MG&E proposes lowering electric rates and slightly increasing gas rates

Madison Gas and Electric has proposed lowering its electric rates and increasing its natural gas rates slightly in 2019 and 2020.

If approved by state regulators, the proposal would lower the typical residential electric bill by $15.97 a year, or $1.33 a month, according to MG&E. The typical residential natural gas bill would increase $4.36 a year, or 36 cents a month in 2019 and by a total of $11.65 a year, or 97 cents a month in 2020.

The proposal — which was filed with the Public Service Commission on Tuesday — would lower MG&E's overall electric rates by 1.94 percent and increase natural gas rates by 1.06 percent in 2019 and 1.46 percent in 2020.

The changes would take effect Jan. 1 if approved by the PSC.

The proposed rates are part of a settlement agreement that was negotiated with the Citizens Utility Board of Wisconsin, an organization representing residential and small commercial customers; the Wisconsin Industrial Energy Group; Airgas USA LLC; Renew Wisconsin; Clean Wisconsin; and the Board of Regents of the University of Wisconsin System.

“Entering into settlement discussions, we challenged MG&E to think beyond just holding rates flat  — asking the utility to look for opportunities to reverse the trend of seemingly ever-increasing utility rates in Wisconsin,” Tom Content, executive director of the Citizens Utility Board, said in a statement. “We view this settlement as a down payment toward sustained savings for customers.”

The proposed rate decrease reflects the lower corporate tax rate and the lower cost of renewable generating capacity, such as a wind farm being built in Saratoga, Iowa.

The corporate tax rate was lowered to 21 percent from 35 percent as part of the federal tax reform legislation passed in December. Projected taxes are included as an expense when setting utility rates and the cost is passed onto customers.

As part of the proposed settlement, MG&E agreed to accelerated depreciation of certain assets, including an older gas-fired power plant and a coal-fired power plant.

Depreciation accounts for the wear and tear on assets.

Accelerating the depreciation of the plants will reduce MG&E’s rate base — the assets on which its stockholders earn a return — and therefore its profits. But it will free the utility to invest in lower-cost solar and wind projects.

"By essentially paying off these older assets sooner, we have more flexibility to make new investments in cost-effective renewable energy," Jeff Keebler, MG&E president and chief executive officer, said in a statement.

MG&E has 151,000 electric customers in Dane County and 158,000 natural gas customers in seven south-central and western Wisconsin counties.