Wisconsin Energy Corp.’s proposal to build and rebuild powerplants in the state is a little less certain today after thecompany threatened to pull the plug on its $6 billion proposal ifit is not allowed to spin off its power plants into an unregulatedsubsidiary.

The largest utility in Wisconsin formally launched its proposallast week (see Daily GPI, Dec. 4), toapproval from Gov. Tommy G. Thompson, and mixed reviews fromlegislative and consumer groups. Though it has carried the support ofthe governor since it was first unveiled two months ago, some ofWisconsin Energy’s plan has raised eyebrows at the state’s PublicService Commission, which would ultimately hold sway 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 tomake it come about. Without the changes, it says it might have tolook elsewhere 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 last week, Gov. Thompson saidhe would ask for a change in state law to make it easier forWisconsin 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 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.”

PSC, which has a meeting scheduled today at 10 a.m., was notexpected to address the Wisconsin Energy proposal in its regularmeeting. There was no comment about the company’s latestannouncement.

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