With the Citizens Utility Board Act of 1979, the Wisconsin Legislature created the Citizens Utility Board of Wisconsin (CUB) to represent the interests of residential and small business customers of Wisconsin’s electricity, natural gas, water, and telecommunications public utilities.¹ In the decades since CUB’s creation, CUB has evolved alongside markets, politics, technology, and the natural environment. Currently, CUB operates as an independent I.R.C. § 501(c)(3) organization (that is, a nonprofit), rather than a state governmental board, and focuses primarily on energy utility (electricity and gas) regulation, because this is what CUB’s main source of funding supports² and where customer representation is most needed.³

In energy utility regulation, the ground is shifting – not only for CUB but also for existing utilities, stakeholder groups, potential new players, regulators, and customers. Energy has a major role to play in addressing the existential threat of climate change. The traditional emphasis in utility regulation on safety, reliability, and affordability has broadened to include environmental responsibility, which includes both meeting carbon-reduction mandates and advancing energy justice – fairness and equity in terms of who benefits from, and who bears the burdens of, energy production, transmission, distribution, and consumption.

History of Utility Regulation

In the late 19th century, the U.S. Supreme Court affirmed the power to regulate private industries that serve the common good.⁴ The seminal case involved a handful of companies that provided grain storage and handling services. Illinois had passed a law in 1871 capping the prices these companies could charge, and one company sued. Based on the common-law principle that “when private property is devoted to a public use, it is subject to public regulation,”⁵ the Court found that the companies provided monopoly services, their grain elevators and warehouses were “affected with a public interest,” and Illinois could regulate their pricing.⁶

Similarly, the railroads that private companies were building to support (and profit from) industrialization and commerce were natural monopolies – the service they provided had high fixed costs (costs of laying railroads, building train stations, and purchasing trains) such that it would be impractical and inefficient for more than one company to provide the service. States fought back against the railroads’ monopolistic pricing practice by forming their own railroad commissions. The Wisconsin Railroad Commission, a product of the 1874 Potter Act (named after its sponsor), comprised three appointed commissioners who had the right to examine the books of railroad companies and to reduce customer rates.⁷ Litigation ensued, with the presidents of two railroads protesting that the law unconstitutionally destroyed the railroads’ earning power.

Meanwhile, a shift in energy consumption was underway. At first, heat and lighting came from traditional fuels – wood, peat, and coal, for example – that consumers collected themselves or purchased from competitive local suppliers. Gas light utilities began developing larger facilities and networks of wires and pipes for supplying energy to customers, with some local oversight. In the 1880s, Thomas Edison established the first investor-owned electric utility at Pearl St. Station in New York City.

In Wisconsin, the Potter Act did not survive the railroad moguls’ late-19th-century challenge, but public utility regulation did. The 1907 public utilities law established the regulatory authority of the Wisconsin Public Service Commission (PSC) and essentially rebranded the Wisconsin Railroad Commission as the PSC. Today, the notion of regulation as a proxy for market competition lives on, and monopolies that supply necessary services to the public are subject to federal, state, and sometimes local regulation. The PSC still comprises three appointed commissioners with broad regulatory discretion, including the right to examine utilities’ books and, most important, set the prices they charge.

Fast forward to the 1970s. An energy crisis was upon us. At the same time, lawyer and activist Ralph Nader⁸ recognized a growing problem: some monopoly utility companies seeking profit and growth were overcharging customers, providing unreliable service, and profiting mightily. Nader envisioned democratically governed advocacy groups that could pool their resources to participate in regulatory proceedings – a people-powered check on high utility bills and monopolistic practices. Nader got the word out,⁹ and citizens utility boards began to take shape across the U.S.

Season 1 of CUB

In 1979, the Wisconsin Legislature created CUB to, among other things, advocate on behalf of residential and small-business utility customers (often called “ratepayers,” although CUB prefers the term “customers”) at hearings before administrative agencies.¹⁰ CUB’s charter was pointedly nonpartisan. Today CUB operates as the oldest citizens utility board in the U.S. and remains true to its nonpartisan charitable and educational mission to:

“1) [P]rovide public interest legal services to ensure effective and democratic representation of residential, small commercial, and small industrial utility customers before regulatory agencies and the courts; 2) advocate for safe, reliable, affordable, and environmentally responsible utility services; 3) educate and empower consumers and the general public through the preparation, compilation, analysis, and dissemination of information and resource materials relating to utility regulation and public energy and telecommunications policy.”¹¹ CUB has encountered challenges along its path to organizational survival. For a few years, CUB built its membership, raised funds, and communicated with Wisconsin utility customers through paper inserts in the gas and electric bills customers received from public utilities. By 1984, CUB had about 90,000 donor-members who paid a $3 annual membership fee.¹² In 1986, a U.S. Supreme Court ruling prohibited these sorts of bill inserts,¹³ and CUB was forced to reorganize as an independent nonstock, nonprofit corporation under I.R.C. § 501(c)(3) to raise the funds necessary to continue operating.

From the 1980s until recently, CUB’s primary source of financial support was through the PSC’s intervenor-compensation fund.¹⁴ This funding model presented operational challenges because intervenor compensation could not be awarded until after the representation had occurred, depended on the PSC’s discretion, and came from a pot of money that grew larger and smaller depending on legislative budgetary priorities. Further, CUB was competing with other stakeholders who intervened and participated in PSC proceedings.

Reinforcement for CUB came through 2021 Wis. Act 24, when the legislature reaffirmed CUB’s role as the consumer advocate for Wisconsin’s residential and small-business public utility customers and provided for dedicated funding for CUB.¹⁵ Act 24 enabled CUB to double in size, from three employees to six, and to hire an in-house counsel. (CUB had been operating for several years without an attorney.) CUB moved into a new office space (one block from the PSC) before the old CUB office’s demolition. CUB still must raise funds to continue operating but now has capacity to take on more cases and issues on behalf of customers.

Season 2 of CUB

Today CUB¹⁶ has an executive director, a fundraising and communications director, a regulatory affairs director who also provides subject-matter expertise in policy and utility ratemaking, a regulatory strategist who provides subject-matter expertise in economics and utility finance, and a general counsel.

Given CUB’s size, everyone must do a little of everything. As the sole attorney at CUB, most of my time goes to regulatory work and related administration. I also advise CUB on things like governance and personnel and pitch in with communications and development. The executive director interacts extensively with the PSC, journalists, customers, stakeholder groups, legislators, and other consumer advocate offices. The regulatory affairs director meets with utilities, lending a customer perspective and fostering a collaborative relationship that can prevent small tensions from becoming large, contested issues. The regulatory affairs director also is the in-house information technology support specialist.

Wisconsin, Oregon, and Louisiana are the only states in which an independent nonprofit organization is solely responsible for utility consumer advocacy. Most other states also have a designated utility consumer advocate in the state attorney general’s office or the commerce department, a separate office led by an appointed advocate, or both.¹⁷ For example, Minnesota has an independent nonprofit CUB with a staff of eight, including three attorneys, and also has an Energy & Utilities division in its Department of Commerce and a division of its attorney general’s office that intervene in utility cases. The Wisconsin CUB’s membership in the National Association of State Utility Consumer Advocates (NASUCA),¹⁸ an organization dedicated to education, information exchange, and collaboration in regulatory issues facing customers, helps increase capacity.

Representing Wisconsin Public Utility Customers

Wisconsin customers purchase gas and electricity from a cooperative utility, a municipally owned and run utility (“muni”), or one of the investor-owned utilities (IOUs) operating in the state. The PSC regulates the IOUs and the munis, and CUB focuses most of its effort on the profit-driven IOUs and their customers. Wisconsin’s largest IOUs are WeEnergies, Wisconsin Power & Light Co. (Alliant), Northern States Power Co. – Wisconsin (Xcel), and Madison Gas & Electric.

The PSC’s mission statement includes “ensur[ing] safe, reliable, affordable, and environmentally responsible utility services,” and this is a good starting point for defining the public interest that utility regulation seeks to protect. The IOUs provide services to customers, and they also are beholden to their shareholders. Much of CUB’s work lies in the tension between what’s good for customers and what’s good for the shareholders. As the U.S. Supreme Court said, “[t]he public interest is far broader than the economic interest of a particular power supplier.”¹⁹ The challenge of regulation is to align the behavior of a privately owned IOU with the broader public interest.²⁰

Utility regulation works differently in each state. Wisconsin is among more than 30 states in which both gas and electric services are regulated. Minnesota, Iowa, and Indiana are also fully regulated, while Illinois is fully deregulated and Michigan is partially deregulated. Layered onto state regulation (or competition) of retail sales is interstate transmission regulation, overseen by the Federal Energy Regulatory Commission (FERC). Wisconsin utilities belong to a nonprofit called the Midcontinent Independent System Operator (MISO), which oversees utilities’ access to FERC-regulated transmission services and operates a pricing-based wholesale power market, and Wisconsin belongs to the Organization of MISO States, which represents states’ interests before MISO.

Utility Construction Approval Process in Wisconsin. A utility seeking to build a new generation facility larger than 100 megawatts (MWs) must apply for a certificate of public convenience and necessity (CPCN).²¹ To meet CPCN requirements, the utility must demonstrate that a proposed facility “satisfies the reasonable needs of the public” and that “the design and location or route is in the public interest.” Additionally, Wisconsin’s energy priorities law requires a showing that the utility has considered, to the extent cost effective and technically feasible, energy conservation and efficiency, noncombustible renewable energy resources, and renewable biofuels before nonrenewable carbon-fueled resources.²²

CUB regularly intervenes in CPCN contested cases²³ and provides evidence regarding the need and cost effectiveness of the proposed facility. CUB evaluates the applicant’s alternatives analysis and offers expert testimony on whether the proposed investment is the best use of customer dollars in the near term and long term. Unlike many other states, Wisconsin does not require IOUs to file integrated resource plans with the PSC, so it can be difficult to know how a proposed facility fits into the IOU’s long-term plan unless the IOU voluntarily provides this context, which some IOUs do.

Other intervening parties might include renewable energy advocates, environmental advocates, health advocates, community advocates, equity and energy justice advocates, industrial customer advocates, municipalities, and private companies that have an interest in the matter. The PSC is not a party to contested case proceedings, but PSC staff contribute extensive technical expertise, making data requests that utilities are required to respond to, testifying, and participating in hearings as a nonparty. Parties and the PSC typically submit direct, rebuttal, and surrebuttal testimony in writing and sometimes offer additional testimony on the stand during the technical hearing (conducted with videoconferencing technology) before the PSC’s administrative law judge. Parties then submit initial posthearing briefs and reply briefs. Parties file motions and respond to motions when evidentiary and procedural matters arise. The PSC has 180 days from the time a CPCN application is complete to take final action unless the PSC chair extends the deadline.²⁴

Rate Cases and Other Utility Matters. The other big category of IOU cases that CUB intervenes in are rate cases. Every two years an IOU comes before the PSC to present its expected costs (revenue requirement) for the upcoming biennium and its proposal for how to recover those costs from customers in rates. CUB intervenes and typically begins analyzing the proposal once PSC staff have completed their audit: a review of the IOU’s proposed expenses. In the 2023 rate cases, CUB advocated for a decrease in IOUs’ profit rates, or return on equity, and for costs to be allocated in a way that minimized the rate increase for residential customers. CUB argued that IOUs’ high stock prices demonstrate an ongoing structural imbalance favoring shareholders over customers²⁵ and that, therefore, it is time to reduce returns on equity.

Beyond construction dockets, rate cases, annual fuel reconciliation cases, and other contested issues, CUB participates in PSC-led investigations into matters such as affordability programs for customers, buyback rates for the excess power that comes from privately owned distributed generation, and performance-based regulation. In 2022 and 2023, CUB intervened in 33 dockets before the PSC. While CUB’s capacity to participate in federal matters is limited, CUB also submitted comments on FERC matters and filed an amicus brief with the U.S. District Court for the Western District of Wisconsin. CUB’s work on Wisconsin matters is supported by the electronic records filing system that the PSC has made available to the public through its website.²⁶ It is easy to file and search using the electronic system.

Challenges and Opportunities in the Next Era of Utility Regulation

CUB’s job, and the job of a utility consumer advocate in general, involves a tangle of competing public interests.²⁷ The climate crisis has ushered in a new era in energy, utilities, and regulation. Climate disasters are devastating the planet, disproportionately affecting historically and structurally disadvantaged communities that have already borne an excessive share of the costs of carbon, in terms of health, life spans, safety, and quality of life. Coal plants throughout the U.S., including in Wisconsin, that continue operating with years and even decades remaining in their useful lives are ecological, human health, and financial burdens. Payment for these plants is spread across customers’ rates over the 40 or so years that the plants were expected to operate, but urgent carbon-reduction mandates can’t be met if the plants keep running.

When undepreciated plants shut down before the end of their originally expected lives, they become stranded assets; that is, the utilities have not recovered the costs associated with constructing the facilities. IOUs argue that not allowing them to charge customers for these costs could strain the utilities’ operations and diminish the quality of their service. Having customers pay for the remaining costs runs afoul of the “used and useful” standard, whereby customers should not be expected to pay for utility investments that do not serve customers.²⁸ Paying for coal plants that are out of service and contributing to the high IOU returns on equity is an expensive proposition for customers, whose bills are increasing because of the necessary transition to renewable energy sources, including IOU investments in new solar, wind, and battery electric storage systems. Add on stranded asset costs, and the resulting rates and household energy burdens (the percentage of a household’s income that goes toward energy bills) could be unreasonably high.

Securitization²⁹ is one financial tool for dealing with stranded assets, but for securitization to meaningfully benefit Wisconsin customers in the current regulatory environment, legislation is needed.³⁰ Today CUB, other advocates, the PSC, IOUs, and the public are grappling with the public-interest tradeoffs this quandary presents.

At the same time, technological developments in renewable energy systems, efficiency, and electrification are creating flexibilities in energy production and consumption. Falling prices and governmental incentives for carbon-free distributed generation are bringing privately owned and sited solar panels and even battery electric storage systems within more customers’ reach. How does and should public utility regulation treat this generation? How can distributed generation and related technologies such as demand response benefit all customers and best serve the public interest?

Public involvement in utility regulation in Wisconsin is expanding in pace with the urgency of these challenges and opportunities. It used to be common for construction and rate cases to have only a few intervenors, including CUB and the Wisconsin Industrial Energy Group, which represents large industrial customers. Last fall, in the Madison Gas & Electric rate case,³¹ 20 parties intervened. Among them were municipalities, community advocates, and environmental advocates working to advance energy justice. Groups with expertise in representing low-income customers now intervene in cases, and their advocacy and CUB’s are mutually reinforcing, furthering customer-centric positions on the issues under consideration and procedural justice more broadly. Public interest advocates don’t always take the same positions on the complex and nuanced technical issues that arise in public utility regulation. Still, CUB joins forces with other intervenors to fight for evidence-based outcomes and for transparency, inclusivity, and the public’s right to be informed and involved.

Conclusion

If you’ve read this far, you’re probably interested in energy democracy. If so, check out the PSC’s very useful website, psc.wi.gov, where you can learn how to participate in a case as a member of the public,³² compare your utility bill to what it would be if you were a customer of another Wisconsin public utility,³³ keep tabs on major cases,³⁴ and sign up for PSC press releases,³⁵ among other things.

Endnotes

1 See Wis. Stat. § 199.02.

2 Wis. Stat. § 196.315.

3 Telecommunications is largely deregulated in Wisconsin, although the state regulator, the Wisconsin Public Service Commission (PSC), is leading a sweeping effort to expand affordable broadband service to previously unserved or underserved areas of the state. All but one of Wisconsin’s 575 drinking systems are municipally owned, and the PSC regulates all of them.

4 Munnv. People of State of Ill., 94 U.S. 113 (1876).

5 Id. at 130.

6 Id.

7 See Wis. Hist. Soc’y, Potter Law (1874), https://www.wisconsinhistory.org/Records/Article/CS1739 (last visited Mar. 8, 2024).

8 While many people think of Ralph Nader as the hanging chad of an independent party candidate for U.S. President in 2000, he has devoted his life to tenacious consumer protection activism.

9 See, for example,Ralph Nader, A Self-Defense Plan for Utility Customers, https://nader.org/1974/10/25/a-self-defense-plan-for-utility-customers/, which we believe ran in the Washington Star and the New York Times.

10 Chapter 72, Laws of 1979.

11 CUB bylaws, art. III, https://www.cubwi.org.

12 Peter W. Hanschen, Robert L. Harris & Shirley A. Woo, Consumer Access to Utility Mailings: First Amendment and Other Issues, 5 Energy L.J. 327, 328-29 (1984).

13 PacificGas & Elec. Co. v. Public Utils. Comm’n of Cal., 475 U.S. 1, 8 (1986).

14 Wis. Stat. § 196.31.

15 Wis. Stat. § 196.315.

16 www.cubwi.org.

17 Five states don’t have a consumer advocate office. They are North Dakota, South Dakota, Mississippi, Rhode Island, and Idaho.

18 www.nasuca.org.

19 OtterTail Power Co. v. United States, 410 U.S. 366 (1973).

20 See Scott Hempling, Regulating Public Utility Performance: The Law of Market Structure, Pricing and Jurisdiction 3 (ABA 2d ed. 2021).

21 Wis. Stat. § 195.491(3).

22 Wis. Stat. §§ 1.12, 196.025(1).

23 Wis. Stat. ch. 227. CPCN and rate-making proceedings are class 1 proceedings. Wis. Stat. § 227.01(a).

24 Wis. Stat. § 196.315(3)(g).

25 See, e.g., Federal Power Comm’n v. Natural Gas Pipeline Co. of Am., 315 U.S. 575 (1942).

26 Pub. Serv. Comm’n of Wis., ERF Electronic Records Filing System, https://apps.psc.wi.gov/ERF/ERF/ERFhome.aspx (last visited Mar. 8, 2024).

27 Elin Swanson Katz & Tim Schneider, The Increasingly Complex Role of the Utility Consumer Advocate, 41 Energy L.J. 1 (2020).

28 Wis. Stat. § 196.05; see Duquesne Light Co. v. Barasch, 488 U.S. 299 (1989).

29 The National Association of Regulatory Utility Commissioners (NARUC), in a February 2024 report, offers this helpful description: “Securitization is a form of financing that is designed to lower a utility’s cost of capital, which results in a reduction in the amount of money its customers will have to repay. This reduction occurs because the interest paid to bondholders is lower than the utility’s weighted cost of capital (comprising its borrowing costs and allowed return on equity). The securitization process is a conversion of an asset that is not a tradable financial product into a tradable financial product, or security. In the case of early coal plant retirements, the asset being securitized is the right to receive the flow of payments from rate-paying customers, and the security is a bond that is backed by the flow of ratepayer payments.” Kathryn Kline, NARUC, Mitigating Stranded Asset Risks to Utility Customers: An Exploration of Securitization and Retiring Coal Generation 3, (Feb. 2024), https://pubs.naruc.org/pub/D41DAF2A-9425-50CD-C1E2-70B694AAC1A4.

30 See 2023 S.B. 651, which also provides for integrated resource plans.

31 Docket No. 3270-UR-125.

32 Pub. Serv. Comm’n of Wis., Public Participation,https://psc.wi.gov/Pages/CommissionActions/PublicParticipation.aspx (last visited Mar. 8, 2024).

33 Pub. Serv. Comm’n of Wis., Electric Residential Monthly Bill Comparison, https://apps.psc.wi.gov/RATES/electricbill/default.aspx (last visited Mar. 8, 2024).

34 Pub. Serv. Comm’n of Wis.,Highlighted Construction Cases, https://psc.wi.gov/Pages/CommissionActions/HighlightedCases.aspx (last visited Mar. 8, 2024).

35 Pub. Serv. Comm’n of Wis., PSC News Release, News Archive and Other Media Information, https://apps.psc.wi.gov/APPS/NewsReleases/default.aspx (last visited Mar. 8, 2024).