PSC compromises on utility profits 

State energy regulators Thursday compromised on a utility rule that customer groups said could allow consumers to pay indirectly for bonuses and stock options awarded to executives at the state’s investor-owned utilities.

The Public Service Commission also made changes to satisfy concerns lawmakers raised over new guidelines for local governments to use when developers propose to build small wind farms.

In a new rule designed to simplify how utilities recover fuel costs, the commissioners rebuffed a request by utilities and members of the state Senate who wanted the commission to stop using cases involving fuel costs to determine whether utilities were earning too much money. But they also didn’t go as far as customer groups, the Wisconsin Paper Council and Wausau Paper Corp. had sought, rejecting their proposal to include executive bonuses in the calculation when probing whether a utility earned too much profit.

Commissioners Eric Callisto and Lauren Azar said they remained concerned about executive compensation at the investor-owned utilities. Callisto asked that the PSC staff monitor the issue over the next two years, with the commission planning to regulate bonuses through its regular audits and rate cases rather than cost increases linked to fuel.

Robert Norcross, the commission administrator, said the agency will be reviewing monthly earnings reports submitted by utilities to assess whether they are earning more than their authorized profit level.

“If it looks like the utilities are really over-earning, we could inform the commission of that and they could take whatever action they wanted to,” Norcross said.

Utilities had urged the commission and the Legislature to strip from the rule any look into excess revenues, arguing that cases involving costs for power plant fuel aren’t the proper place to deal with whether utilities earned too much money.

Customer groups termed the vote an acceptable compromise because they wanted to retain the opportunity for the commission to probe into whether utilities were earning too much.

“It’s not as strong as we would have liked, but the commission made assurances that ratepayers will not pay for bonuses in the future,” said Charlie Higley, executive director of the Wisconsin Citizens’ Utility Board, a customer group.

Azar, who has been the commission’s most vocal critic of executive compensation, said she was glad that this case shed light on the size of the bonuses, which totaled $44 million last year at four of the investor-owned electric and natural gas utilities in the state, on top of $10 million in salaries for those 20 executives.

She termed the incentive compensation “unacceptable.”

In the proxy statements filed with the Securities and Exchange Commission, utility holding companies defend the bonuses and stock options as pay-for-performance metrics that reward top management when the company’s financial results are strong.

Also Thursday, the commission revised language in a proposed rule that would govern how small wind farms in Wisconsin are regulated.

The revisions would allow turbines to be built closer to homes that aren’t hosting wind turbines than the original rules allowed. The revised rules would apply the same standard that the commission used when it approved construction of We Energies’ Glacier Hills Wind Park northeast of Madison, Callisto said.

As a result, wind turbines must be at least 1,250 feet away, the commission decided.

“By setting a maximum setback distance of 1,250 feet, the rule would not impose economic burdens on wind developers seeking to install newer and larger wind turbines now available in the market, such as the 2.5-megawatt turbines being erected at the Shirley Wind Farm in Brown County,” said Michael Vickerman, executive director of the renewable energy advocacy group Renew Wisconsin.

In addition, the commission made changes to address concerns raised by farmers during a recent legislative hearing on the wind rules. The changes would set up a system to compensate farmers for lost crop production within one-half mile of wind turbines if aerial spraying of insecticides isn’t able to be done because of the presence of the turbine.