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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract] |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES We and our subsidiaries have significant commitments and contingencies arising from our operations, including those related to unconditional purchase obligations, environmental matters, and enforcement and litigation matters. Unconditional Purchase Obligations Our electric utilities have obligations to distribute and sell electricity to their customers, and our natural gas utilities have obligations to distribute and sell natural gas to their customers. The utilities expect to recover costs related to these obligations in future customer rates. In order to meet these obligations, we routinely enter into long-term purchase and sale commitments for various quantities and lengths of time. Our non-utility energy infrastructure generation facilities have obligations to distribute and sell electricity through long-term offtake agreements with their customers for all of the energy produced. These projects also enter into related easements and other agreements associated with the generating facilities. The following table shows our minimum future commitments related to these purchase obligations as of December 31, 2019, including those of our subsidiaries.
|  |  |  |  |  | Payments Due By Period
(in millions) |  | Date Contracts Extend Through |  | Total Amounts Committed |  | 2020 |  | 2021 |  | 2022 |  | 2023 |  | 2024 |  | Later Years
Electric utility: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nuclear |  | 2033 |  | $ | 8,319.0 |  |  | $ | 475.1 |  |  | $ | 501.1 |  |  | $ | 531.2 |  |  | $ | 563.0 |  |  | $ | 596.8 |  |  | $ | 5,651.8 |
Coal supply and transportation |  | 2024 |  | 983.2 |  |  | 306.9 |  |  | 255.7 |  |  | 223.4 |  |  | 196.5 |  |  | 0.7 |  |  | — |
Purchased power |  | 2051 |  | 428.3 |  |  | 88.9 |  |  | 58.5 |  |  | 51.5 |  |  | 46.5 |  |  | 43.4 |  |  | 139.5 |
Natural gas utility: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Supply and transportation |  | 2048 |  | 1,652.3 |  |  | 344.8 |  |  | 285.5 |  |  | 224.6 |  |  | 131.2 |  |  | 70.8 |  |  | 595.4 |
Non-utility energy infrastructure: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchased power |  | 2061 |  | 173.6 |  |  | 7.7 |  |  | 8.8 |  |  | 8.6 |  |  | 8.8 |  |  | 8.9 |  |  | 130.8 |
Natural gas storage and transportation |  | 2048 |  | 13.6 |  |  | 7.7 |  |  | 2.7 |  |  | 1.3 |  |  | 0.8 |  |  | 0.1 |  |  | 1.0 |
Total |  |  |  | $ | 11,570.0 |  |  | $ | 1,231.1 |  |  | $ | 1,112.3 |  |  | $ | 1,040.6 |  |  | $ | 946.8 |  |  | $ | 720.7 |  |  | $ | 6,518.5 |
Environmental Matters Consistent with other companies in the energy industry, we face significant ongoing environmental compliance and remediation obligations related to current and past operations. Specific environmental issues affecting us include, but are not limited to, current and future regulation of air emissions such as SO 2, NOx, fine particulates, mercury, and GHGs; water intake and discharges; management of coal combustion products such as fly ash; and remediation of impacted properties, including former manufactured gas plant sites. We have continued to pursue a proactive strategy to manage our environmental compliance obligations, including:
• | the development of additional sources of renewable electric energy supply;
• | the addition of improvements for water quality matters such as treatment technologies to meet regulatory discharge limits and improvements to our cooling water intake systems;
• | the addition of emission control equipment to existing facilities to comply with ambient air quality standards and federal clean air rules;
• | the protection of wetlands and waterways, threatened and endangered species, and cultural resources associated with utility construction projects;
• | the retirement of older coal-fired power plants and conversion to modern, efficient, natural gas generation, super-critical pulverized coal generation, and/or replacement with renewable generation;
• | the beneficial use of ash and other products from coal-fired and biomass generating units; and
• | the remediation of former manufactured gas plant sites.
Air Quality National Ambient Air Quality Standards After completing its review of the 2008 ozone standard, the EPA released a final rule in October 2015, which lowered the limit for ground-level ozone, creating a more stringent standard than the 2008 NAAQS. The EPA issued final nonattainment area designations in April 2018. The following counties within our service territories were designated as partial nonattainment: Door, Kenosha, Manitowoc, Northern Milwaukee/Ozaukee, and Sheboygan shorelines. This re-designation was challenged in the D.C. Circuit Court of Appeals in Clean Wisconsin et al. v. U.S. Environmental Protection Agency. Petitioners in that case have argued that additional portions of Milwaukee, Waukesha, Ozaukee, and Washington Counties (among others) should be designated as nonattainment for ozone. In November 2019, the D.C. Circuit Court of Appeals heard oral arguments for that case. A decision is expected in spring 2020, and we expect that any subsequent EPA re-designation, if necessary, would take place in mid-2021. We believe we are well positioned to meet the requirements associated with the ozone standard and do not expect to incur significant costs to comply. The State of Wisconsin is currently working with stakeholders, including us, in developing regulations for inclusion in the state implementation plan required by the rule. Mercury and Air Toxics Standards In December 2018, the EPA proposed to revise the Supplemental Cost Finding for the MATS rule as well as the CAA required RTR. The EPA was required by the United States Supreme Court to review both costs and benefits of complying with the MATS rule. After its review of costs, the EPA determined that it is not appropriate and necessary to regulate hazardous air pollutant emissions from power plants under Section 112 of the CAA. As a result, under the proposed rule, the emission standards and other requirements of the MATS rule first enacted in 2012 would remain in place. The EPA is not proposing to remove coal- and oil-fired power plants from the list of sources that are regulated under Section 112. The EPA also proposes that no revisions to MATS are warranted based on the results of the RTR. As a result, we do not expect the proposed rule to have a material impact on our financial condition or operations. Climate Change The ACE rule became effective in September 2019. This rule provides existing coal-fired generating units with standards for achieving GHG emission reductions. The rule was finalized in conjunction with two other separate and distinct rulemakings, (1) the repeal of the Clean Power Plan, and (2) revised implementing regulations for ACE, ongoing emissions guidelines, and all future emission guidelines for existing sources issued under CAA section 111(d). Every state's plan to implement ACE is required to focus on reducing GHG emissions by improving the efficiency of fossil-fueled power plants. The rule is being litigated in challenges brought in the D.C. Circuit Court of Appeals by 22 states (including Illinois, Michigan, Minnesota, and Wisconsin), local governments, and certain nongovernmental organizations. This litigation is proceeding, but has not yet been scheduled for oral argument. The WDNR is working with state utilities and has begun the process of developing the implementation plan with respect to the ACE rule. In December 2018, the EPA proposed to revise the New Source Performance Standards for GHG emissions from new, modified, and reconstructed fossil-fueled power plants. The EPA determined that the BSER for new, modified, and reconstructed coal units is highly efficient generation that would be equivalent to supercritical steam conditions for larger units and subcritical steam conditions for smaller units. This proposed BSER would replace the determination from the previous rule, which identified BSER as partial carbon capture and storage. In April 2019, we issued a climate report, which analyzes our GHG reduction goals with respect to international efforts to limit future global temperature increases to less than two degrees Celsius. We will evaluate potential GHG reduction pathways as climate change policies and relevant technologies evolve over time. We continue to evaluate opportunities and actions that preserve fuel diversity, lower costs for our customers, and contribute toward long-term GHG emissions reductions. Our current plan is to work with our industry peers, environmental groups, public policy makers, and customers, with goals of reducing CO 2 emissions. In 2019, we met and exceeded our 2030 goal of reducing CO 2 emissions by 40% below 2005 levels, and are re-evaluating our longer-term CO 2 reduction goals. As a result of our generation reshaping plan, we retired approximately 1,800 MW of coal generation since the beginning of 2018, including the 2018 retirements of the Pleasant Prairie power plant, the Pulliam power plant, and the jointly-owned Edgewater Unit 4 generating units as well as the March 2019 retirement of the PIPP. See Note 6, Property, Plant, and Equipment, for more information. We also have a goal to decrease the rate of methane emissions from the natural gas distribution lines in our network by 30% per mile by the year 2030 from a 2011 baseline. We were over half way toward meeting that goal at the end of 2019. We are required to report our CO 2 equivalent emissions from our electric generating facilities under the EPA Greenhouse Gases Reporting Program. Based upon our analysis of the data, we reported CO 2 equivalent emissions of 21.8 million metric tonnes and 26.4 million metric tonnes to the EPA for 2019 and 2018, respectively. The level of CO 2 and other GHG emissions varies from year to year and is dependent on the level of electric generation and mix of fuel sources, which is determined primarily by demand, the availability of the generating units, the unit cost of fuel consumed, and how our units are dispatched by MISO. We are also required to report CO 2 equivalent emissions related to the natural gas that our natural gas utilities distribute and sell. Based upon our analysis of the data, we reported CO 2 equivalent emissions of 29.4 million metric tonnes to the EPA for 2019 and 2018. Water Quality Clean Water Act Cooling Water Intake Structure Rule In August 2014, the EPA issued a final regulation under Section 316(b) of the Clean Water Act that requires the location, design, construction, and capacity of cooling water intake structures at existing power plants to reflect the BTA for minimizing adverse environmental impacts. The rule became effective in October 2014 and applies to all of our existing generating facilities with cooling water intake structures, except for the ERGS units, which were permitted under the rules governing new facilities. We have received BTA determinations for OC 5 through OC 8, Weston Units 2, 3, and 4, and VAPP. Although we currently believe that existing technology at the PWGS satisfies the BTA requirements, final determinations will not be made until the discharge permit is renewed for this facility, which is expected to be in 2021. Until that time, we cannot determine what, if any, intake structure or operational modifications will be required to meet the new BTA requirements for this facility. As a result of past capital investments completed to address Section 316(b) compliance at WE and WPS, we believe our fleet overall is well positioned to meet the regulation and do not expect to incur significant costs to comply with this regulation. Steam Electric Effluent Limitation Guidelines The EPA's final 2015 ELG rule took effect in January 2016. This rule created new requirements for several types of power plant wastewaters. The two new requirements that affect WE and WPS relate to discharge limits for BATW and wet FGD wastewater. As a result of past capital investments at WE and WPS, we believe our fleet is well positioned to meet the existing ELG regulations. Our power plant facilities already have advanced wastewater treatment technologies installed that meet many of the discharge limits established by this rule. There will, however, need to be modifications to the BATW systems at Weston Unit 3 and OC 7 and OC 8. Also, one wastewater treatment system modification may be required for the wet FGD discharges from the six units that make up the OCPP and ERGS. Based on preliminary engineering, we estimate that compliance with the current rule will require $60 million in capital costs. The ELG requirements for BATW and wet FGD systems are currently being re-evaluated by the EPA. In September 2017, the EPA issued a final rule (Postponement Rule) to postpone the earliest compliance date to November 1, 2020 for the BATW and wet FGD wastewater requirements while it reconsiders the ELG rule. The Postponement Rule left unchanged the latest ELG rule compliance date of December 31, 2023. In November 2019, the EPA Administrator signed the proposed ELG Reconsideration Rule to revise the treatment technology requirements related to BATW and wet FGD wastewaters at existing facilities. The EPA also proposed a provision that exempts facility owners from the new BATW and wet FGD requirements if a generating unit is retired by December 31, 2028. We expect the rule to be finalized in late 2020. In the meantime, we are currently evaluating what impact, if any, the proposed rule would have on our estimated compliance cost. Land Quality Manufactured Gas Plant Remediation We have identified sites at which our utilities or a predecessor company owned or operated a manufactured gas plant or stored manufactured gas. We have also identified other sites that may have been impacted by historical manufactured gas plant activities. Our natural gas utilities are responsible for the environmental remediation of these sites, some of which are in the EPA Superfund Alternative Approach Program. We are also working with various state jurisdictions in our investigation and remediation planning. These sites are at various stages of investigation, monitoring, remediation, and closure. In addition, we are coordinating the investigation and cleanup of some of these sites subject to the jurisdiction of the EPA under what is called a "multisite" program. This program involves prioritizing the work to be done at the sites, preparation and approval of documents common to all of the sites, and use of a consistent approach in selecting remedies. At this time, we cannot estimate future remediation costs associated with these sites beyond those described below. The future costs for detailed site investigation, future remediation, and monitoring are dependent upon several variables including, among other things, the extent of remediation, changes in technology, and changes in regulation. Historically, our regulators have allowed us to recover incurred costs, net of insurance recoveries and recoveries from potentially responsible parties, associated with the remediation of manufactured gas plant sites. Accordingly, we have established regulatory assets for costs associated with these sites. We have established the following regulatory assets and reserves for manufactured gas plant sites as of December 31:
(in millions) |  | 2019 |  | 2018
Regulatory assets |  | $ | 685.5 |  |  | $ | 687.1 |
Reserves for future environmental remediation |  | 589.2 |  |  | 616.4 |
Renewables, Efficiency, and Conservation Wisconsin Legislation In 2005, Wisconsin enacted Act 141, which established a goal that 10% of all electricity consumed in Wisconsin be generated by renewable resources annually. WE and WPS have achieved their required renewable energy percentages of 8.27% and 9.74%, respectively, and met their compliance requirements by constructing various wind parks, a biomass facility, and by also relying on renewable energy purchases. WE and WPS continue to review their renewable energy portfolios and acquire cost-effective renewables as needed to meet their requirements on an ongoing basis. The PSCW administers the renewable program related to Act 141, and each utility funds the program based on 1.2% of its annual retail operating revenues. Michigan Legislation In December 2016, Michigan enacted Act 342, which requires 12.5% of the state's electric energy to come from renewables for years 2019 through 2020, and energy optimization (efficiency) targets up to 1% annually. The renewable requirement is increased to 15.0% for 2021. UMERC was in compliance with these requirements as of December 31, 2019. The legislation continues to allow recovery of costs incurred to meet the standards and provides for ongoing review and revision to assure the measures taken are cost-effective. Enforcement and Litigation Matters We and our subsidiaries are involved in legal and administrative proceedings before various courts and agencies with respect to matters arising in the ordinary course of business. Although we are unable to predict the outcome of these matters, management believes that appropriate reserves have been established and that final settlement of these actions will not have a material effect on our financial condition or results of operations. Consent Decrees Wisconsin Public Service Corporation – Weston and Pulliam Power Plants In November 2009, the EPA issued an NOV to WPS, which alleged violations of the CAA's New Source Review requirements relating to certain projects completed at the Weston and Pulliam power plants from 1994 to 2009. WPS entered into a Consent Decree with the EPA resolving this NOV. This Consent Decree was entered by the United States District Court for the Eastern District of Wisconsin in March 2013. With the retirement of Pulliam Units 7 and 8 in October 2018, WPS completed the mitigation projects required by the Consent Decree and received a completeness letter from the EPA in October 2018. See Note 6, Property, Plant, and Equipment, for more information about the retirement of the Pulliam units. We plan to request termination of the WPS Consent Decree during 2020. Joint Ownership Power Plants – Columbia and Edgewater In December 2009, the EPA issued an NOV to Wisconsin Power and Light, the operator of the Columbia and Edgewater plants, and the other joint owners of these plants, including Madison Gas and Electric, WE (former co-owner of an Edgewater unit), and WPS. The NOV alleged violations of the CAA's New Source Review requirements related to certain projects completed at those plants. WPS, along with Wisconsin Power and Light, Madison Gas and Electric, and WE, entered into a Consent Decree with the EPA resolving this NOV. This Consent Decree was entered by the United States District Court for the Western District of Wisconsin in June 2013. As a result of the continued implementation of the Consent Decree related to the jointly owned Columbia and Edgewater plants, the Edgewater 4 generating unit was retired in September 2018. See Note 6, Property, Plant, and Equipment, for more information about the retirement. WE paid an immaterial portion of the assessed penalty but has no further obligations under the Consent Decree.

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