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Quad/Graphics Leads Way for Large Firms to Wangle Discounts in Wisconsin Market

October 21, 2015 By Cheryl Kaften

The Wisconsin Public Service Commission (PSC) approved a special energy rate (Docket No. 6630-TE-101) on October 15 to encourage Quad/Graphics – a major printer of magazines and catalogs that already has 15 plants in the state and 75 facilities nationwide – to expand its operations further in Wisconsin, and then moved to open up the utility discounts to other large We Energies customers.

Based in Sussex, within the Milwaukee metropolitan area, Quad/Graphics already employs 7,700 people in the state and now is planning on investing another $100 million to create as many as 500 jobs there in an expansion geared to handle new business. Earlier this year, Quad won a long-term contract from Hearst Magazines to print 20 of its 21 titles. It also won a contract to print additional titles for Time Inc.

In its filing, the company stated, “The reality is that because printing is an energy intensive industry we … therefore do consider electricity pricing when deciding [at] which facilities to grow production; and [at] which facilities to slow production. The risk associated with being exposed to market-based energy costs, even for incremental load, is not one that we take lightly. However, with the competitive marketplace that we operate in, it is a risk that is necessary, and the proposed Economic Development Rider (EDR) will be a helpful tool in allowing Quad/Graphics to compete and grow Wisconsin’s economy through job creation.”

The printer also said that the discounted rates would keep other larger manufacturers in Wisconsin – and that past history had demonstrated that companies were willing to move for lower rates.

“It was not too many years ago that another of Wisconsin’s utilities lost several very large manufacturers and had dramatically reduced energy sales,” Quad/Graphics reminded the PSC, adding, “ As a consequence, the utility had to raise rates on all of its remaining customers— an increase of about $90 million annually. All ratepayers benefit from strong businesses and the sales that they bring to Wisconsin utilities, the loss of which can be very painful.”

In its decision, as reported in the Milwaukee-Wisconsin Journal Sentinel, the state Public Service Commission agreed to allow Quad/Graphics to buy power at wholesale market prices for any additional electricity it uses as part of its expansion.

Quad/Graphics asserts that the discounted rates – as well as tax credits valued at more than $15 million from the Wisconsin Economic Development Corporation – persuaded the company to commit to expanding in Wisconsin; rather than in other states in which it already does business, such as West Virginia, Oklahoma, or Georgia .

In connection with the request for the EDR, PSC Chairperson Ellen Nowak suggested several changes to the proposal – including an Experimental Economic Development Rider (PSC REF#: 274216.) that could open the door for other manufacturers to apply for the incentives.

The proposed Experimental Economic Development Rider would be available to customers that have at least 5,000 employees working in Wisconsin. An eligible customer must have at least 15 large customer class accounts with We Energy. In addition, an eligible customer must “attest that, but for the EDR, either on its own or in combination with a package of economic development or job creation incentives from a local, county, State of Wisconsin, or federal program, the customer would not have added load within [We Energy’s] service territory.” Eligible customers also must apply for and receive at least $15 million of refundable tax credits for companies that retain or create jobs in Wisconsin.

The new EDR would consist of a two-tiered rate structure based on We Energy’s General Primary Service–Time-of-Use (Cp-1) rate schedule and Real-Time Market Pricing (RTMP) Rider:

  • . Tier I – All usage below baseline – Consists of firm service usage subject to the rates and conditions of the company’s Cp-1 rate schedule.
  • Tier II – All usage above baseline incremental energy rate – Pricing as defined in the company’s RTMP Rider.

According to Elise Nelson, a spokesperson for the Wisconsin PSC who emailed information to Retail Energy Buyer, while the subscribing customer and We Energy can agree on a recent 12-month historical usage period to serve as the initial baseline for the Real Time Market Pricing Rider, “a different baseline, determined using the 12-month period immediately prior to the customer’s start of service under the EDR, shall be used to measure actual load maintenance and growth and determine continued eligibility.”

 The tariff will close to new customers as of June 30, 2016. “Further,” Nelson said, “the four-year service agreement entered into between the subscribing customer and We Energy under this tariff shall not be extended or modified without prior PSC approval. Once the four‑year term ends, a customer would return to the Cp-1 tariff or whatever other rate for which the customer is eligible.”

Finally, the incentive is expected to save Quad/Graphics more than $2 million in 2016, but should not result in higher prices for other utility customers, according to the PSC. We Energies has been mandated to make annual reports to the PSC about the energy sales that are tied to the discount.

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