Madison Gas and Electric announced late last week monthly electric rates will increase slightly for customers beginning next year, while natural gas rates will drop.
The monthly electric rates for MG&E customers will increase by about $1.75, MG&E spokesperson Steve Kraus said.
MG&E originally requested to increase electric rates by 4.5 percent and to increase natural gas rates by 2.3 percent, Public Serve Commission spokesperson Teresa Smith said.
“The PSC approved a rate increase of 3.5 percent for electric — which is less than what MG&E asked for — and approved a 1 percent reduction for residential gas rates because MG&E received too much revenue from their bills,” Smith said.
As a result, the natural gas rates for the average MG&E customer will decrease by about 50 cents per month, Smith said.
Electric rates will increase overall by $12 million and natural gas rates will decrease by $1.5 million for the year.
These rate changes will go into effect sometime in January, Kraus said.
“Normally, rates change starting on January 1, but the commissioners have a number of things in front of them they need to complete before they change the rates,” Kraus said.
Although MG&E originally requested to increase natural gas rates, they ended up with a slight decrease, Kraus said.
“In many cases this is fairly common,” Kraus said. “It is not unusual for the utility and the commission to come up with different numbers.”
To change its rates for electricity and natural gas, MG&E submitted an application to the Public Service Commission of Wisconsin in April, according to Smith.
“Primary drivers of the need for [a rate increase] are infrastructure costs to maintain reliability, to comply with more stringent environmental regulations, and to satisfy customer demand,” MG&E attorneys said in the PSC application.
Additional reasons for the proposed rate increases include a drop in sales during the economic downturn, the application added.
When a utility sets its rates, Smith said, the company does a very complex analysis that estimates how much they will spend to purchase gas and electric for their entire clientele.
“MG&E overestimated the costs, which is why the PSC reduced the gas rate,” Smith said.
