Wisconsin Power & Light Co., Alliant's state utility unit, had applied for a permanent 12.9 percent rate of return for the Cedar Ridge Wind Farm under Act 7, a 2005 state law that provides for setting permanent rates of return for individual utility projects such as power plants and wind farms.
The law is designed to provide a degree of certainty to a utility, investors, and ratepayers on the recovery of a facility's costs.
The PSC issued a preliminary, oral decision setting the rate of return for Cedar Ridge at 10.5 percent for its 20-year life.
"We are disappointed in the terms of the PSCW's decision and we believe that the decision is contrary to the intention of Wisconsin Act 7 to encourage investment in new generation, including renewable energy," William D. Harvey, Alliant chairman, president and CEO, said in a statement. "WP&L will review the final order and communicate whether or not it intends to make the investment in accordance with the terms and conditions of the PSCW's Act 7 decision."
Alliant also can choose to let the project fall under its overall rate of return, which is set annually by the PSC. Alliant's 2007 rate of return is 11.2 percent.
The choice is "kind of like the difference between a fixed-rate mortgage and an ARM (adjustable rate mortgage)," Alliant spokeswoman Erin Dammen said.
Dammen said Alliant would make its decision after the PSC issues its final, written order on the rate of return for Cedar Ridge under the Act 7 application.
Not moving forward with the project is "an absolute last resort if we could not justify going forward with the project from a financial perspective," Dammen said. "Right now we are only considering the options that would allow us to continue with the project, either by financing through Act 7 or through traditional rate base."
Alliant also is waiting for the PSC decision on its application to construct the 60- to 99-megawatt wind farm.