Wisconsin Energy amends filing, proposes more plants

By the OGJ Online Staff

HOUSTON, Feb. 23, 2001—Wisconsin Energy Corp. Friday said it will amend its controversial application to spin off existing generating capacity to an unregulated affiliate and will seek state approval to build 1,100 MW in addition to the 1,700 MW it has already proposed.

The Milwaukee-based energy firm said it completed discussion on a framework with the Customer First! Coalition, a consumer group, in the interests of avoiding California-style electricity shortages in Wisconsin. The company’s initial application raised serious questions of market power, according to the Wisconsin Public Service Commission (PSC).

The new proposal focuses on “building infrastructure rather than deregulation,” said Lee Cullen, attorney for the Customers First! Coalition.

In the original filing, Wisconsin Energy asked the PSC to rule a new generation affiliate could build 1,700 MW of merchant generating capacity within its electric utility’s service territory under existing state law and for permission for Wisconsin Electric Power Co., its electric utility subsidiary, to spin off existing fossil fuel generation assets to the generation affiliate. The proposal is part of a 10-year, $6 billion expansion plan the company reported in September.

Wisconsin Energy proposed to allow the generation affiliate to supply Wisconsin Electric with power to serve its retail customers under a long-term purchased power agreement, which would be subject to PSC and Federal Energy Regulatory Commission review.

The price of electricity from existing plants would have been set under traditional utility cost-of-service regulations, while electricity generated by the new plants would be calculated as if the new capacity were owned and operated by a third party merchant power company.

Under existing PSC rules, Wisconsin Electric could build cost-based generation within in its service territory and its parent can build merchant plants outside that territory. The present regulatory structure doesn’t provide for a purchase power agreement.

Now, rather than sell the output of the new plants to Wisconsin Electric under a long-term contract, under the latest proposal the new subsidiary will lease the plants to the utility for a 20-25 year period. Wisconsin Electric personnel would operate and maintain the new plants as part of the lease agreement.

At the end of the lease agreement, Wisconsin Energy has proposed to allow Wisconsin Electric the right to renegotiate and continue the lease or acquire the plants outright at market value. Existing plants would remain with Wisconsin Electric, and the regulatory status of the existing plants would be unchanged.

As with the initial proposal, the PSC would review and approve the lease terms. The company said other utilities, municipal utilities, cooperatives, and power marketing associations will either be able to expand or extend wholesale power purchases from Wisconsin Electric because of the additional megawatts being proposed.

Wisconsin Energy CEO Richard Abdoo said the company is hopeful the plan will receive quick approval from the PSC. “It’s critical that we begin our detailed planning immediately on these power plants if we are to begin construction in 2002 and have our first gas-fired unit in service by 2005,” he said.