Rate Matters

Except to the extent noted below, the circumstances set forth in Note 10 to the consolidated financial statements included in NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2012 and in Note 5 to NSP-Wisconsin’s Quarterly Report on Form 10-Q for the quarter period ended March 31, 2013 and June 30, 2013, appropriately represent, in all material respects, the current status of other rate matters, and are incorporated herein by reference.

Pending Regulatory Proceedings — Public Service Commission of Wisconsin (PSCW)

Wisconsin 2014 Electric and Gas Rate Case — On May 31, 2013, NSP-Wisconsin filed a request with the PSCW to increase rates for electric and natural gas service effective Jan. 1, 2014. NSP-Wisconsin requested an overall increase in annual electric rates of $40.0 million, or 6.5 percent, and an increase in natural gas rates of $4.7 million, or 3.8 percent.

The rate filing is based on a 2014 forecast test year, a return on equity (ROE) of 10.4 percent, an equity ratio of 52.5 percent, and a forecasted average net investment rate base of approximately $895.3 million for the electric utility and $89.8 million for the natural gas utility.

On Oct. 4, 2013, the PSCW Staff filed their direct testimony and recommended an electric rate increase of $23.8 million, or 3.8 percent, and a natural gas rate decrease of $1.1 million, or 0.9 percent. PSCW Staff’s recommendations were based on a 10.2 percent ROE and a 52.5 percent equity ratio.

The most significant adjustments proposed by the PSCW Staff are shown in the table below:



(Millions of Dollars)	Electric Staff Testimony October 2013			Natural Gas Staff Testimony October 2013
Rate request	$	40.0		$	4.7
Electric fuel and purchased power	(5.1		)	—
Sales forecast	(4.8		)	—
Incentive compensation and merit pay	(3.0		)	(0.6		)
ROE	(1.6		)	(0.2		)
Conservation funding transfer	0.7			(0.7		)
Depreciation expense	(0.7		)	(1.3		)
Ashland site amortization expense	—			(2.3		)
Other, net	(1.7		)	(0.7		)
Recommended rate increase (decrease)	$	23.8		$	(1.1	)

The majority of the adjustment to electric fuel and purchased power is the result of the PSCW Staff’s proposal to discontinue using the New York Mercantile Exchange (NYMEX) futures prices as a basis for setting the fuel price forecast and instead using a discounted percentage of the NYMEX futures prices. PSCW Staff’s sales forecast adjustment is based on the assumption that the strong sales growth trend from 2010 through 2012, primarily in the large commercial/industrial sector, will continue through 2013 and 2014, while NSP-Wisconsin’s forecast shows moderating growth.

On Oct. 18, 2013, NSP-Wisconsin filed rebuttal testimony, revising the requested electric rate increase to $34.0 million and natural gas rate increase to zero, based on a 10.4 percent ROE and other adjustments.

Next steps in the procedural schedule are as follows:


•	Surrebuttal testimony - Oct. 28, 2013;


•	Hearing - Oct. 30, 2013;


•	Initial brief - Nov. 13, 2013; and


•	Reply brief - Nov. 20, 2013.

A PSCW decision is anticipated in December 2013, with final rates going into effect in January 2014.