Bruce Murphy
Murphy’s Law

The Remarkable Clout of We Energies

Year after year the company jacks up prices with bipartisan approval. Why?

By - Mar 21st, 2017 01:11 pm
Sign-up for the Urban Milwaukee daily email
Gale Klappa

Gale Klappa

Apparently nobody had explained the rules to Rep. Adam Neylon (R- Pewaukee).

Neylon was one of four Republican legislators who announced a bill called a “Ratepayers First” proposal that would rein in profits made by We Energies from its power plants.

“Wisconsin’s electricity rates are among the highest in the Midwest,” state Sen. Duey Stroebel (R-Saukville), a co-sponsor of the bill, complained in a press release announcing the proposal.

“Wisconsin’s high energy rates are hurting families and stifling economic development,” added Neylon.

But once Assembly Speaker Robin Vos found out about the bill, the four lawmakers were chastised in a closed-door meeting of the Republican caucus, as Milwaukee Journal Sentinel columnist Dan Bice reported.

They had erred, it seems, in not forewarning Vos they intended to introduce the bill. “I’ve apologized to them for any miscommunication or lack of communication,” Neylon told Bice.

Perhaps worse, the proposal had put a brief scare into stockholders, helping cause a three-percent dip in the price of We Energies stock. Neylon, however, declined to apologize for that. “I don’t work for We Energies,” Neylon said. “Ultimately, I’m responsible to and work for the taxpayers.”

But Neylon admitted his bill probably wasn’t going anywhere. Nothing, it seems, can stop the ever rising rates of We Energies and other public utilities. This is a public monopoly, with an all-but guaranteed market and rate of return, yet you rarely if ever hear members of either party call for the Public Service Commission to crack down on We Energies. Why is that?

In theory a public body like the PSC should be protecting us ratepayers. Heck, it goes back to the days of reforming governor Robert LaFollette, under whom the state created a Railroad Commission, that by 1907 was also overseeing the public utilities and by 1931 became the Public Service Commission.

But companies that are regulated typically work to get industry sympathizers appointed to the commission and lobby lawmakers to pass laws benefitting the industry and hire lawyers who know the PSC rules better than the PSC staff. And so in 1979 the legislature created the Citizens Utility Board (CUB) to give citizens “a voice” in PSC decisions and CUB later spun off to become an independent non-profit.

But by 2009 CUB was having trouble raising enough money and the legislature helped create a special grant of $300,000 per year to help CUB fund its operations.

Of course that still left CUB at a huge disadvantage combatting We Energies. “They have no restrictions on what they can pay experts, and that’s paid for by the ratepayers,” as Charles Higley, CUB’s former executive director, once complained to me. (We Energies spokesman Brian Manthey said his company can only recover “reasonable costs” incurred.)

But CUB can’t afford the top experts. “We have to pay below-market rates for the experts we hire,” Higley noted. “It’s not a fair fight. It’s very frustrating.”

But it gets worse. CUB’s $300,000 grant wasn’t guaranteed and came out of the PSC budget, which made it tricky for CUB to criticize decisions made by the PSC. “Absolutely. We have to be very careful,” Higley admitted. “It does limit our independence.”

Meanwhile, another advocacy group was created back in the 1970s, the Wisconsin Industrial Energy Group, a non-profit whose budget comes from more than 30 industrial firms that are concerned about rising rates for electricity. In the past, WIEG had argued that WE Energies’ profit margin should be kept at 9 percent to 10.5 percent, while the PSC had allowed an annual return of more than 12 percent.

And yet between the oversight by the “Public” Service Commission and advocacy by CUB and WIEG, We Energies continues to enjoy big rate hikes.

The PSC allowed Wisconsin utilities to increase electric rates by 55 percent from 2002-2010, during a period when inflation rose by just 20 percent. A study by the UW-Milwaukee Employment & Training Institute found that the average cost of heat and electricity for city of Milwaukee renters, all customers of We Energies, nearly doubled in just six years, rising from $1,318 in 2000 to $2,227 in 2006.

While rate hikes have moderated in recent years, We Energies still raised rates by about 16 percent since 2010.

These ever-higher rates helped drive profits for We Energies. A study by WIEG found Wisconsin utilities had the second-highest profit margin among 26 states studied.

Those generous profits, in turn, help pay for huge bonuses for We Energies executives, which amounted to $77 million over a three year (2009-2011) period, according to annual reports it files with the PSC.

Compensation for We Energies executives was $26.7 million in 2015, according to Morningstar, including $13 million for now retired chief executive Gale Klappa. Klappa earned a whopping $49 million in total compensation in the six years prior to 2012 and another $36 million since then. Forbes found that Klappa was the third-best paid utility CEO in the nation — this, in a market (the Milwaukee metro area) that ranks 39th in the nation.

Yet there is also plenty of money on hand to pay off politicians. According to the Wisconsin Democracy Campaign, contributions from the Milwaukee company and its current subsidiaries (Wispark, Wisconsin Public Service Group, Integrys Energy Group) to Gov. Scott Walker and current legislators from 2009 through 2016 totaled $726,363 and would have been higher if former legislators were included.

Those contributions might help explain why Vos was not crazy about legislation intended to limit the rate hikes and profits of We Energies. Vos also argued the bill was unconstitutional, which coincidentally was the same argument made by the company.

We Energies also seems to have clout with the Metropolitan Milwaukee Association of Commerce,whose Senior Vice President and lobbyist Steve Baas pushed to eliminate the $300,000 funding for CUB. An editorial by the Journal Sentinel noted that Gale Klappa was vice-chairman of the MMAC board and that Baas’ effort was about “clearing the field for the utilities in rate cases.”

The publication UtilityDive.com reported that the anti-CUB proposal came in the wake of three major disputes between We Energies and CUB.

Via email, Baas described CUB as a special interest group. But when asked who else advocates to limit rate increases affecting residents and businesses, he had no reply. Todd Stuart, executive director of WIEG, says that “CUB has been effective, especially given the resource constraints in recent years and when you compare them to their counterparts in neighboring states.”

The MMAC represents 2,000 companies all over the Milwaukee metro area, many of whom must compete with companies in other states paying less for electricity. So why try to hamstring a group that pushes for lower rates? Why side with a public monopoly that doesn’t have to compete in the marketplace the same way as MMAC’s other members do?

As Stuart recently noted, “Wisconsin’s largest manufacturing companies, now pay an average of 13% more for electricity than the average rates paid by their competitors in all other Midwest states. That’s a big cost disadvantage for our members, some of whom pay well over $1 million a month for electricity.”

And yet the MMAC, legislators in both parties and the state’s power structure never seem greatly concerned about the situation. Nothing can fully explain the mysterious and continuing clout of We Energies.

Remarkably, it was Gov. Walker who opposed the proposal to cut the funding for CUB, though he didn’t restore the funds. In essence, this meant CUB could apply for funding from the PSC and received a smaller amount of funding, $227,000, in 2016.

Now it is up to CUB’s new director, Tom Content, to seek additional funding. Content was the Journal Sentinel reporter who covered the utilities and energy issues for years for the newspaper. He’s left a declining newspaper to join a non-profit with a declining budget. Good luck, Tom, all of us paying We Energies for gas and electricity wish you well.

If you think stories like this are important, become a member of Urban Milwaukee and help support real independent journalism. Plus you get some cool added benefits, all detailed here. 

Categories: Murphy's Law, Politics

50 thoughts on “Murphy’s Law: The Remarkable Clout of We Energies”

  1. Bruce Hall says:

    Perhaps the complaints should be addressed here: http://psc.wi.gov/consumerInfo/FAQ's/energy/utilityRatesDetermined.htm

    Average retail price (cents/kWh)
    __________________________
    Michigan 10.76
    Wisconsin 10.73
    U.S. Total 10.41 ***
    Ohio 9.98
    Minnesota 9.53
    Illinois 9.40
    Indiana 8.99
    Iowa 8.35

    So, Wisconsin electricity may be slightly higher priced than surrounding states, but it’s about average.

    New England, New York, and California are the most energy-expensive states in the lower 48. Much of the differences may simply be due to the differences in the cost of doing business in various states… land, prevailing wages, taxes, regulations, etc.

    https://www.eia.gov/electricity/state/

  2. Bruce Hall says:

    In my first comment, I provided a 50-state comparison of electric energy costs. It is interesting to compare that analysis with the 50-state index of energy regulation.

    https://docs.google.com/viewer?url=https%3A%2F%2Fwww.pacificresearch.org%2Ffileadmin%2Ftemplates%2Fpri%2Fimages%2FStudies%2FPDFs%2F2013-2015%2F50States_ExecSumm8pg_Finalwebl.pdf

    The Relative Economic Efficiency of State Energy Regulations map may offer some insight to why Wisconsin and Michigan have relatively higher energy costs than their midwestern neighbors.

    I’m sure some will argue against this source on political or philosophical or religious grounds, but I haven’t found a better look at this issue at the state level.

  3. WashCoRepub says:

    -Was WE Energies given a chance to comment on this story?
    -I seem to recall the company has had to make fairly massive infrastructure improvements at several generating facilities in recent years to clean up the coal burning.
    -I can’t defend Klappa’s salary or executive compensation as a group. Is that set by a compensation committee that ultimately reports to shareholders?
    -I will say all my experiences with WE Energies have been very positive from a customer-service standpoint, and a reliability standpoint.

  4. Jon Erik Kingstad says:

    Wisconsin regulators lost jurisdiction over rate based regulation when the Wisconsin legislature with approval of Thompson appointed PSC “restructuring” the utility industry in 1999-2001. Most of WE Energy’s investment in electric transmission facilities was transferred to American Transmission Company which is jointly owned by WE Energy with other electric utility holding companies and some muni’s. The electric utility companies were “de-integrated” into separate wholesale and retail distribution firms. The PSC only regulates the retail distribution rates which are really subject tothe whoesale rates of the other components firms. Those rates are regulated but only after a fashion by the FERC. I once worked at the PSC but I don’t see the point of it any more.

  5. Vincent Hanna says:

    Ah Bruce is back. At least I know what I can ignore.

    WCR, do any of your points relate to the main thrust of the story, the clout that WE Energies has in the state and if said clout is outsized?

  6. old baldy says:

    Bruce Hall:

    How do you explain the 22+% difference between WI and IA, other than relative position along the Mississippi? More rural electric co-ops?

    Jon:

    You hit the nail on the head. TGT really was a visionary when it came to getting his buddies a maximum return. Having worked in the industry back in the 80’s I can recall all the investor owned utilities really sharpening their collective pencils to get a rate increase, CUB being a force, and WI having the lowest kW rates in the midwest. Boy how that changed.

  7. David Ciepluch says:

    This is my own perspective on the rate increases. You can confirm with a utility communications contact but you will likely obtain a different perspective.

    Many of We Energies and collaborating utilities are on the hook for over $4 Billion in new power plants in Port Washington, Oak Creek, wind turbine farms, and a co-generation plant that burns wood, and environmental pollution upgrades at the older Oak Creek and Pleasant Prairie Power Plants. Most Wisconsin utilities also replace distribution lines and substations that runs into the millions. During the 1990s, Wisconsin was bumping into shortfalls in the availability of electric energy, so planning was ramped up based on an increase of 3% growth each year. Actual growth may have been in the 2% range. Per the monopoly and regulated arrangements with the WPSC and utilities, consumers pay for these upgrades in rates spread out over a period of decades.

    Utilities like any business like to grow and sell more of their product – electricity and natural gas, and some steam energy. Engineers like to plan and build things. Business growth has always been the normal practice for utilities. Wall Street and corporate boards reward the executives (CEOs) for this approach.

    Another much less costly path could have been chosen. The commitment to state wide Focus on Energy program expenditures could have been tripled. During 2008, the Energy Center of Wisconsin came out with an initial report that supported this approach. A comprehensive approach with energy efficiency, solar electric, thermal storage on time of us rates, could have mitigated a need for much of growth of power plants. Wisconsin could reduce fossil fuel consumption by 50% and save consumers over $7 Billion annually creating thousands of labor jobs in the building renovation and construction industry.

    Wisconsin also lessened their overall commitment to renewable energy from large wind turbine farms. States west of the can produce about 25% of their electric from large wind farms. Wisconsin was on a pathway towards that goal, but has been stunted at less than 5%. On some days and periods of months, these new plants may sit idled, since lower cost wind produced electric power from outside the region can be brought into Wisconsin. Even if a plant sits idle, Wisconsin consumers are still on the hook paying for the plants and upgrades. Regulated Wisconsin are guaranteed a profit of what has been traditionally around 11% based on their capital expenditures, and ongoing maintenance expenses. This has been the practice for decades.

  8. Tim says:

    Wisconsin used to have some of the cheapest energy costs in the country. Thanks to the PSC being stacked with GOP buddies, WE Energies went on to build the biggest, baddest coal power plant WI has ever seen.

    Iowa doubled down on wind energy… guess who made the right decision.

    http://www.bizjournals.com/milwaukee/blog/2014/09/wisconsin-loses-cheap-power-status-will-it-return.html

    Renewables aren’t just good for the environment, they’re good for the wallet.

  9. Bruce Hall says:

    Vincent Hanna… the opinionator without data.

    Old baldy: https://www.eia.gov/electricity/state/ I’d suggest that Iowa may have more in common with states like Nebraska than Wisconsin when it comes to generating electricity. If you look at the map titled “The Relative Economic Efficiency of State Energy Regulations” in the first link I provided, you may see the commonality. Perhaps another question might be: why is Michigan’s cost higher than Wisconsin’s? I’d suggest that both Michigan and Wisconsin have been doing a lot of work on their generating and distribution infrastructure over the past decade which has to be covered in their rates.

  10. David Ciepluch says:

    Electricity is still a bargain at the rates we pay and the work performance we take for granted by just flipping a switch. Many people pay more for internet, cable, and phone services that exceeds the price of their electric energy bill. The other overpriced services would all fall apart without electricity. Natural gas is still a bargain and currently abundant with current fracking technology that has been used over the past decade.

    This in no way means we could not conserve and reduce consumption of electric and natural gas energy through consumer owned energy efficiency, solar electric panels, thermal mass storage with furnaces, heat pump water heaters, and ice making AC equipment on time of use rates for night time storage at 5 cents per kwh. This would reduce export of fossil energy dollars out of state and save consumers over $7 Billion annually. Utilities and energy companies do not like this approach since it puts a huge dent in their monopoly control of supply and pricing. It goes against the capitalistic approach of growing the business and increased sales each year.

  11. Vincent Hanna says:

    Bruce do you have any opinion on the actual subject of the story, the level of clout of WE Energies?

  12. Bruce Hall says:

    Vincent Hanna:

    The “level of clout” of WE Energies is really quite irrelevant to the analysis of results. Wisconsin’s rates are both reasonable and normal given the factors that go into establishing the rates.

    If Wisconsin’s rates were dramatically out of line with Michigan’s, for example, I would say that there were obvious questions. But given that both states had needs to replace old or shutting down facilities and that overall reliability needed upgrading, the fact that both states have essentially the same rates reinforces the fact that there is no “level of clout” issue and that phrase is only inflammatory, not analytical.

    As I suggested to old baldy, look at the data I provided and you’ll gain some insight into cost factors such as land, labor, and infrastructure, as well as regulatory impact. For example, in Michigan, a specific percentage of electricity must be generated by wind power… even though that power generation is intermittent and requires a costly backup system. Without the regulatory requirements, electricity costs in Michigan would be lower.

  13. Vincent Hanna says:

    So the only way WE Energies could be fairly considered to have an excessive level of clout is if rates were significantly higher in Wisconsin? The fact that politicians got in trouble for trying to take on WE Energies and backed down when their intentions were revealed means absolutely nothing in terms of their clout in the state? That doesn’t make any sense.

  14. Jon Erik Kingstad says:

    The rates paid for electric and natural gas still do not cover the “externalized” environmental cost. Damages are to groundwater through fracking and excessive CO2 emissions from coal burning electric generation plants are the largest environmental costs that are not paid for by electric and natural gas customers. A carbon tax would be the economically rational way of sending the price signals to the market, such as it is, and would also raise energy prices so renewable and energy efficiency would be more competitive alternatives (which they are now anyway) or to create subsidies for investments in those areas.

    The Wisconsin PSC was leading the nation in that direction with the last several advance plans in the 1990’s. Advance Plan 6 and Advance Plan 7 were moving the electric utilities to having them quantify these externalities in terms of costs. I suspect that it why the Thompson packed Commission ended this process or overhauled it to move away from such thinking.

  15. Bruce Hall says:

    So Vincent Hanna feel that anecdotal accounts of politicians backing down from WE Energies (or maybe simply agreeing with it after reviewing the facts) is evidence of nefarious dealings and excessive rates while JE Kingstad would prefer to pile on taxes for “externalized” costs that are impossible to demonstrate but would add to the rates.

    This is a great sampling of opinions in lieu of facts. Maybe Wisconsin does have a problem, but I’m not certain it’s with WE Energies.

  16. Bruce Hall says:

    For those of you who care to understand the impact of renewable energy (generally 10% or less of most states’ electricity generation) this study published by the federal government this month estimates the cost impact of renewables (advocated by the likes of Mr. Kingstad) to be in the 1-8% range. Now you can do the math and understand that if renewables constitute 10% or less of the total, but increase total costs by up to 8% that the cost impact per percentage point of renewables is significant.

    https://emp.lbl.gov/sites/all/files/lbnl-1007261.pdf

    Wisconsin is in the 1% range which isn’t bad; California, which has significantly higher costs per kwh than Wisconsin is in the 10% range. So, renewables, while purported to be good for the environment (there is debate about that), are not necessarily good for the pocketbook.

    For those of you (excluding Messrs. Hanna and Kingstad) who would like a better understanding of how overall costs are generated, you might do well to read this article. https://www.bloomberg.com/news/articles/2016-04-04/why-your-utility-bill-s-still-rising-even-when-power-s-so-cheap

    I’ll give you a hint: “Electricity itself makes up about a third of the average utility bill, down from about half just eight years ago, thanks to a flood of cheap fuel, natural gas extracted with fracking from tight-rock formations.” The article goes on to explain the other 2/3 of your bill.

  17. Vincent Hanna says:

    Bruce apparently reading comprehension is not your strong suit, so you clearly have a problem. I said nothing about nefarious dealings or excessive rates. Don’t put words in my mouth. That should be beneath you.

  18. Bruce Hall says:

    “So the only way WE Energies could be fairly considered to have an excessive level of clout is if rates were significantly higher in Wisconsin? The fact that politicians got in trouble for trying to take on WE Energies and backed down when their intentions were revealed means absolutely nothing in terms of their clout in the state? That doesn’t make any sense.”

    “I said nothing about nefarious dealings or excessive rates. Don’t put words in my mouth.”

    Isn’t the whole issue here that because WE Energies allegedly has “excessive clout” that Wisconsin’s electric rates are higher than they should be… “a nefarious scheme to cheat people out of their money” as Webster’s Dictionary gives as an example. Perhaps your inference was meant to be taken differently. Perhaps your writing skill is not your strong suit.

    Regardless, the your contentions and that of this article are, without supporting data, baseless.

  19. David Ciepluch says:

    The level of clout is related to We Energies persuading the WPSC of the need for over $4 Billion in capital improvements over the past 12 years. As a company the case was laid out before the Commission and approved. Now all customers will be paying for these improvements for decades to come.

    About half the capital expenditure could have been avoided if WI had taken a different path of consumer owned energy efficiency and solar electric along with large utility wind farms, like utilities west of the Mississippi River with 25% of their production from wind that now sells back into WI as lower priced energy.

  20. Tim says:

    Iowa is getting 28.5% of its electricity from wind energy vs 2% for Wisconsin. Yet, Wisconsin has electricity that costs 30% more.

    http://www.iaenvironment.org/webres/File/News%20%26%20Resources/Fact%20Sheets/Iowa%20Wind%20Energy%20Fact%20Sheet%20March%202016.pdf

    Bruce Hall, the evidence isn’t saying what you’d like it to say.

  21. Bruce Hall says:

    The argument that wind energy is the reason for lower electricity costs is simplistic:

    “Texas was again the top wind power state with nearly 36 million megawatthours (MWh) of electricity. Iowa was second, with more than 15 million MWh, followed by California, Oklahoma, Illinois, Kansas, Minnesota, Oregon, Colorado, Washington, North Dakota, and Wyoming.Apr 15, 2014”

    Certainly, wind electrical generation makes sense in certain geographic areas, especially the plains states where land is cheap and winds are strong. http://www.eia.gov/todayinenergy/detail.php?id=15851 However, regulations can more than override that.
    https://docs.google.com/viewer?url=https%3A%2F%2Fwww.pacificresearch.org%2Ffileadmin%2Ftemplates%2Fpri%2Fimages%2FStudies%2FPDFs%2F2013-2015%2F50States_ExecSumm8pg_Finalwebl.pdf

    California, for example, is one of the leading wind power states, but has among the highest electricity rates because of its regulatory structure. Once again, I’ll refer you to page 5 of the above link. Most of the plains states have less government interference and operate more efficiently in the marketplace. Note that Wisconsin and Michigan have a high regulatory environment… similar to California… and have higher electricity rates than nearby states.

    Of course, states that have higher wind power generation levels have also benefitted from enormous federal subsidies. Fortunately, those subsidies are completely free. If we were 100% wind power, why then the federal government would be able to keep our individual costs of electricity really low. But for now, Wisconsin is one of those states that subsidize states like Iowa.

    http://instituteforenergyresearch.org/wp-content/uploads/2013/12/State-Level-Impact-of-Federal-Wind-Subsidies.pdf (page 2)

  22. David Ciepluch says:

    Utilities in Wisconsin are a regulated monopoly. They are still stock owned businesses that compete in the marketplace.

    A diverse portfolio of generation from coal, natural gas, and large wind sources with the most efficient production and distribution systems, and an educated consumer with a strong commitment to energy efficiency, solar electric, energy storage, and conservation are the strongest hedge and competitive force for lowest price and competition. I do not include nuclear since it is the most costly method of electric production today.

    The lowest cost energy is conservation – use daylight for buildings as much as possible. I have walked into conference rooms that are daylight designed, in a meeting with sustainable professionals and all the lights are turned on.

    Regulations are a requirement for many reasons for disposal of coal ash, emissions from power plants that pollute the air and water, and hazardous waste disposal. Regulations protect the health safety and welfare of citizens. We elect government officials that take an oath of office to abide by laws and protect people, and violate that oath every minute they hold office.

  23. Jon Erik Kingstad says:

    Mr. Hall: The Bloomberg article you cite above is consistent with the point I make about Wisconsin’s now defunct Advance Plan process, also known as “least cost planning.” Investment in capital intensive generation and transmission facilities, which also help fund the utility’s holding company operations through bond and stock funding operations and excessive capital charges, are the major drivers of electric and natural gas rates. The idea behind least cost planning and advance planning was to shadow price these costs which are ‘avoidable” in the sense that smaller investments in customer owned energy conservation , and solar and wind and other renewables, keep rate base low and thus electric (and natural gas) rates.

    You make a valid point about wind investment. However, utility investment in wind is offset by large investments in the large wind plant which needs to be “dispatchable” and capable of being streamed into the grid instantaneously as well as transmission lines needed to transport such load to population centers where the demand is.

    Wisconsin fell behind in least cost planning during the Thompson administration which effectively deregulated Wisconsin utilities. I don’t know here you get the idea that Wisconsin is a heavy regulation state unless you think that the contined existence of the PSC means that any meaningful regulation is occurring.

    By the way, I suspect that the reason these Republican State Senators were taken to the woodshed by Assembly Speaker Vos for suggesting a bill to rein in electric rates is because such a bill would be unconstitutional. Not unconstitutional as in any “taking” sense. Unconstitutional in the “preempted by federal law” sense. Wholesale rates are subject to FERC regulation (which is simply oversight and not active regulation as Wisconsin used to require). Charges by WE Energy (Generation) to WE Energy (retail) are therefore preempted. Any bill seeking to regulate such charges is also preempted under the US Constitution Commerce Clause and the Preemption Clause.

  24. Tim says:

    Bruce Hall, wind energy as a driver of lower electricity prices is simplistic. It has the added benefit of being true.

    You continue to imply that regulation of utilities is what is driving rate increases. We’re saying that the failure to regulate utilities in WI while granting monopolies is causing rate increases.

    Do you understand that part? Has it been lost in translation or have you been ignoring it?

  25. Vincent Hanna says:

    “Regardless, the your contentions and”

    You said what about my writing Bruce? Glass house and all that.

  26. Vincent Hanna says:

    Could go either way Tim. I’m pretty sure he doesn’t live in Wisconsin, for one thing, and in the past his only information has come from extremely right-wing think tanks and publications. So he is on the side of WE Energies here.

  27. old baldy says:

    Bruce Hall:

    “Kingstad would prefer to pile on taxes for “externalized” costs that are impossible to demonstrate but would add to the rates”.

    That is absolute nonsense. So in your world we just ignore the adverse impacts caused by any form of electrical generation. Welcome to the 1950s.

  28. Bruce Hall says:

    Although regulations do play a part in the total cost (certain regulations require a specific percentage of wind/solar power of total electricity sold), you cannot ignore the transfer of money between states in the form of subsidies.

    States such as Iowa and Texas have been quite smart in riding the regulation and subsidy gravy trains.

    From the link:

    “Despite the Midwest region being a net taker of federal wind subsidies, Michigan, Missouri, Ohio,
    and Wisconsin are net payers. Each of these states also has Renewable Portfolio Standards
    (RPS) that require electric utilities to generate a certain percentage of their electricity from
    renewable sources. Given that these states do not produce much wind but are still required to
    add renewables like wind to their generation mix, these states are most likely buying wind from
    states whose wind producers are net takers of federal wind subsidies.

    State focus: (The impact of state regulations) Ohio provides a case study for how state renewable electricity mandates can
    force taxpayers to bestow additional subsidies on wind producers in other states. Ohio’s RPS
    requires utilities to generate 12.5 percent of their electricity from renewable sources like wind
    by 2024. In annual compliance filings, Duke Energy Ohio, a utility that provides electricity to 27
    much of the Cincinnati area, reported that they met one half of their total non-solar renewable
    energy requirements for 2012 by purchasing RECs from “adjacent states.” Similarly, FirstEnergy
    Ohio Utilities, which includes subsidiaries that provide electricity to Akron, Cleveland, and 28 29
    Toledo, also purchased renewables from “other states deliverable into Ohio” to comply with the
    RPS in 2012.

    *** In other words, Ohio taxpayers subsidize wind producers in net taker states not
    only through their federal tax dollars, but also through the state RPS—which utilities cannot
    meet without purchasing electricity from wind producers in neighboring states.” ***

    Just how much has this impacted rates for the “taker” states like Iowa and Texas?

    State Net Impact
    Net Payers
    —————
    California (195,849,979.44)
    New York (162,554,909.54)
    Florida (138,141,406.15)
    New Jersey (125,585,386.93)
    Ohio (103,847,353.90)
    Net Takers
    ————–
    North Dakota 110,663,105.34
    Oklahoma 150,598,297.94
    *** I̲o̲w̲a̲ 2̲6̲5̲,̲4̲4̲8̲,̲7̲8̲8̲.̲4̲8̲ ***
    Texas 394,451,907.04

    $265 million in subsidies from other states is a pretty good extortion scheme for Iowa. Then you get some people in Wisconsin who think their state utilities have “excessive clout” because they produce what is needed in the most reasonable manner rather than stealing from their neighbors.

    What did this extortion scheme cost Wisconsin? $(13,807,377.82)
    Ohio? $(103,847,353.90)
    Michigan $(42,702,978.55)

    It looks as if your federal representatives and their “special tax considerations” have been the ones responsible for Iowa’s great “success”. Apparently, wind turbines work most effectively as money-sucking machines.

    http://instituteforenergyresearch.org/wp-content/uploads/2013/12/State-Level-Impact-of-Federal-Wind-Subsidies.pdf

  29. old baldy says:

    Bruce:

    “Note that Wisconsin and Michigan have a high regulatory environment… similar to California… and have higher electricity rates than nearby states”.

    Again, a nonsense claim. Utility regulation in WI, at least by DNR, has diminished considerably under the walker/stepp administration. You can easily look that up.

    However expansion of wind energy production in WI has effectively been prohibited by excessive regulation and unobtainable siting requirements pushed through by Sen. Cowles R-Green Bay at the urging of the utility industry. The irony is that Cowles was once a champion of all forms of green energy production, but changed his position when threatened by a primary opponent by walker and fitzgerald.

  30. Bruce Hall says:

    Vincent Hanna: “Could go either way Tim. I’m pretty sure he doesn’t live in Wisconsin, for one thing, and in the past his only information has come from extremely right-wing think tanks and publications. So he is on the side of WE Energies here.”

    You’re correct that I don’t live in Wisconsin any longer. However, I provided data from several sources, including the federal government. Your disagreement seems to be that the data doesn’t fit the narrative of this article, not that the data are wrong.

    With regard to the extraneous “the” in one of my comments: you got me there, so everything I said must be false.

    Old baldy: with coal powered electricity generation on the wane because of plentiful, cheap, and clean natural gas, the “externalities” argument is losing steam. Besides, there are “externalities” associated with both wind and solar electricity generation… especially among wildlife and ecosystems. But to simply throw out the concept that “there are some negative impacts from traditional power generation” is not an economic assessment of the total cost/benefit picture. Thanks to natural gas, the cost of electricity has actually declined nationally over the last decade. If your only argument is the bogeyman “CO2”, then you have to determine what percent of the human-generated 3.5% of atmospheric CO2 comes from electricity generation and then apply that to the “predictive (maybe) model” of 1-degree per century rise in temperature (3.5% * X% * 1-degree). Then you have to determine the net impact of that 1-degree pre century … or even 2-degrees if you want to be pessimistic … change in the economic condition of the world (weather, disease… cold weather is more dangerous than hot weather…, land use, food production… consider longer growing seasons at higher latitudes…, etc.).

    It’s a complex and nearly impossible task to assess the economic impact of “externalities” if you are simply talking about CO2. Likewise, it’s a complex and nearly impossible task to assess the economic impact of lithium mining, water pollution, environmental and habitat change, and direct killing of wildlife from the support and operation of “alternative” electrical energy production. The impact of these will only increase in the coming decades.

  31. David Ciepluch says:

    We Energies was committed to more wind turbine farms. Then with the 07-08 economic downturn, the electric use growth curve became more stunted. It was no longer the 3% annual increase in use at the same time construction had already started on two new power plants with natural gas and coal.

    The portfolio became overbuilt in WI, and there no longer a need for wind turbines. They would have been excess energy. When Walker was elected, new Commissioners came in, along with legislative changes in renewable requirements were dropped. At one time under Doyle, there was a renewable commitment path of 25% by 2025 in the State Senate, but Democrat Plale voted against his own bill. He was later voted out and replaced by Larson. Plale got a job under Walker.

    Cowles who had once been a bi-partisan leader on energy efficiency and renewable energy went with the Walker approach.

  32. old baldy says:

    Bruce:

    “the “externalities” argument is losing steam”. Just sticking your head in the sand doesn’t make them go away.

    Externalities such as fly ash dumps, contaminated coal gas sites, etc are still around and causing problems and costing money. Remember the fly ash landslide a few years ago in Milwaukee? That is and long-term problem that isn’t losong steam.

  33. David Ciepluch says:

    Since the 70s to present day with EPA and DNR regulations, utilities in Wisconsin have made major strides in reduction of waste. Essentially the ash that used to fly into the air out of stacks (pre-1970s) is now stored in licensed landfills. 99.9% of particulate matter is collected from emissions. Scrubbers remove SO2/NOX. CO2 is emitted.

    The transportation industry is now responsible for more than 1/2 of all air pollution. There are also major contributors like agriculture that dumps millions of tons of pesticides, herbicides, and fertilizers, that blow up in dust and get washed into waterways polluting lakes, rivers, groundwater and air. Research has now shown that air pollution is also absorbed through the skin and makes up about 1/2 of human intake of pollutants that harm us.

    We dump millions of tons of salt onto landscapes annually that is toxic to life in waterways. Lake Michigan has doubled in salinity in the past 100 years due to runoff.

    Wind turbines have no emissions and produce the energy free of charge once constructed. Solar electric panels and energy efficiency by the consumer are the most direct threat competition to utilities and energy companies and affect their bottom line, and have zero emissions.

  34. Bruce Hall says:

    old baldy:

    Wisconsin is one of those states that has a particularly high level of electricity generated by coal. Other states’ utilities have been rapidly converting to natural gas; however, Wisconsin is a state that has little or no reserves of its own even though its eastern part share a basin with Michigan that contains the largest known reserve of natural gas in the U.S.

    *** “Wisconsin has no natural gas production. Although eastern Wisconsin is within the boundaries of the Michigan Basin, a bowl-shaped geologic structure centered in Michigan’s Lower Peninsula, Wisconsin does not have any of the Basin’s prolific natural gas reserves.34,35 Wisconsin’s natural gas needs are met by several interstate pipelines.36 Much of Wisconsin’s natural gas supply is from production in Oklahoma, Texas, Louisiana, and Kansas, with additional supply from Canada.37 Wisconsin does not have any natural gas market centers, and natural gas is delivered to the state’s consumers from U.S. market centers in other Midwestern states and from western Canada.38,39,40 Natural gas enters Wisconsin by pipeline primarily from Illinois and Minnesota. Typically, about one-third of the natural gas volume that enters Wisconsin exits the state, most of it continuing on to Michigan.41 Wisconsin has no underground natural gas storage fields.42

    Wisconsin’s residential and industrial sectors are the state’s largest natural gas consumers, but use by the electric power sector more than doubled between 2011 and 2015.43 About two-thirds of Wisconsin households use natural gas as their primary fuel for home heating.44” ***

    Offshore turbine farms have been used for wind power, but they are considerably more expensive to build and maintain than on-shore aggregates. The combination of old coal plants and shutting down nuclear plants while lacking other alternatives has left Wisconsin a net importer of electricity.

    *** “Coal is the primary fuel for electricity generation in Wisconsin, accounting for more than half of the state’s net generation.48 Natural gas-fired power plants have contributed an increasing share of the state’s net generation since 2004, reaching one-fifth of the total net generation for the first time in 2015.49,50 Nuclear reactors and, to a lesser extent, hydroelectric power, biomass, and wind, supply almost all of the state’s remaining net generation.51 Until recently, two nuclear power plants supplied about one-fifth of Wisconsin’s electricity generation.52 However, the Kewaunee Nuclear Power Plant ceased operations in May 2013. Nuclear power now supplies about 15% of the state’s total net generation.53,54 To meet demand, Wisconsin is a net electricity importer.55” ***

    Source —- https://www.eia.gov/state/analysis.php?sid=WI

    Externalities:
    This high use of coal results in a dirtier environment and fly ash waste. Some states have successfully used fly ash as a component of concrete, thus turning a problem into an opportunity. Some nations have made the use of fly ash mandatory in concrete because it strengthens the concrete more than Portland cement. *** The problem of turning waste into resource is a political one. ***

    http://www.academia.edu/9126219/ADVANTAGES_OF_USING_FLY_ASH_IN_CONCRETE_INDUSTRY_FOR_ACHIEVING_SUSTAINABLE_DEVELOPMENT

    http://www.proash.com/wordpress/?page_id=95

    Wisconsin is a state with it’s unique set of circumstances regarding electricity:
    – few natural resources for natural power generation.
    – large amounts of biomass, but hard to use
    – hydroelectric power is available, but no dam building for decades because of environmentalists
    – no natural gas reserves
    – no coal reserves
    – a general geography and weather patterns not conducive to widespread land-base alternatives

    – relatively high industrial demand (compared with states like Iowa)

    – a mandate to use alternative energy regardless of practical limitations. Wisconsin has achieved its 10% alternative energy mandate, but now there is debate about a 30% level by 2030 (13 years). This would require a substantial reconfiguration of Wisconsin’s power system and invariably raise the cost of electricity for decades given that solar power is not a viable option and wind farms have more limited on-shore potential in Wisconsin than plain states that have stronger and more consistent wind patterns.

    http://legis.wisconsin.gov/assembly/shankland/news/Pages/30-percent-renewable-energy-requirement-by-2030-proposed.aspx

    Just a science is never settled, neither is technology. Wind turbines may be the future, but perhaps not in the form that we presently see. https://explorist.futurism.com/bladeless-wind-turbines-may-future-wind-power/

  35. Jon Erik Kingstad says:

    Mr. Hall: I’m not sure I follow your reasoning about “subsidies” to wind power, or “subsidies” to other states. Calling the costs of power generated by wind farms located in other states a “subsidy” doesn’t automatically make them bad. How are payments for wind power any worse or even a subsidy than payments for power to Manitoba Hydro? Wisconsin is in the unenviable position of lacking the wind resource of states like Minnesota or North Dakota. So large transmission for large 1.5 MW sized wind farms are going to be only way Wisconsin is going to get to tap into this resource.

    You say that it’s “complex and nearly impossible task to assess the impact of “externalities” if you are simply talking about CO2″. True, but the other “externalities” you are identify are not a threat to existence of life on this planet. The cost/benefit assessment is not as hard as you seem to think. The benefit its the preservation of life and human civilization. What’s that worth? We’re at the point where those opposed to measures which reduce carbon emissions have the burden of proving that the cost outweighs that benefit. Environmentalist Bill McKibben and scientists with the organization “350.org” have quantified the limits of parts per million of CO2 that can be emitted in the atmosphere as the “tipping point” to reverse the effects of human caused climate change. It’s an attainable goal to reduce emissions globally to that limit which will require planned reductions maybe supported by sort of international emissions trading scheme. It’s this logic which supports the EPA’s CO2 emission rules requiring electric companies and coal generating plants to add technologies that reduce carbon emission. Those rules are a bone of political contention, which is outside of the scope of this article on the PSC. But behind that lies climate denialism and I’d submit the same logic and simple greed which corrupted Wisconsin’s progressive energy policies and energy policy across the country.

  36. Bruce Hall says:

    JE Kingstad: with regard to subsidies for wind power, they come in the form of tax credits. This article (I provided the link in an earlier comment) explains the workings.

    https://docs.google.com/viewer?url=http%3A%2F%2Finstituteforenergyresearch.org%2Fwp-content%2Fuploads%2F2013%2F12%2FState-Level-Impact-of-Federal-Wind-Subsidies.pdf

    It’s worth reading in its entirety, but there is an analysis of the Midwest (includes Wisconsin and Iowa) that is particularly illuminating.

  37. Tim says:

    Bruce Hall, it is not environmentalists that are preventing more Dams for hydroelectricity. We don’t have the large rivers or steep drops needed.

    It’s the same thing with your bs “practical limitations” about why more renewables can’t be used. Iowa is using ~30% right now AND they have cheaper electricity.

    Right now, Wisconsin is going to have a wave of power plant retirements over the next 10-15 years.

    https://en.wikipedia.org/wiki/List_of_power_stations_in_Wisconsin

    Many of these coal beasts were commissioned in the 1950’s & 1960’s. They done their service and it’s time to replace with renewables. The best part about renewables is they don’t have a fuel cost.

    Their is no risk that the price will balloon, like if coal was just replaced with natural gas. There is no spent nuclear waste or coal ash to dispose of.

    There is no stream of money leaving WI to pay for fuel, that you admit above that WI never had and never will.

    Renewables are cheaper, reliable, and cut down on smokestack pollution. Unless you’re in the pocket of big money interests like WE Energies, why all the shilling?

  38. Bruce Hall says:

    Tim, there is a “Dam Removal Alliance” in Wisconsin that actively seeks to remove dams from rivers. The DNR also offers dam removal grants (http://dnr.wi.gov/Aid/DamRemoval.html). Other dams are force to retrofit “fishways”. The sentiment is that even though dams are clean energy, people prefer unimpeded rivers. I’m not saying that is bad, but it does effectively remove one “alternative energy” alternative.

    Long-term wind turbines will be the choice for new power generation, but several technologies need to be improved, most notably the storage systems and grid balancing. Urea/aluminum batteries developed at Stanford University may be the type of solution that frees wind-powered systems from backup generators. For now, wind turbine systems are competitive because of the significant fund transfers in the form of tax credits.

    http://instituteforenergyresearch.org/wp-content/uploads/2013/12/State-Level-Impact-of-Federal-Wind-Subsidies.pdf

    At some point, wind power will have to stand on its own economic merits. Until then, natural gas is the power source of choice… clean, widely available, cheap, and can be used to convert existing coal plants.

  39. Vincent Hanna says:

    “Unless you’re in the pocket of big money interests like WE Energies, why all the shilling?”

    Good question. I heard a story a month or two ago about more and more corporations investing in renewable energy. They aren’t doing it for appearances or to pat themselves on the back. They are in the business of making money, and they are doing it because they strongly believe it’s best for their bottom line.

  40. Tim says:

    http://www.oilandgas360.com/wind-boom-generators-going-wind-economics/

    March 23, 2017

    “We’re investing big in wind because of the tremendous economic value it brings to our customers,” Xcel CEO Ben Fowke said in a press release this week. Xcel said using wind generation will save its customers $7.9 billion over 30 years.”

    Huh, I guess the CEO of XCEL Energy knows something you don’t Mr. Hall. You should go tell him to buy up some old coal plants. That’s the ticket to low rates.

  41. David Ciepluch says:

    Wisconsin consumers and utilities have kind of missed the window of opportunity for large wind farms. Since 2010, we have had very backward leadership in Wisconsin. It is also a main reason Wisconsin is in a stagnant and downward spiral economic situation.

    Energy efficiency and solar electric by consumers is a vast opportunity for energy savings for consumers where thousands of jobs could be created in renovation of buildings. We lack political will and leadership in this area too, to our state’s ongoing detriment.

  42. David Ciepluch says:

    Wisconsin has maxed out on hydro dam opportunities, and various utilities have repowered some of the plants. Hydro energy is no free lunch – rivers are drastically altered along with native fisheries. And not for the better.

    In regards to battery technology, utilities would love to hold the advantage with large storage batteries and sell electric at their price to consumers. Electric batteries are less than 50% efficient.

    Low cost battery technology in the consumers’ buildings is already available and in limited use. Huge computer servers use night time ice making chiller storage for keeping equipment cooled during the daytime of operation. Off peak energy cost about 5 cents per kwh. Residential consumers could have the same battery energy storage in low cost devices like thermal storage furnaces, heat pump water heaters, that are the lowest cost ways of heating a home and water with off peak rates of 5 cents per kwh. Ice making AC equipment is also available but would need a larger home or commercial building that makes use of air conditioning for best efficiency. These types of systems are more than 95% efficient at storing and reusing the stored energy. And it provides the consumer the control over use and price.

  43. PT says:

    25 million in compensation.That’s obscene.

  44. Cheryl says:

    For a public utility, having a high guaranteed rate or return and obscene levels of executive compensation is questionable. PSC is supposed to protect ratepayers, but it seems that they don’t really care about that anymore. They also regulate on the water side, and haven’t said no to any electric or water rate increases in recent years, at least that I’m aware of. Many rate increases may be necessary to deal with old, failing infrastructure. Waukesha is likely to go in asking for a 300% rate increase for their Great Lakes diversion so that will be interesting. It’s likely PSC will rubber stamp that too.

    Another issue is that We Energies pays for some things from our ratepayer funds (plants and upgrades), and for others from profits. They got sued by Clean Wisconsin, Sierra Club and others for some illegal activity associated with the new Oak Creek Power Plant/Elm Rd Generating Station, which they said was an extension of the older plant so they didn’t need to meet best available technology for new power plants. They also started building their intake before receiving state permits, and that precluded (in my foggy memory) having closed cycle cooling that would have protected millions of fish from being impinged and entrained in the new intake, which is open cycle (sucks in lots of lake water every day and discharges back).

    That led to a settlement that has created the Fund for Lake Michigan. We Energies is supposed to pay 4 million per year from 2011 to 2035 as part of that settlement. Instead of taking those funds from “profits”, the parties to the lawsuit and PSC approved that those funds come from ratepayers–so that makes approval of those funds a political football each year. Funds approved in past years by the PSC have been far BELOW 4 million per year and there was at least one year where no funds were allocated. In addition, after stating initially that ratepayers wouldn’t have to pay legal fees for these lawsuits, PSC reneged and allowed that to be charged to ratepayers as well. It would seem that pollution settlements, legal settlements and legal fees associated with mismanagement (as opposed to regular legal work to obtain easements for lines, etc.) shouldn’t be paid by taxpayers, but rather should come from the profits or high rates of return. Maybe that would lead to better behavior, better oversight, and less lawsuits going forward. Plus, it would actually provide funds promised by We Energies to pay to “right” an environmental wrong.

  45. Alex says:

    WE Energies is a terrible corporation. The leaders of WE Energies to take two steps:

    1) Convert WE Energies to 100% consumer and community ownership. Make WE Energies a democratic business where the ratepayers and communities that create these huge profits get to make the decisions. Only then will this utility truly be be a part of our community.

    2) Announce a plan to convert all power production to 100% renewable energy sources. Consumers support this, and we are almost there technologically for this to be economically feasible.

    These two things would make our community stronger and healthier. WE Energies needs to take the right steps.

  46. David Ciepluch says:

    Cheryl, when Walker was elected and appointed new Commissioners, I believe they let We Energies off the hook for the $4 million annual environmental contribution for area projects. PSC also let them off the hook on a commitment of $6 million annually for renewable energy consumer programming in the service territory. All related to the Elm Road Plant.

    As consumer memory fades, so to the promises and commitments made. I believe We Energies used the excuse that they are doing enough in this area by supporting the state-wide Focus on Energy programs and low income Weatherization. While this is true, the other commitments were made above and beyond these established programs. And yes as rate payers, we do pay for all these efforts including the extraordinary obscene wages and benefits of the Executives.

  47. Bruce Hall says:

    Top 15 utility company CEOs by compensation: http://www.elp.com/articles/slideshow/2016/07/top-15-best-paid-utility-ceos.html

    A range of $9.7 to $16.1 million.

    Top 15 actors by compensation: http://www.bollywoodgalaxy.net/news/top-15-highest-paid-actors-in-the-world-2016/

    A range of $27.0 to $64.5 million. But they provide more utility.

    Top 15 U.S. athletes by compensation: https://www.forbes.com/athletes/list/#tab:overall

    A range of $34.2 to $77.2 million. But they provide the power to the balls.

    Top 15 U.S. technology CEOs by compensation: http://www.networkworld.com/article/3085445/careers/20-highest-paid-tech-ceos.html#slide2

    A range of $16.7 to $53.2 million. But they power our smart phones.

    No doubt about it. Utility company CEOs are way overpaid compared to top earners in our essential services. Go get ’em LeBron!

  48. Bruce Hall says:

    Alex, your propose 100% renewables as the goal for Wisconsin electricity generation. That’s noble. The experiment has already been implemented in the province of South Australia which gets only 40% of its electricity from wind turbines. I suggest you read this article from the Herald Sun in Australia in its entirety.

    https://wattsupwiththat.com/2017/02/09/south-australia-heatwave-wind-power-collapse-rolling-blackouts/

    I’m sure the technology will improve, but wind turbines are now at the equivalent of 1950s automobiles; they work, provide power, look impressive, but have a lot of drawbacks. Natural gas is still Wisconsin’s best and cleanest alternative although politics will require unreliable and expensive alternatives and keep the cost of electricity higher than it has to be in Wisconsin because natural gas/coal backup are required. Still, as long as the federal government continues to pour in large taxpayer-fund subsidies for wind farm projects, the “levelized” costs will be comparable to natural gas.

    The residents of Iowa have learned that they can get the residents of Wisconsin, Michigan, Ohio, and other states to subsidize their electricity through the use of wind farms, so I guess Wisconsin, Michigan, Ohio and other states can get Iowa to subsidize their rates, too.

    https://www.brainyquote.com/quotes/quotes/m/margaretth502392.html

  49. Tim says:

    It’s interesting that Gale Klappa makes about as much as people leading utilities more than double in size.

    Well, it would be interesting if I wasn’t paying for it… it’s robbery. We need to get more competition and get rid of their guaranteed profits.

Leave a Reply

Your email address will not be published. Required fields are marked *