MGE had asked for a $6.9 million, or 2.56 percent, increase in electric rates and a 3.7 percent hike in natural gas rates. The PSC tentatively approved a 2 percent increase for natural gas.

Part of the electric rate increase was to help pay for a new metering and billing system, as well as additional operation and transmission costs and cybersecurity updates.

As part of the preliminary decision, the PSC lowered the return on equity that MGE is allowed — a measure of the utility’s profitability — to 9.8 percent. It is the first time since the 1970s that a utility has had its return on equity under 10 percent, PSC spokeswoman Elise Nelson said.

MGE’s return on equity had been 10.2 percent, and the utility had asked to continue that.

“This is about at the median of what commissions have been approving around the country,” said Jeff Ripp, PSC Division of Energy Regulation administrator, in an interview.

Kurt Runzler, acting executive director of the Citizens Utility Board of Wisconsin, said lowering the return on equity (ROE) was a good decision. “It sets a new cap for what the ROE should be for utilities in Wisconsin ... because it’s been too high for quite a few years now.”

Runzler said as interest rates have fallen, the return on equity should have dropped, as well.

But Mitch Brey, campaign director for RePower Madison, said he is disappointed that commercial and industrial customers will see the benefits rather than residential ratepayers. Brey also said he would like to have seen the PSC order a rollback in the fixed monthly fees MGE now charges.

In 2014, MGE proposed a dramatic change in its rate structure that would have hiked the fixed rate from $10.50 a month to $67 a month by 2017. A storm of opposition resulted in a modified plan that raised fixed charges to $19 a month in 2015 and froze them in 2016. The utility then held an extended series of meetings with residents to get the public’s views.

“MGE went to great lengths to collect feedback on rate design, only to propose no change in rate design,” said Brey.

MGE spokesman Steve Schultz said the utility is reviewing the tentative decision and won’t comment about it yet. “We’ll know more when we get the written order from the PSC in the next several weeks,” he said.

Two renewable energy issues also were part of the rate case. In one matter, the PSC said MGE shareholders, not ratepayers, should pay for the Shared Solar community project, involving 1,700 solar panels being installed on the roof of the Middleton Municipal Operations Center. Nearly 300 customers have volunteered to pay extra to cover costs of the renewable energy.

Tyler Huebner, executive director of RENEW Wisconsin, said making it part of the rate base might have spurred more such projects, sooner.

Huebner said, though, he’s encouraged that commission chair Ellen Nowak and commissioner Mike Huebsch showed interest in an MGE proposal for a pilot project that would let corporations contract with MGE to build renewable power for them. The PSC asked for changes in the plan and left the door open for future consideration.

Huebner said the voluntary program could not only boost renewable investment in Wisconsin but could also attract new companies to the area. He said Google, Facebook and Microsoft all opened large data centers in Iowa because of the large number of wind farms there.

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Judy Newman is a business reporter for the Wisconsin State Journal.