WEC Energy Group’s five-year capital forecast reflects $9.7bn, CEO says

WEC Energy Group’s (NYSE:WEC) five-year capital forecast reflects $9.7bn versus the last five-year plan, which reflected $9.2bn, WEC Energy Group President and CEO Allen Leverett said on Feb. 1 during the company’s 4Q16 and full-year 2016 earnings call.

Those figures do not include the company’s share of projected capital investments at American Transmission Company (ATC), which is $1.4bn for investments inside the traditional ATC footprint, and about $300m in projected capital outside of the footprint, he said.

He also noted that ATC on Jan. 30 announced that it has entered into a joint operating agreement with the Arizona Electric Power Cooperative (AEPCO). That partnership, known as ATC Southwest, will develop needed transmission projects in Arizona and the southwest United States, he said.

According to a Jan. 30 statement posted on ATC’s website, AEPCO and ATC Development Co., a development branch of ATC, have entered into the joint operating agreement.

AEPCO CEO Patrick Ledger said in the statement: “Arizona and the Southwest are growing, and we’re already seeing increased demand for power that can only be met if we’re willing to step up and develop the transmission projects that will meet that demand over the next two decades and beyond. This partnership means both companies can draw on our mutual resources to meet that demand in a way that keeps rates low and reliability high.”

Mike Rowe, president and CEO of ATC Development Co., said in the statement in part: “We have significant experience working with public power in the Midwest, and we look forward to partnering with public power in the Southwest. ATC Southwest will be adding value through identifying and implementing transmission solutions that deliver reliability, economic and renewable energy benefits in the southwestern United States.”

FERC matters

Among other things, Leverett said during the earnings call that FERC in late September 2016 affirmed a prior administrative law judge (ALJ) recommendation of a 10.32% base return on equity (ROE) in response to the “first” Midcontinent ISO (MISO) ROE complaint.

“ATC qualifies for a 50 basis point adder for being a MISO member, thus, increasing [its] return on equity to 10.82%, and we are currently recognizing income at this 10.82% level,” he said.

Referencing the recently announced resignation of FERC Chairman Norman Bay, which will leave FERC with two commissioners, Leverett said: “Although the recent commissioner resignation at FERC injects some additional uncertainty, we still expect an order by the end of June in the second MISO complaint case. In that case, the ALJ recommended a base return on equity of 9.7%. Again, ATC qualifies for the 50 basis point adder, which would bring [its] return on equity to 10.2%. When the final order is received, we [anticipate] transitioning to the 10.2% return on equity.”

As TransmissionHub reported last July, according to the ALJ’s June 30, 2016, initial decision involving the second complaint, the initial decision addresses a complaint filed under section 206 of the Federal Power Act (FPA) and Rule 206 of the commission’s Rules of Practice and Procedure. The complaint seeks to lower the base return on common equity (base ROE) of transmission-owning members (MISO TOs) of MISO.

All of the MISO TOs, except ATC, are authorized to collect a base ROE of 12.38%; ATC is authorized to collect a base ROE of 12.20%. The complainants (joint customer complainants) asked that the MISO TOs’ base ROE be lowered to 8.67%, the initial decision added.

The initial decision noted that MISO, in conjunction with the MISO TOs, in December 2001 filed proposed changes to the MISO Tariff to, inter alia, increase the base ROE received by MISO TOs from 10.5% to 13% for all MISO pricing zones, except for that of ATC. As relevant in the proceeding, the initial decision said that FERC set the base ROE for hearing and subsequently affirmed an initial decision, which approved a base ROE of 12.38% for MISO TOs.

The 12.38% base ROE is located in Attachment O of the MISO Tariff and is collected by all MISO TOs, except for ATC, whose base ROE of 12.2% was established as part of a settlement agreement that was filed with the commission in March 2004.

The joint customer complainants in February 2015 filed the complaint, and by order dated June 18, 2015, the commission set the matter for hearing, and prescribed an effective date of Feb. 12, 2015, for the 15-month refund period. By order dated June 24, 2015, the chief judge directed that an initial decision be issued by June 30, 2016.

The initial decision authorizes the MISO TOs to collect a base ROE of 9.7%.

Earnings report

WEC Energy Group on Feb. 1 reported net income based on generally accepted accounting principles (GAAP) of $194.4m, or 61 cents per share, for 4Q16 compared with $179.3m, or 57 cents per share, for 4Q15.

The statement noted that WEC Energy Group was formed in late June 2015, when Wisconsin Energy completed the acquisition of Integrys.

The company said that 4Q15 earnings include acquisition costs of 5 cents per share, and excluding those costs, WEC Energy Group’s adjusted earnings per share for 4Q15 were 62 cents per share.

WEC Energy Group said that for the full-year 2016, it recorded net income based on GAAP of $939m, or $2.96 per share, compared to $638.5m, or $2.34 per share, for the full-year 2015.

WEC Energy Group also said that its adjusted earnings per share, which exclude acquisition costs, increased 33 cents per share, from $2.64 for the full-year 2015 to $2.97 for the full-year 2016.

About Corina Rivera-Linares 3063 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.