Q. What is the purpose of your testimony?
A. The purpose of my testimony is to discuss the May 2011 decision by We Energies to cancel a 10-year, $60 million commitment to support renewable energy development in its service territory. [***BEGIN CONFIDENTIAL***] [***END CONFIDENTIAL***] (Exhibit __ (MJV-1)).
My testimony includes a recommendation to the Commission that it not allow We Energies to reallocate in 2012 the $6 million per year it had committed to spend on renewable energy development activities for other purposes. [***BEGIN CONFIDENTIAL***] [***END CONFIDENTIAL***]
Q. What is RENEW’s interest in this proceeding?
A. [***BEGIN CONFIDENTIAL***][***END CONFIDENTIAL***] RENEW is also a founding member of the We Energies Renewable Energy Collaborative (“WEREC”), the stakeholder body that has helped We Energies to achieve its voluntary renewable energy goal (5% by 2011) and maximize the value of its 10-year commitment to build, largely from scratch, a strong renewable energy infrastructure within its service territory. The collaborative, consisting of Midwest Renewable Energy Association, Citizens Utility Board, American Wind Energy Association, Wisconsin Energy Conservation Corporation, Customers First Coalition, and the 16th Street Community Health Center, has been working since 2002 to shape and guide We Energies’ renewable energy program. I think I can speak for all of the nonprofits in the collaborative when I say that our combined efforts and resources produced the strongest and most innovative utility-run renewable energy program in the state. Until We Energies announced its decision to terminate it, the program it had developed was widely regarded as one of the most successful utility-administered renewable energy initiatives in the nation.
Q. What was the basis of We Energies’ $6 million per year commitment to renewable energy?
A. I will quote from Jeff Anthony, who, as a We Energies manager in 2005, submitted testimony in the utility’s 2005 rate case (Docket No. 05-UR-102) providing details regarding We Energies’ request to recover $6 million per year in costs associated with planned renewable energy development activities:
In its first “Power the Future” filing in early 2002, [We Energies] made several commitments to renewable energy. Among those commitments was that, subject to regulatory approval and cost recovery, the Company would spend an additional $6 million per year to achieve a target of 5 percent of Wisconsin retail load served by the year 2011. With reference to this commitment, the PSCW in its November 10, 2003, Order in the “Power the Future” docket, stated: “As part of the PTF proposal, WEPCO has committed to a goal of obtaining 5 percent of its energy from renewable resources by 2011. This is more than twice the renewable portfolio standard set forth under Wis. Stats. § 196.378, which requires that at least 2.2 percent of each electric provider’s retail energy must be from renewable energy resources by this date. WEC has also declared its intent to spend up to $6 million per year for ten years on emerging technologies and activities, to encourage the development of renewable resources.Q. We Energies launched its Renewable Energy Development program in 2002. Why did the utility wait until 2006 to begin spending $6 million per year on the program?
A. As a condition of its WICOR merger, the Commission imposed a five-year rate freeze on We Energies that expired on January 1, 2006.
Q. Did We Energies receive approval on its request to recover $6 million for renewable energy development costs?
A. Yes, it did. It also received approval from the Commission in 2007 to spend $6 million per year on its renewable energy development program in 2008 and 2009, and it also received approval in 2009 to spend $6 million per year on its renewable energy development program in 2010 and 2011. All told, We Energies has sought and received permission to spend up to $36 million on the renewable energy program it has developed in consultation with WEREC.
Q. Did We Energies produce a “Renewable Energy Development” program plan for the PSC’s review?
A. Yes. In 2006, We Energies created a fully fleshed-out program plan and presented it to the PSC that September, building on the summary table it had submitted in the previous rate case. The program plan contained a diverse portfolio of renewable energy projects and initiatives. We Energies also committed to hiring an outside firm to perform an independent assessment of all of the elements and initiatives set forth in the Renewable Energy Development program plan.
Q. What elements of We Energies’ Renewable Energy Development program do you consider to be particularly successful?
A. Several of We Energies’ customer incentives and tariffs were unique in the way they complemented Focus on Energy’s renewable energy program. For example, We Energies was the first utility to: (1) offer a solar energy-specific buyback rate; (2) increase the net energy billing capacity ceiling for small wind systems generators to 100 kW; and (3) support renewable energy-specific conferences and events such as Solar Decade held in Milwaukee. Perhaps the most innovative element in We Energies’ program, however, was its special incentive for nonprofit customers seeking to install renewable energy systems. Every three months, We Energies would solicit proposals from schools, religious institutions, local governments, nature centers and other nonprofit entities to co-fund new renewable energy systems on their premises. This We Energies incentive supplemented Focus on Energy grants and cash-back awards. It was designed to overcome the inability of these nonprofit entities to capture federal renewable energy tax credits to offset their own system acquisition costs. As a result of this unique incentive, there are more renewable energy systems serving nonprofit customers in We Energies territory than in any other utility territory. This initiative has an educational component to it as well; We Energies posts real-time production data from these systems on its web site. (Exhibit __ (MJV-2)).
We Energies was also the first Wisconsin utility to field a large solar initiative which supported a total of one megawatt of photovoltaic generating capacity on seven customer rooftops. All told, We Energies’ support of solar energy, including solar hot water systems, helped foster the convergence of a solar industry cluster in southeast Wisconsin consisting of such companies as Helios USA, Johnson Controls, Caleffi Solar, Hot Water Products, and Sunvest.
Q. In what other ways did We Energies’ program benefit ratepayers?
A. We Energies has a number of renewable energy systems 10 kW and above that are interconnected to its distribution system. (Exhibit __ (MJV-3)). Depending on the specific tariff through which We Energies acquires the generation, many of these installations, including most if not all of the biogas generation facilities in its service territory, are a source of Renewable Energy Credits, that, beginning in 2012, can be banked to help the utility meet its 2015 target under Wisconsin’s Renewable Energy Standard. That supply cushion could become very valuable to We Energies if an extended interruption occurs with a major supply source of renewable electricity. Also, the preponderance of solar PV systems in We Energies territory was a contributing factor enabling We Energies to weather July’s heat waves without setting a new record for system-wide peak demand.
Q. Did RENEW have any advance knowledge of We Energies’ unilateral decision to prematurely terminate its Renewable Energy Program?
A. At WEREC’s May 11, 2011 meeting, We Energies representatives disclosed to the collaborative the company’s internal decision to unilaterally and prematurely terminate the program. There had been no discussion of such an outcome between We Energies and any of the other collaborative members prior to the meeting. We Energies’ representatives assured us that the decision was final and irrevocable. Indeed, by the time We Energies got around to dropping this particular bombshell on WEREC participants, program termination was already a fait accompli. One day later, an announcement on the termination appeared on We Energies’ web site.
Q. Has We Energies provided any information to the Commission explaining its unilateral decision to prematurely terminate its program?
A. No, it has not. We Energies has yet to offer an explanation for its decision in this proceeding. In fact, We Energies is not explicitly asking for permission to discontinue funding for this initiative at this time. Instead, the program’s suspension is merely assumed within its proposed suspension of certain regulatory amortizations for 2012. This suspension for the test year would appear to set the stage for termination of the program pursuant to Wis. Admin. Code ch. PSC 137.
Q. Why should the Commission reject We Energies’ decision to prematurely and unilaterally terminate its Renewable Energy Development program?
A. There are several persuasive reasons for not sanctioning We Energies’ decision to unilaterally and prematurely terminate its Renewable Energy Development program. One, this proceeding, to date, is devoid of any justification by We Energies for this abrupt change of course. Two, the Commission has in three previous rate cases approved the $6 million per year earmarked for supporting renewable energy development activities. Nothing has happened between the most recent approval of funds for this initiative and today that warrant a lesser amount of funding for this initiative, let alone its outright termination. [***BEGIN CONFIDENTIAL***][***END CONFIDENTIAL***] In other words, there is a trust issue here that should not be summarily dismissed.
Five, the Commission staff audit in this proceeding revealed excess revenue for the test year of more than $85.8 million under the proposal submitted by WEPCO compared with adjustments proposed by Commission staff. “In other words, these proposed adjustments indicate that applicants are proposing to defer $85.8 million more than is necessary to achieve no change in base rates.” Accordingly, there is no valid basis for We Energies to contend that it must terminate or suspend its renewable energy program with a relatively small annual budget of $6 million. We Energies could cover program costs 14 times over with its revenue surplus. Six, this initiative is an important source of renewable energy development and innovation throughout We Energies’ service territory, providing support for customer-sited renewable energy installations, conferences, workshops, research and development activities, demonstration projects, and advanced renewable buyback rates. Although the accomplishments of this program over the past five years are a good start, there is still much to be achieved. Termination of this program would be a severe blow to area contractors, businesses, and manufacturers that invested in new production capacity and expanded their workforce in direct response to the favorable climate for renewable energy that We Energies had created in its service territory. Allowing We Energies to abruptly terminate its renewable energy initiative without cause would send a strong signal to these businesses and other prospective market actors that they should focus their renewable energy development work in out-of-state markets, where policy commitments are durable enough to survive the whims of utility managers.
Q. Does this complete your direct testimony?
A. Yes it does.