Wisconsin Energy Corp.’s proposal to build and rebuild powerplants in the state was a little less certain at the end of lastweek after the company threatened to pull the plug on its $6billion proposal if it is not allowed to spin off its power plantsinto an unregulated subsidiary.

The largest utility in Wisconsin formally launched its proposalearlier this month, to approval from Gov. Tommy G. Thompson, andmixed reviews from legislative and consumer groups. Though it hascarried the support of the governor since it was first unveiled twomonths ago, some of Wisconsin Energy’s plan has raised eyebrows atthe state’s Public Service Commission, which would ultimately holdsway over the issue.

Wisconsin Energy’s 45-page filing with PSC details the company’scommitment to solve the state’s electricity shortfall expected incoming years – but it also wants some changes in state law to makeit come about. Without the changes, it says it might have to lookelsewhere for new development.

Under its building proposal, Wisconsin Energy would increase theenergy supply in the state nearly 19% over 10 years. By 2010, thestate expects it will need an additional 4,000 MW. WisconsinEnergy’s proposal would add nearly half of that, with twocoal-fired units in Oak Creek adding 1,200 MW, and replacing a unitin 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 iteasier for Wisconsin utilities, of which Wisconsin Energy’s are thelargest, to build power plants. He said the electric system wasfragile, with more transmission lines and plants needed.

However, PSC thinks that Wisconsin Energy’s proposal has someproblems connected with it, including the issues of market powerand stranded costs and benefits. PSC commissioned a report earlierthis year, the “Horizontal Power Market in Wisconsin,” thatrecommended splitting up Wisconsin Electric, Wisconsin Energy’ssubsidiary, into three independent owners, and calling for 30% to40% of its existing capacity be sold under long-term fixed pricecontracts. Wisconsin Electric already has about 50% of the state’smarket, serving more than 1 million electric and 940,000 naturalgas customers in Wisconsin and Upper Michigan.

Along with PSC’s concerns, Customers First!, a statewidecoalition of electric cooperatives, municipal utilities andconsumer groups, questions removing generation plants fromregulation. The Wisconsin Federation of Cooperatives fears that ifthe company is given the right to move existing plants into anunregulated utility, they could soon be sold to out-of-statecompanies, and trigger problems similar to those facing California.

Dave Jenkins, the cooperative’s division manager, said “it wouldbe devastating to our economy,” and Customers First! attorney LeeCullen said the plan “requires legislative changes, and we thinkthe commission should dismiss the petition until and unlessWisconsin Energy can get those changes.”

Without some incentive, though, Wisconsin Energy now isthreatening to turn out the lights on its billion-dollar plan,titled “Power the Future.” Without the ability to spin off itspower plants – except two nuclear reactors in Point Beach -Wisconsin Energy is unsure it can obtain capital to finance theproposal.

“We will take our money and go somewhere else,” said LarrySalustro, senior vice president. “All of the future energy needs ofour customers must be supplied by independent power producers.”

Carolyn Davis, Houston

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