We Energies residential customers will see a double digit increase in their electric bills, and a smaller increase in their natural gas bills next year.

The Public Service Commission of Wisconsin on Thursday agreed to a rate increase of 10.9% for residential electric service. The panel adopted a staff recommendation that was lower than the 13% increase sought by We Energies, but higher than the amount sought by consumer advocates.

The decision resolves an unusually contentious rate case that focused on energy affordability, particularly for thousands of low-income households that are struggling with inflation.

We Energies estimates the increase will add about $11 to the average residential customer's monthly electric bill.

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The exact amount of the increase remains an estimate. Staff is reviewing the rate and other decisions made by commissioners that reduced the utility's operating costs to prepare a final rate schedule for each class of customer. The PSC will finalize rates at a future meeting.

The rate case drew the attention of community activists who staged rallies and filed objections in the arcane rate-setting process.

Consumer ire ignited in October when the utility — after reaching a partial settlement agreement with many of its largest customers and some, but not all, of the environmental and consumer advocates that had signed on as intervenors — changed the rate increases to favor its largest customers.

A huge number of public comments

The case drew more than 1,200 public comments, most critical of the utility's proposal to increase residential electric rates by 13% while dropping the proposed rate increase by 50% for its largest industrial customers.

"One of the things that really stood out from all the comments that the public provided was that this is not a time to be sticking residential customers with a double-digit increase. And that's exactly where it landed," said Tom Content, executive director of the Citizens Utility Board of Wisconsin.

PSC chairperson Rebecca Cameron Valcq suggested setting rates based on We Energies' initial proposal of a 5.5% increase for residential customers. That idea received no support from commissioners Tyler Huebner and Ellen Nowak, who agreed in a 2-1 vote to follow the staff recommendations.

"They had a chance to make this a single-digit increase for residential customers and they didn't grasp that chance," Content said. "They let go of it."

Residential natural gas rates will also go up for 2023.

Commission staff estimate natural gas costs will go up 6.2%, or about $47 a year, for residential customers of Wisconsin Gas, which serves the city of Milwaukee, its western and northern suburbs and Ozaukee and Washington counties. Wisconsin Electric Gas Operations customers in the southern suburbs and Waukesha, Walworth, Racine and Kenosha counties will pay about 9.5% more for gas service. That adds up to an estimated $63 in additional annual gas costs.

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Some wins for consumers

In setting the rates, the commission set the utility's profit limit at 9.8% for both its electric and gas operations, a reduction from 10.2% and 10%, respectively. The move follows the commissioners' preference for gradual change. The decision was a blow to consumer groups like CUB that had sought a reduction to 9%. We Energies had asked to keep its profit rate unchanged, arguing that a reduction would hurt investors and its ability to borrow funds at favorable rates.

"It's good to see the profit rate come down, but it's still a profit rate that's higher than the national average and much, much higher than these utilities need to raise capital in the market," Content said. "That was that was a step in a small step in the right direction, but not far."

Other changes resulted in a $65.5 reduction of We Energies' revenue requirement, the amount it needs from ratepayers to cover its operating costs, according to a memo prepared by PSC staff.

Consumer advocates claimed victory on several issues, including agreements for We Energies to:

• Write off more $34 million in unpaid bills and late fees stemming from a prohibition on utility disconnections during the height of the coronavirus pandemic.

• Extend a pilot program for low-income ratepayers known as the Low-Income Forgiveness Tool, or LIFT.

• Reduce a fixed monthly service charge from $16 to $15.

• Work with consumer organizations to develop a pilot program for a scaled rate based on household income that was proposed by Walnut Way, the Lindsay Heights neighborhood organization that was among the intervenors in the rate case.

Rate cases typically address customer costs for two years. This year, the PSC agreed to keep 2024 open in recognition of the economic volatility wrought by inflation, this year's spike in natural gas prices and other concerns.

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Contact Karl Ebert at kebert@gannett.com. Follow him on Twitter at @karlwebert.

This article originally appeared on Milwaukee Journal Sentinel: We Energies residential customers to pay 10.9% more for electricity