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Why Your Electric Bill is So High

Apr. 11, 2017
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Photo credit: Flickr.com/photos/dharma_for_one/

For years the Shepherd Express has been critical of the dubious management decisions of our energy utility, the regulated monopoly We Energies, for both its high utility rates and for having some of the highest-paid executives in the state. Even other business executives who manage real businesses that have competitors and have to compete in the marketplace for customers, criticize We Energies privately.

Almost any business owner will tell you that producing goods or services is the easier part of business compared to selling the products or services in the marketplace. As a regulated monopoly, a utility only has to produce the energy; they have no significant competitors within their defined service area and the state Public Service Commission (PSC) sets their rates to provide an allowable return on its assets, which is currently more than 10%.

Is the Power Company Just Another Utility?

A power company is virtually identical to a municipal utility like the Milwaukee Water Works. One provides energy the other provides water, both are necessary and both have virtually no real competition. You can’t shower in bottled water.

Actually, there are municipally owned power companies, and they provide the needed energy to their customers usually at lower costs. Furthermore, the municipally owned power companies are accountable to their customers, who are essentially the owners, and not to a group of wealthy outside investors looking only to maximize their profits. Vital services that utilities provide should be primarily driven by serving the needs of the residents and businesses in their service area rather than simply by the profit motive.

How Our Electric Power Rates Got Out of Control

Three decades ago, residents and businesses in the Shepherd’s seven-county Milwaukee distribution area had the lowest electric utility rates in the Midwest and among the lowest in the nation. These low rates were because the CEO of the electric power company at that time, Charlie McNeer, cared about the fact that if our rates go up, our area would be less competitive for new business development and we would lose jobs. He was right, and he developed a number of successful policies at the utility to enable him to hold down the rates. Then he retired and it all began to change.

Starting under Gov. Tommy Thompson, the governor’s appointments to the board of the Public Service Commission, created a PSC that became a very compliant regulator. Instead of being the watchdog for the customers, the PSC began to approve almost every request, in some cases modified, from the utility, and things began to change until we now have the highest electric rates in the Midwest. Our power rates have increased at a record pace over the past 15 years because the utility kept going to the Public Service Commission looking for rate hikes to pay for their overbuilding of power plants and for providing their shareholders with a very, very handsome rate of return.

The commissioners of the PSC are appointed for six-year terms by the governor. If the state legislature had to vote on the rate requests and the governor had to sign off on them, we would not have these exorbitant rates. The main force pushing back against the power companies before the PSC has been the Citizens Utility Board (CUB) and some of the individual businesses that consume large quantities of energy. CUB has done a very good job with its limited resources.

Now a new group of some of Wisconsin’s leading businesses including MillerCoors has formed, the Initiative for Competitive Energy, Inc. (ICE) that will now also be coming before the PSC to argue for “policy decisions that encourage stronger economic growth through lower electric prices.”

Coincidentally, We Energies has now proposed a rate freeze through 2019. After years and years of rate increases, many believe that We Energies is just trying to lock in their victories before the PSC and the public begin to take a serious look at the exorbitant utility rates and how We Energies spends our ratepayers’ dollars. Even the very conservative Metropolitan Milwaukee Association of Commerce is supporting the rate freeze, which, in essence, appears finally to be their admission that things have gotten out of control. However, the new ICE and CUB are saying that perhaps a rate freeze is not the answer, but rather a rate rollback is needed. This scrutiny of the energy rates is long overdue.


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