$14 Billion Package 
Federal Energy Bill Back in the News

At press time, U.S. Senate Energy & Natural Resources Chair Pete Domenici (R﷓NM) introduced a new, slimmed down version of the federal energy bill, S. 2095. The new bill is estimated to cost $14 billion compared to the estimated $31 billion cost of the bill’s prior version, H.R. 6 (the Energy Policy Act of 2003).

The good news is that S. 2095’s tax title includes public power’s tradable tax credit language, which had been stripped from H.R. 6 last Fall. Except for deletion of the controversial product liability protection language for producers of fuel oxygenates such as ethanol and methyl tertiary butyl ether (MTBE), S. 2095’s provisions on electricity, hydropower licensing reform and other policy titles remain otherwise unchanged from the conference report version.

The new bill was going to be brought directly to the Senate floor, bypassing the committee process, and action on the bill was to occur in late-February. While the Senate is acting on this new, “slimmed-down” version of the energy bill, the House is still maintaining that it has no plans to act on such a bill at this time. 

The top Democrat on the energy committee, Sen. Jeff Bingaman (D﷓NM), expressed skepticism about the new bill, since the House will not accept a bill without MTBE liability protections, the Administration is still calling for the bill to be $8 billion and Democrats were, once again, shut out of the drafting process. Bingaman said that “we need to get back to the tradition of passing energy legislation based on consensus and bipartisanship. The sooner we focus on what is realistic and most needed in energy policy, the better off our country will be.”

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Preparing for MISO Market Implementation
by Marlin Vrbas, P.E, Virchow, Krause & Company

Wisconsin’s municipal electric utilities may soon be participating in new electric markets with new rules, risks and opportunities. How soon is still uncertain. The current Midwest Independent System Operator (MISO) market implementation plan calls for a December 2004 startup date. The Wisconsin stakeholders, which include utilities and other interested parties, have proposed MISO market participation in Wisconsin beginning in 2010. This proposal also calls for the American Transmission Company (ATC) to implement centralized dispatch of excess supply over the next eighteen to twenty four months, which may include elements of a competitive market. It seems prudent for Wisconsin’s municipal utilities and joint action agencies to prepare for market participation over the next one to two years. The first step to preparation is to develop a basic understanding of how the new markets will work.

The basic market concept is relatively straightforward. Market participants with sufficient generation or purchase agree-ments can continue to supply nearly all of their energy require-ments by scheduling load and generation on a next-day or next-hour basis using “self schedules” or “bilateral transactions.” In this way, the overall cost of power is set primarily by the production or purchase cost, plus congestion if it exists between generators and loads. Energy that is not supplied in this way can be purchased in the “day-ahead market” by submitting load bids describing the megawatt (MW) requirement for each hour of the following day. If the actual energy taken from the grid exceeds the scheduled and day-ahead award amounts, the difference is automatically supplied by the “real-time market.” If the energy taken from the grid is less than the total schedules and day-ahead awards, the difference is essentially sold back to the real-time market.

In theory, the energy supplied in response to the day-ahead load bids and real-time requirements will be provided by competitive offers. When true competition exists, competitive offers are expected to be near the marginal cost of production. However, transmission constraints can severely limit competition by creating “load pockets” in which suppliers may bid at prices that far exceed marginal costs, either to protect capacity reserve margins, or to maximize profit margins. A Load Serving Entity (LSE) inside a load pocket may see congestion charges added to the cost of power delivered from lower cost resources outside of the pocket. To offset these additional charges, an LSE must maximize the use of Financial Transmission Rights (FTRs.)

FTRs, measured in MW, provide payments that offset congestion charges, and are expected to be made available to LSEs up to the transmission system’s uncongested load serving capability. Since the ATC system is already highly congested, it is expected that the total FTR allocation will not fully offset all congestion charges. One of the major stumbling blocks to market implementation revolves around how to allocate transmission congestion charges that are not offset by FTRs. ATC generator redispatch costs are averaging about $1,000,000 per month. ATC customers share these costs on a monthly load-ratio basis. In the proposed market designs, net congestion charge allocations will depend on several factors. One factor is the location of the utility, or group of utilities, relative to congested lines and production resources. Another factor is the effectiveness of selected FTRs which depends on how production resources are matched to loads.

In addition to understanding the new market concepts, municipal utilities should:

Develop a MISO interaction strategy: LSEs must decide whether to rely on their suppliers for market participation services, to participate independently, or via a joint action agency. An LSE that wishes to have direct control over FTRs may register as a MISO transmission customer, reserve capacity via the OASIS, and register as a “commercial price node” via the asset registration portal. An LSE that wishes to purchase energy from the market must register as a Market Participant and prepare to communicate via rigidly defined file transfer protocols. Practical experience in market interaction can be gained by participating in the market trials currently being conducted by the MISO. Municipal utilities that are not planning to participate directly should assure that their suppliers are taking appropriate steps to prepare.

Evaluate FTR selection options: The MISO has published the results of studies which provide an indication of near term, seasonal LMPs throughout Wisconsin. This data, supplemented by independent analysis, may be used to strategically evaluate FTR alternatives regarding commercial price node formation and related choices.

Update resource plans: In addition to providing more transparent energy prices, LMP markets provide more options regarding transmission access. For example, increased assurance of transmission service request approval can be gained by agreeing ahead of time to pay congestion charges. The combined effect is to provide more resource plan options, and to facilitate quantified comparisons of long and short-term alternatives.

Through strategic planning and preparation, Wisconsin’s municipal utilities can successfully participate in the new markets and remain among the lowest cost energy providers in the U.S.

Definitions:
Bilateral Transaction – The simultaneous scheduling of generation and load in accordance with an agreement between two entities for the sale and delivery of energy services. Energy costs associated with bilateral transactions are agreed upon by the counterparties, and are not determined by the MISO market. Congestion charges are applied if the marginal cost of congestion differs between the injection (generation) and withdrawal (load) cpNodes.
Commercial Price Node (cpNode) – A generator bus, load bus or zone, or collection of load buses or zones, for which Locational Marginal Prices are computed for purposes of market settlement. 

Day-Ahead Energy Market – A market in which energy is scheduled and sold in agreed upon amounts for each hour of the following day, in accordance with financially binding forward contracts.
Load Pocket – An area with highly concentrated loads served over a constrained transmission system which creates a condition giving local generators market power in that segment of the market.
Locational Marginal Price (LMP) – The day-ahead or real-time market clearing price for energy at a given location (cpNode) which is equivalent to the cost of serving the next increment (MW) of load, taking into account the physical limitations of the transmission system.
Real-Time Energy Market – A market in which energy is scheduled and sold on a minute-by-minute basis in amounts consistent with system dispatch protocols and price calculations. The real-time energy market provides “balancing energy” which makes up the difference between actual energy injections and withdrawals, and energy injections and withdrawals scheduled or awarded in the day-ahead market.
Self Schedule – A notification to the MISO that a generator intends to inject energy in specified amounts, times and locations, and is willing to be paid according the corresponding LMP. If a generator with load serving obligations (an LSE) injects and withdraws the self-scheduled MW amounts at the same cpNode, the amount paid to the market will equal the amount received from the market, so the net cost of energy for the LSE is the cost of production. If injections and withdrawals occur at different cpNodes, congestion charges are applied when the marginal cost of congestion differs between the cpNodes.

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Eagle River’s Annual Ice Palace

Each winter, volunteers put in more than 700 “man-hours” to cut nearly 3000 12-inch-thick ice blocks from a local lake, haul them to downtown Eagle River, Wisconsin, and build a huge ice palace.

The ice palace has become a popular attraction for motorists, snowmobilers, locals and visitors, as dozens of people stop each day to photograph the 20-foot high structure along Highway 45 North.

“I’ll bet there have been a million pictures taken of people in front of and around the ice palace,” said Pat Weber, Eagle River Water & Light Foreman and Chief of the area’s Volunteer Fire Department, which has coordinated ice palace construction for the past 10 years. “I wish I had stock in Kodak,” he adds. 

The design changes each year, and it gets “a little bigger and taller each time,” Weber notes. “One design we won’t repeat is the ice palace we built that had round towers,” says Weber. “It took a tremendous amount of time and effort to round off each ice block and the volunteers told me in the no uncertain terms that would be the last Ice Palace we’d build with anything round,” he remembers.

The ice castle has been appearing in Eagle River on and off since the late 1920s. It is now built annually, weather permitting, on the weekend closest to New Years.

“It’s a wonderful project,” comments Weber. “We take pride in our community - and we do the ice castle for the same reasons we’re volunteer firemen - to serve the community and the people of the area.”

First, the ice is scored and cut on Eagle River’s Silver Lake. Then, over 2,500 blocks of ice, each measuring 10 x 10 x 20 inches and weighing 60-70 pounds, are removed from the lake. The ice blocks are trucked to the site, and the construction work begins. All done by hand! And although the number of blocks of varies with the structure, up to 3,000 are used each year.

In recent years, colored floodlights have been added to illuminate the palace at night, and photos silhouetting people in front of the ice castle are spectacular. This year, 83 floodlights and two quartz lights are in use. They are lit an average of 12 hours per night, the same as Eagle River’s street lights. The Eagle River Water & Light Department covers the cost of the 8500 kilowatts required to light the structure as its donation to the community project.

“It sure brings a lot of wonderful notoriety to the area,” adds Weber. “People just love it, and so do we.”

Depending on weather, the Ice Castle normally stands until late February, when the remains are taken down.

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MEUW/WPPI Local Officials Meet Wisconsin 
Congressional Delegation in Washington, D.C.

Public power communities in Wisconsin were well represented at the recent 2004 APPA Legislative Rally (February 1-4, 2004) in Washington, D.C.

It was not an ideal time to be in the nation’s Capitol. A letter laced with toxic ricin was sent to Senate Majority Leader Bill Frist, causing the closure of Senate office buildings and the cancellation of our scheduled meetings with Senators Herb Kohl and Russ Feingold (although we were able to meet briefly with their staff).

All told, 39 local elected or appointed officials, and utility staff from MEUW’s 82 communities attended. Twenty-four public power communities in Wisconsin (nearly a third of the 82 MEUW members) sent representatives, including 13 Mayors and Village Presidents.

We had meetings with all eight Wisconsin members of House of Representatives or their staff. At those meetings, we presented each member (or their staff) with an impressive three ring binder full of information about public power in Wisconsin, electric restructuring and electric reliability issues from a Wisconsin perspective, and an update on municipal telecommunication issues.

We presented the 2004 Friend of Public Power Award to Representative David Obey (D-7th CD) at a special luncheon event in the Longworth House Office Building on Tuesday, February 3.

On behalf of the entire MEUW organization and all of its members, THANK YOU to all who participated in the 2004 APPA Legislative Workshop and Rally. We really appreciate all of your efforts! And please mark your calendars now for the 2005 APPA Legislative Workshop and Rally (February 9-12, 2005 in Washington, D.C.)! Special thanks to Lauri Morehart (WPPI) for the wonderful photos!

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Shortcuts
by Dean Larson, MEUW Safety Director

How many times in our lives do we take shortcuts? Whether it’s at work or at home we take shortcuts often. Why do we do this?

The biggest reason is to save time. Our lives have become so busy that anything we can do to save time is a bonus. Technology has given us the ability to make things that help us save time and effort. The use of a digger-derrick truck, for example, saves us from having to dig by hand. We might save an hour and considerable effort by using it. That is an approved and safe method of doing a job. But we also do things we know we shouldn’t.

When we take a shortcut or break a safety rule we are really playing Russian Roulette. But we are often overconfident in our abilities; that nothing will happen, it will never happen to me, I have done it this way all my life. But the reality is that accidents do happen. If you jump over a trench for instance instead of walking around and nothing happens we become comfortable doing this. But one day while jumping over that trench you sprain your ankle. Now you have some discomfort but it was nothing too serious. However, the next time it may be a broken leg. Now you can’t work or mow the lawn at home, and it starts to hit home because it is affecting your ability at work and home.

What if the accident is even more serious? What if the accident results in an electrical burn and you lose a limb or your life? Who will care for your family if you die? These are questions and situations we don’t want to think about. If you lost a limb, how would your life change? How would it change your family’s lives? Maybe you won’t be able to give your wife or kids a hug. You may not be able to play with your children, or your grandchildren. You might have to find a different type of work. These are unpleasant things to think about, but it can and does happen.

Work in the electric industry can be dangerous, but sometimes we make it even more so. Saving a little bit of time at work or at any other activity isn’t worth the potential tradeoff in terms of how it can change your life forever. Be careful out there, do things right and do them safe.

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