By Amanda Durish Cook

FERC ruled Thursday that Wisconsin Electric Power Co. overcharged ratepayers on Michigan’s Upper Peninsula by almost $23 million under MISO-ordered system support resource agreements.

The commission largely agreed with an administrative law judge’s initial decision on refunds under two SSR agreements that kept the 344-MW Presque Isle coal plant in Marquette, Mich., running in 2014 and early 2015 for reliability (ER14-1242-006, et al.).

Judge Michael Haubner issued an initial decision in July, saying WEPCo had overcharged ratepayers over the SSR agreements. (See Upper Peninsula Ratepayers to Seek FERC Probe of Billing Fraud.)

WEPCo had argued that the commission should accept its simple three-year average of historical costs from 2011 to 2013 as basis for compensation in the SSR agreements, but FERC took the judge’s view, agreeing that SSR compensation should be limited to actual costs. FERC said the plant’s compensation “must be limited to Wisconsin Electric’s going-forward costs, and the record shows that the negotiated amount was not shown to be a reasonable estimate of Wisconsin Electric’s going-forward costs. In fact, the negotiated amount greatly exceeded Wisconsin Electric’s actual going-forward costs.” The commission also rejected the company’s portrayal of the order as “retroactively implementing a new standard for SSR compensation without providing fair notice.”

Under MISO’s first SSR agreement (Feb. 1 through Oct. 14, 2014), WEPCo collected almost $37 million in fixed-cost compensation, but FERC said the utility should have only gotten about $23 million, resulting in a refund of about $14 million.

FERC said ratepayers were due an $8.6 million refund from MISO’s second SSR agreement (Oct. 15, 2014, through Jan. 31, 2015) because the agreement contained an excessive cost of capital and ineligible capital expenditures. FERC agreed with Haubner’s view that MISO didn’t adequately support its proposed 11.5% long-term cost of capital during the second SSR, saying 9.68% was more appropriate.

The refunds include a $2.4 million charge collected under the first SSR agreement to overhaul a generator turbine. FERC ruled the charge must be refunded to avoid WEPCo taking advantage of upgrade costs and then planning a return to service.

FERC gave MISO 45 days to make a refund report, brushing aside the RTO’s complaints that Haubner’s initial order did not provide clear guidance on how to calculate refunds.

The commission also agreed with the judge that WEPCo must refund a $1.4 million consulting services invoice relating to upgrades to bring the 61-year-old coal plant into compliance with EPA’s Mercury and Air Toxics Standards. But it stopped short of determining whether changed dates on the invoices constituted fraud.

Last year, Cloverland Electric Cooperative accused WEPCo of backdating the consulting contract after the plant operator learned that the second version of its SSR agreement would cover costs incurred from MATS upgrades under a revised fixed-cost component. MATS upgrades were ineligible for recovery under the previous SSR agreement.

“We make no findings at this time regarding whether Wisconsin Electric committed fraud or engaged in manipulation when a date was changed on an invoice for MATS compliance related costs, but we have referred the matter to the commission’s Office of Enforcement for further examination and inquiry as may be appropriate,” FERC said.