Commentary: Politics vs. energy policy in Wisconsin

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

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

If you pay attention to energy-related news, it may have come as a surprise how often Wisconsin energy policy has appeared in the national headlines over the past year.

These include decisions by the Public Service Commission of Wisconsin (PSCW) to approve utility proposals that dramatically increase monthly charges on residential electric bills and that levy monthly fees on people who own solar electric systems. These policies, widely rejected by public utility commissions across the country, are key elements of a national strategy being advanced by special interests to further gain influence over regulated energy markets.

Wisconsin is now in the unfortunate position of being a case study for such strategies in the new wild west of campaign finance.

The Supreme Court’s Citizen’s United ruling, the subsequent rise of Super PACs that aren’t required to disclose donors, the complete dysfunction of the Federal Election Commission, and the absence of a legal definition of “coordination” between these groups and political candidates have catalyzed a new and alarming level of collusion between wealthy, corporate interests and the elected and appointed public officials that have sworn to serve and protect the public interest (I should note that this has not gone unnoticed as an overwhelming majority of Americans are in favor of a complete overhaul of current campaign finance laws).

Not surprisingly, electricity markets that depend on non-partisan, unbiased regulators to protect consumers from monopoly utility interests are beginning to show fundamental weaknesses in this new landscape.

In Wisconsin, these weaknesses are being exploited to increase profits and market share for investors and executives in electric utilities that choose to take advantage of this situation. And, it is now apparent where this wealth will come from: the home and small businesses owners that are captive to the utility service.

Please don’t get me wrong; investors in this critical industry should have the opportunity to earn a return on their investment. This is necessary if we want to attract the investment required to build and maintain a reliable, resilient, efficient, safe, and clean electrical grid. And, regulated utilities employ lots of honest, hard working people that help ensure a critical service to society.

However, when utility executives and investors coordinate with political operatives to advance policies that reduce customer choice, shift costs to those with less financial capital, and amass wealth for those with political power, we should be concerned that this is an abuse of monopoly privilege that will only get worse.

Yet, I don’t think it’s fair to blame the utilities. I hear this more and more as people begin to understand the ramifications of these new policies. It is important to note that not all utilities have taken advantage of this situation. And, as a friend recently told me “You can’t blame the fox for being a fox. You should, however, catch the person that is opening up your chicken coop at night.”

In short, blame the politicians and the regulators they appoint. Or, blame yourself (or your neighbor) for electing them and not holding them accountable.

For those who care deeply about this issue, the market manipulation has been easy to predict. We recognize that energy generation and transmission projects are good investments for monopoly utility investors because the customers are captive and the returns are projected at 10 percent or more.

In the absence of market competition, public utility commissions, often the sole state regulator in these matters, are charged to serve as a proxy for a competitive market, while ensuring that all classes of ratepayers (e.g. rural households, urban apartment-dwellers, small businesses, large factories) are billed fairly and that there is enough energy to keep the lights and heat on.

In Wisconsin, legislators passed special legislation in the 1990’s allowing investors in Wisconsin’s monopoly utilities to earn 12.7 percent profits. As intended, this spurred the construction of power plants around the state. Wisconsin currently has more generation capacity than the market requires as well as some of the highest electrical rates in the Midwest.

And, consumer demand for electricity has been steadily decreasing and is not projected to increase in the foreseeable future even as the Gross Domestic Product (GDP) grows. This is a problem for investors that want utilities to build more power plants since the return on investment comes directly from the future bills of captive ratepayers.

As you can imagine, this situation makes the approval of large, expensive power plants a critical issue for regulators across the country.

There is a market force that provides a counterbalance to the urge to overbuild generation and transmission projects: energy efficiency and customer-owned renewable energy. All customers have accessible and affordable options for energy conservation and efficiency, and the value of these investments increase as utility rates rise. This also holds true for customer investments in on-site power generation, particularly with solar photovoltaic (PV) systems. To this point, more new wind and solar energy have come on line in the US over the last year than any other source of electricity, including natural gas.

So, everything should be OK, right? Maybe the headline of this article should read “Even In Monopolized Markets Competitive Forces Prevail To Protect Consumers!” Unfortunately, the reality looks much more bleak for electric customers in Wisconsin and other states.

Instead of raising the price we pay per unit of energy, utilities are advancing plans to raise the fixed costs we pay each month, ensuring that no matter how much electricity we use (or don’t use) we’ll still pay.

However, the increased fees will not apply to everyone. For this to be politically tenable, big industrial customers will need to be protected. This is being justified in the name of economic growth. The increase in monthly fixed fees for residential customers has a less palatable justification. It seems we just need to “pay our fair share.”

Over the coming years, this “fair share” campaign may result in a massive payout to utility investors and a significant transition of cost from industrial users to home and small business owners. For example, if the PSCW approves the recent proposal submitted by Wisconsin Public Service, residential customers will pay $300 a year without using a single electron.

In the new wild west of campaign finance, the reasoning for this is quite simple: those with the most money make the rules.

If you aren’t concerned yet, you should know that the lone voice protecting Wisconsin residential ratepayers, the Citizens Utility Board (CUB), is under attack by the same special interests that are bringing “innovation” to Wisconsin electric rates.

The Wisconsin Joint Finance Committee, in a 12-4 vote along party lines, just proposed to defund CUB and other non-profit petitioners to the PSCW. In 2014, CUB was granted $300,000 of funding from electric ratepayers (not tax dollars) and saved those same ratepayers $116 million – more than 38 times the investment. This is a great deal for Wisconsin ratepayers. So, why did all 12 Republicans on the committee vote to approve the cut? It should be noted that the same committee maintained funding for the utilities’ legal counsel to petition the PSCW.

In the coming years, home and business owners will not enjoy the benefits of CUB, a small and effective non-profit organization, unless the legislature removes this cut from the state budget. The PSCW is completely dominated by commissioners appointed by Republican Governor Scott Walker and they have given every indication that they will approve the expansion of utility investments in fossil-fuel generation, increases in monthly fixed charges for homes and small business, fees on customers that own solar electric systems, and surely other proposals yet to be made public.

People across the country are paying attention to Wisconsin and are fearful that these policies will come to their state. They don’t want all of this waste and risk added to the electrical infrastructure we depend on. They don’t want the excess costs shifted to the little guy. They don’t want to derail the local economic growth and job creation that results from growing energy efficiency and solar energy markets.

They are hoping that people in Wisconsin can stop this theft before all of our coops are empty.

Nick Hylla is the executive director of the Midwest Renewable Energy Association. The MREA is a member of RE-AMP, which publishes Midwest Energy News.

2 thoughts on “Commentary: Politics vs. energy policy in Wisconsin

  1. There is one person ultimately responsible that Hylla doesn’t name and that is Governor Scott Walker. Walker has now appointed all three members of the PSC. Fueled by his presidential ambitions, he has attempted to roll back the entire framework of progressive policy that established the American social compact through the last century. Much of this was pioneered in Wisconsin, including the system of regulating utility monopolies through Pubic Service Commissions. Now instead we have a system of guaranteeing utility monopolies and profits. We can only hope that Wisconsin’s fate will serve as a cautionary example and ultimately expose the man and discredit his ideas.

  2. Thanks for writing this exceptionally astute article regarding wisconsin elec rate policy. I planned to move from minnesota to wisconsin only to learn that the base rate at polk burnett is 34 dollars, when my entire elec bill here in minn is thirty three. I started reading to learn why and suspected the politicians and the puc were in kahootz but didn’t know about the 12.7 percent rio for investors. Are coops entitled to the same rid turn on investment? I hope your articles get published in the wisconsin newspapers, etc so the ratepayers know what is going on. No one in my family in wisconsin knew why their electric bills were so high. Now we know. Thank you for this well written article. Is anyone in wisconsin standing up to protest this unsavory arrangement?