Wisconsin Energy Threatens to Unplug
Wisconsin Energy Corp.'s proposal to build and rebuild power
plants in the state was a little less certain at the end of last
week after the company threatened to pull the plug on its $6
billion proposal if it is not allowed to spin off its power plants
into an unregulated subsidiary.
The largest utility in Wisconsin formally launched its proposal
earlier this month, to approval from Gov. Tommy G. Thompson, and
mixed reviews from legislative and consumer groups. Though it has
carried the support of the governor since it was first unveiled two
months ago, some of Wisconsin Energy's plan has raised eyebrows at
the state's Public Service Commission, which would ultimately hold
sway over the issue.
Wisconsin Energy's 45-page filing with PSC details the company's
commitment to solve the state's electricity shortfall expected in
coming years - but it also wants some changes in state law to make
it come about. Without the changes, it says it might have to look
elsewhere for new development.
Under its building proposal, Wisconsin Energy would increase the
energy supply in the state nearly 19% over 10 years. By 2010, the
state expects it will need an additional 4,000 MW. Wisconsin
Energy's proposal would add nearly half of that, with two
coal-fired units in Oak Creek adding 1,200 MW, and replacing a unit
in Port Washington with a 500 MW gas-fired plant.
At the Wisconsin Economic Summit earlier this month, Gov.
Thompson said he would ask for a change in state law to make it
easier for Wisconsin utilities, of which Wisconsin Energy's are the
largest, to build power plants. He said the electric system was
fragile, with more transmission lines and plants needed.
However, PSC thinks that Wisconsin Energy's proposal has some
problems connected with it, including the issues of market power
and stranded costs and benefits. PSC commissioned a report earlier
this year, the "Horizontal Power Market in Wisconsin," that
recommended splitting up Wisconsin Electric, Wisconsin Energy's
subsidiary, into three independent owners, and calling for 30% to
40% of its existing capacity be sold under long-term fixed price
contracts. Wisconsin Electric already has about 50% of the state's
market, serving more than 1 million electric and 940,000 natural
gas customers in Wisconsin and Upper Michigan.
Along with PSC's concerns, Customers First!, a statewide
coalition of electric cooperatives, municipal utilities and
consumer groups, questions removing generation plants from
regulation. The Wisconsin Federation of Cooperatives fears that if
the company is given the right to move existing plants into an
unregulated utility, they could soon be sold to out-of-state
companies, and trigger problems similar to those facing California.
Dave Jenkins, the cooperative's division manager, said "it would
be devastating to our economy," and Customers First! attorney Lee
Cullen said the plan "requires legislative changes, and we think
the commission should dismiss the petition until and unless
Wisconsin Energy can get those changes."
Without some incentive, though, Wisconsin Energy now is
threatening to turn out the lights on its billion-dollar plan,
titled "Power the Future." Without the ability to spin off its
power plants - except two nuclear reactors in Point Beach -
Wisconsin Energy is unsure it can obtain capital to finance the
"We will take our money and go somewhere else," said Larry
Salustro, senior vice president. "All of the future energy needs of
our customers must be supplied by independent power producers."
Carolyn Davis, Houston