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<title>July 2001: Wisconsin Governor Announces Energy Plan For Increased
Capacity And Lower Wholesale Energy Taxes</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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<img src="../images/statelin.gif" alt="STATELINE by Robert Olson" border="0" width="375" height="75">
</center><p align="left"><b><u><br>
July 2001</u>
<br>
<font size="6">Wisconsin Governor Announces
Energy Plan For Increased Capacity
And Lower Wholesale Energy Taxes<br>
</font>
</b><strong>by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
200</em>1/10/06)</font></p>
<center>
<p ALIGN="JUSTIFY">In June, 2001, Wisconsin Governor Scott McCallum
announced a state energy plan surveying the state’s energy supplies and
unveiling programs designed to meet future demand, diversify fuel sources,
and upgrade the existing electricity and natural gas infrastructure. The
energy plan also discusses energy efficiency, renewable energy, and low
income assistance programs. Wisconsin’s electric industry is not fully
restructured; rather, Wisconsin has adopted an incremental approach to
restructuring. In 1998, the Electric Reliability Act was passed, which
authorized the construction of new merchant power plants for wholesale power
sales. The Electric Reliability Act also streamlined the process for new
plant construction, required the transfer of control of transmission from
utilities to an independent system operator, and required Wisconsin
utilities to add 500 MW of capacity. In October, 1999, legislation known as
"Reliability 2000" was signed into law. Reliability 2000 required utilities
to transfer transmission assets to a separate company, which has since
become the American Transmission Company. Energy efficiency and low income
programs were also transferred from utilities to the state for
implementation, leaving utilities to operate within their core businesses.
</p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p ALIGN="JUSTIFY">The 2001 energy plan recommends capacity expansion and
fuel diversity. Total existing capacity in the state is 13,200 MW. The
energy plan predicts a shortfall of 7,220 MW to meet the anticipated demand,
plus an 18% reserve, by 2016. With energy efficiency factored in, the energy
plan projects the actual shortfall will be 6,300 MW. Consequently, the
energy plan recommends that Wisconsin take steps to assure 6,300 MW of
additional capacity is added by 2016. The energy plan also seeks a
legislative reduction in the tax rate on gross revenues from wholesale
electricity sales from 3.19% to 1.59%. In addition, the energy plan
recommends that the Wisconsin Public Service Commission (WPSC) and the
Wisconsin Department of Natural Resources (WDNR) implement regulatory
changes to remove barriers to the installation of customer-sited generation.
The plan further recommends that the WPSC establish consistent statewide
interconnection standards and procedures for customer-owned generation.</p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p ALIGN="JUSTIFY">The energy plan advocates greater reliance on locally
available renewable resources for fuel to offset the potential price and
supply volatility which could result from Wisconsin’s substantial reliance
upon imported fuels. Imported fuels make-up 96% of Wisconsin’s energy fuels.
Four percent of Wisconsin’s energy is supplied by renewable fuels (biomass,
wind, solar, hydroelectric power, and geothermal-aided heat pump power). The
Electric Reliability Act required Wisconsin utilities to add 50 MW of new
renewable capacity by December 31, 2000, which has been done. Reliability
2000 further required that renewable energy make up 2.2% of retail sales in
Wisconsin by the year 2012. The energy plan states that the Wisconsin
Department of Administration (WDOA) and the WPSC "will evaluate and, if
feasible, recommend expansion of the amount of renewable energy required in
the state’s electric Renewable Energy Portfolio." </p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
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<p ALIGN="JUSTIFY">The energy plan assesses various sources of renewable
energy and their suitability for development as fuel sources in Wisconsin.
The Governor’s plan states wood is one of the state’s most abundant
renewable energy sources. It also states corn, switchgrass, fast-growing
trees, and organic wastes are other potential biomass fuel sources, and
addresses the potential of wind, solar, hydroelectric, and geothermal fuel
sources in the state. Research by the Wisconsin Energy Division is cited
which concludes that renewable energy investments generate three times more
jobs, earnings, and output than investments in fossil fuels. The energy plan
projects that the state will exceed the 2012 2.2% renewable portfolio
standard, and will see a total of 2.58% renewable-sourced power, or 390 MW,
by 2012. It also states the renewable energy portfolio standard may make up
for as much as 530 MW of the 6,300 MW shortfall. </p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p ALIGN="JUSTIFY">The Governor’s energy plan also calls for improvements in
the infrastructure necessary to transmit electricity and natural gas.
Imported power accounts for 15% of the state’s electricity needs. The plan
states the transmission grid is no longer adequate to meet the demand, and
Wisconsin’s geographic location between two great lakes places physical
limitations on the transmission options. The WPSC has studied a number of
proposals to upgrade the transmission grid, and approved some proposals,
yet, according to the energy plan, the transmission problem has not been
solved. The energy plan provides that Wisconsin quickly move ahead with a
proposal to increase transmission capacity. </p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p align="left">The energy plan also questions the adequacy of the natural
gas pipeline system. While natural gas provides approximately 4% of the fuel
for electricity, the energy plan anticipates significant growth in the use
of natural gas over the coming years, and states seventeen natural gas-fired
facilities, comprising 7,052 MW, are under consideration in Wisconsin. The
plan describes an existing pipeline used to transport natural gas from a new
pipeline between Canada and Chicago, and the anticipated construction of a
second pipeline from Chicago to southeastern Wisconsin, which construction
has been approved by the Federal Energy Regulatory Commission. A third,
in-state pipeline recently received approval from the WPSC, according to the
energy plan. The energy plan recommends that the WPSC and Wisconsin gas
utilities study long-term forecasts for natural gas demand and the pipeline
capacity needed to meet that demand.</p>
<center><font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p align="left">According to the energy plan, 64% of Wisconsin’s energy is
fueled by coal. The energy plan anticipates that coal and nuclear fuel
sources will remain Wisconsin’s dominant fuel sources. The energy plan
recommends that power plant operators be encouraged to use clean coal
technologies. It also recommends that new mercury regulations presently
being prepared by the WDNR be studied by the WPSC, WDNR, and WDOA to assess
the proposed regulations’ effect on existing coal-fired generation capacity.
The energy plan further recommends that the WPSC prepare energy impact
statements for proposed WPSC rules which are determined to significantly
impact the state’s energy policies.</p>
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<blockquote>
<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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