REGULATORY ENVIRONMENT

6 Months Ended

Jun. 30, 2023

Wisconsin Electric Power Company, Wisconsin Public Service Corporation, and Wisconsin Gas LLC

2024 Limited Rate Case Re-Opener

In accordance with their rate orders approved by the PSCW in December 2022, WE, WPS, and WG filed requests for limited electric and natural gas rate case re-openers, as applicable, with the PSCW on May 15, 2023. The limited electric rate case re-openers filed by WE and WPS include updated revenue requirements for the generation projects that were previously approved by the PSCW and are expected to be placed into service in 2023 and 2024. WE's limited electric re-opener also includes the projected savings from the retirement of the OCPP units 5 and 6, which are expected to be retired in May 2024. WE and WG also filed a request for a limited natural gas rate case re-opener to reflect the additional revenue requirements associated with their previously approved LNG projects that are expected to be placed into service in 2023 and 2024, respectively.

The requested increases in 2024 base rates are as follows:


	WE					WPS					WG
Requested 2024 base rate increases
Electric	$	45.0	million	/	1.3%	$	8.6	million	/	0.5%	N/A
Gas	$	23.9	million	/	4.5%	N/A					$	22.2	million	/	2.9%

The utilities' ROE and common equity component averages will not be addressed in the limited rate case re-openers. A PSCW decision is expected in the fourth quarter of 2023, with new rates expected to be effective January 1, 2024.

The Peoples Gas Light and Coke Company and North Shore Gas Company

2023 Rate Case

In January 2023, PGL and NSG filed requests with the ICC to increase their natural gas rates. They are requesting incremental rate increases of $194.7 million (13.0%) and $18.7 million (7.8%), respectively. The requested rate increases are primarily driven by capital investments made to strengthen the safety and reliability of each utility’s natural gas distribution system. PGL is also seeking to recover costs incurred to upgrade its natural gas storage field and operations facilities and to continue improving customer service.

Both companies are requesting an ROE of 9.90% and a common equity component average of 54.0%. PGL is not seeking an extension of the QIP rider. Instead, PGL will return to the traditional rate making process to recover the costs of necessary infrastructure improvements. See the Qualifying Infrastructure Plant Rider section below for more information on the QIP rider.

An ICC decision is anticipated in the fourth quarter of 2023, with any rate adjustments expected to be effective January 1, 2024.

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 will not seek an extension of the rider beyond 2023.

PGL's QIP rider is subject to an annual reconciliation whereby costs are reviewed for accuracy and prudency. In March 2023, PGL filed its 2022 reconciliation with the ICC, which, along with the reconciliations from 2016 through 2021, are still pending.

As of June 30, 2023, there can be no assurance that all costs incurred under PGL's QIP rider during the open reconciliation years, which include 2016 through 2022, will be deemed recoverable by the ICC.

Minnesota Energy Resources Corporation

2023 Rate Case

In November 2022, MERC initiated a rate proceeding with the MPUC to increase its retail natural gas base rates by $40.3 million (9.9%). MERC's request reflected a 10.3% ROE and a common equity component average of 53.0%. The proposed retail natural gas rate increase was primarily driven by increased capital investments as well as inflationary pressure on operating costs. In December 2022, the MPUC approved MERC's request for interim rates totaling $37.0 million, subject to refund. The interim rates went into effect on January 1, 2023.

On May 11, 2023, MERC filed with the MPUC a settlement agreement it reached with certain intervenors. The settlement agreement reflects a natural gas base rate increase of $28.8 million (7.1%), along with a 9.65% ROE and a common equity component average of 53.0%. Under the terms of the settlement agreement, MERC will continue the use of its decoupling mechanism for residential customers, and it will be expanded to include certain small commercial and industrial customers. The settlement agreement is pending MPUC approval. MERC’s customers will be entitled to a refund to the extent the interim rate increase exceeds the final approved rate increase. We expect a decision from the MPUC in the fourth quarter of 2023.

Michigan Gas Utilities Corporation

2023 Rate Case

In March 2023, MGU filed a request with the MPSC to increase its retail natural gas base rates by $19.1 million (9.1%). The request reflected a 10.4% ROE and a common equity component average of 51.4%. MGU also requested changes to its MRP rider, including updates for projects that are expected to be placed into service during 2023 and 2024, updates to remaining project costs to address inflation, and an extension of the rider for an additional two years (new expiration of 2029).

The proposed natural gas rate increase was primarily driven by capital investments made to strengthen the safety and reliability of MGU's natural gas distribution system and to provide service to additional customers. Inflationary pressure on operating costs also contributed to the proposed rate increase.

In July 2023, MGU reached a comprehensive settlement that resolves all issues in its rate case. The settlement agreement is being finalized and is expected be filed with the MPSC for approval shortly.

An MPSC decision is anticipated in the second half of 2023, with new rates expected to be effective January 1, 2024.