Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. WEC ENERGY GROUP, INC. (783325) 10-Q published on May 03, 2019 at 12:38 pm
Reporting Period: Mar 30, 2019
We are currently party to several easement agreements that allow us access to land we do not own for the purpose of constructing and maintaining certain electric power and natural gas equipment. The majority of payments we make related to easements relate to our wind farms. We have not classified our easements as leases because we view the entire parcel of land specified in our easement agreements to be the identified asset, not just that portion of the parcel that contains our easement. As such, we have concluded that we do not control the use of an identified asset related to our easement agreements, nor do we obtain substantially all of the economic benefits associated with these shared-use assets.
In March 2019, WE, WG, and WPS filed applications with the PSCW to increase their retail electric, natural gas, and steam rates, as applicable, effective January 1, 2020. The WE and WPS proposals are targeting effective electric rate increases of approximately $83 million (2.9%) and $49 million (4.9%), respectively, in 2020, and additional increases of $83 million (2.9%) and $49 million (4.9%), respectively, in 2021. For WE’s, WG’s, and WPS’s natural gas customers, the proposals are targeting effective rate increases of approximately $15 million (3.9%), $11 million (1.8%), and $7 million (2.4%), respectively, in 2020. WPS is proposing an additional effective natural gas rate increase of $7 million (2.4%) in 2021. The WE proposal also targets a $1 million (4.5%) effective increase in its steam rates. The proposals for WE, WG, and WPS reflect a ROE of 10.35%, 10.30%, and 10.35%, respectively. All three of these Wisconsin utilities proposed a common equity component average of 52.0% on a financial basis and proposed to continue having an earnings sharing mechanism through 2021.
The proposed increase in electric rates at WE was driven by higher transmission charges, recovery of SSR revenues that were assumed in WE's 2015 rate order but were not received, and an increase in costs associated with a purchased power agreement previously approved by the PSCW. WE's proposed electric rates reflect its request to partially offset these increases with approximately $111 million of previously deferred tax benefits from the Tax Legislation. WE's proposal also includes its request for approval to continue collecting the carrying value of the Pleasant Prairie power plant and the PIPP using the current approved composite depreciation rates, in addition to a return on the remaining carrying value of the plants.
The proposed increase in electric rates at WPS was driven by the inclusion of WPS's SMRP, the Forward Wind Energy Center, and WPS's investments in two solar projects in rates, along with continued investments in system reliability and the recovery of various regulatory deferrals, including the deferral of the revenue requirement for ReACT™ costs above a previously authorized level. WPS's proposed electric rates reflect its request to use $40 million of previously deferred tax benefits from the Tax Legislation to partially offset these increases. WPS's proposal also includes its request for approval to continue collecting the carrying value of Pulliam units 7 and 8 and the Edgewater 4 generating unit using the current approved composite depreciation rates, in addition to a return on the remaining carrying value of the units.
In April 2018, MERC filed an application with the MPUC to establish a rider to begin recovering approximately $12 million of capital investments and $3 million of operating and maintenance expenses related to gas utility infrastructure costs (GUIC). Minnesota law allows recovery of GUIC incurred to replace or modify natural gas facilities (including costs incurred for surveys, assessments, and other work necessary to determine the need for replacement or modification) to the extent the work is required by state, federal, or other government agencies and exceeds the costs included in base rates. In February 2019, the MPUC issued a final written order approving MERC's use of the GUIC rider to start recovering in 2019 the costs noted above. As MERC requested, the rider will be subject to an annual true-up. The GUIC rider went into effect on May 1, 2019.
Net cash used in investing activities increased $170.8 million during the first quarter of 2019, compared with the same quarter in 2018. The increase in net cash used in investing activities was driven by the acquisition of an 80% ownership interest in Upstream during January 2019 for $268.2 million, which is net of cash and restricted cash acquired of $9.2 million. See Note 2, Acquisitions, for more information. This increase in net cash used in investing activities was partially offset by an $80.8 million decrease in cash paid for capital expenditures during the first quarter of 2019, compared with the same quarter in 2018, which is discussed in more detail below.