We Energies customers face another rate hike — but smaller, as regulators push back on utility

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We Energies customers are in for another round of rate hikes over the next two years, although not as steep as the utility first proposed.

Wisconsin’s Public Service Commission voted Thursday to approve a roughly 7% increase in We Energies’ electricity rates spread across 2027 and 2028 — the utility’s sixth consecutive rate hike. The utility expects an average residential customer’s monthly bill to rise between $7 and $8 per month in 2027 and again by between $6 and $7 the following year. 

The utility will direct much of the new revenue toward emerging renewable energy, natural gas and battery storage projects. It comes after We Energies, which serves more than a million customers in Wisconsin and parts of Michigan and Illinois, touts a roughly $10 billion increase to its capital spending plans over the next five years.

The company initially proposed a roughly 9% overall electricity price increase, including a 16% hike for residential customers, over the next two years. 

We Energies’ rate increases have outpaced inflation for the past three years, and commissioners sought to pump the brakes during Thursday’s 10-hour hearing.

“I do not believe we can ignore the cumulative impact of years of increases simply because each individual increase can be explained by a particular investment or expense,” Commissioner Kristy Nieto said at the hearing’s outset. “When customers are experiencing some of the highest rates in the region” and the utility is delivering strong returns for its shareholders, she added, “we have to ask whether the scales are properly balanced.”

The commission pared back the increase on multiple fronts, including by lowering the utility’s guaranteed “rate of return” —  the amount We Energies shareholders earn on each dollar they invest, passed along to ratepayers on their electricity bill. Market forces also play a role: We Energies’ fuel costs are also set to dip next year, as are those of Wisconsin’s other major utilities.

Their rewrite came two days after Wisconsinites voted to send a Democratic trifecta to Madison in 2027, with a new governor and legislative majorities poised to steer the largest energy buildout in Wisconsin’s living memory. The commission’s chair made clear on Thursday that she wants lawmakers to overhaul the state’s utility regulation rules. 

What is We Energies’ new rate of return? 

We Energies’ shareholders typically earn a 9.8% return on their investment, though that rate rises to roughly 10.5% or more for dollars spent building infrastructure to power data centers.

The company asked the commission this year to bump its rate of return to 9.9%, which it was as a “conservative” increase needed to attract new capital.

The request prompted outcry from — among other critics — Walmart. In testimony filed with the Public Service Commission in September, the retail giant called the request “unjustified,” saying it would push We Energies shareholders’ profit margins above the national average — and even higher when accounting for profits from new data center customers.
Walmart did not propose an alternative, but the Wisconsin Citizens Utility Board called for lowering the rate by nearly a percentage point.

Commissioners split the difference Thursday, setting the rate at 9.5%. The decrease from We Energies’ original ask will save ratepayers roughly $60 million over the next two years as the utility ramps up construction. 

Do the rate increases include data center-related costs?

We Energies proposed the rate increase in March, when the utility still awaited commission input on a pitch to bill ratepayers for a quarter of the costs of building new power plants for new data center customers. The utility offered to offset those costs for non-data center ratepayers with revenue from selling the plants’ surplus electricity on the wholesale market. 

Commissioners rejected that plan a month later, instead ordering We Energies to assign the power plant construction costs directly to its current and future large data center customers. 

A pending agreement between We Energies and Oracle, a partner in the Project Lighthouse data center campus in Port Washington, could also save ratepayers millions. 

The tech giant reached an agreement with We Energies last month to “subscribe” to a share of the Point Beach Nuclear Plant’s electricity output. Fueling that plant – Wisconsin’s largest — is increasingly expensive; the price of a megawatt of Point Beach electricity will rise more than 7% under We Energies’ current contract with the plant’s operator. The utility estimates that granting Oracle rights to a share of the plant’s output would spare other ratepayers roughly $300 million in fuel costs over the next five years. The commission has yet to approve the agreement.

Ratepayers could still pay for a portion of transmission infrastructure built to serve data centers. Transmission cost sharing is mostly outside the Wisconsin Public Service Commission’s authority. 

Those powers rest with the Federal Energy Regulatory Commission, which is considering a proposal from the American Transmission Company — the utility that owns and operates most of Wisconsin’s grid — to charge data center operators based on their projected transmission needs. 

Microsoft, the operator of the sprawling new data center in Mount Pleasant, has pushed back on that plan, arguing the transmission company could overbill it for infrastructure without providing an opportunity to protest. 

How did regulators respond to We Energies’ cost overruns?

Commissioners attempted to clamp down on We Energies’ recent overspending on renewable energy projects by limiting its shareholders’ profits from a southeast Wisconsin solar and battery project.

The commission allowed We Energies in 2022 to purchase a large planned solar farm and battery storage facility in Kenosha County from an independent developer for $433 million.

The solar farm went online in late 2024; the battery facility followed less than a year later. Their final price tag exceeded the commission-approved figure by nearly 40%.

WEC Vice President of Regulatory Affairs Richard Stasik attributed the overrun to inflation, component shortages and delays tied to a then-new law requiring customs officers to confirm that the project’s solar panels weren’t made using forced labor in China’s Xinjiang Uyghur Autonomous Region. 

Commissioner Marcus Hawkins noted that the labor law — and many of the other economic forces behind the overspend — existed before We Energies sought permission to buy the  facilities. Hawkins argued that the utility’s leaders “chose to put their head in the sand” instead of identifying those risks in their purchase request, leaving ratepayers to absorb any unexpected spending.

While the commissioners allowed We Energies to bill ratepayers for the full cost of the projects, they barred the utility from earning a profit on the $166 million in unapproved spending.

“We need to deny something,” Hawkins said, explaining the decision would pressure utilities to be more transparent about the risks of budget overruns when proposing to build or buy new infrastructure.

The commission plans to revisit two other multimillion-dollar overspends in the utility’s next rate case. We Energies’ Darien Solar Energy Center in Rock and Walworth counties is 35% over budget; the utility’s Koshkonong Solar Energy Center in Dane County is 42% over budget. Neither project is fully online as of November.

Unlike the Kenosha County facility, the commission approved the Darien and Koshkonong projects on the condition that We Energies cannot bill ratepayers for any amount above their  original price tags.

How did regulators try to ease the burden of retired power plants on ratepayers?

We Energies’ customers still owe roughly $1 billion for the utility’s “stranded assets” — power plants and generators retired before the utility’s customers fully paid off their value. When the utility pulled the plug on its once-mighty Pleasant Prairie coal plant in 2018, for instance, ratepayers still owed $775 million toward We Energies’ investment in the plant, plus a return for shareholders. 

“Retiring these plants saves customers millions of dollars in avoided operations and maintenance costs and hundreds of millions of dollars in additional costs for ongoing capital investments when compared to their original expected retirement dates,” Stasik testified earlier this year.

With more retirements on the horizon, consumer advocates pushed the commission to lighten the financial burden the now-demolished generators place on ratepayers. 

The commission took a moderate approach on Thursday, extending the timeline for We Energies to recoup its investments in the “stranded assets.” The longer payment period will reduce customers’ monthly payments on the remaining balance by spreading those costs over six additional years. Commissioners also voted to limit shareholder profits on the defunct plants. The Wisconsin Industrial Energy Group, which represents manufacturers and other large electricity customers, estimated those changes will save ratepayers at least $30 million by 2028.

While forcing the utility to write off the plants as a loss was out of the question, Nieto argued that treating the plants “as though they were used and useful” is unfair to ratepayers.

The problem isn’t new, Hawkins added. But the looming retirement of coal generators at We Energies’ Oak Creek plant in Milwaukee County — which the utility pushed back from 2024 to 2027 — and the construction of new renewables and natural gas projects increased pressure to spare ratepayers from a double whammy. 

“Now we have the confluence of the replacement costs hitting along with more stranded asset costs piling up,” he said.

Public Service Commission Chair Summer Strand described extending the payment timeline as the best option in the limited pool available under state law, slipping in a critique of state lawmakers for limiting commissioners’ flexibility.  

“We do not have any action from the policymakers in this state to help with stranded assets,” she said. 

Some neighboring states allow utilities to “securitize” the remaining value of a retired plant — converting the value into a specialized bond, similar to refinancing a mortgage. Customers still pay back the bond, but its interest rate on the bond may be lower than the utility’s profit margin. 

Will We Energies bill ratepayers to pay for its board of directors?

We Energies sought permission to bill ratepayers for roughly $5.3 million to cover a portion of its board of directors fees, arguing that the board’s oversight of budgets, capital plans and risk management “helps ensure utility resources are used prudently and in customers’ interests.” 

Commissioners weren’t convinced. The board provides a “shareholder benefit, not a customer benefit,” Strand said. “If you benefit from an expense, you should pay for it.”

We Energies also asked to bill ratepayers roughly $4 million over the next two years for its membership in industry associations. Several of those groups, especially the Wisconsin Utilities Association, the Metropolitan Milwaukee Association of Commerce and the national Edison Electric Institute and American Gas Association, run extensive state and federal lobbying operations.
The commission typically allows utilities to recoup only a portion of their membership dues from ratepayers — a share meant to match the ratepayer benefits of those memberships. That practice will continue over the next two years. Commissioners called the justifications in the latest request for billing customers for some membership dues  “flimsy” and urged the utility to be more transparent about whether the memberships benefit customers in any future requests. 

“I don’t know how else to send the message that we’re serious about this,” Strand said. 

How much will We Energies’ customers pay to restore service when the utility disconnects them for missing bills?

We Energies disconnected roughly 60,000 customers last year for falling behind on their energy bills, including roughly one in six households in parts of Milwaukee’s North Side. The commission placed a one-year hold on disconnections at the start of the COVID-19 pandemic, and annual disconnection totals remained below pre-pandemic levels — about 51,000 in 2019 — until 2024. 

“Disconnection is always a last resort,” We Energies spokesman Brendan Conway told Wisconsin Watch in an email. “A number of factors in recent years have created unique situations that impact customer bills, including very cold winter weather and very hot summer weather, fluctuating natural gas prices impacted by international events and an increase in federal heating assistance available to people during and after the COVID pandemic that has expired.”
We Energies currently requires that disconnected customers pay at least 80% of their past-due balance to restore their electricity service, with a maximum down payment of $600 for low-income households. 

Strand called the $600 cap “atrocious” and far out of reach for low-income households already behind on bills.

Commissioners agreed to lower the minimum payment for all customers to 50% of their arrears and cap the maximum down payment for low-income customers at $100. 

How did We Energies, investors and ratepayer advocates respond to the PSC?

We Energies did not publicly object to the commission’s multimillion-dollar cut to its revenue request.
“The Commission’s votes today support key investments for our customers: more Wisconsin-produced energy, continued tree trimming to reduce power outages and undergrounding of power lines to strengthen the grid against severe weather. It also reflects our shared commitment to ensuring that no costs to serve data centers are shifted to other customers,” Conway wrote in a statement after the hearing. “Our typical customer bills are below the national average and in line with customers across the Midwest. That will remain true in the coming years.”
The Citizens Utility Board applauded the commission’s efforts to rein in costs, but Executive Director Tom Content emphasized that regulators could have gone further — especially if state lawmakers gave them a longer leash. 

“The savings could be in the hundreds of millions of dollars, but unfortunately not enough to stop an increase from taking effect,” he wrote in a preliminary press release. “After all, the increase sought was nearly half a billion — $449 million — over two years.”

Shares in WEC Energy Group, We Energies’ parent company, hit an all-time high of $120 shortly before Thursday’s hearing. That price fell to $116 by Friday morning. 

Strand used the rate case to renew her criticism of Wisconsin’s comparatively hands-off approach to energy planning and legislative Republicans, just two days after Democrats won a trifecta in state government. 

“The commission is still tasked with balancing reliability, affordability and environmental responsibility,” she said as the marathon hearing began. The task is challenging, Strand added, because the commission is “hamstrung by an inadequate and outdated regulatory framework” and because “the majority party that has been in power since 2011 has refused to consider beneficial changes.”

The state Senate confirmed Strand to the commission in 2024; her term ends in 2029. Commissioners Nieto and Hawkins are serving without Senate confirmation, enabling Gov.-elect David Crowley to appoint a new majority to the commission next year.

We Energies customers face another rate hike — but smaller, as regulators push back on utility is a post from Wisconsin Watch, a non-profit investigative news site covering Wisconsin since 2009. Please consider making a contribution to support our journalism.