Legislative Focus: Tight State Budget Aided by Stimulus Package

On February 17, Governor Jim Doyle presented his proposed 2009-2011 State Budget to a joint meeting of the State Senate and Assembly, and he painted a stark picture. To close a budget gap that had grown to $5.7 billion by mid-2011, Doyle proposed using $2.1 billion in federal stimulus funds to protect education and health care programs.

In terms of the federal stimulus package that President Barack Obama signed in Denver, CO, on that same day, Wisconsin businesses and governments should receive at least $276 million, and possibly much more, in energy-related funds according to the Wisconsin Office of Recovery and Reinvestment.

Energy provisions in the federal stimulus package include funding for efforts to make buildings more efficient and to boost the use of renewable energy sources such as wind turbines and solar panels.

Also included are tax credits for manufacturers of energy technologies and for consumers who improve the energy efficiency of their homes or buy plug-in hybrid cars. For instance, homeowners will get credits of up to $1,500 for energy upgrades, such as purchases of qualified furnaces and insulation.

Wisconsin is likely to receive $146 million to weatherize some of the most inefficient buildings in the state. An additional $130 million or so is expected under two kinds of grants for energy-efficiency and other projects, said David Jenkins, who is handling energy projects for the Office of Recovery and Reinvestment. “In addition to that money, there are 11 different energy- and energy-science-related competitive grant programs, some of which hold promise for Wisconsin,” he said. “Our companies and universities and technical colleges are going to do a good job of competing for that money.” For more information, go to: http://www.recovery.wisconsin.gov/

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APPA Washington Report
When Your Friends Say There’s a Problem
by Robert Varela, Editor, APPA’s Public Power Weekly

When even staunch supporters of an institution concede that it has a fatal flaw, it’s clear that changes have to be made. Independent power producers and power marketers have been among the staunchest supporters (and beneficiaries) of the centralized wholesale electricity markets run by regional transmission organizations. But, at a Jan. 13 Federal Energy Regulatory Commission technical conference, two IPPs and Morgan Stanley, the financial firm that has been a major player in the RTO-run markets, said that the RTO-run markets have a fatal flaw.

The markets run by the RTOs, including their new capacity markets, are not sufficient to support construction of new baseload generation, Bruce Levy of International Power said. Long-term assets need long-term pricing, not the short-term pricing offered by the centralized markets, said Anthony Ianno, managing director, head of Energy & Utilities Global Risk Capital Markets, for Morgan Stanley. The ability to finance a plant without a strong power purchase agreement was part of the credit bubble that burst and is gone forever, said Invenergy President and CEO Michael Polsky. “The crisis put things back in order where you have to have a contract.”

Lending a lot of money to a company to build a power plant when that company doesn’t have some sort of steady income stream is the equivalent of making a large subprime loan to an individual who doesn’t have a steady job. Generators in the RTO markets (and some economists) have argued that the prices in those markets are too low (even though they’re higher than in non-RTO regions), that there’s a huge amount of “missing money.” Now we know where the “missing money” is— in the future revenue stream guaranteed by a long-term contract.

International Power’s experience is that a 15-year power purchase agreement is needed to support a baseload plant, Levy said. (To be fair, Levy argued that, once the financial crisis ends, the RTO-run capacity markets will be the best way to get new plants built.) The only way to build long-term assets is with long-term pricing, Morgan Stanley’s Ianno said. That means either a power purchase agreement, traditional cost-based regulation or a floor price in the capacity markets run by RTOs, he told FERC. (A floor price in the capacity markets would be any generator’s fantasy—“Heads I win, tails the ratepayers lose.”).

The concessions by ardent supporters of the RTO-run markets are stunning. For pointing out flaws in these markets, public power has been painted as anti-competition, anti-market, mom-and-pop operations standing in the way of progress.

The technical conference also provided support for another charge by public power: that the RTO-run short-term markets have distorted the entire wholesale electricity market, as sellers link contracts to prices in the short-term markets. ISO New England cleared $10 billion in transactions through its market last year—“close to 80% of the total energy traded in New England,” said ISO-NE Vice President and Chief Financial Officer Robert Ludlow.

Bringing about long-term contracts “is beyond or really at the utmost limit of our authority,” outgoing FERC Chairman Joseph Kelliher said. It’s more up to state regulators, who can approve utilities’ long-term power purchase contracts as prudent, he indicated. The commission generally regulates power sellers rather than power purchasers, Kelliher said.

He’s right—up to a point. The commission bears primary responsibility for the design and regulation of wholesale electricity markets and there clearly are problems with the RTO-run markets. The inability to get new power plants built clearly qualifies as a fatal flaw for any electricity system.

It also is an open secret that some generators—notably those that own nuclear or coal plants—are making huge profits selling into the RTO-run markets. There’s nothing wrong with making money in competitive markets, but there is something wrong when a market operates like an ATM for some sellers.

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Fifth Annual Municipal Utility Legislative Day Set for March 18

The fifth annual “Municipal Utility Legislative Day” will take place on Wed., March 18, 2009, at the Inn on the Park hotel on the Capital Square in Madison. Municipal utility (electric, water, wastewater) officials, city and village elected officials and other local government personnel will gather to learn about important issues that affect their daily utility operations.

The purpose of the annual gathering is to share information with each other on legislative bills, administrative rules, and local ordinances that might affect local utility operations. Here’s the confirmed lineup for the Rally:
          State Rep. Spencer Black (Chair, Assembly Natural
             Resources Committee);
          State Rep. Jim Soletski (Chair, Assembly Energy &
             Utilities
             Committee);
          Wisconsin Supreme Court Chief Justice Shirley
             Abrahamson;
          State Senator Mark Miller (Co-Chair, Joint Committee on
             Finance); and
          Gary Wolter, CEO, Madison Gas & Electric, and Director
             of the State Office of Recovery and Reinvestment.

This is your chance to hear directly from legislative leaders and others on how the 2009-2010 Legislative Session is shaping up – and how you can have an influence on the outcome. Registration will start at 8:30 a.m. at which time coffee and pastries will be available, the program will begin at 9 a.m., and we will conclude with a luncheon.

Call or e-mail MEUW Associate Director, Scott Meske for more information (608-837-2263 or smeske@meuw.org). You can also download the registration form for the Legislative Rally by visiting www.meuw.org, and clicking on the “Major Events” link on the left side of the page.

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April 22, 2009 in Marshfield
MEUW Management Certification Program “Session C”

Municipal Electric Utilities of Wisconsin is continuing its program to provide education for “home grown” management personnel–both existing managers and future management prospects. Session C (Utility Planning and Risk Management) will be held on Wednesday, April 22, 2009 at the Marshfield Holiday Inn.

The instructors will be Dave Krause, P.E., Krause Power Engineering, and Linda Pophal. Dave has decades of experience in the electric industry and has extensive experience working with a number of MEUW member utilities.

Session C topics covered include: strategic planning – thinking outside the box (moving past “it’s the way we always do it”); how to work with change in the industry and in your utility; overcoming resistance to change; planning and maintenance versus reacting and repair; setting your department up for successful transitions; Wisconsin law regarding the bidding process for construction projects; developing effective requests for proposals; how to determine an accurate “scope of work” to be completed by engineers, contractors and/or employees (identify timeline and responsibility); assessing your utility’s risk areas and insurance coverage needs; and security concerns.

Your utility will receive a copy of the registration materials in mid-March. They will also be available at www.meuw.org/events.htm. The registration deadline is April 10, 2009.

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Rubber Goods Testing
By Jeff Vonau, MEUW Safety Director

In the electric utility business, few if any pieces of “Personal Protective Equipment” (PPE) outweigh our rubber goods. Rubber gloves, blankets, and cover-up are our defense against accidental or incidental electric contact. Use and care of these items should be paramount, both from the lineman’s standpoint and that of management’s.

Each municipal utility, should have a documented, regular schedule of rubber goods testing. All MEUW member utilities have adopted the APPA Safety Manual, so let’s take a look at the applicable rubber goods testing guidelines stated there. On page 147 of the manual, Table 5.8 details required test intervals:
          Rubber Gloves -- before first issue and every 6 months
             thereafter;
          Rubber Sleeves and Blankets -- before first issue and
             every 12 months thereafter; and
          Rubber Line Hose and Covers --- upon indication that
             insulating value is suspect.

Anytime that any of this PPE is suspect or an incident has occurred where it may have been damaged, it should be taken out of service and sent in for testing. All tested rubber goods that pass should have a current test date stamped on the glove, blanket, or line hose. This serves as a reminder to keep these items current with the applicable test intervals.

A further rubber goods safeguard that lineman shall do is covered on page 97 of the APPA/MEUW Safety Manual, paragraph “g”: “Rubber gloves shall be inspected and given an air test before each day’s use and immediately following any incident that could reasonably be suspected of having caused damage.” This is a simple yet effective practice to keep our gloves safe. Daily inspections of gloves and rubber goods should become as natural as putting on our hardhat and safety glasses. It may well save our life.

When doing visual inspections of rubber goods, take note of how clean/dirty they are. If you wear your gloves every day, especially in hot weather, sweat can build up and cause bacteria to grow. Regular washing with mild detergent in warm water can eliminate bacteria in gloves. When paste or inhibitors are used on utility equipment and it gets on our gloves or blankets, it has a tendency to draw dirt. Also, inhibitors have an oil or petroleum base that will quickly destroy rubber goods. So, simple washing before storage can eliminate that problem and the possibility of tracking. Most rubber goods suppliers or vendors carry the proper detergent to clean these items.

Finally, let’s talk about storage. Rubber goods need to be protected from damage when not in use. On page 97 of the APPA/MEUW Safety Manual, paragraph “h” states that: “Gloves when not in use, shall be kept in canvas bags or other approved containers and stored where they will not become damaged from sharp objects or be exposed to direct sunlight. They shall never be folded while stored nor shall other objects be placed upon them.” Paragraph “I” continues: “Rubber gloves shall be stored in the glove bag with the cuffs down to permit drainage and better ventilation and to reduce the possibility of damage.” Sleeves fall under the “Flexible Protective Equipment” category, and we’re reminded that they too need to be stored in canvas bags or containers to prevent damage from other tools or equipment.

In our economic environment today, cost cutting has become a major issue. Prices for materials and equipment continue to rise, and budget cuts in many areas are common. At the same time, however, common sense should rule. When it comes to linemen safety, trimming rubber goods testing would be a disaster. We simply cannot put a price on human life. Most utilities in the state have their own favorite “lab” that does their testing. If you need a list of companies that will test your utility’s rubber goods, please email me (jvonau@meuw.org).

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June 24-26 in Manitowoc
Plan to Attend the 2009 MEUW Annual Conference: “It’s So Easy Being Green”

If you haven’t heard by now … there is a major effort in this country to reduce the amount of carbon and pollutants that humans put into the environment. This is commonly referred to as reducing greenhouse gas emissions or simply “going green.”

As utilities, we carry the largest burden of any other industry to reduce our impacts on the environment. MEUW will carry this theme into the 2009 Annual Conference in Manitowoc June 24 through 26^th. Please mark your calendars to join us in a great city by a Great Lake.

Details will be circulated in April, but we anticipate having practical discussions and presentations about how your municipal electric utility can make a difference -- things like energy efficiency and conservation best practices, community-wide initiatives, smart grids, future electric rate design, consumer and citizen education, and other topics to help arm you with what you need to begin or continue on this “green path” we are on today. Here’s the schedule:

          Wednesday, June 24: various MEUW Committee meetings
             throughout the day;

          Thursday, June 25: Annual MEUW Conference sessions
             and presentations throughout the day, concluding with the
             Wisconsin Utility Suppliers Association (WUSA) Trade Show
             & Reception and Annual MEUW Awards Banquet; and

          Friday, June 26: Annual MEUW Business Meeting in the
             morning.

Please look for an announcement and registration details about the 2009 MEUW Annual Conference in April, and we hope to see you in Manitowoc in late June!

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