January 6, Ms. Mary Jo Kunkle Executive Secretary Michigan Public Service Commission 7109 W. Saginaw Hwy. P.O. Box Lansing, MI 48909

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1 Founded in 1852 by Sidney Davy Miller SHEI A. WELLMAN TEL (517) FAX (517) Miller, Canfield, Paddock and Stone, P.L.C. One Michigan Avenue, Suite 900 Lansing, Michigan TEL (517) FAX (517) January 6, 2015 MICHIGAN: Ann Arbor Detroit Grand apids Kalamazoo Lansing Troy FLOIDA: Tampa ILLINOIS: Chicago NEW YOK: New York OHIO: Cincinnati CANADA: Toronto Windsor CHINA: Shanghai MEXICO: Monterrey POLAND: Gdynia Warsaw Wrocław Ms. Mary Jo Kunkle Executive Secretary Michigan Public Service Commission 7109 W. Saginaw Hwy. P.O. Box Lansing, MI e: Wisconsin Public Service Corporation and Michigan Gas Utilities Corporation MPSC Case No. U Dear Ms. Kunkle: Enclosed for electronic filing please find the Joint Application of Wisconsin Public Service Corporation and Michigan Gas Utilities Corporation for ex parte authority to revise and implement tariff sheets reflective of a new methodology for determining budget bill amounts as relating to the implementation of the new Integrys Customer Experience project. If you should have any questions, please kindly advise. Very truly yours, Sherri A. Wellman Enclosures cc: David J. Tyler David J. Kyto Dan Blair Susan Corbin SAW/tmb \

2 STATE OF MICHIGAN BEFOE THE MICHIGAN PUBLIC SEVICE COMMISSION * * * * In the matter of the application of ) WISCONSIN PUBLIC SEVICE COPOATION ) and MICHIGAN GAS UTILITIES COPOATION ) for authority to revise and implement tariff sheets ) reflective of a new methodology for determining budget ) bill amounts and to advise of other changes as relating to ) the implementation of the ICE. ) Case No. U JOINT APPLICATION Wisconsin Public Service Corporation ( WPS Corp ) and Michigan Gas Utilities Corporation ( MGUC ) ( Joint Applicants ) seek authority from the Michigan Public Service Commission ( MPSC or the Commission ) to revise and implement, respectively, tariff sheets reflective of a new methodology for determining budget bill amounts in connection with the implementation of the new Integrys Customer Experience project ( ICE ). Joint Applicants also seek to advise of the new process of calculating and determining Bill/Unbilled revenues as a result of implementing the ICE. In support of this Joint Application, the following representations are made: 1. WPS Corp, a wholly-owned subsidiary of Integrys Energy Group Inc. ( Integrys ), is a corporation organized under the laws of the State of Wisconsin, with its principal offices located at 700 N. Adams Street, P.O. Box 19001, Green Bay, Wisconsin WPS Corp is authorized to transact business in Michigan, and is engaged in the generation, purchase, distribution and sale of electric energy, as well as the transportation, distribution and sale of natural gas, in northeastern Wisconsin and an adjacent part of Menominee County in the

3 Upper Peninsula of Michigan, principally the City of Menominee and environs. WPS Corp has both electric and gas tariff sheets approved by, and on file with, the MPSC. 2. MGUC, a wholly-owned subsidiary of Integrys, is a corporation organized under the laws of the state of Delaware, and authorized to transact business in Michigan, with its principal offices located at 899 South Telegraph oad, Monroe, Michigan, MGUC is engaged in purchasing, storing, transporting, distributing and selling natural gas to the public in southern and western portions of Michigan s Lower Peninsula. MGUC has gas tariff sheets approved by, and on file with the MPSC. 3. Integrys family of five regulated utilities, inclusive of WPS Corp and MGUC, currently operates with three distinct billing systems. Presently, Integrys is in the process of implementing the ICE project which will result in a single billing system for all five regulated utilities. Specifically, the ICE will convert the existing billing systems into a single, modern Open-C technology platform. Among other features, the ICE will provide improved billing and payment related performance. In MGUC s last rate case, U-17273, as well as in WPS Corp s pending electric rate case, U-17669, greater details regarding the ICE project, including a description of its benefits to ratepayers have been provided. 4. As part of this billing platform conversion, a change to the current methodology for determining Budget Bill amounts will need to be made. ule 18 of the Commission s Consumer Standards and Billing Practices, , provides in pertinent part that [u]pon customer request, a utility shall bill a customer with a satisfactory payment history under an equal monthly billing program, if the commission finds that the billing program assures reasonable billing accuracy. WPS Corp s Budget Bill Plan for electric and natural gas service provide for the 2

4 determination of the budget amount as follows: The regular budget amount is determined by dividing the estimated annual billing for all service, including yard lighting, by 12. The result is rounded to the next higher whole dollar. (See MPSC Vol No 5-E, Original Sheet No. C-6.00 and MPSC Vol No 5-Gas, Original Sheet No. C-9.00) MGUC currently uses the same methodology as WPS Corp for determining customer budget billing amounts. 5. With the conversion to ICE, the new method for calculating the budget bill amount will be as follows: The regular budget amount is determined by taking the actual energy related bill amount and dividing this by the number of billing days in the period to get average cost per day. This average cost per day is then multiplied by 30 to determine a monthly amount. The monthly amount will then be multiplied by a multiplier for rates and a multiplier for weather. The rate multiplier is only added if the costs are going up or down dramatically. The weather multiplier is a 2 digit number based on the degree days of the applicable utility. Below is an example, for illustrative purposes only. Number of billing days Ave cost per day Monthly cost per day Weather factor adjustment Month Total bill amount ate factor adjustment January $ $ $ February $ $ $ March $ $ $ April $ $ $ May $ $ $ June $ $ $74.76 July $ $ $82.77 August $ $ $77.25 September $ $ $99.68 October $ $ $ November $ $ $ December $ $ $ $ $ The budget would be $ per month 3

5 6. This change in the budget bill calculation methodology will not result in an increase in cost of service for customers. 7. Attached as Attachments 1, 2 and 3, respectively, are proposed tariff sheets for WPS Corp Electric, WPS Corp Gas and MGUC which reflect the change in methodology for determining the budget amount. 8. The Joint Applicants represent that the proposed method assures reasonable billing accuracy because it accounts for a customer s average usage, adjusted for weather impacts and rate impacts. 9. The Joint Applicants wish to advise the Commission that the conversion to ICE will also result in changes to the methodology utilized for calculating and determining Billed/Unbilled revenues. Attached as Attachment 4 is a description of the change. This change will not result in any rate impacts, as calculation and determination of Billed/Unbilled revenues do not impact customers bills. 10. Because the requested change to the methodology for calculating the budget bill amount and the information regarding the billed/unbilled revenues as arising from the conversion to the ICE, will not result in an increase to cost of service for either WPS Corp s or MGUC s customers, the Joint Applicants represent that the Joint Application may be approved without the expense and time associated with notice and hearing. WHEEFOE, Wisconsin Public Service Corporation and Michigan Gas Utilities Corporation respectfully request the issuance of an ex parte order granting: A. Approval of the Joint Application, and authority to revise the methodology to determine budget bill amounts and implement the proposed tariff sheets attached to this Joint Application as Attachments 1, 2 and 3; and 4

6 B. Approval of such other and further authority as may be lawful and proper. espectfully submitted, WISCONSIN PUBLIC SEVICE COPOATION and MICHIGAN GAS UTILITIES COPOATION Dated: January 6, 2014 By: One of Its Attorneys Sherri A. Wellman (P38989) Paul M. Collins (P69719) Miller, Canfield, Paddock, & Stone, PLC One Michigan Avenue, Suite 900 Lansing, Michigan (517) Attorneys for Wisconsin Public Service Corporation and Michigan Gas Utilities Corporation \

7 MPSC Vol No 5-ELECTIC (eformatted ate Book) WISCONSIN PUBLIC SEVICE COPOATION 1st ev. Sheet No. C-6.00 eplaces Original Sheet No. C-6.00 C2. Standard ules & egulations General VIM Continued from Sheet No. C-5.00 Attachment 1 Page 1 of 1 Customers on the budget payment plan shall be notified of adjustments through either a bill insert or message on the bill. When an adjustment is made to a budget payment amount, the customer will be informed of the adjustment at the same time the bill containing the adjustment is rendered. Customers who have arrearages shall be allowed to establish a budget payment plan by signing a Settlement Agreement for the arrears. The Settlement Agreement payment amount is not subject to the late payment charge. However, budget payment plans shall be subject to the late payment charge. In addition, if a budget payment is not paid, the customer shall be notified with the next billing that if proper payment is not received subsequent to this notification, the next regular billing may effectuate the removal of the customer from the budget and reflect the appropriate amount due. At the end of the budget year, if an underbilled or overbilled balance exists in a customer s account, the balance shall be handled as follows: 1) A customer s debit balance will be consolidated into the new budget amount or, at the customer s option, will be paid in full or on a deferred basis. 2) A customer s credit balance will be applied against the customer s account or, at the customer s option, a refund will be made or it will be consolidated into the new budget amount. If a customer has a credit balance of more than $2 at the end of the program year, upon the request of the customer, the utility shall return the credit balance. D. Determination of Budget Amount: The regular budget amount is determined by taking the actual energy related bill amount and dividing this by the number of billing days in the period to get average cost per day. This average cost per day is then multiplied by 30 to determine a monthly amount. The monthly amount may be multiplied by a multiplier for rates and a multiplier for weather.the regular budget amount is determined by dividing the estimated annual billing for all service, including yard lighting, by 12. The result is rounded to the next higher whole dollar. The estimated annual billing may be determined by heat loss calculations, analysis of previous use, estimated normal use, or any combination of the preceding. E. Billing Method: The difference between actual service used and the budget amount is calculated monthly during the budget year. The adjustment may be a charge or credit to make the amount due for current service, including yard lighting, equal to the budget amount. The adjustment is printed on all bills during the customer s budget year. Continued to Sheet No. C-7.00 Issued: XX-XX-XX By D M Derricks VP egulatory Affairs Green Bay, Wisconsin Effective for Service On and After: XX-XX-XX Issued Under Auth. of Mich Public Serv Comm Dated: XX-XX-XX In Case No: U-17759

8 WISCONSIN PUBLIC SEVICE COPOATION MICHIGAN Attachment 2 Page 1 of 2 MPSC Vol No 5-GAS 1 st evised Sheet No. C-8.00 (eformatted ate Book) eplaces Original Sheet No. C-8.00 C1. General ules (Schedule GXM) (Contd) Natural Gas Continued from Sheet No. C-7.00 b. Availability The Budget Billing Plan is available to all prospective and existing year-round residential and commercial customers with monthly charges not to exceed $1,000 and no past due amounts. A budget payment plan may be established at any time of the year. c. Budget Amount and Administration The monthly budget amount shall be calculated by the utility on the basis of the estimated consumption and estimated applicable rates through the end of the budget year. A budget year begins with the customer's first bill on the budget plan and ends after 12 months. An applicant for a budget plan shall be informed at the time of application that budget amounts shall be reviewed and changed every six months, if necessary, in order to reflect current circumstances. Adjustments to the budget amount will be made with the objective that the customer's underbilled or overbilled balance in the 12th month of the budget year shall be equal to one month's budget amount. Customers on the budget payment plan shall be notified of adjustments through either a bill insert or message on the bill. When an adjustment is made to a budget payment amount, the customer will be informed of the adjustment at the same time the bill containing the adjustment is rendered. Customers who have arrearages shall be allowed to establish a budget payment plan by signing a deferred payment agreement for the arrears. The deferred payment amount is not subject to the late payment charge. However, budget payment plans shall be subject to the late payment charge. In addition, if a budget payment is not paid, the customer shall be notified with the next billing that if proper payment is not received subsequent to this notification, the next regular billing may effectuate the removal of the customer from the budget plan and reflect the appropriate amount due. At the end of a budget year, if an underbilled or overbilled balance exists in a customer's account, the balance shall be handled as follows: Continued to Sheet No. C-9.00 Issued: xx-xx-xx By DM Derricks VP egulatory Affairs Green Bay, Wisconsin Effective for Service On and After: xx-xx-xx Issued Under Auth. of Mich Public Serv Comm Dated: xx-xx-xx In Case No: U-17759

9 WISCONSIN PUBLIC SEVICE COPOATION MICHIGAN Attachment 2 Page 2 of 2 MPSC Vol No 5-GAS 1 st evised Sheet No. C-9.00 (eformatted ate Book) eplaces Original Sheet No. C-9.00 C1. General ules (Schedule GXM) (Contd) Natural Gas Continued from Sheet No. C ) A customer's debit balance will e consolidated into the new budget amount or, at the customer's option, will be paid in full or, on a deferred basis. 2) A customer's credit balance will be applied against the customer's account or, at the customer's option, a refund will be made or, it will be consolidated into the new budget amount. d. Determination of Budget Amount The regular budget amount is determined by dividing the estimated annual billing for all service, including yard lighting, by 12. The result is rounded to the next higher whole dollar. The estimated annual billing may be determined by heat loss calculations, analysis of previous uses, estimated normal use, or any combination of the preceding. The regular budget amount is determined by taking the actual energy related bill amount and dividing this by the number of billing days in the period to get an average cost per day. This average cost per day is then multiplied by 30 to determine a monthly amount. The monthly amount may be multiplied by a multiplier for rates and a multiplier for weather. e. Billing Method The difference between actual service used and the budget amount is calculated monthly during the budget year. The adjustment may be a charge or credit to make the amount due for current service, including yard lighting, equal to the budget amount. The adjustment is printed on all bills during the customer s budget year. All budget accounts are billed as scheduled each month. The readings are estimated if an actual reading is not obtained. The adjustment to any "late cycle" billing of budget accounts is made equal to the amount of the billing, since the budget amount has already been billed. The difference between the actual billing and budget amount (the adjustment) is accumulated each month as "not due". The not due balance, including the current adjustment, is printed at the bottom of the bill and may be a charge or a credit. The amount remaining as "not due" is applied to the bill due at the end of the customers budget year unless the customer discontinues service before that time or the budget is cancelled. If the budget amount is accurate, the weather is normal, and there are no rate or tax changes, the balance should be roughly equal to the budget amount. The "not due" balance is applied to the final bill if the customer discontinues service. Continued to Sheet No. C Issued: xx-xx-xx Effective for Service By DM Derricks On and After:xx-xx-xx VP egulatory Affairs Issued Under Auth. of Green Bay, Wisconsin Mich Public Serv Comm Dated:xx-xx-xx In Case No: U-17759

10 MICHIGAN GAS UTILITIES COPOATION M.P.S.C. No. 2 GAS Continued From Sheet No. C C3.4 Budget Billing Attachment 3 Page 1 of 2 Original Sheet No. C Definition Budget Billing distributes the estimated annual payments required into equal amounts over a 12-month period to lessen the impact of large bills incurred in a few consecutive months. An adjustment is applied to the bills due during the first 11 months of the budget year to make the amount due for current service equal to the budget amount. The difference between the actual billing and the budget amount is accumulated as not due and is applied to the bill due the last month of the budget year, unless the customer discontinues service before that time or the budget is cancelled for some reason. Availability Budget Billing is available to existing residential and commercial customers who receive service for a full 12-month period. A budget payment plan may be established at any time of the year. Budget Amount and Administration The monthly budget amount shall be calculated by the utility on the basis of the estimated consumption and estimated applicable rates through the end of the budget year. A budget year begins with the customer's first bill on the budget plan and ends after 12 months. An applicant for a budget plan shall be informed at the time of application that budget amounts shall be reviewed and changed every six months, if necessary, in order to reflect current circumstances. Adjustments to the budget amount will be made with the objective that the customer's underbilled or overbilled balance in the 12th month of the budget year shall be equal to one month's budget amount. Customers on Budget Billing shall be notified of adjustments through either a bill insert or message on the bill. When an adjustment is made to a budget payment amount, the customer will be informed of the adjustment at the same time the bill containing the adjustment is rendered. Customers who have arrearages shall be allowed to establish a budget payment plan by signing a deferred payment agreement for the arrearage. The deferred payment amount is not subject to late payment charges; however, budget payment plans shall be subject to late payment charges. In addition, if a budget payment is not paid, the customer shall be notified with the next billing that if proper payment is not received subsequent to this notification, the next regular billing may effectuate the removal of the customer from the budget plan and reflect the appropriate amount due. Continued on Sheet No. C Issued: By D M Derricks Asst. VP egulatory Affairs Green Bay, Wisconsin Effective for Service On and After: Issued Under Authority of Michigan Public Service Commission Dated: In Case No. U-17759

11 MICHIGAN GAS UTILITIES COPOATION M.P.S.C. No. 2 GAS Continued from Sheet No. C C3.4 Budget Billing (contd.) Attachment 3 Page 2 of 2 Original Sheet No. C At the end of a budget year, if an underbilled or overbilled balance exists in a customer's account, the balance shall be handled as follows: 1) A customer's debit balance will be consolidated into the new budget amount or, at the customer's option, will be paid in full or, on a deferred basis. 2) A customer's credit balance will be applied against the customer's account or, at the customer's option, a refund will be made or, it will be consolidated into the new budget amount. Determination of Budget Amount The regular budget amount is determined by taking the actual energy related bill amount and dividing this by the number of billing days in the period to get an average cost per day. This average cost per day is then multiplied by 30 to determine a monthly amount. The monthly amount may be multiplied by a multiplier for rates and a multiplier for weather. The rate multiplier is only added if the costs are going up or down dramatically. The weather multiplier is a 2 digit number based upon degree days. Billing Method The difference between actual service used and the budget amount is calculated monthly during the budget year. The adjustment may be a charge or credit to make the amount due for current service equal to the budget amount. The adjustment is printed on all bills during the customer s budget year. All budget accounts are billed as scheduled each month. The readings are estimated if an actual reading is not obtained. The adjustment to any "late cycle" billing of budget accounts is made equal to the amount of the billing, since the budget amount has already been billed. The difference between the actual billing and budget amount (the adjustment) is accumulated each month as "not due". The not due balance, including the current adjustment, is printed at the bottom of the bill and may be a charge or a credit. The amount remaining as "not due" is applied to the bill due at the end of the customer s budget year unless the customer discontinues service before that time or the budget is cancelled. If the budget amount is accurate, the weather is normal, and there are no rate or tax changes, the balance should be roughly equal to the budget amount. The "not due" balance is applied to the final bill if the customer discontinues service. Continued on Sheet No. C Issued: By D M Derricks Asst. VP egulatory Affairs Green Bay, Wisconsin Effective for Service On and After: Issued Under Authority of Michigan Public Service Commission Dated: In Case No. U-17759

12 Attachment 4 Page 1 of 3 Design Approach The general approach is to change the existing meter estimation formula. More validations will be added when selecting base periods, make the weather weighing factor more effective, using either weather based or a linear formula when computing the estimate and adjusting for the range of the neutral temperature. Base Period Definition & Validation - Do not use a period as a basis for estimation if it was estimated and if the reading prior to it was estimated. - Check if there is was a move-in that occurred within the base period. If there is, move to the previous month. - If there is a meter exchange or service orders, move to the previous month. - Compare the percentage of the number of days of the base period to the current period. It must be at least 80%. Otherwise move to the previous month. - Compare the ratio of the average degree day coefficient of the base period to the current month (or vice versa). It should be at least 60%. This will ensure that there is no extreme weather difference between the base and current periods. If there is a significant difference, move to the previous month. This validation will only be done if the service is considered to be affected by weather factors. - Compare the ratio of the premise s average usage against the base period's average usage (or vice versa). The percentage should be at least 40%. Estimation Calculation Enhancements - Account for the type of device when computing based from degree days. - To effectively account for weather factors, the formula for computing the estimated usage will be changed to: Current Period Day Count X Avg Usage for Base Period X (Average Degree Day Coefficient atio between current period and base period). The new process will try to use two base periods whenever possible. Those are the last X months of the same year and the last X months for the past year. "X" is the maximum number of months that can be use when selecting the base period for the current and past year. It will be configurable by company and will initially be set to 3 months for all companies. - The degree day coefficient ratio will not always be computed as Current Degree Days divided by Base Period Degree Days. If there are two suitable base periods selected, the average of the two estimated usages will be used as the final estimated usage. If there is only one suitable base period selected, it will become the final estimated usage. If for some reasons a suitable base period is not available and the system was configured to use average usages, the premise service or region average will be used. If there is no history yet, the region average for the service of the same rate class within the company will be used. The system will have an average for each season (summer, fall, winter, spring) plus a 12-month average. When using the average as a basis for estimation, the system will try to use the average for the season first. If it does not exist yet, the 12-month average will be used. Same thing applies when using region averages. What criteria for Weather Based Estimation: Months for seasons are defined below. If the period falls in between seasons, it will be considered to be in the season that has the most number of days. If the days are equal, the most recent season will be used. o Summer June, July, August o Fall September, October, November o Winter December, January, February o Spring March, April, May

13 MGU Summary Assumes ICE go-live is May, 2015 Attachment 4 Page 2 of 3 1 MGU Current State MGU has 3 processes for calculating unbilled usage/revenue: Transportation Gas: A month-end reading is used in combination with an average distribution rate. Cycle Billed Customer Usage Estimate: Billed usage + unbilled usage prior month unbilled usage = Estimated usage for calendar month with additional calculations related to send outs for CA customers evenue Estimate: Usage is allocated to classes of customers & applicable distribution rates are applied Fixed Charges are prorated Monthly and quarterly process controls are used to analyze validity of estimates & drive adjustments MGU Future State Unbilled process will utilize end of calendar month meter readings to estimate unbilled usage for Large Volume Gas contracts All other contract unbilled usage for will be estimated using a new billing estimation routine Unbilled revenues will be calculated for every contract Accounting will be able to compare results to gas throughput (less gas unaccounted) & will be able to cancel/rebill unbills if needed. Approval will be completed via an approval window

14 WPSC Summary Assumes ICE go-live is May, 2015 Attachment 4 Page 3 of 3 1 WPSC Current State WPSC Future State WPSC volume is estimated by utilizing end of calendar month AM readings where available and estimating remaining at a contract level. Open-c applies costs to adjusted total volumes based on last month s rates Unbilled process will continue to utilize end of calendar month AM readings to estimate unbilled usage for most WPSC contracts. Non-AM contract unbilled usage for some WPSC contracts will be estimated using a new billing estimation routine Unbilled revenues will be calculated for every contract Accounting will compare results to electric generation (less line loss) and gas throughput (less gas unaccounted) & will be able to cancel/rebill unbills if needed. Approval will be completed via an approval window