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REGULATORY ENVIRONMENT | 3 Months Ended
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Mar. 31, 2022
Regulated Operations [Abstract] |
REGULATORY ENVIRONMENT | REGULATORY ENVIRONMENT Recovery of Natural Gas Costs Due to the cold temperatures, wind, snow, and ice throughout the central part of the country during February 2021, the cost of gas purchased for our natural gas utility customers was temporarily driven significantly higher than our normal winter weather expectations. All of our utilities have regulatory mechanisms in place for recovering all prudently incurred gas costs. In March 2021, WE and WG received approval from the PSCW to recover approximately $54 million and $24 million, respectively, of natural gas costs in excess of the benchmark set in their GCRMs over a period of three months, beginning in April 2021. In March 2021, WPS also filed its revised natural gas rate sheets with the PSCW reflecting approximately $28 million of natural gas costs in excess of the benchmark set in its GCRM. WPS also recovered these excess costs over a period of three months, beginning in April 2021. PGL and NSG incurred approximately $131 million and $10 million, respectively, of natural gas costs in February 2021 in excess of the amounts included in their rates. These costs were recovered over a period of 12 months, which started on April 1, 2021. PGL's and NSG's natural gas costs are being reviewed for prudency by the ICC as part of their annual natural gas cost reconciliation. The ICC could order the refund of any costs determined to be imprudent as part of the reconciliation. A decision regarding this review is expected by the end of 2022. In February 2021, MERC incurred approximately $75 million of natural gas costs in excess of the benchmark set in its GCRM. In August 2021, the MPUC issued a written order approving a joint proposal filed by MERC and four other Minnesota utilities to recover their respective excess natural gas costs. MERC will recover $10 million of these costs through its annual natural gas true-up process over a period of 12 months, and the remaining $65 million over 27 months, both of which started in September 2021. Recovery of these costs and the issue of prudence has been referred to a contested-case proceeding. As a result of the proceeding, the MPUC could disallow recovery or order the refund of any costs determined to be imprudent. A decision regarding this review is expected during the third quarter of 2022. Natural gas costs incurred at MGU and UMERC in excess of the amount included in their respective rates were not significant. Wisconsin Electric Power Company, Wisconsin Public Service Corporation, and Wisconsin Gas LLC 2023 and 2024 Rates In April 2022, WE, WPS, and WG filed requests with the PSCW to increase their retail electric, natural gas, and steam rates, as applicable, effective January 1, 2023. The requests reflected the following:
|  | WE |  | WPS |  | WG
Proposed 2023 rate increase |  |  |  |  |  |  |  |  |  |  |  |
Electric |  | $ | 260.5 | million | / | 8.4% |  | $ | 73.9 | million | / | 6.2% |  | N/A
Gas |  | $ | 50.7 | million | / | 10.7% |  | $ | 30.3 | million | / | 8.3% |  | $ | 60.1 | million | / | 8.3%
Steam |  | $ | 3.3 | million | / | 15.5% |  | N/A |  | N/A
Proposed ROE (1) |  | 10.0% |  | 10.0% |  | 10.2%
Proposed common equity component average on a financial basis (1) |  | 53.0% |  | 53.0% |  | 53.0%
(1) The proposed ROEs are consistent with each utilities' currently authorized ROE. The common equity component average for each utility is currently 52.5%. The primary drivers of the requested increases in electric rates are capital investments in new wind, solar, and battery storage; capital investments in natural gas generation; reliability investments, including grid hardening projects to bury power lines and strengthen WE's distribution system against severe weather; and changes in wholesale business with other utilities. Many of these investments have already been approved by the PSCW. The requested increases in natural gas rates primarily relate to capital investments previously approved by the PSCW, including LNG storage for our natural gas distribution system. The utilities also proposed continuing to use an earnings sharing mechanism. Under the proposed earnings sharing mechanism, if the utility earns above its authorized ROE: (i) the utility would retain 100.0% of earnings for the first 25 basis points above the authorized ROE; (ii) 50.0% of the next 50 basis points would be required to be refunded to ratepayers; and (iii) 100.0% of any remaining excess earnings would be required to be refunded to ratepayers. WE and WPS are seeking a limited rate re-opener for 2024 to address additional revenue requirements associated with generation projects that are expected to be placed into service in 2023 and 2024. In addition, WE and WG are requesting a limited rate re-opener for 2024 to address additional revenue requirements associated with LNG projects that are expected to be placed into service in 2023 and 2024, respectively. We expect a decision from the PSCW in the fourth quarter of 2022, with any rate adjustments expected to be effective January 1, 2023. The Peoples Gas Light and Coke Company Qualifying Infrastructure Plant Rider In July 2013, Illinois Public Act 98-0057, The Natural Gas Consumer, Safety & Reliability Act, became law. This law provides natural gas utilities with a cost recovery mechanism that allows collection, through a surcharge on customer bills, of prudently incurred costs to upgrade Illinois natural gas infrastructure. In January 2014, the ICC approved a QIP rider for PGL, which is in effect through 2023. PGL's QIP rider is subject to an annual reconciliation whereby costs are reviewed for accuracy and prudency. In March 2022, PGL filed its 2021 reconciliation with the ICC, which, along with the 2020, 2019, 2018, 2017, and 2016 reconciliations, are still pending. As of March 31, 2022, there can be no assurance that all costs incurred under PGL's QIP rider during the open reconciliation years will be deemed recoverable by the ICC.

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