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About The Author:

Robert A. Olson is a partner in the law firm of Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law, public utility law and related commercial transactions.

He can be reached at:

Brown, Olson & Gould, PC
2 Delta Drive
Suite 301
Concord, NH 03301
(603) 225-9716









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STATELINE by Robert Olson

July 2001

Wisconsin Governor Announces Energy Plan For Increased Capacity And Lower Wholesale Energy Taxes
by Robert Olson  --   Brown, Olson and Wilson, P.C.
(originally published by PMA OnLine Magazine: 2001/10/06)

In June, 2001, Wisconsin Governor Scott McCallum announced a state energy plan surveying the state’s energy supplies and unveiling programs designed to meet future demand, diversify fuel sources, and upgrade the existing electricity and natural gas infrastructure. The energy plan also discusses energy efficiency, renewable energy, and low income assistance programs. Wisconsin’s electric industry is not fully restructured; rather, Wisconsin has adopted an incremental approach to restructuring. In 1998, the Electric Reliability Act was passed, which authorized the construction of new merchant power plants for wholesale power sales. The Electric Reliability Act also streamlined the process for new plant construction, required the transfer of control of transmission from utilities to an independent system operator, and required Wisconsin utilities to add 500 MW of capacity. In October, 1999, legislation known as "Reliability 2000" was signed into law. Reliability 2000 required utilities to transfer transmission assets to a separate company, which has since become the American Transmission Company. Energy efficiency and low income programs were also transferred from utilities to the state for implementation, leaving utilities to operate within their core businesses.

The 2001 energy plan recommends capacity expansion and fuel diversity. Total existing capacity in the state is 13,200 MW. The energy plan predicts a shortfall of 7,220 MW to meet the anticipated demand, plus an 18% reserve, by 2016. With energy efficiency factored in, the energy plan projects the actual shortfall will be 6,300 MW. Consequently, the energy plan recommends that Wisconsin take steps to assure 6,300 MW of additional capacity is added by 2016. The energy plan also seeks a legislative reduction in the tax rate on gross revenues from wholesale electricity sales from 3.19% to 1.59%. In addition, the energy plan recommends that the Wisconsin Public Service Commission (WPSC) and the Wisconsin Department of Natural Resources (WDNR) implement regulatory changes to remove barriers to the installation of customer-sited generation. The plan further recommends that the WPSC establish consistent statewide interconnection standards and procedures for customer-owned generation.

The energy plan advocates greater reliance on locally available renewable resources for fuel to offset the potential price and supply volatility which could result from Wisconsin’s substantial reliance upon imported fuels. Imported fuels make-up 96% of Wisconsin’s energy fuels. Four percent of Wisconsin’s energy is supplied by renewable fuels (biomass, wind, solar, hydroelectric power, and geothermal-aided heat pump power). The Electric Reliability Act required Wisconsin utilities to add 50 MW of new renewable capacity by December 31, 2000, which has been done. Reliability 2000 further required that renewable energy make up 2.2% of retail sales in Wisconsin by the year 2012. The energy plan states that the Wisconsin Department of Administration (WDOA) and the WPSC "will evaluate and, if feasible, recommend expansion of the amount of renewable energy required in the state’s electric Renewable Energy Portfolio."

The energy plan assesses various sources of renewable energy and their suitability for development as fuel sources in Wisconsin. The Governor’s plan states wood is one of the state’s most abundant renewable energy sources. It also states corn, switchgrass, fast-growing trees, and organic wastes are other potential biomass fuel sources, and addresses the potential of wind, solar, hydroelectric, and geothermal fuel sources in the state. Research by the Wisconsin Energy Division is cited which concludes that renewable energy investments generate three times more jobs, earnings, and output than investments in fossil fuels. The energy plan projects that the state will exceed the 2012 2.2% renewable portfolio standard, and will see a total of 2.58% renewable-sourced power, or 390 MW, by 2012. It also states the renewable energy portfolio standard may make up for as much as 530 MW of the 6,300 MW shortfall.

The Governor’s energy plan also calls for improvements in the infrastructure necessary to transmit electricity and natural gas. Imported power accounts for 15% of the state’s electricity needs. The plan states the transmission grid is no longer adequate to meet the demand, and Wisconsin’s geographic location between two great lakes places physical limitations on the transmission options. The WPSC has studied a number of proposals to upgrade the transmission grid, and approved some proposals, yet, according to the energy plan, the transmission problem has not been solved. The energy plan provides that Wisconsin quickly move ahead with a proposal to increase transmission capacity.

The energy plan also questions the adequacy of the natural gas pipeline system. While natural gas provides approximately 4% of the fuel for electricity, the energy plan anticipates significant growth in the use of natural gas over the coming years, and states seventeen natural gas-fired facilities, comprising 7,052 MW, are under consideration in Wisconsin. The plan describes an existing pipeline used to transport natural gas from a new pipeline between Canada and Chicago, and the anticipated construction of a second pipeline from Chicago to southeastern Wisconsin, which construction has been approved by the Federal Energy Regulatory Commission. A third, in-state pipeline recently received approval from the WPSC, according to the energy plan. The energy plan recommends that the WPSC and Wisconsin gas utilities study long-term forecasts for natural gas demand and the pipeline capacity needed to meet that demand.

According to the energy plan, 64% of Wisconsin’s energy is fueled by coal. The energy plan anticipates that coal and nuclear fuel sources will remain Wisconsin’s dominant fuel sources. The energy plan recommends that power plant operators be encouraged to use clean coal technologies. It also recommends that new mercury regulations presently being prepared by the WDNR be studied by the WPSC, WDNR, and WDOA to assess the proposed regulations’ effect on existing coal-fired generation capacity. The energy plan further recommends that the WPSC prepare energy impact statements for proposed WPSC rules which are determined to significantly impact the state’s energy policies.

Robert A. Olson is a partner in the law firm of Brown, Olson & Gould P.C. which maintains a nationwide practice in energy law, public utility law and related commercial transactions. He can be reached at:

Brown, Olson & Gould, PC
2 Delta Drive, Suite 301
Concord, NH 03301 | (603) 225-9716

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