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From Wisconsin: Why Are We Paying We Energies $430 Million in Profits on a Coal Plant That Shut Down Last Year?

The article below was written by Thomas Content, who is the Director of the Citizens Utility Board of Wisconsin. The Wisconsin CUB eloquently argues that the government-approved monopoly utility company in Wisconsin should not get to profit on a coal plant it shut down before the end of its useful life. I couldn’t agree more.

The most important thing you can remember about utility companies like Xcel Energy and WE Energies is that they are not private companies. They are government approved monopoly utilities that are guaranteed to make a profit. You have no choice but to purchase your electricity from the utility in your service area. There is no competition, and this is not a free market.

Gas prices are up nearly three bucks a gallon, so maybe it’s time for a car that gets better mileage. You head to the dealership to trade in your car in your quest for better miles per gallon. But before you drive it away, you find out how much money you’ll get from trading in that old, less efficient car. You want to make sure you don’t get a bad deal.

For We Energies customers trying to cope with high electric rates, it’ll be a much different story if the utility gets its way. Customers of the monopoly utility will have to pay for the new car—plus keep making payments, with 10% interest, for the inefficient old car they’re “trading in.” Sound crazy? Let me explain: The Pleasant Prairie power plant was shut down last year. In Wisconsin, unlike other states, utilities don’t have to get state permission to shut plants down, even when there’s still a lot left to pay off on the equivalent of the car loan [emphasis added].

How big of a loan remains to be paid off? A whopping $645 million for Pleasant Prairie, including hundreds of millions spent in the last decade to keep the plant going. In its application to raise rates by 6% by 2021, the Milwaukee utility asks that its customers keep paying for that plant for 20 more years—that’s right, for a plant that it decided to shut down because it was no longer needed.

We don’t think it’s fair for customers already paying the seventh highest electric rates in the Midwest to fork over profit of more than 10% a year for a power plant that will never be used again to keep the lights on or businesses humming. If you tally up just the profit We Energies projects it’ll make on that shuttered plant in the years ahead, it adds up to more than $430 million, much of it paid for by the homeowners, renters and businesses in Milwaukee and southeastern Wisconsin [emphasis added].

Of course, this isn’t the only issue that will be examined in the rate case, which would tack on another $80 a year to a typical household’s power bill if state regulators rubber-stamp the utility’s application. Some other issues in focus for us at the Citizens Utility Board:

  • We Energies earns the highest profit of all the utilities in the state and is among the top performing utilities on Wall Street; now it’s asking the Public Service Commission for an even higher profit rate in 2020 and 2021.
  • The monopoly utility is also asking to bill Wisconsin customers for costs that should be the responsibility of Michiganders. When We Energies’ parent company bought another utility four years ago, Michigan’s governor, iron ore mines and other big energy customers protested at first but ultimately brokered a deal saddling We Energies customers in Wisconsin with extra costs. That’s not something customers here should have to pay.

But this coal plant issue is one to keep an eye on, because Wisconsin’s utilities, after investing heavily in fossil-fuel-based fleets, have now pledged to shutter more coal plants as they shift away from coal and toward trimming emissions linked to climate change.

Let’s not force customers to pay money for nothing and let the monopolies earn double-digit profit on all the investments they’re now second-guessing and shedding. If we don’t stand up and call for a better deal, it will be like our paying high-interest loans for the efficient car we want to drive and for the gas guzzler that’s been sent to the junk heap.

Wisconsin’s mechanism for regulating electric utilities is fundamentally broken. Unlike Minnesota, utility companies in Wisconsin do not have to get approval from the Public Service Commission (PSC) to shut down power plants, but they do have to get approval for new power plants.

This leaves Wisconsin consumers in a bind, because utility companies get to claim a power plant isn’t needed, as in the case of Pleasant Prairie, but then these same monopoly utility companies ask for approval to build more solar, wind, and natural gas capacity, claiming they need the power plants because they shut down the coal plants.

In the end, Wisconsin’s utility regulation is the worst of both worlds: the regulator does not have the authority to stop a plant from closing, and utility companies there are also guaranteed to make a profit by building new power plants, or even recovering costs on perfectly good power plants that they closed down.

The people of Wisconsin should be outraged. Either give the PSC final say on which power plants close, and when, or remove the profit guarantees for utilities and make them truly compete in a free market. As it stands, the current situation is the worst-case scenario for Wisconsin families and businesses.

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