Declining fuel prices last year could result in typical Madison Gas and Electric customers receiving an average credit of $12.50 on their April electric bills if the Wisconsin Public Service Commission approves a request made by the utility Thursday.
The price of coal and natural gas, two fuel sources MGE uses to generate electric power, abruptly rose and then fell last year, which resulted in the utility collecting $5.3 million more than authorized by the PSC.
The PSC allows utilities to pass on to customers the cost of fuel it uses. In May, the PSC authorized MGE to add a surcharge on its bills to recover fuel costs higher than expected in the utility's last full rate case. The price of natural gas and diesel oil, which made the cost of transporting coal more expensive, spiked soon afterward but then declined rapidly, giving MGE more than authorized.
"Fuels used to generate electricity are huge costs to utilities and unlike other states, in Wisconsin, we estimate what our costs will be one to two years in advance, which is why we need to make adjustments later as it's almost impossible to meet those marks," said MGE spokesman Steve Kraus.
PSC regulations also allow utilities to retain the excess earnings for up to 12 months, then calculate the over-collected amounts and refund it subject to interest.
A message to the PSC for comment on MGE's request wasn't immediately returned.
MGE agreed to add 10.8 percent interest to its over-collected amounts and make the refunds available by the end of March.
The average refund of $12.50 was estimated based on residential customers using 600 kilowatts of electricity a month.
Refunds usually only occur during periods of extreme price volatility like the economy experienced last year, Kraus said. As long as prices remain relatively stable, fuel costs stay within a previously set price range and refunds aren't necessary, he said.
Last fall, Alliant Energy made average refunds of $7.12 to residential customers after it was determined it over-collected $12.7 million in energy charges.
MGE will apply to the PSC for new electrical rates this spring, Kraus said, but unlike Alliant, its rate request won't reflect the need to make up for revenue lost from large industrial customers closing or scaling back production.
"We don't have those large customers or heavy industries like Alliant or Public Service (of Green Bay). Our customer base has a different makeup," he said.
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