Wisconsin Energy Threatens to Unplug

Wisconsin Energy Corp.'s proposal to build and rebuild power plants in the state is a little less certain today 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 last week (see Daily GPI, Dec. 4), 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 last week, 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 proposal.

"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."

PSC, which has a meeting scheduled today at 10 a.m., was not expected to address the Wisconsin Energy proposal in its regular meeting. There was no comment about the company's latest announcement.

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