A Wonderful but Unfortunately Symbolic Effort
Issue of the Week
We have much respect for the recent action of four Republican legislators, Senators Duey Stroebel and Robert Cowles and Representatives Adam Neylon and Jim Ott, who chose to stand up for the average electric ratepayer and for jobs in Wisconsin against the powerful special interests of the utilities. They are introducing legislation (LRB 0600/1) that would give a little more power to the Public Service Commission to hold down the ever-rising electric rates. In their letter to their colleagues introducing and explaining their bill, they start with “Wisconsin’s electric rates are among the highest in the nation, and in the energy-intensive manufacturing sector Wisconsin’s above-average rates are a barrier to job growth and capital investment. If Wisconsin is to continue to lead the way in manufacturing, a regulatory environment that promotes economic development and protects ratepayers is critical.”
Protecting the ratepayers and standing up to the special interests is not the way the Republicans controlling the Wisconsin legislature have been functioning for the past six years, so this is a real breath of fresh air. A bit of history would be helpful. In the early 1980s, when WE Energies was Wisconsin Electric Power Company (WEPCO), and they hadn’t gotten permission yet from the state to set up their dubious holding companies, their CEO, Charlie McNeer, was very concerned about keeping the electric rates down to keep southeastern Wisconsin competitive and protect our business climate. He created various programs to hold down demand for electricity and avoid the need to build new and expensive power plants. For example, WEPCO would give customers a U.S. Savings Bond if they traded in their old inefficient appliances for new, more energy-efficient ones. At that time, we had either the lowest rates in the Midwest or very close to the lowest rates. McNeer even put up billboards on I-94 in Kenosha County as you approached the Illinois boarder that read something like “Mr. Business Owner, why not consider relocating in Wisconsin where your utility rates would be significantly lower?”
How Did All This Change?
After McNeer retired, things changed radically. The new leadership misread the obvious signs of the energy future and the fact that renewable energy would become a growing factor in holding down the demand for electricity from traditional power plants. Instead, they invested billions of dollars in traditional power plants and put the ratepayers on the hook for billions of dollars of long-term debt. We now have the highest residential electric rates in the Midwest. Furthermore, if demand goes down and people buy less electricity from the traditional coal and gas plants, the rates will simply increase to cover the debt service on the huge debt they incurred, and also to insure the shareholders get their generous rates of return. The executives responsible for all of this received huge bonuses and are now comfortably retired, and we, the ratepayers, are stuck with some of the highest electric rates in the nation and it will probably continue to get worse as demand goes down. Unfortunately, this makes our business climate in southeastern Wisconsin much less competitive for any electric-intensive industries.
How could all this happen? Utilities are monopolies, meaning that they have no meaningful competition in their service area. They are “regulated monopolies,” which means they need permission from the state Public Service Commission to get rate increases. That sounds good in theory, but the utilities have a great deal of money and many employees, so they have political power. Governors appoint the members of the Public Service Commission, and they also get contributions and political pressure from the utilities. Many people who work in this area feel that the regulated monopolies, the utilities, have done a good job of getting compliant individuals appointed to the Wisconsin Public Service Commission. As they would say, “the fox is ‘protecting’ the hen house.” So when you have weak regulation, the special interests have great control and bad things will follow.
This current bill is a good piece of legislation, but unfortunately it is a symbolic effort. The Republican leadership in the Assembly, for example, will not let this bill succeed since they rely heavily on the utilities to help fund their campaigns. The bill has recently been announced, and there are already eight institutions registered to weigh in on the legislation. All eight are against and all are either utilities or their front groups. Even though this bill does not have a chance in the Wisconsin legislature, it is still nice to see four Republican legislators bucking their leadership and the majority of their GOP colleagues by trying to do what is good for the average citizen and good for Wisconsin’s future.