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In early April, the Midwest Consumer Utilities, which includes WPPI Energy and Madison Gas and Electric Company, released a study that shows Wisconsin consumers can expect higher energy costs under a federal greenhouse gas (GHG) cap-and-trade regime, and could face alarming economic impacts under some program designs.

“Climate change presents a serious challenge that must be met,” said Roy Thilly, President and CEO of WPPI Energy. “This study shows that how you address the problem matters. An auction of the allowances will cause electricity prices to rise significantly to the detriment of all customers in Wisconsin. I hope the sober results help guide the outcome of the federal debate.”

The study projects the potential rate impact of various legislative approaches on the Midwest Utilities’ customers and on the economies in their respective states. It estimates the annual average rate increases for consumers in Wisconsin could be 19 percent to 63 percent from 2012 to 2030, under a cap-and-trade program that employs a 100 percent auction method. If the cap-and-trade program were designed using a method that gives the cap-and-trade revenue back to customers, Wisconsin customers still could see an annual average increase of 3 percent to 26 percent, according to the study.

“As a signatory to the Governor's Global Climate Change Task Force Recommendations we have been and continue to be supportive of tackling the issues surrounding climate change. This study shows that implementation details of a cap-and-trade program are very important to limiting the cost to consumers," stated Gary Wolter, President and CEO of MGE.

The study highlights how allowance auctions could substantially harm coal intensive states in the Midwest with energy intensive industries, such as Wisconsin’s papermaking industry, and how the allocation of allowances is essential to help states like Wisconsin that face the greatest challenges in moving to a low carbon economy. A full copy of the study is posted on: www.meuw.org.

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June 24-26 in Manitowoc
2009 MEUW Annual Conference: It’s So Easy Being Green

Mark your calendars for June 24-26th! MEUW’s 80th Annual Conference will be held at the Manitowoc Holiday Inn (4601 Calumet Avenue). The theme of this year’s Annual Conference is It’s So Easy Being Green.

We are bringing in a slate of presenters and panels all aimed at helping you, the municipal electric utility, learn how to implement energy conservation programs for your customers. Just as important is to understand why it makes good business sense to invest in energy conservation efforts. Presenters include Glenn Cannon, Clean Energy Ambassador and former GM of Waverly (IA) Light & Water; J.P. Blackford, APPA Environmental Services Engineer; Brian Driscoll, Wisconsin Office of Energy Independence; and Mary Schlaefer, Wisconsin Energy Conservation Corporation Executive Director.

On Wednesday, for the first time in some years, we will be sponsoring a planned tour as part of the pre-conference activities. We’ll be visiting Orion Energy Systems and Tower Tech Systems, both nationally recognized renewable energy companies. Don’t miss a chance to see these two up and coming rising companies in the renewable energy industry – right in Manitowoc. We’ll cap off Wednesday with an informal cook out/reception sponsored by our friends at WUSA and Manitowoc Public Utilities.

Presentation of MEUW Awards will be included throughout Thursday’s agenda, and nomination forms have been sent out already. Make sure you take the time to recognize your governing board members and fellow public power officials. It only takes ten minutes to thank those who support your utility and staff. Need another copy of the MEUW Award Nomination materials? Call MEUW (608/837-2263) or visit www.meuw.org/currdocs.htm (under the April 7 documents heading).

This year will again feature the WUSA Trade Show and Reception on Thursday afternoon before the Awards Banquet. We are happy to be working with WUSA on the “Vendor Treasure Hunt” special door prize drawing, similar to last year’s event. Don’t miss a chance to visit your favorite vendor booths and possibly win a very nice gift.

The MEUW Awards Banquet on Thursday evening will have several of our top awards presented, including the 2009 Philip LaFollette and Don Smith award recipients. We’ll finish up the week with the MEUW Annual Meeting on Friday morning.

This year’s registration materials were sent to your utility on April 20. If you need another copy, call 608/837-2263 or visit www.meuw.org/events.htm.

We have a room block at the Holiday Inn ($95 single or double occupancy). The room block will be released on May 26, so make your reservations before then by calling 920-682-6000. Be sure to ask for the “MEUW” block to get the special rate.

See you at the conference!

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Awards Given on March 23 in Austin, TX
MEUW Members Receive APPA Awards

APPA’s Reliable Public Power Provider (RP3) awards were presented on March 23 during APPA’s Engineering & Operations Technical Conference in Austin, Texas.

The RP3 program recognizes public power utilities that demonstrate proficiency in four key disciplines: reliability, safety, training and system improvement. Criteria are based on sound business practices and represent a utility-wide commitment to safe and reliable delivery of electricity. Nationwide, 60 public power utilities earned RP3 recognition this year for providing the highest degree of reliable and safe electric service. This is the fourth year that APPA has offered the RP3 designation, which is good for a term of two years.

Only three utilities earned the highest RP3 level, Diamond, including MEUW Member River Falls Municipal Utility. “RP3 designees are shining examples of excellence in utility operations,” said Paul Allen, Vice Pres., Engineering at Nashville, TN, Elec. Service and Chair of APPA’s RP3 Review Panel. “These utilities are currently providing their communities with a high level of reliable and safe service while focusing on future improvements.”

The 38 utilities earning Platinum level RP3 status (the next highest) include three MEUW Members: Oconomowoc Utilities; City Utilities of Richland Center; and Two Rivers Water & Light.

Congratulations to these four MEUW Members. If your utility would like to apply for APPA’s RP3 designation, applications are due by September 25, 2009.

Eighty-six public power utilities, including nine in Wisconsin, have earned APPA’s Electric Utility Safety Award for safe operating practices in 2008. More than 200 utilities entered the annual contest. Entrants were placed in categories according to their number of worker hours and judged for the most incident-free records during 2008. Maude Grantham-Richards, Electric Utility Director of Farmington, NM, Electric Utility System and Chair of the APPA Board of Directors presented the awards on March 23 during the APPA Engineering & Operations Technical Conference in Austin. “In our industry, safety isn’t just important–it’s vital,” said Grantham-Richards. “These exceptional utilities have demonstrated unfaltering commitment to this most essential component of electric service.”

MEUW Members who received APPA Safety Awards, in categories based on size, are: Group A (Utilities with less than 15,000 worker-hours of exposure): First Place - Columbus Water & Light and City Utilities of Richland Center. Second Place - New Holstein Utilities. Honorable Mention - Waupun Utilities. Group B (Utilities with 15,000 to 29,999 worker-hours of exposure): First Place - Rice Lake Utilities, Stoughton Utilities, Two Rivers Water & Light and Waunakee Utilities. Honorable Mention - Sturgeon Bay Utilities.

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APPA Washington Report
Carbonated Markets
by Robert Varela, Editor, APPA’s Public Power Weekly

A “disaster in the making” is how Rep. Greg Walden, R-Ore., described proposals for carbon emission allowance auctions under a federal cap-and-trade system. “If you like the bubbles of the technology market and the housing market, I predict you'll love the bubble that will come from the cap-and-trade market.”

Rep. John Dingell, D-Mich., recently described an organization interested in a cap-and-trade bill as “a bunch of good-hearted Wall-Streeters...getting ready to cut a fat hog.”

President Obama said a cap-and-trade system “has to take into account regional differences. It has to protect consumers from huge spikes in electricity prices.”

Democrats in Congress working on cap-and-trade legislation say they will write very tough regulations for the carbon markets—“foolproof” in the words of one lawmaker.

Forgive me for being skeptical, but I’ve observed the creation of too many electricity markets, starting with California, where experts assured everyone that the markets could not be manipulated.

The most recent example comes from the New England Independent System Operator’s capacity market.

Due to loopholes in ISO New England’s capacity market rules, New England electricity customers have paid $85.8 million in installed capacity payments to companies who never supplied any electricity or capacity. Money for nothing. Just as in the California energy crisis, these companies withheld electricity from the market. They submitted bids at extremely high prices and, on 108 occasions when those bids were accepted, simply refused to deliver. Under the ISO’s rules, they were never fined or penalized for failure to deliver.
One of the more disturbing things about this scheme is that it began as soon as the ISO started its capacity market in December 2006. These companies instantly increased their bids many fold and, during most of the months since, then their bids have essentially been at the $1,000 per megawatt-hour cap, according to the ISO’s market monitor. That price translates to a power plant with a 22,000 Btu/kWh heat rate burning natural gas that cost $45/MMBtu. Lately, the price of natural gas in the Northeast has been around $4/MMBtu.

So why did it take almost two-and-a-half years, 108 refusals to deliver (with zero penalties) and $86 million before the ISO asked the Federal Energy Regulatory Commission to approve rule changes to end this scheme? The almost instant skyrocketing of the prices offered by these companies should have set off alarm bells. Granted, this was an obscure corner of one of the ISO’s markets and the amount involved wasn’t much of a percentage of the ISO’s overall $10 billion per year markets. But $86 million isn’t chump change and the carbon markets look to be about 10 times bigger than all of ISO New England’s markets combined.

Assuming that lawmakers cannot bring themselves to vote for a carbon tax, Congress needs to write rules for the carbon markets that are as tight as possible, with penalties and sanctions to match. In a resolution on preventing manipulation in carbon markets, APPA members said any federal climate change legislation must “include strong provisions to: oversee and monitor the allowance market; prevent manipulation and other abusive practices; appropriately sanction those parties that seek to illegally or fraudulently exploit the market; and, provide a mechanism to adjust the market design in a timely manner to achieve program goals cost-effectively.”

Congress already is considering more authority for FERC. Sen. Maria Cantwell, D-Wash., has introduced legislation that would authorize the commission to: (1) issue cease-and-desist orders to stop manipulative schemes that are in progress; (2) to freeze the assets of any entity that is suspected of market manipulation; and (3) to change or suspend power rates for up to 30 days.

Authority to issue cease-and-desist orders perhaps could have helped with the capacity import schemes in ISO New England’s markets—assuming the commission had learned about them. No rules are foolproof.

That’s another reason why APPA members, in a policy resolution on climate change, said any cap-and-trade program “must include a safety valve (which sets a maximum allowance price) or other stringent cost control mechanisms that mitigate price volatility and protect consumers.”

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