Stabilizing Wisconsin's Energy Situation

Wisconsin is energy challenged. It has some of the oldest energy infrastructure and most constricted power lines in the country. Only four high-voltage transmission lines connect it to sources of power in other states. And it can't produce its own fossil fuels. All of these factors translate into

"Affordable, reliable electricity keeps our stores open, factories running, and payrolls being made," says RJ. Pirlot, director of legislative relations for the Wisconsin Manufacturers & Commerce. "Stabilizing Wisconsin's energy is key to Wisconsin's long-term economic health."

Luckily, these issues were considered critical back in the late 1990s. Since then Wisconsin has been working hard to correct them, not only by building new infrastructure, but also by passing legislation that speeds up the whole process. Time continues to be of the essence if Wisconsin wants to beat the odds of having a large-scale energy failure.

"We've already invested $1 billion in transmission improvements and it will take another $4 billion to finish the work," said Mark Williamson, vice president of major projects for American Transmission Co. "This will take care of Wisconsin's energy needs for at least a generation."

Blame the glaciers

Wisconsin's predicament is largely due to its unique geography. "Wisconsin is bordered on two sides by Great Lakes and to the west by the Mississippi River, which is difficult to cross with transmission lines," said Scott Smith, manager of communications for Alliant Energy.

That only leaves southerly routes to Illinois and Iowa and a few paths into Minnesota for interstate transmission of electricity. As a result, Wisconsin only has four high-voltage transmission lines connecting it to the national power grid; in comparison, Illinois has 24 and Minnesota 18.

Wisconsin's four incoming lines do not have the capacity to meet our increasing demands for electricity, which are growing about 2% to 3.5% per year. That's the equivalent of needing to build a new 350 MW generating plant every year for the next seven years to keep up with demand.

Even with the completion of the Arrowhead-Weston high-voltage line in 2008 from Wausau to Duluth, Minn., which will add a fifth interstate link, Wisconsin will still be narrowly constrained. The federal government defines a system as being constrained if it has a minimum of 500 hours of restricted flow. Williamson indicated that Wisconsin's grid, with about 2,500 hours of restricted flow, is one of the most constrained systems in North America.

Tackling the problem

In response to this crisis, ATC was formed in 2001 when the state's largest electric utilities and many municipal ones transferred their transmission assets - the high-voltage power lines that connect power plants to local distribution systems - to it in exchange for a share of ownership. ATC did not include the northwest portion of the state where Xcel Energies and Dairyland Cooperative still hold sway. Small parts of Michigan's Upper Peninsula and northern Illinois are also in ATC's territory.

As the first multi-state, transmission-only utility, ATC owns and operates about 9,000 total miles of transmission line (including 1,023 miles of extra-high-voltage line) and 460 substations.

Since its inception, ATC has invested heavily in upgrading Wisconsin's power grid. From 2001 ATC has worked on more than 500 projects. In 2004 it invested $227 million in new capital projects and $43 million in maintenance capital projects.

Looking ahead 10 years, ATC has outlined $3.4 billion in construction plans, including 517 miles of new transmission lines and improvements to 1,025 miles of existing line. Building infrastructure isn't cheap: it costs about $2 million/mile for a 345 kV line and $1 million/mile for lower voltages.

"Electric rates in Wisconsin will continue to increase as new power plants and transmission lines are built," said Roy Thilly, president and CEO of Wisconsin Public Power Inc. "Wisconsin's rates have been remarkably stable over the last 20 years, but this cannot be sustained with soaring fuel costs, growing consumption, and retirement of older plants."

Coal is still king. Even with the keen interest in natural gas, renewables, and nuclear energy, coal is still the clear favorite. The federal government estimates that utilities will generate 3% more electricity from coal in 2007 than they did in 2005, while electricity from natural gas-fired plants is expected to drop by 2%.

Yet even coal is not without risks. In 2005 there were significant delays in coal shipments from the western states because of railroad problems. Constriction also affects the coal industry - only two Class-I railroads serve the Powder River Basin in Wyoming, which supplies 60% of Wisconsin's coal. The PSC estimated that coal problems cost Wisconsin utilities nearly $50 million in 2005.

Wisconsin's power grid today

"For Wisconsin, 1997-99 was the low point in electricity reliability," said Dan Ebert, chairman of the Public Service Commission of Wisconsin. "We hadn't built a power plant or significant transmission line for at least 25 years. Since 2003 the PSC has approved three coal-fired baseload plants, which will provide nearly 2,000 MW of energy, and approved $1 billion in improvements to the transmission infrastructure."

In 2004 ATC conducted more than 1,000 technical studies regarding reliability, constraints, and new generation and load connections. Currently ATC is involved in three large-scale improvements that are absolutely vital to Wisconsin's power grid:

1. The Arrowhead-Weston 345 kV high-voltage power line from Wausau to Duluth, Minn. About a third of the line has been built, with completion expected in the summer of 2008. Arrowhead-Weston will help relieve statewide constriction and improve reliability in northern Wisconsin.

2. Upgrades in north-central Wisconsin that include 100 miles of new 345 kV lines and upgrades to 25 miles of lower-voltage lines. ATC will also connect the new Wisconsin Public Service Corp. generation plant at Wausau to the Arrowhead-Weston transmission line. The new kV lines will improve the much-needed transfer capability between Wisconsin and Minnesota.

3. Dane County upgrades. Dane County's grid is becoming increasingly vulnerable to widespread outages. Usage is outpacing capability at an annual rate of 3.75%. ATC will construct a 50-mile, 345 kV line from the southeast corner of the county to west Middleton. Recommendations will be presented to the PSC in 2007 with construction completed by 2011.

MISO

The Midwest Independent Transmission System Operator Inc., a Federal Energy Regulatory Commission-approved regional transmission organization, was founded in 1996 to monitor the electronic transmission system across a region that stretches from Pennsylvania to Montana to Manitoba - including the Midwest. It also has the authority to order emergency energy schedules.

"Basically MISO has a map of the region that shows the price of electricity every five minutes," said Pete Waldron, vice president of energy supply operations for Madison Gas and Electric.

"MISO is supposed to be a tool to provide the lowest possible electric prices through competition," commented Earl Gustafson, a vice president with the Wisconsin Paper Council. "However, Wisconsin's reliability challenges make its needs different compared to most other states in MISO's footprint. It's fair to say, from a Wisconsin perspective, there is some question regarding whether MISO will be a cost-containment tool."

Access to electricity through MISO is still a constriction issue for Wisconsin.

"Our prices would be more like the other states if our transmission system was robust," said WPPI's Thilly. "Because we are constrained, our energy costs are 20% to 30% higher. MISO is a very clear signal from the federal government that Wisconsin needs to upgrade if it wants to be competitive."

MGE has seen some benefits from MISO. "I can find energy out there at a lower price," said Waldron. "For example, we used our Blount Street generating station 20% less than we did the previous year, even though it was hotter. When the station's not running, that means we're getting electricity from somewhere else for less money."

Conservation

There are three parts to the energy equation in Wisconsin - more interstate transmission, better reliability, and conservation/alternative energy.

A PSC report issued last fall showed that Wisconsin could save enough electricity through conservation to defer the construction of some future power plants.

Newly passed Senate Bill 459, which implements recommendations from Gov. Doyle's Task Force on Energy Efficiency and Renewables, requires that:

* By 2015, 10% of the state's electricity will come from renewable resources. (The previous goal was 2.2% by 2011, and the current average is about 4%.)

* Utilities will spend 1.2% of their annual operating revenues to fund statewide energy efficiency and renewable resources programs.

* By 2011,20% of the energy used by the state's six most-energy-consuming agencies will come from renewable resources.

Some utilities are ahead in renewables. "Right now about 10% of our energy comes from wind," said Kim Zuhlke, VP of new energy resources at Madison-based Alliant Energy. "Wind is a natural hedge against fuel price volatility. Ultimately it would be nice to have about 20% to 25% of our portfolio in wind and renewables."

In the face of increasing energy bills and reliability challenges, the paper industry is exploring using woody biomass for energy. "This is fiber that is not suitable for use as pulpwood or saw logs, but appears to be a significantly untapped energy resource," said Gustafson. "The vision for paper mills is to become bio-refineries, utilizing more biomass as an energy resource to produce traditional paper products."

"We also need to make sure that new nuclear power plants are an option in Wisconsin," stressed Pirlot. "Right now there is a virtual statutory moratorium on new nuclear power plants in Wisconsin. This must be repealed. We have two existing facilities - Point Beach and Kewaunee. Nuclear generation has been, and continues to be, one of the most reliable sources of electricity for Wisconsin. Nuclear power has recently surpassed coal as a more-economic fuel for the production of electricity. Our nuclear units will face decisions considering their federal Nuclear Regulatory Commission relicensure in 2011 and 2013. Relicensure is critical to the cost diversity of Wisconsin's electric generation portfolio. The ability to add to the productive capacity of Wisconsin's nuclear units, or to add new capacity at other sites, will be critical to investment decisions concerning these units."

Addressing all these ongoing challenges may seem like a daunting task, but the utilities, ATC, and the Public Service Commission seem to be making the right plans and taking the right steps to assure Wisconsin citizens and industry of adequate and reliable electric power.