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Major Industries Could Be Moved By High Rates To Leave Wisconsin

August 23, 2016 By Cheryl Kaften

Wisconsin’s prohibitive electric rates could drive some of the state’s biggest industrial energy customers to relocate or expand elsewhere, the Wisconsin Public Service Commission (PSC) is being cautioned (Docket No. 5-ES-108).

Consumers should be able to choose their preferred power provider rather than being restricted to the current utility monopolies, the state regulatory panel was told at a recent hearing, in a request to revive the long-dormant issue of electric choice in Wisconsin, reports the local Wisconsin State Journal.

The comments are among 30 submitted in response to the Strategic Energy Assessment 2022 (SEA), a 70-page evaluation of the state’s energy needs and expectations over the next six years, approved and posted to the PSC website on August 1.

Indeed, said the Wisconsin Industrial Energy Group and the  Wisconsin Paper Council  (collectively, the Industrial Customer Groups or ICG), “It is particularly troubling to note in a state whose economy is built on manufacturing that, in 2015, not only did Wisconsin have the highest average industrial rate when compared to surrounding states, the Midwest and U.S. averages respectively; but the growth rate from 2001 to 2015 was the highest as well. This trend is of grave concern and results in more industrial load being at risk of expanding or relocating in states with greater market access and/or much lower rates.”

Specifically, according to the report, Wisconsin’s average electric rates are highest among eight Midwest states for the first time since 2006 – at 10.97 cents per kilowatt-hour (kWh). The other states’ average rates range from 8.65 cents in Iowa to 10.87 cents in Michigan. The U.S. average is 11.02 cents per kilowatt-hour, the assessment found.

For industrial customers, the situation is worst: Rates are also highest in Wisconsin at 7.81 cents/kWh compared with those in other Midwest states, ranging from 6.06 cents to 7.25 cents/kWh.

The Retail Energy Supply Association intervened in the case, stating, “RESA believes that the commission should actively consider how electric restructuring and a commitment to the development of a well-functioning competitive market model could address the commission’s concerns about the serious problem facing Wisconsin electricity customers, especially larger users that employ large number of people – which are the economic engine of Wisconsin. Wisconsin electricity customers once enjoyed enviably low rates, but now, as the SEA acknowledges, pay the highest rates in a large 12-state Midwest region.

Charter Steel, in written comments to the PSC picked up by the Wisconsin State Journal, said that  – other than scrap metal, for which price changes can be passed along to customers – electricity is its highest expense, “exceeding labor costs” at its Saukville steel melting operations, where 700 people are employed.

“Because a commodity business like steel is extremely competitive, it is vital that Charter Steel’s key input costs be competitive. This is no longer the case for electricity,” the company said.

In fact, Charter Steel could be one of those businesses planning to grow outside the state, the local news outlet reported.

Bob Venable, president and chief operating officer of Charter Manufacturing, Charter Steel’s parent company, said “We Energies, the Milwaukee utility company that provides power to the Saukville steel mill, charges 25 percent more than the average regional and national industrial rates.

“And the difference is significantly larger when compared with our rates in Illinois and Ohio,” where Charter also has operations, he said.

“We are not considering moving — we have a very large investment in our Wisconsin operations and are committed to Wisconsin. That said, the non-competitive cost of electricity in the We Energies’ service territory is a key reason we are looking to expand outside of Wisconsin for future growth projects,” Venable said, in an email exchange with the Wisconsin State Journal.

In approving the Strategic Energy Assessment, the three-member PSC did not comment on the prospect of reopening a discussion on electric deregulation. Most recently, the commission had opened a docket on deregulation in 1994 and closed it in 2000.

What’s more, if deregulation were to be reconsidered by the PSC, it would require approval from the state legislature, PSC spokeswoman Elise Nelson told the State Journal.

“The pros and cons of retail choice are speculative at best given the unique nature of each state’s utilities, customers, load, etc. A number of states have suspended or rescinded so-called ‘retail choice’ and moved back to the traditional regulatory model,” Nelson said.

The PSC conducts a Strategic Energy Assessment every two years.

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