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Commission authorizes WPNL accounting treatment for Heartland pipeline participation, declines carrying cost authorization
Summary
The commission approved Wisconsin Power and Light’s request to record a contribution in aid of construction (CAIC/kayak) for participation in the ANR Heartland expansion project into account 182.3 with reporting conditions, but commissioners declined to authorize carrying costs at this time.
The Public Service Commission approved Wisconsin Power and Light’s (WPNL) request to record its contribution in aid of construction (described in the meeting as "kayak") for participation in the ANR Heartland expansion project into account 182.3 (other regulatory assets), subject to reporting and standard administrative conditions, and did not authorize carrying costs at this time (docket 66‑80‑AF‑108).
Chair Strand opened the discussion with background: WPNL requested authorization to record roughly $73.1 million of projected capital investment (about $81.3 million including carrying costs, per the company’s estimate) as a contribution to the Heartland expansion, which would add new pipeline capacity and replacements in Wisconsin and Illinois. Chair Strand noted that because the pipeline is an ANR asset that requires FERC approval and is not currently an ANR project with filed FERC authorization, the commission’s scope for oversight is limited and he recommended guardrails including quarterly reporting. "Because this is an ANR interstate project, ANR needs FERC approval to begin construction, which it has not yet received," he said, and proposed quarterly progress reports describing FERC status, construction milestones, percent complete, actual costs to date and an annual revised total cost estimate.
Why this matters: WPNL said the participation would secure firm gas supply for its Nina and Sheboygan generating stations, citing changes in MISO accreditation requirements and the company’s need to strengthen capacity accreditation after recent facility upgrades and a partial sale of generating assets. WPNL estimated that recording the contribution as a kayak would save customers about $13 million on a net present value basis compared to other funding methods, according to Chair Strand’s summary of the applicant’s filings.
Commission decisions and conditions: Commissioners agreed to grant WPNL’s request to record the contributions in account 182.3, subject to conditions modeled on prior commission dockets: (1) quarterly progress reports beginning with the first full quarter after the final decision is served and continuing until the project is in service; (2) each quarterly report to include FERC approval status, construction commencement date, construction status summaries, anticipated in‑service date and percent physical completion and actual project costs to date; and (3) an annual revised total cost estimate once per year and the date the facilities are placed in service. Commissioners also added a standard accounting‑only condition that any authorization is for accounting purposes only and does not pre‑judge future ratemaking treatment. Chair Strand, Commissioner Nieto and Commissioner Hawkins further added a condition to require annual reporting of current capacity accreditation values for the affected generating facilities for the period beginning with the pre‑project benchmark and continuing annually for two years after the project is placed in service to permit tracking of whether the stated capacity benefits materialize.
On the second decision item — WPNL’s request to accrue carrying costs at its economic cost of capital while the project is not in rate base — commissioners concluded the record was insufficient and noted a lack of precedent and limited risk to WPNL under its contract with ANR. Commissioners were not confident authorizing carrying costs in this docket would be appropriate given the project is not yet filed with FERC and the utility would not own the pipeline. The commission therefore did not authorize accruing carrying costs at this time; several commissioners indicated the applicant could seek such recovery later in a rate case with a fuller record.
The motion to approve WPNL’s accounting request with the described conditions was moved and seconded and carried by voice vote; commissioners indicated they would not approve the carrying costs request (alternative 4) at this time.
Next steps: WPNL must submit the quarterly and annual reports as a condition of the accounting authorization, and any future request to authorize carrying costs or ratemaking treatment would be considered in a subsequent proceeding.
