We Energies is asking the Public Service Commission (PSC) to approve a 5.9% increase in our utility bills over the next two years. This is not unusual for We Energies (WE), which now has our utility rates second highest among Midwestern states. Imagine if the city or county government tried to raise our property taxes at anything close to a 5.9% increase; people would be out on the street demanding change. But We Energies continues to ask for these rate hikes, and the PSC commissioners continue to give them most of what they ask for.
So, what can we rate payers do about it? Not much. We can’t live without heat and electricity, and there is no real competitor because We Energies is a monopoly, albeit a regulated monopoly. The power company is simply a utility like our city-owned water works; both provide a vital service and should be driven by what is best for its customers.
While We Energies executives are primarily concerned about maximizing their profits for their outside investors, we, the voters, control our water utility, and if we organize, we can change the decisions of the water utility. Some cities, like Cleveland, still have a municipally owned power company despite decades of attacks and misinformation from the private utilities. In Wisconsin, We Energies only needs to get the approval from the PSC. They set the rates, and if we want electricity, we pay their bills.
The PSC is governed by a three-person board appointed by the governor and currently has three Scott Walker-appointed commissioners who are very sympathetic to the arguments put forth by the utilities. As economists will point out, there is a term for this. It’s called “regulatory capture,” where the companies to be regulated have de facto control over the regulators. Essentially, it is a classic case of the fox guarding the henhouse. So, expect Walker’s PSC appointees to gently push back and then to give We Energies most of what they are asking for.
Why the Increases?
Why does WE need the rate increase? The main one is that We Energies needs to recover the costs of the very costly and misguided capital expenditures they made. We, the rate payers, unfortunately are forced to pay for their poor decision making. Without question, the worst decision they made was in the early part of the 21st century, when any forward-looking person knew that we would need to change how we produce energy because the status quo was unsustainable.
|
|
Instead, the WE Wizkids built a couple-billion-dollar, massive coal-fired power plant that we, the ratepayers, are going to have to pay for over the next 30-plus years. We understand that at this point in time, a utility can’t be run exclusively on alternative energy and that they need a base energy supply that doesn’t rely on wind or the sun.
When We Energies was proposing the coal-fired plant, the Shepherd Express and others were promoting limited-size natural gas plants for the needed consistent and reliable source of energy as alternative energy sources grew and improved. The natural gas proponents felt it was clearly a better choice than coal. It turned out as many predicted: Natural gas plants would have been a much smarter choice being both less expensive and much, much cleaner. Today, our utility bills would be lower, and our business climate would be much stronger as companies look at utility costs as one factor in the plant location selection process.
Another reason for our high utility rates is that WE pays its executives some of the highest salaries of all the publicly traded companies in Wisconsin. Again, this is a monopoly with a captive audience of customers who can’t go to a competitor. As a result, the utility can just pass these costs on to the ratepayers. Keep in mind that we pay for these rate increases twice—once in our household utility bill and again as the businesses we patronize have to push a part of these rate increases on to their customers. Our groceries would be cheaper if We Energies didn’t have such high utility rates.
Thirty Years Ago it was Different
But it wasn’t always this way; actually, it was much the opposite. Milwaukee had some of the lowest electric power rates in the Midwest. In the 1980s, Wisconsin Electric Power Company, the predecessor of We Energies, had big plans to spend billions of dollars on a nuclear power plant, which would have caused serious rate increases as we paid for the project. The new CEO at the time, Charlie McNeer, was concerned about keeping our rates low so businesses would grow in Wisconsin and create family supporting jobs.
Instead of spending on more expensive and polluting or dangerous power plants, McNeer focused on conservation with a number of innovative programs. These programs included providing a cash incentive for households and businesses to give up their old, inefficient refrigerators and air conditioners and replace them with new high-efficiency ones. These programs worked so well that McNeer was able to cancel the proposed nuclear power plant and declare that there would be no new power plants built through the end of the 20th century. That’s leadership.
After he retired in the 1990s, things began to change. This is when We Energies built its enormous coal-fired power plant, and rates began to climb. The new Republican-dominated PSC approved WE’s coal-fired power plant, the utility executives walked away with hefty bonuses and we, the rate payers, have gotten the second-highest utility rates among the Midwestern states.
Today, we have a PSC that is afraid to offend the utilities. We need change if want to see our manufacturing companies stay in Wisconsin. Going forward, we need a PSC to function as a real regulatory body; however, we don’t expect to see that until our new governor is able to slowly replace the current Walker appointees.
