Riverside power plant

Alliant Energy Corp., Madison, says savings it expects from the federal tax law changes could avert a rate increase that would have been needed to help pay for construction of a new, $700 million natural gas-fired power plant next to a similar plant, shown above, that it already owns and operates in the town of Beloit.

Wisconsin’s largest utility companies say they will save millions of dollars in the short term and hundreds of millions of dollars long-term as a result of the tax cuts Congress passed in late 2017.

Some of that windfall may come back to consumers’ pockets this year, but it’s too soon to say how much that will amount to, in dollars and cents.

Nationwide, ratepayers could benefit by as much as $80 to $90 a year, Robert Powelson, a member of the Federal Energy Regulatory Commission, said in January, according to a story by Bloomberg news service.

In January, the state Public Service Commission told Wisconsin’s investor-owned utilities to project how much money they will save — thanks to the federal legislation that slashes the corporate income tax rate to 21 percent from 35 percent — and to outline how they propose to deal with the excess money they are collecting “for the benefit of ratepayers, as soon as possible.”

“The commissioners view this as an important issue,” said Matthew Spencer, spokesman for the three-member regulatory panel. He said PSC chairwoman Ellen Nowak “wanted this issue raised as soon as she saw the tax cuts were signed into law in December.”

Here’s what three of the biggest utilities — Madison Gas & Electric, Alliant Energy Corp. of Madison, and We Energies of Milwaukee — expect to reap in taxes they won’t have to pay:

  • MGE:
  • Savings of $8 million to $10 million in 2018 and as much as $130 million over the life of the utility’s assets, such as power plants and distribution lines. About 75 percent of the benefits this year would be attributed to retail electric customers and 25 percent to retail natural gas customers, MGE said.
  • Alliant Energy:
  • Savings of $40 million to $50 million in 2018, with 90 percent of that from retail electric customers and 10 percent from retail natural gas customers. Over the life of the assets, which could be 30 years or more, the projected tax benefits could run $485 million to $495 million, Alliant said.
  • WEC Energy Group
  • (whose utilities include We Energies in Milwaukee, Wisconsin Public Service in Green Bay and others): Savings of $120 million in 2018 and as much as $1.7 billion over the life of the assets.

The projections do not include all of the anticipated cost reductions from companies the utilities coordinate with, such as American Transmission Co. and interstate gas pipelines, which could add tens of millions of dollars more in savings, the utilities said.

The Citizens Utility Board of Wisconsin (CUB) thinks the benefits should be returned to utility customers because they are paying rates this year that are based on the 35 percent tax rate.

“These tax dollars are really customer dollars. We want to see it come back to customers,” CUB executive director Tom Content said.

The utilities, in their reports to the PSC, are considering different ways of dealing with the unexpected cash.

MGE said it could provide a bill credit to customers in 2018 and use some of the money to invest in capital improvements such as renewable energy and smart grid technology “without negatively impacting customer rates.”

Alliant said it would like to consider a number of options, such as using part of this year’s savings “to provide an across-the-board bill decrease,” with the rest of the current year’s funds used to offset costs for projects the PSC already has approved.

For one thing, future savings could help pay for the $700 million natural-gas-fired power plant Alliant is building near Beloit, which was projected to require an 8 percent hike in base electric rates when it goes into service in 2020, Alliant said. Instead, with the tax savings, it could be possible to bring the new power plant online “without increasing customer rates at all,” the utility said.

We Energies — whose electric service extends into eastern Dane County — said it wants to apply all of the tax savings to its costs, rather than providing a credit on ratepayers’ bills. The company said that will offset future rate increases and “would provide the largest benefit to its customers.” We Energies has about $200 million in transmission costs alone that have not been recovered through customer rates, spokesman Barry McNulty said.

CUB, the Wisconsin Paper Council and the Wisconsin Industrial Energy Group filed joint comments with the PSC on Tuesday calling for all of the utilities to return at least a portion of their 2018 tax savings to customers as a bill credit to existing rates, and they asked for a chance to verify the accuracy of the utilities’ figures.

The three organizations also said they do not oppose using some of the tax savings to stave off rate hikes in the next few years. MGE and Alliant, in particular, are expected to file rate cases later this year that would have been likely to raise customer charges in 2019.

Utility regulators in most states are considering how to handle the tax benefits, and utilities have come forward with a number of alternatives, according to information compiled by Michigan State University’s Institute of Public Utilities.

Florida Power & Light, for instance, said it plans to put the money toward paying the $1.3 billion cost of restoring power from Hurricane Irma last September, saving each of its customers an average of $250 in potential rate increases.

In Illinois, ComEd said it will return a total of $200 million to ratepayers, for a $2 to $3 monthly decrease in the average residential customer’s bill.

The Wisconsin PSC has not yet given a timetable for acting on the issue.

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