Case Studies: Utilities

Kenrich Assisted Utility In Recovering Legal Expenses Through Rate Base

Summary:

Wisconsin Electric Power Company (WEPCO) was seeking to recover litigation expenses incurred for the spent fuel storage claim against the Department of Energy (DOE) through its rate base. The matter was before of the Public Service Commission of Wisconsin (PSC) for testimony and decision.

Kenrich Group was retained by counsel for WEPCO to file rebuttal testimony with the PSC. The rebuttal testimony covered the WEPCO litigation and various detailed comparisons against other spent nuclear fuel cases. In addition to pre-filed testimony, Kenrich personnel testified live at the PSC hearing on the matter, with cross examination by interveners, as well as PSC staff. The PSC granted WEPCO full recovery of its litigation expenses incurred for its spent fuel claim.

Background

Since 1982, DOE has charged utilities a fee on every kilowatt hour of electricity sold by a nuclear power plant. In return for the fee, DOE was required to begin removing the highly-radioactive used nuclear fuel (“spent fuel”) from plants across the United States no later than January 31, 1998. DOE has yet to perform and this significant, ongoing delay in performance caused WEPCO to incur significant costs to store substantially greater quantities of discharged spent fuel on-site at the Point Beach nuclear plant than it would have stored had DOE performed as contractually required. Following unsuccessful attempts at settlement, WEPCO filed a complaint with the U.S. Court of Federal Claims in 2000 to recover the costs that would not have otherwise been incurred if DOE had performed its contractual obligations. After an extended proceeding, culminating in a lengthy trial in 2007, WEPCO successfully settled its claim against DOE for approximately $45.5 million in 2011.

WEPCO has and will continue to refund to its customers the settlement amount from DOE. The matter in front of the PSC was whether WEPCO should recover the legal fees associated with the DOE litigation and settlement through the rate base. An intervener group, Citizens Utility Board, compared the settlement WEPCO received from the DOE and the legal costs expended, against the settlement amount and legal fees of Xcel Energy. Citizens Utility Board proposed a reduction in the legal fees WEPCO could recover from the rate base.

Solution

Kenrich personnel were retained by outside counsel for WEPCO to provide detailed analyses of various spent nuclear fuel cases and litigation fees incurred. Kenrich has extensive prior utility experience, particularly on nuclear power plant matters, and specifically the spent nuclear fuel case for WEPCO. Kenrich memorialized the results of the analyses in pre-filed rebuttal testimony with the PSC. Kenrich’s rebuttal testimony detailed various aspects of WEPCO’s spent nuclear fuel suit and compared it to other spent nuclear fuel cases, noting various unique issues and aspects of the WEPCO spent nuclear fuel case regarding damages and causation. Kenrich’s rebuttal testimony also opined that a head-to-head comparison between any two spent nuclear fuel cases is difficult at best, especially given the significant differences between the Xcel Energy and WEPCO cases. After detailing specific issues and facts on the WEPCO spent nuclear fuel matter, Kenrich opined that the legal fees incurred on the WEPCO case were reasonable and in line with, or less than, those incurred by other utilities. Kenrich personnel also testified live at a PSC hearing on the matter, with cross examination by interveners, and PSC staff.

Result

The PSC decided not to reduce the amount of legal fees recovered by WEPCO. The PSC found that it was “difficult to determine the reasonableness of legal expenses in one case by comparing them to legal expenses from another case.” This finding validated or adopted the conclusions and opinions provided in the Kenrich pre-filed and live testimony. Through Kenrich’s knowledge of the nuclear industry, and specifically spent nuclear fuel matters, Kenrich was able to assist WEPCO in full recovery of its legal expenses from the spent nuclear fuel suit.