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WPL Regulatory Update

Scott R. Smith

Director, Regulatory Affairs

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Today’s Agenda

1. WPL 2010 Fuel Case

2. WPL 2011 Rate Case

3. WPL’s Economic Development Rate Proposal

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2010 Fuel Case

Filed WPL’s request on 4/30 Electric retail revenue requirement of $8.8 million

0.9% average increase Small / residential – 0.7% Large / industrial – 1.1%

Approximate effective date Interim rates (subject to refund) – June

2010 Final rates – before year end

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What are the Major Differences in Fuel Costs from Monitoring Levels?

Actual Fuel Costs – January – March$2,077,773

Delivered Cost of Fuel $4,413,819

Natural Gas Price ($2,939,725) Market Energy Price Changes

$5,214,457 Total $8.8

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WPL 2010 Fuel Case – Rough Timeline

Apr 30 WPL files

May Hearing on interim rates

Jun Interim rates effective

July Audit complete

Aug Staff / Intervenors file

Sep Hearing

<YE Final Order

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WPL 2010 Rate Case – Limited Request

Filed WPL’s request on 4/30 Electric only retail revenue requirement of

$35.4 million when compared to current rates Bent Tree $41.0 Expiring deferral credits $4.7 Lower fuel costs $(10.3)

Request includes items already approved by the PSCW or for which there is precedent

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WPL 2010 Rate Case – Limited Request

Does not suggest changes to: Return on equity Sales volumes UR-117 Furlough Inclusion

No Increase in Natural Gas

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Rate Impact

3.6% average increase when compared to current rates 2.7% if fuel case approved in total

WPL rate design proposal Allocate the revenue requirement increase to customer

classes based on the percentage increases approved by the Commission in 6680-UR-117

Approach generally maintains the current revenue allocation

relationship to COSS results

Small / residential – 4.2% increase from current Large / industrial – 2.4% increase from current

Anticipated effective date – 1/1/2011

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WPL Rate Case Rough Timeline

Apr 30WPL files May-Jun Revenue Requirement audit Jul Pre-hearing conference Jul-Aug Rates audit Sep Staff / Intervenors file Oct Hearings Nov Oral decision Dec Final order Jan 1 Rates effective

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Economic Development Rate - Background

Proposed to Commission in November, 2009

Economic downturn severely affected WPL service territory through the loss or reduction of energy demand from WPL’s industrial and commercial customers.

Loss of sales increased rates – smaller number of units to spread fixed costs

Increase sales that would not have occurred organically occurred

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Rationale

Decreased load has resulted in rate increases by shifting recovery of fixed costs to remaining customers.

Increasing load will spread fixed costs to more customers thereby reducing rate pressures on existing customers.

As long as the incremental load covers more than the marginal incremental costs, existing customers will benefit.

Other states have similar programs. Wisconsin needs this type of program to remain competitive.

Program is designed to provide the most benefit at the “start up” of development thereby aiding the potential for success and then moves the incremental load to full rates to ensure all customers benefit and are treated equitably.

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Economic Development Rate – Customer Requirements

Customers must meet several significant requirements. Must have also received governmental

economic development assistance of $500k or more.

Must sign an affidavit that “but for” the economic development rate and governmental assistance the increase (or retention) of load would not have occurred.

Discounts are subject to reimbursement if load drops during discount period.

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Economic Development Rate Overview

Rate Rider for CP-1(Industrial at distribution) and CP-2 (Industrial at transmission) Allows for discounts to a level that maintains rate

coverage 105% of WPL’s marginal costs Temporary and declining discount levels for a

maximum of 5 years Applicable to incremental load

New customers Expansion

Possible applicability to retain customers, subject to PSCW approval

Requirements to invest in “economically viable” energy efficiency

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Example:

Before New Customer After

Load 10,000,000 100,000 10,100,000

Revenues From Existing Customers 1,000,000$ (250) 999,750$ Decreased Rates to Existing CustomersRevenues From New Customers 0 5,250 5,250 New Revenues 1,000,000$ 5,000$ 1,005,000$

Marginal Cost 500,000$ 5,000$ 505,000$ Fixed Costs 500,000$ 500,000$ Total Costs 1,000,000$ 5,000$ 1,005,000$

Total Costs Per Unit 0.1000$ 0.0995$ Decreased average cost for all customers

Marginal Costs Per Unit 0.0500$ 0.0500$ Fixed Costs Per Unit 0.0500$ 0.0495$ Decreased average fixed cost for all customers

Note: The revenues from the new customer will increase with each year during the programas the level of discounts decrease.

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Status

Waiting on formal PSCW Order to Implement.

Will likely need to re-file updated tariff sheets with the PSCW to reflect PSCW Order requirements.

Currently anticipate that the tariff will be available on July 1, 2010.