The Wisconsin Public Utility Commission recently released a Strategic Energy Assessment 2022 which outlines the state’s energy requirements for the next six years.
When it comes to energy rates within Wisconsin, the report states that “Direct rate comparisons among states and regions are difficult because of the complexities of energy regulation and the energy market in general. While Wisconsin?s rates are higher than many other states in the Midwest, the Commission noted that in a comparison of average residential bills, the average Wisconsin residential customer’s monthly bill has consistently fallen at or below the Midwest average.”
However, when it comes to energy and the state’s business sector, it is clear that the Public Utility Commission faces a difficult challenge. The report simplifies this fact by indicating that “…the Commission also continues to explore innovative retail rate options for Wisconsin businesses to control their energy costs while contributing to economic growth in the state.”
Digging a little bit deeper into Wisconsin’s current energy situation uncovers businesses that are feeling the economic pinch of these high energy rates. In fact, if the state does not act quickly on trying to bring about cheaper rates, it runs the risk of losing their big manufacturers to other states in the country.
Wisconsin’s Current Electricity Rates
Just how high are Wisconsin’s energy rates?
According to the Strategic Energy Assessment 2022, Wisconsin’s average rates are the highest when comparing electricity rates with the other eight states within the Midwest. Wisconsin’s average rate is 10.97 cents per kWh, where Michigan is only 10.87 cents per kWh, and Iowa’s rates are at 8.65 cents per kWh. These rates are even higher for industrial customers reaching 7.81 cents per kWh in Wisconsin while only reaching between 6.06 to 7.25 cents per kWh for other Midwest states.
Wisconsin’s Manufacturing Industry
When the Wisconsin Public Utility Commission released their report many businesses within the state wanted to make sure that their voices were heard. These entities are convinced that if something is not done to effectively combat the rising electricity rates, the result will be a negative impact on the manufacturing industry within the state and as a result, the state’s economy.
Currently, 85% of all Wisconsin’s exports come from manufactured goods. The resulting output of these technologies and products is approximately $50 billion for a state that employs 450,000 within this single industry.
A few other quick stats on Wisconsin’s manufacturing includes:
- Second highest concentration of manufacturing employees of any state
- There are over 9,500 manufacturing companies in the state
- The state invests $150 million in training for manufacturing workers
The bottom lines is that if manufacturing companies decide to take their business to a state with lower energy rates, this could have a huge impact on Wisconsin’s economy.
Wisconsin Industrial Energy Group
The Wisconsin Industrial Energy Group is comprised up of over 30 companies, including some of the largest manufacturers within the state. Together, they provided a statement to the Pubic Utility Commission in a joint effort with the Wisconsin Paper Council. The statement argues that electricity within Wisconsin is not available to businesses at a reasonable price when compared to other states across the nation.
The groups stated ?It is particularly troubling to note in a state whose economy is built on manufacturing that in 2015, not only did Wisconsin have the highest average industrial rate when compared to surrounding states, the Midwest and U.S. averages respectively, but the growth rate from 2001 to 2015 was the highest as well.”
The most important statement from the group highlights the fact that the high rates are putting the manufacturing industry at risk. Companies who want to expand their business operations are starting to look outside Wisconsin. In some cases, high energy rates are also triggering conversations about complete company relocation to states with lower or more affordable rates.
Charter Steel is one of the companies that provided comments and feedback to the Public Utility Commission. They indicated that since 2001 the electric industry has significantly altered in areas where We Energies, a local utility, regulates electric service. Charter Steele wrote, “By 2014 We Energies? rates for the same customers had risen by 100% and are now 23% above the rest of the state, and the Midwest and national averages. From 1997-2015 Wisconsin had the largest percentage increase in electric rates of any state in the nation, mostly due to the above market increases in We Energies? rates.”
Charter Steel also wrote, “. . . in the early 2000’s, We Energies flexed its political muscle to pass the Power the Future (PTF) regulatory revisions and has otherwise received regulatory treatment at the Wisconsin Public Service Commission allowing it now to earn at the very highest equity return levels in the country.” The company’s comments go on to highlight the fact that the PTF program has helped We Energies to increase their electric generating capacity. They no longer need a new base loaded power plant because they have the ability to serve the state’s new power requirements for several service territories well into the mid-2020’s.
Despite the facts presented, Bob Venable, president and chief operating officer of Charter Manufacturing, Charter Steel?s parent company has said to the State Journal, ?We are not considering moving ? we have a very large investment in our Wisconsin operations and are committed to Wisconsin.” However, he continued with “. . . the non-competitive cost of electricity in the We Energies? service territory is a key reason we are looking to expand outside of Wisconsin for future growth projects.?
Energy Deregulation in Wisconsin?
Both the Wisconsin Industrial Energy Group and Charter Steel have proposed a solution to combat and prevent electricity rates from raising any further. This proposed solution requires Wisconsin to consider changing from a state with a regulated energy market to a state with a deregulated energy market.
Simply put, energy deregulation is the process in which companies known as Retail Energy/Electricity Providers (REPs) are allowed to offer energy supply services to customers within an area. A deregulated energy market helps to break up utility monopolies by creating competition through REPs. A utility’s service is based on territory, and currently, depending on the territory where a person resides or where the company is based, a residential or commercial customer might have a choice between two to three utilities. Some have no choice at all and there is no incentive for the utility to provide better rates.
When there are more options — providers, plans, and rates — to choose from through deregulation, it forces all companies and entities involved to offer the best deals, products and services in order to attract and retain customers.
Energy deregulation is currently available in many states including Texas, Pennsylvania, Connecticut, Maine, Illinois, and Ohio (to name a few). For both residents and businesses living and operating in these areas of the country, they have the opportunity to explore their energy supplier options and then decide on the rate/plan that best suits their needs.
In Charter Steel’s submitted comments, the company had this to say about states that have adopted energy deregulation: “the utilities along with the regulatory bodies and consumer groups worked out legislative solutions which caused the utilities to sell electric generating capacity and at the same time give the largest electric customers “direct access” to wholesale electric markets.
The power plant sales, when coupled with the opening of a direct retail market for independent power producers, created a robust market for the generating capacity capital assets the utilities put up for sale. It caused the utilities to “right size” their capacity assets for their native load. In most cases the asset sales were at prices way above the book value which was the basis on which those utilities were recovering costs from retail customers.”
Ultimately, Charter Steel believes that “the new regulatory regimes adopted in these states have ultimately been win (for retail customers), win (for industrial customers), win (for the utilities selling the assets), and win (for the independent power producing industry).”
Changes to Strategic Energy Assessment 2022
The Wisconsin Industrial Energy Group also proposed several key elements to add to the existing Strategic Energy Assessment 2022 report. Some of these key elements include:
- Including facts and figures regarding energy consumption
- Including demand response based rates
- Evaluation of industrial relative rate competitiveness
- Including assessment of status of transmission cycles in nearby states and building generation
- Including when the industrial rates of nearby states will match or catch up to Wisconsin
Rest assured: if and when energy deregulation does come to Wisconsin, ElectricChoice.com will offer rates and plans for homes and businesses there as we currently do with other deregulated energy markets in the US.