Power bills to rise as utilities build energy infrastructure

Power bills to rise as utilities build energy infrastructure

Apr 03 - Milwaukee Journal Sentinel

Wisconsin residents and businesses will see power bills increase each year as utilities scramble to build new plants and transmission lines, utility executives said Friday.

Utilities plan to spend billions on such upgrades in the next few years. The building boom is in large part a response to electricity shortages that spawned calls for conservation and near-blackouts on hot summer days in 1997 and 1998.

Two decades of failing to build power plants and new transmission lines kept Wisconsin power prices artificially low, said Bill Harvey, president and chief operating officer of Madison-based Alliant Energy Corp.

"We have created a surreal environment" when it comes to energy pricing, Harvey told more than 160 people who attended a forum at the Milwaukee Athletic Club.

"All of us are very concerned about our mistakes of the past coming home to roost and creating price shock on a fragile Wisconsin economy," he said.

"We are correcting an errant course. But the reality is we're catching up, and catching up in big lumps."

Increases on increases

Those price increases will come on the heels of already higher prices being paid by many power customers.

Tari Emerson, procurement manager at Charter Manufacturing Co. in Saukville, said her company -- one of Wisconsin Energy Corp.'s largest customers -- has faced sizable utility bill increases in recent years.

Some of those increases have been because natural gas has increasingly been used by utilities to generate electricity at times of peak demand -- and costs for that fuel have leaped, not just in winter but also during hot spells in the summer, she said.

"We do have concerns going forward," Emerson said. "Wisconsin has lost its place as the lowest cost in our Midwestern area. What's going to happen when we do build the infrastructure that we need to build?"

Rates in Wisconsin were historically the lowest in the upper Midwest -- and ranked lower than seven nearby states as recently as 1997. But they have crept up in recent years, and state prices are now in the middle of the pack among Midwest states.

The state, through the state Public Service Commission, will "do what we can" to keep rates affordable, Gov. Jim Doyle said.

"But we must be realistic and recognize that years of under- investment in our energy infrastructure requires that we are going to have to be making significant capital investments, today and in the years to come," he said.

Gale Klappa, who becomes Wisconsin Energy chairman and chief executive next month, said customers in southeastern Wisconsin can expect regular rate increases in the next several years in the range of 3% to 4% a year.

To help minimize increases, Wisconsin Energy will cut its own costs and improve efficiency and productivity, Klappa said. Without those improvements, he said, the utility would need electricity rate increases of 6% a year to help pay for its power-plant building program.

New pricing system

Concerns about rates are responsible for an unprecedented push by Wisconsin utilities, industries and customer groups to protest a planned energy transmission pricing system set to kick off in December.

Under the system, Wisconsin could be penalized because of its transmission problems -- its lack of investment in the transmission grid and the fact that it has just four high-voltage lines connecting it with the rest of the eastern United States power grid.

Doyle and Wisconsin's utility executives recently asked the Federal Energy Regulatory Commission to allow the state to wait five years before joining the new market being set up by the Carmel, Ind.- based Midwest Independent Transmission System Operator. That would give the state time to get the $420 million Wausau-to-Duluth transmission line built, as well as new generating plants.

Some utility regulators and executives worry that Wisconsin's delay could scuttle the creation of the Midwest energy market.

"MISO may be dead if the market doesn't start, but Wisconsin will be dead if the market doesn't work," said Jose Delgado, chief executive of American Transmission Co. ATC operates high voltage lines in Wisconsin, upper Michigan and part of Illinois.

This week, the Midwest transmission coordinator released a study contending that Wisconsin would save $51 million a year once the new market opens. Wisconsin utilities have projected the state could lose $200 million a year.

Although the federal commission doesn't support a five-year delay, it has pledged to ensure that Wisconsin's utilities and customers aren't harmed by the market's start-up.

Bloomberg News contributed to this report.