The Customers First! Coalition Generation Action Plan: A Summary

January, 2001

Two large Wisconsin utilities are promoting plans for the future of electricity in Wisconsin that include giving them the authority to give away their existing power plants (paid for and supported for many years by customers of the utilities) to unregulated subsidiary companies belonging to their parent corporations -- the holding companies. One of the utilities has not said that it will build any new plants at all. The other has said that it will not build any new plants unless it can give existing generation to an affiliated, unregulated GenCo.

The Customers First! Coalition (CFC) agrees with the two utilities that Wisconsin needs new power plants to preserve reliable electric service and provide power for our future growth. The CFC Generation Action Plan will get Wisconsin where it needs to be -- with reliable service, stable rates and ability to serve growth -- faster than the utilities' plans, and without new legislation sure to provoke a prolonged battle at the Capitol.

Here’s How

• Wisconsin needs new infrastructure, including power plants, to meet its near-future needs. Without it, our well-being and economic future are threatened.

• Electric utilities and independent power producers should both be encouraged to build needed power plants. The utilities already have a duty to provide adequate service at just and reasonable rates, and have existing sites that would be appropriate for plants.

• New plants built by independents would serve the state's goal of increasing competition. Selling their power to utilities, to serve Wisconsin customers, would help the independents' chances of success.

• The Public Service Commission has the authority to and should determine how to get the needed power plants built, taking into account competition, fuel diversity and Wisconsin's energy priorities.

• The Commission should also adopt specific new measures to insure regulatory certainty for new utility power plants and power purchases, including new rate recovery mechanisms for new plants, treating them as stand-alone assets for ratemaking purposes, and setting targeted financial terms for the new plants, including rate of return, return on construction work in progress and depreciation periods. The Commission should also let the utilities recover a margin on purchases of power which benefit customers.

• The Commission should also consider using a leaseback transaction as an option for encouraging utilities to build new plants. The lease would be a financing vehicle only, with the utilities (the lessees) having complete control over operation, maintenance and dispatch of the plants.

• The utilities do not now have, and should not be given, the authority to give away their generating assets to unregulated GenCo affiliates. Once these assets belong to unregulated GenCos, the companies are free to sell them off to the highest bidder and keep the profits for the shareholders alone, with no benefits for the customers who have supported the plants all along.

• Major legislative changes would be required to implement the GenCo proposals, ensuring a costly and bitter battle at the Capitol. As in California, putting regulated assets into GenCos would deprive the state of regulatory authority and shift it to the federal government. Add scarce supplies to this mix, and Wisconsin customers would have no more effective protection against volatile, skyrocketing prices and threats of blackouts than California customers have.

The CFC Generation Action Plan offers the fastest and least controversial way to move ahead. It would allow Wisconsin to go forward without new legislation, keep reliability and stability associated with existing power plants, and give the utilities and independent companies the incentives they need to build new plants. Regulatory authority would remain in state instead of going to Washington. Wisconsin cannot afford any more delay and controversy in solving its energy shortage.

For More Information Contact Customers First! at 888.960.4478 or 608.286.0784