What’s the matter with Wisconsin?
That’s what many clean energy proponents are asking, in the wake of the Wisconsin Public Service Commission (PSC)’s decisions in favor of rate restructuring that could virtually kill solar and other types of distributed generation across much of the state.
Despite significant public opposition, the PSC in November decided to approve rate cases filed by utilities We Energies, Madison Gas & Electric (MGE) and the Wisconsin Public Service Corporation, which could drastically reduce the feasibility of installing solar or other types of renewable energy for consumers in the Milwaukee, Madison and Green Bay areas.
The approvals are not final until written decisions are issued; PSC spokesman Nathan Conrad said that will likely happen in mid-December.
Similar rate restructuring proposals have been made by utilities around the country. But public service commissions have overwhelmingly not supported them, either turning down the requests or delaying a decision while demanding more study.
Wisconsin is the lone exception, according to a tally kept by the Alliance for Solar Choice (TASC).
The Wisconsin rate cases were approved by two of the three PSC commissioners, both appointed by Gov. Scott Walker and with ties to the utility industry and powerful national conservative organizations.
On Dec. 1, TASC filed a legal motion with the commission demanding one of the commissioners, Ellen Nowak, be recused from the We Energies proceeding, charging "lack of impartiality" because of statements she made at conferences advocating for the types of changes the utility requested.
TASC has also said they will likely file a legal challenge to the PSC decision once the written decision is issued.
The rate cases clearly are part of the larger contentious political context in the state, where Walker has picked fights with the wind industry and otherwise closely aligned himself with fossil fuel interests. The legislature is majority Republican, and the state is still characterized by bitter political divisions laid bare during the fight around public employees’ collective bargaining rights in 2011.
But the solar showdown doesn't necessarily fit a standard political narrative. Across the country there is widespread bipartisan support for solar energy and there was strong bipartisan opposition to the restructuring in Wisconsin.
“There’s no comparison at all between Wisconsin and any other Midwestern state or any other state in the country,” said TASC president Bryan Miller. Of the We Energies case specifically, he added, “This is by far the most extreme result anywhere in the country. It’s the most extreme thing any utility has ever even asked for.”
'Not to be a buzzkill...'
The utility industry nationwide has made clear that their profits and longstanding business models are at risk because of the rise of distributed generation – most prominently rooftop solar but also small wind turbines, geothermal systems and biodigesters that use farm waste to generate gas and electricity.
Nowak took this position at a forum in March sponsored by the Edison Foundation and Institute for Electric Innovation, advising utilities to “please come in with ideas” for rate redesign to offset the financial impacts of increased distributed generation.
After the moderator asked panelists if they were “excited” about advances in distributed generation, she urged caution and reassessment of how costs are allocated.
“Not to be a buzzkill, but I’m a little worried,” she said. “It’s a wonderful thing to have the customers engaged and have a two-way system. But if you don’t have a real discussion about what those costs are and that the DG customer is continually using that grid and continually using the services and getting a right value on what they are using from the system as well as putting into it without shifting costs to others, if we don’t take care of that now, while it’s still relatively small, we are going to have a big problem later.”
Utilities around the country have tried to curb the impact and spread of distributed generation by making it harder for people to get reimbursed for energy they send back to the grid, by limiting or banning third-party financing of such systems, and by imposing fees and other obstacles on the interconnection of such generation to the grid.
The Wisconsin rate restructuring, which dramatically increases the fixed charges that customers pay each month, would make it extremely difficult to finance solar and other renewable energy projects.
There is currently only a small amount of solar installed in Wisconsin, indicating the proposals are more about future projections and perhaps trying to set a national precedent than they are about the current and near-term situation on the ground in Wisconsin.
Regulators have a responsibility to ensure that utilities can effectively serve their customers and avoid financial or structural crises. But clean energy experts argue that the shift to more solar and distributed generation can ultimately be beneficial for all involved, even if it might involve short-term hits to a utility company’s bottom line.
“The decisions that were made were very much in line with what is necessary from the utility perspective to protect shareholders,” said Bradley Klein, a staff attorney for the Environmental Law & Policy Center (ELPC). “Our view of the role of a public service commission is much broader – that a public service commission exists to protect the public interest and promote a safe and reliable electric utility system that provides for the public interest and enables new technologies for customers.
"So the commission needs to create the regulatory structure that will enable those types of innovations and provide incentives for companies to evolve and innovate. That in the long term will serve the public in the best way.”
Business and influence
Gov. Walker has made much throughout his tenure of supporting business interests and proclaiming Wisconsin is “open for business.” He has also been closely associated with conservative, pro-business organizations like the American Legislative Exchange Council (ALEC) and Americans for Prosperity.
Such groups frequently work against renewable energy on the national and state levels, presumably influenced by their close ties with the fossil fuel industry. In an interview this summer, ALEC’s new CEO, Lisa Nelson, named Walker a model for promoting limited government, and applauded him for promoting “growth and competition.”
In the rate cases, testimony supporting the utilities was submitted by the Consumer Energy Alliance (CEA), a Houston organization with ties to the Institute for Energy Research and other anti-renewable energy groups.
CEA submitted what it said were names of 2,500 Wisconsin residents supporting the MGE and We Energies rate proposals, but the Madison Capital Times revealed that some of the people had not signed anything and actually opposed the utility plans. The ELPC, TASC and Renew Wisconsin have called for an investigation and raised the possibility of perjury charges, noting that CEA officials testified under oath to the veracity of the signatures.
Klein and others also see the Edison Electric Institute as a major player. The institute, affiliated with the Edison Foundation, has warned of adverse impacts on utilities from the disruptive challenges presented by the rise of distributed generation, though it also frames distributed generation as an important innovation.
Edison Electric Institute’s PowerPAC lobbies Congress and donates to politicians in support of investor-owned utilities’ interests. PowerPAC spent almost $800,000 in campaign donations in each of the last two election cycles on the federal level, with about 56 percent going to Republicans and 44 percent to Democrats.
We Energies has also donated generously to candidates – almost two-thirds to Republicans in the last two election cycles, according to Opensecrets.org. We Energies employees have donated almost $120,000 to Scott Walker since 2010, according to the campaign finance database Wisconsin Democracy.
PSC commissioners are appointed by the governor and confirmed by the state senate for staggered six year terms. Nowak was appointed by Walker, as was commission chair Phil Montgomery, who also voted for the rate cases. Commissioner Eric Callisto, appointed by previous Governor Jim Doyle, a Democrat, voted against them.
Montgomery was previously a Republican state representative from Green Bay, who in 2005 was named ALEC’s “legislator of the year” and co-sponsored bills based on models that ALEC has pushed in legislatures around the country.
Nowak was previously a director of School Choice Wisconsin, placing her on the same side as Walker and other conservatives in the contentious and highly politicized battle over school reform.
On June 10, Nowak spoke on a panel with Gale Klappa, the CEO of We Energies’ parent company WEPCO, at an Edison Electric Institute conference in Las Vegas. Nowak urged utilities to request increased fixed charges on all customers, “so those customers who don’t participate in DG are not paying for those who do.”
Three weeks later, We Energies submitted to the PSC its detailed proposal for changes including the fixed charge increase, which makes solar much less viable.
In its legal motion, TASC essentially alleges that the June 10 appearance and the panel in March show that Nowak has taken an inappropriately advisory and proactive role in shaping We Energies policies, as opposed to simply regulating the company's proposals.
"When Ellen Nowak is at a conference put on by the largest trade association for utilities in the country, and she’s on a panel with the chief person she regulates, dispensing advice to him as if she’s one of his consultants rather than one of his regulators, it shows you how broken the system is," said Miller. "She prejudged the rate case, there's no doubt about the timing here."
Conrad, the PSC spokesman, said that “allegations Commissioner Nowak was taking part in ex parte communications will be proved incorrect.”
“She had absolutely zero one-on-one meetings with Gale Klappa,” he said. “And during the panel he was part of, there were no specifics of any case discussed. Over the course of her career she’s made similar statements in a number of forums.”
Lack of support, evidence
Comments and testimony offered at public hearings in October on the MGE and We Energies cases were overwhelmingly opposed to the rate restructuring and in favor of solar energy.
For example, at the six-hour We Energies public hearing in Milwaukee on October 8, one resident after another testified passionately about their anger at the plan and their support for solar energy. Only a handful of speakers, mostly representatives of industry groups or trade unions, spoke in favor of the changes.
In all more than 1,300 comments were submitted, a far greater amount than such arcane proceedings usually draw.
Political conservatives were some of the most outspoken opponents of the rate changes.
Former U.S. Rep. Barry Goldwater Jr. heads the group TUSK (“Tell Utilities Solar won’t be Killed”) which explicitly opposes the Wisconsin rate cases and calls the proposals a “new tax” on solar by a government-regulated monopoly.
Republican Mark Honadel, the former Chair of the Assembly Committee on Utilities and Energy and a Scott Walker backer, has also spoken and written critically of the rate proposals.
Other conservative leaders backing solar include prominent Tea Party advocate Debbie Dooley, who has spoken in Wisconsin and other states in favor of pro-solar policies.
“Conservatives support solar because it represents choice and competition - an alternative to the monopoly,” said TUSK spokesman Michael Scerbo. “And conservatives support lower taxes. Imposing taxes on rooftop solar goes against conservative principles. The commissioners who voted to impose these solar taxes are out of touch with conservative values and seem to have lost sight of those principals. We Energies is a monopolist utility trying to protect its profits. That's what this is about.”
There are no specific requirements as to how public opinion must figure in to PSC decisions. Conrad said the decisions are based on the official record, which includes all official public testimony and comments. But policy experts said it is unusual both for so much public opinion to be expressed in a rate case, and for a commission to seemingly disregard that many comments.
Klein said it is not surprising or untoward that commissioners would have strong political and policy viewpoints. But in the Wisconsin cases, he and other critics have lambasted how the commission seemingly made its decision with little empirical evidence to back up the utilities’ claims.
For example, We Energies and MGE had argued that customers with solar installations are not paying their “fair share” for grid maintenance and operation. But neither the utilities nor the commission publicly released any studies showing this to be the case.
Meanwhile one study commissioned by We Energies itself in 2009 showed net benefits to all consumers from solar on the grid. Similar results were found in recent studies in Mississippi and Nevada. In Nevada, a study commissioned by the public service commission showed that grid benefits from solar would outpace costs by $36 million.
Miller also notes that testimony filed by the commission’s own expert in the proceeding in August cites a lack of evidence that customers with distributed generation are not paying their fair share. PSC energy policy analyst Corey Singletary testified, "I do not believe that the utility has provided sufficient support for its proposal to replace all of its current net metering tariffs,” and advised more study be undertaken.
In other states, public service commissions have demanded reports and studies when utilities have proposed changes similar to the Wisconsin rate cases. For example public service commissions in Louisiana, Texas and Utah – states where fossil fuel and other large corporate interests have much sway -- demanded evidence and denied utility requests for rate restructuring hostile to solar.
“It’s perfectly acceptable for commissioners to have a point of view and particular policy preferences – commissioners are people like everybody else, they have specific backgrounds and are appointed by politicians for specific reasons,” said Klein.
“I don’t think commissioners having an opinion or a preference on certain policies is objectionable," Klein added. "But this went way beyond having a policy orientation. The commission in this case made decisions not supported by evidence.”
When asked whether any studies supported We Energies' proposal, Conrad said that, "Although there are no studies, per se, the Commissioners weighed heavily on the testimony (in each rate case not just WE Energies) of expert witnesses in their decision making process." He pointed to testimony that currently We Energies recovers only 60 percent of its fixed energy costs through fixed charges.
What happens next
Within 30 days of the commission publishing its final rule, lawsuits can be filed in state circuit court seeking to overturn the decision. A request for a rehearing by the commission can also be filed within 20 days, and such a request would stop the clock on the 30-day window for lawsuits.
Miller said TASC will definitely challenge the decisions, though he declined to say in exactly what form. Klein said that the ELPC will weigh its options once the final decisions are out. Kira Loehr, executive director of the Citizens Utility Board of Wisconsin, also said her group will carefully review the language of the final decisions and possibly take action.
Miller said he feels confident the state court will ultimately reverse the commission’s decision. Klein said he is also hopeful of such an outcome, pointing to the July Iowa State Supreme Court decision in favor of solar energy, ruling against a public service commission’s opposition to the use of third party financing for solar installations. A ban on third party financing is also a key issue in We Energies’ rate case.
"We wouldn’t be surprised with any motion for a rehearing," said Conrad. "The commission will stand by their findings and move forward."
The state legislature has been drawn into the PSC cases. The husband of state lawmaker Christine Sinicki (D-Milwaukee), who opposes the rate cases, was among the contested names listed on the Consumer Energy Alliance petition. State Sen. Tim Carpenter (D-Milwaukee) has called for changing the structure of the PSC and for taking more time to review public input on the rate cases.
Meanwhile, individual citizens have limited recourse. Wisconsin is a fully regulated state, meaning unlike in deregulated states like Illinois, consumers cannot leave We Energies or MGE and select an alternative electricity retailer. PSC commissioners are appointed by the governor, not elected, so citizens have no direct power to remove them from office.
But Klein and others don’t think consumers will quietly accept the changes. If they are implemented as planned, Klein thinks it will stoke larger political awareness and action around renewable energy and citizen control over their energy choices.
“Over the long term this is not a good strategy for Wisconsin electric companies to try to narrow choices for their customers and penalize technology and innovation,” Klein said. “Companies that are more creative and embrace innovation and technology ultimately will be the companies that succeed. The companies that try to block change will get left behind.”
The ELPC and Citizens' Utility Board are members of RE-AMP, which also publishes Midwest Energy News.