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ANTICIPATING TOMORROW's ENERGY DEMANDS; Billions for Power Lines; 10-Year Plan Lays Out Spending to Improve State's Power Grid

Posted on: Wednesday, 28 September 2005, 15:00 CDT

By THOMAS CONTENT

A new long-range plan for the state's power grid to be unveiled today calls for spending $3.4 billion over the next 10 years to build additional power lines and improve existing lines, American Transmission Co. said.

The plan calls for almost 500 miles of new power lines and about 1,000 miles of rebuilt or upgraded lines in southern and north central Wisconsin.

The $3.4 billion estimate represents a jump of $600 million, or 21%, from a similar plan the company presented last fall. ATC already has spent nearly $500 million on power line improvements in the past several years.

"We're addressing the needs, but the needs are still there and we're still focusing on them," said Don Morrow, the company's director of planning.

The rising costs to shore up the state's power grid come at a time of soaring energy prices both at the gas pump and for home heating. The state has also seen big jumps in the price of electricity in recent years.

Milwaukee-based We Energies, which raised customers' bills about 5% this year, is seeking to increase those bills almost 7%, or $5 a month, on Jan. 1. The utility said transmission-related costs account for half of its proposed $143.5 million increase, which would increase a typical customer's residential electric bill to $79 a month if approved by state regulators.

The rising cost of fuels such as natural gas represents the lion's share of increases customers are seeing on their monthly bills, according to American Transmission. Costs relating to transmission lines account for 5% to 7% of a typical electric customer's monthly bill, ATC spokeswoman Maripat Blankenheim said.

But the expanding price tag for the 10-year power line plan comes as customers are railing against price increases. Manufacturers say the state's economic competitiveness has been hamstrung since the late 1990s by price increases that have driven Wisconsin electric rates higher than those in most other Upper Midwest states.

The increase in the cost of the power-line plan is likely to put pressure on state regulators already hearing gripes from customers about rising rates.

A coalition of several state manufacturers groups is challenging American Transmission to prove that all of its new power lines are needed.

In a filing with the state Public Service Commission Tuesday, the Wisconsin Industrial Energy Group, Wisconsin Paper Council and Wisconsin Manufacturers & Commerce questioned whether the state will truly see economic benefits in the form of access to cheap power in other states from building a new $352 million high- voltage power line linking Dane County and Iowa.

The groups want the state Public Service Commission to approve "only those necessary initiatives that are built upon systematic planning and which clearly show strong potential to lower customers' energy costs. If increased reliability is purchased at the cost of companies being forced to shutter their facilities or shift production and employment elsewhere, Wisconsin's significant economic challenges will only be exacerbated," the groups said.

Driving ATC's higher costs are soaring steel prices, rising labor costs and continuing increases in demand for electricity, planning director Morrow said.

Even with the increases, the transmission portion of a customer's bill is likely to remain well below 10%, Blankenheim said, given the other increases customers are seeing on their bills. We Energies customers are being asked to fund nearly $3 billion for new power plants under construction in Port Washington and Oak Creek.

Despite the money ATC has spent in recent years, Wisconsin continues to have one of the most congested power-grid systems in the nation, ATC says. That's why the state's transmission needs don't end with construction of the $420 million Wausau-to-Duluth, Minn., power line, which started this summer.

"A '68 VW may get you to work, but it'll nickel and dime you to death with repairs until you get something new and start making payments on it," Blankenheim said.

City of Pewaukee-based American Transmission estimates that demand for electricity is growing at a rate of 2% a year, with pockets of the state notably Madison, Green Bay, Rhinelander and Lake Geneva seeing much higher annual growth rates.

The cost for American Transmission's 10-year plan will be paid for by customers of utilities across eastern Wisconsin and Michigan's Upper Peninsula, ATC says.

Customer groups concerned

Customer groups say they want to monitor American Transmission to ensure that the state doesn't build too many power lines. They note that utilities have an economic incentive to build more lines because their income grows in proportion to the amount of money they have invested in such projects.

"ATC does make money from customers like you and me," said Charlie Higley, executive director of the Wisconsin Citizens' Utility Board, a utility watchdog group with more than 9,000 members statewide. "There's always the concern that they're going to gold- plate, or build more than they need, which could increase their cash flow and revenues."

Higley said the reasons cited by ATC for the rising expense of power line construction, such as rising steel and labor costs, are plausible. "As far as we can tell, ATC is looking mostly to bring the system up to speed after not having much investment in transmission in the state for quite a few years."

Hurricanes play a role in rising costs as well, Morrow said, as it is more difficult for companies to find electrical contractors when they are serving storm-ravaged areas.

The plan's $3.4 billion price tag includes projects that are under construction, as well as those in the planning stages but not approved by regulators.

Among the projects included:

-- $420 million for the Wausau-to-Duluth power line, planned to open in 2008.

-- $200 million to $250 million for projects connecting Wausau and the Fox River Valley area, including 345-kilovolt power lines designed to help transport power from a new $770 million coal-fired power plant Wisconsin Public Service Corp. of Green Bay is building near Wausau. The projects are to be completed by 2009.

-- $110 million in projects to beef up power reliability in and around Madison and fast-growing Dane County by 2011, plus another $150 million to $200 million in Dane County by 2015.

-- $90 million for a power line by 2010 linking western Waukesha County with eastern Dane County, running through Jefferson County.

-- $352 million to build a new interstate transmission line linking Dane County and northeastern Iowa, though several other routes, to Minnesota and Illinois, are also being considered. That project would be completed by 2013.

Morrow said ATC is sensitive to concerns about rising energy prices and uses various models to strive to come up with the lowest- cost solutions.

ATC was formed by a state law that required the state's big utilities to sell off their major transmission lines into a company dedicated solely to the business of building and maintaining power lines.

The company is owned by utilities based in eastern Wisconsin and the Upper Peninsula of Michigan.

The owners with the largest stake in ATC are We Energies, Wisconsin Public Service Corp., Wisconsin Power & Light Co. and Madison Gas & Electric Co.

In a sign that eastern Wisconsin is catching up and improving its power reliability, Morrow said ATC planners see the need for fewer projects over the next 10 years than were called for in last year's 10-year plan.

Of the $3.4 billion, $2.4 billion would be spent on new projects while $1 billion would be spent on upgrading aging substations and lines, Morrow said.

Nino Amato, president of the Wisconsin Industrial Energy Group, said stakeholders, including regulators, need to actively question ATC's cost analyses, its projections for future power needs and other factors.

"Do we need more transmission? Absolutely," Amato said. "Are we pleased that ATC is moving in the right direction? Certainly. But the key is we don't do it at any cost. It has to be cost-effective, and (energy) conservation is becoming increasingly more important in this equation."

ELECTRIC UPGRADES

$3.4 billion in spending will be proposed today: $2.4 billion on new projects and

$1 billion on upgrades.

That will pay for:

500 miles of new lines and

1,000 miles of improved lines

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American Transmission Co.'s 10 year plan can be viewed at www.atc10yearplan.com

Copyright 2005, Journal Sentinel Inc. All rights reserved. (Note: This notice does not apply to those news items already copyrighted and received through wire services or other media.)

Source: Milwaukee Journal Sentinel

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