Summary of UPPCO Rate Case Appeal

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There are 3 major issues that CARE is appealing in last year’s rate case.

  1. In 2014, the former owners of UPPCO sought MPSC approval to transfer ownership to a new group based out of London, England with no previous experience running a utility company. As part of the approval process, the company stated that the transaction would be a stock sale and not have any adverse impact on customer rates. However, when the transaction closed, the company took advantage of lawful IRS provisions which allowed it to treat the transactions as an asset sale. This change in accounting treatment resulted in a $70 million increase in UPPCO’s rate base. Because UPPCO is guaranteed a rate of return on its rate base, this increase resulted in a $5 million increase in rates per year for UPPCO’s customers. CARE believes that this is a violation of the Commission Order in the case which approved the transfer because the transaction did, in fact, have an adverse impact on customer rates despite the pledge that it wouldn’t.
  2. Another issue CARE is appealing has to do with who should pay for an increase in pension costs as a result of the transaction. Because the previous owner was a large utility (Integrys) the ratio of the number of retirees to active employees was approximately 1:1. After the transaction, the ratio is approximately 6 retirees for every active employee. CARE maintains that the majority of those costs should be paid for by shareholders and not ratepayers.
  3. Another major issue CARE is appealing is the Commission’s rejection to give equal weight to a provision in the law that states that rates should be just and reasonable. CARE maintains that the fact that an industrial class  pays a fraction of what residential ratepayers pay is, on its face, unjust and unreasonable. CARE recommend a formula that would have provided a range where the disparity between rates would have been much smaller than what was approved.

Below is a link to the case approving the sale of UPPCO in 2014.
http://efile.mpsc.state.mi.us/efile/docs/17564/0032.pdf