Commentary: Five reasons Wisconsin utility plans are bad for business

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Nick Hylla is the executive director of the Midwest Renewable Energy Association.

By Nick Hylla

It is hard to argue against the merits of energy efficiency for your home or business. The old adage “A penny saved is a penny earned” applies fully in this regard.

Beyond the immediate positive influence on our budgets, efficiency measures have social and environmental benefits since the less electricity we waste, the less we have to produce from increasingly expensive fossil fuel resources. Wise energy use increases the affordability of both current and future electric rates. And, as we begin to understand the costs of pushing the frontiers of fossil fuel extraction, it seems obvious that we should be using our resources wisely.

If this argument seems logical to you, then you will be as frustrated as I am at the current proposals that three investor-owned electric utilities have pending before the Wisconsin Public Service Commission (WPSC). Madison Gas & Electric, Wisconsin Public Service, and WE Energies (all regulated utilities) are advancing separate, but similar, proposals that would dramatically increase the fixed cost that each of us pay to have an electric meter, while at the same time, slightly reducing the per unit costs of the energy we use.

In addition, these and other pending utility proposals contain measures that add on extra fees for customers with renewable energy systems, restrict the leasing of solar electric systems, and pay less for customer production over consumption on a monthly basis.

If this is the first you’ve heard about this, it will be worth your time to research further. If you need convincing, here are five reasons why the proposals are a bad deal for Wisconsin electric users:

  1. The majority of residential customers will see their bills increase with the biggest impact on low-energy-use households.

Not only will the rate changes punish homes and business that have made investments in energy efficiency or renewables, it will also raise monthly bills for people who are conscious of their energy use because they have limited household budgets. It is quite revealing to compare the proposed fixed charges that would appear each month on our future electric bills with the same charges currently in place throughout the Midwest today. For example, Wisconsin Public Service is requesting to increase the monthly fee to $25, which is double the average fee currently charged by utilities in Wisconsin, Minnesota, Michigan, Iowa, and Indiana.

For people who use little energy each month, this means a dramatic increase in annual expenses. Under this new rule, even if a customer did not use a single kilowatt-hour of electricity for the year, they would pay more than $300. In addition, this fee would apply to every meter associated with your account. Farms, municipalities, and businesses with multiple meters should look at this new billing scheme very closely as it may significantly increase future energy costs.

  1. The new rate structures and fees would decrease our ability to produce local, clean energy.

In 2013, more wind and solar energy generation was built in the US than any other energy source (yes, more even than natural gas). And In the first 7 months of 2014, solar and wind energy systems accounted for more than half of all new electrical generation built in the US over that time period. In addition to being our nation’s leading choice for new electricity generation, much of the expansion was due to investments by home and business owners.

This new economy, driven by rapidly falling prices for technologies like solar, is giving choice to consumers and business and bringing new capital and innovation to our national effort to develop clean, domestic energy. This is particularly good for Wisconsin since all of our fossil fuel is imported from out-of-state. It is also good for local employment; especially considering the solar industry now employs more Americans than the coal industry does.

With a clear need to develop domestic energy and create jobs, coupled with the recent Supreme Court ruling setting the framework for regulating carbon emissions, it would be irresponsible to forward rate structures that decrease the financial performance of local investments in renewable energy and energy efficiency. Yet, the increased monthly charges, reduced compensation for renewable energy production, and additional fees levied in these proposals would do just that.

  1. The proposals are unjustified.

The central argument that the utilities are making contends that ratepayers who don’t own renewable energy systems are paying for the excess energy produced by those who do. Since this energy is paid for at the retail rate, it is more expensive and thus unfair. Sounds like they might have a good point. So, how much extra are we paying?

If you are looking for the answer from the utilities, you won’t get it. The reason they do not have the answer is pretty simple: This isn’t actually happening. The utilities concede this point, but, they claim, it could.

Ignoring the fact that the utilities are proposing a dramatic shift in rate structures based on something that isn’t actually happening, it would be wise to study whether the owners of solar, wind, and biodigesters are being subsidized by other ratepayers.

Public Utilities Commissions in Minnesota, Vermont, and Nevada have all commissioned studies to determine the value that solar energy systems provide to the utility. As it turns out, customer-owned solar energy provides distinct advantages to the utility including the production of electricity during times of peak use, the generation of power at the location of use, protection from future spikes in fossil fuel cost, and inherent security and environmental advantages.

Each of these studies showed that the value of solar electricity to the utility exceeded the current retail rate. In addition, the Public Service Commission of Utah just decided against a similar utility proposal, ruling that the utility failed to prove that fees on owners of solar electric systems were justified.

Put simply, if the WPSC accepts these proposals as presented, the decision would ignore the research and precedent set by public utility commissions from around the country. It would even beg the question, “Is Wisconsin’s regulated electric market corrupt beyond repair?” This is a loaded, but important question since a regulated monopoly without regulators is just, well, a monopoly.

If you think I’m just trying to kick-up dust here, take the words of Charles Cicchetti, former chair of the WPSC, in his testimony concerning the current WE Energies (WEPCO) rate case:
“I urge the Commission to reject such a transparentabuse of market power over customers that are effectively held hostage after makinggood faith commitments to follow both price signals and public policy to expand theirgeneration resources.”

And he continues:
“WEPCO invokes mostly outdated and previouslyrejected logic in an attempt to convince the Commission to let it use its utility monopolyand mostly very limited customer choice to force customers to absorb risks in an unjustand unreasonable manner, which is contrary to economic and public policy objectives.”

 

  1. It is simply bad politics.

In recent years, political support for energy efficiency and renewable energy policy in Wisconsin has dried up. There is plenty of voiced support, but little will to be found in the majority party that controls all branches of government.

However, it is becoming more obvious that some within the party view the choice to not buy power and the choice to produce your own power as matters of economic liberty. The bipartisan efforts gaining momentum in neighboring states, strong public support, and recent quotes from national figures may also serve as a wake up call for fiscal conservatives and supporters of free enterprise.

As Barry Goldwater Jr. recently wrote:
“Utilities have added market barriers that prohibit businesses and homeowners from entering the market. They want to limit how people can use their property to generate their own electricity. And, they are attempting to tax the businesses and homeowners that do. These attacks are a blatant attempt to stifle competition in order to protect their monopolies and their bottom lines.”

The principal result of this lack of political will is poor planning. By ignoring the benefits of private investment in renewable energy and efficiency, we are missing opportunities and falling behind states and nations with a more reasoned approach. The proposals under consideration by the commission will lead us to a future with more limited options for how our electricity is produced and more limited influence over rules and regulations that define our energy choices.

  1. There are reasons to think that the proposals will be approved and utilities will pursue similar rules in other states.

Households, small businesses, and large industries have often been on the same side when it comes to utility rate proposals before public utilities commissions. Utility shareholders are constantly pushing for rate increases (for them, higher rates translate to higher revenues). And energy users are constantly pushing for stable, predictable rates that facilitate good business planning.

With the current proposals, both the investor-owned utilities and the large industries will see financial benefits as costs are shifted to residential and small commercial customers. This new ‘team’ of big utility and big industry will manage the vast majority of political influence in this new debate.

With these proposals set to provide rate reductions to Wisconsin’s biggest energy users, it is worth noting that the top ranking aide at the WPSC moved to his current appointment directly from his job as head lobbyist for Wisconsin Manufacturers and Commerce, Wisconsin’s largest industry lobbying group.

If these reasons have you concerned about the future of energy efficiency, renewable energy, and the regulation of utilities in Wisconsin, now is a good time to take action by filing a public comment with the PSC, calling your local representative, and writing a letter to your local paper. Ask them to commission a study to determine the real value of efficiency and renewable energy for Wisconsin utilities and ratepayers. Other states have done so and have forwarded win-win policies that benefit all electric customers.

The Midwest Renewable Energy Association is a member of RE-AMP, which also publishes Midwest Energy News.

3 thoughts on “Commentary: Five reasons Wisconsin utility plans are bad for business

  1. Your article states that the value of solar studies in MN have identified a VOS higher than retail rate. I disagree with this assertion. While the formula has been agreed too, there is yet to be a VOS tariff approved by the commission for any utility. Furthermore, the most recent VOS calculation put forward by the Department of Commerce in Xcel’s Docket 13-867 asserts of a VOS for 2014 of .0984 per Kwh while the 2014 Xcel Retail Rate is .12 kwh per kwh.

  2. Thanks for your clarification. Much appreciated. I would think however, that the Department’s most recent calculation, which is lower, would hold more credence than a preliminary finding. However, I understand that this would not play as well with the premise of your argument.