Governor Doyle Appoints Eric Callisto as New PSCW Chair

On May 1, Governor Jim Doyle announced his appointment of Eric Callisto to Chair the Public Service Commission of Wisconsin, to succeed Dan Ebert who resigned after serving three years in that capacity. Callisto’s appointment will be for a term until March 2015.

“Eric Callisto brings incredible knowledge and insight to this position,” Governor Doyle said. “His background in environmental law and his leadership on a variety of important topics at the Commission for the last two years will continue to serve Wisconsin citizens well during his tenure as Chairperson.”

“It is an honor to serve the State of Wisconsin, which has a long history of leading the nation in utility regulation and energy conservation,” Callisto, 44, said. “Protecting our environment and the consumer while maintaining a reliable utility service will remain an important focus of the Public Service Commission and the State of Wisconsin. Wisconsin continues to be presented with opportunities and challenges in energy, telecommunications, and water utility regulation, and I look forward to addressing them with Commissioners Meyer, Azar, and the strong staff at the PSC.”

Prior to his appointment, he was the Executive Assistant to Chairperson Dan Ebert. Callisto’s previous positions with the State include Administrator of the Division of Enforcement at the Department of Regulation and Licensing and Assistant Legal Counsel to Governor Jim Doyle. From 1997 through 2003 he was an Assistant Attorney General at the Wisconsin Department of Justice, in both the Environmental Protection and Civil Litigation units. He has worked as a public defender in New York City and Philadelphia, and at the U.S. Environmental Protection Agency in Washington, D.C. He has a law degree from the University of Wisconsin-Madison and a B.A. in Environmental Sciences from the University of Virginia.

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APPA Washington Report
Barriers and Can Openers
by Robert Varela, Editor, APPA’s Public Power Weekly

Read (or skim) enough pages of documents about the Federal Energy Regulatory Commission and regional transmission organization markets and, if you’re lucky, you can find some passages that bring the issues into sharp focus.

For example, in its 386-page rehearing order on its market-based rate policies, the commission said it “has long held that long-term markets may be presumed to be competitive, absent barriers to entry…” This brings to mind the old joke about a group of people stranded on a desert island who are trying to figure out how to open some canned goods. The economist says, “First, we assume a can opener.”

The commission goes on: “Given adequate time, notice, and the absence of entry barriers, proposals for new infrastructure will emerge in response to price signals.” Leaving aside for the moment the issue of “the absence of entry barriers,” consider the phrases “adequate time” and “price signals.” In the real world, “adequate time” to build a new power plant means years and “price signals” means increasingly high prices that total billions of dollars.

The commission adds: “Whether there is a meaningful opportunity for entry and when that opportunity is expected to occur may vary depending on such factors as the type or size of resource needed (e.g., system, peaking), whether multiple resources are needed (e.g., transmission and generation), and siting and permitting considerations.” With that tacit admission that barriers to entry may exist, the commission concludes its discussion.

Given its statutory responsibility to ensure that rates are just and reasonable, its decision to rely on competitive markets to do so, and its concession that a lack of barriers to entry is necessary to ensure competition, the commission can’t just vaguely say that barriers to entry may or may not exist and leave it at that. If there are barriers to entry in the electricity industry, then the commission’s long-held presumption that long-term markets are competitive is wrong.

The push to deregulate the electricity industry was based in large part on the assumption that newer, more efficient natural gas turbines would turn existing large nuclear and coal-fired plants into white elephants. Deregulation proponents’ arguments were so persuasive that legislators approved billions of dollars (of ratepayers’ money) in stranded cost payments to the owners of those plants. Of course, the reverse has proved true: gas-fired plants are typically the most expensive, setting the clearing price in RTO-run markets, and those white elephant nuclear plants have turned into golden geese.

Anyone who picks up a newspaper can see anecdotal evidence—a lot of it—of barriers to entry of new generation and transmission. The commission itself last year lobbied for backstop authority to site new transmission lines in situations where there are regulatory barriers to new transmission lines. FERC right now is in the midst of a proceeding to try to resolve extremely lengthy queues for generation interconnection studies by RTOs.

Another major barrier looms on the horizon: climate change legislation. In an analysis of the pending Senate bill, the Energy Information Administration said it expects two-thirds of existing coal-fired power plants would be retired and virtually no new coal plants would be built without carbon capture and sequestration if the Lieberman-Warner bill is enacted.

Because anecdotal evidence isn’t good enough for regulator purposes, APPA has commissioned an independent study of barriers to entry that should be ready shortly. The study should help address the information gap on this issue.

To make matters worse, the commission’s major response so far to the lack of new entry in RTO markets has been to add very expensive capacity markets. As James Wilson of LECG pointed out in a study for APPA of PJM’s “Reliability Pricing Model” capacity market, 90% of the RPM capacity market revenues has gone to existing generators. That’s not solving a problem, that’s throwing (ratepayers’) money at it.

Another old joke about economists is that they get upset when reality doesn’t conform to their theory. Rather than getting upset, FERC just seems to ignore the disconnect between theory and reality in the electricity industry.

The commission under Joseph Kelliher has done a good job of facing up to the reality that RTOs were not going to be established everywhere and that it had to do something about the flaws in its open access rule, Order 888. The commission needs to take that same approach to the RTO-run markets.

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Over Five Percent of Residential Customers Purchased Green Power
River Falls Municipal Utilities Again Leads
in Use of Renewable Energy

The U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) recently released its annual ranking of leading utility green power programs. Based on 2007 customer participation rates, River Falls Municipal Utilities (RFMU) is one of the top utilities in the United States for renewable energy program performance.

RFMU had 5.3 percent of its residential customers purchasing green power equal to all or a portion of their electricity, ranking ninth in the nation on NREL’s “Top 10” list for customer participation rates. RFMU provides green power to its customers through the Wisconsin Public Power Inc. (WPPI) Renewable Energy Program. The community-owned utility is a member-owner of WPPI.

“River Falls has demonstrated a substantial leadership commitment to promoting the use of renewable energy,” WPPI President and CEO Roy Thilly said. “The community’s accomplishment in this area exemplifies how WPPI and its members can work together for a better energy future.”

Community members in River Falls purchase electricity from clean, green sources by participating in the Renewable Energy Program. Customers pay $3.00 per month for blocks of renewable energy equal to some of all of their monthly electric usage. A block is the equivalent of 300 kilowatt-hours of electricity.

Overall, residential customer participation across 40 WPPI member communities that offered the Renewable Energy Program in 2007 was almost 2.5 percent, comparing favorably to the 2007 national average of 1.8 percent cited by NREL. Four WPPI member communities—River Falls, Lake Mills, Stoughton and Oconto Falls—had participation levels exceeding four percent.

Using information provided by utilities, NREL develops “Top 10” rankings of utility programs in the following categories: total sales of renewable energy to program participants, total number of customer participants, customer participation rate, green power sales as a percentage of total utility retail electricity sales, and the lowest price premium charged for a green power program using new renewable resources.

The municipally owned utility of River Falls is the only Wisconsin utility to make the “Top 10” list for customer participation rates. The current NREL “Top 10” list marks the third time River Falls has earned national recognition for its successful green power program performance. Last year, RFMU earned the no. 9 spot for its 2006 customer participation rate. In 2005, RFMU was no. 10 on the list.

REL is the U.S. Department of Energy’s primary national laboratory for renewable energy and energy efficiency research and development. To view NREL’s “Top 10” lists, visit www.eere.energy.gov/ greenpower/resources/tables/topten.shtml.

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April 18-23 in Indianapolis
MEUW Members Receive APPA Awards, Participate in Rodeo

The APPA Lineman Rodeo was held April 18-19 in Indianapolis, immediately prior to the APPA Engineering & Operations Technical Conference. Two MEUW Member crews, including the 2007 MEUW Lineman’s Rodeo winning team, from Cedarburg Light & Water, took part. Kaukauna Utilities (the 2006 MEUW Lineman’s Rodeo champions) also sent a crew.

Terry Huval, Director of Utilities for the Lafayette (LA) Utilities System and Chair of the APPA Board of Directors, presented APPA Reliable Public Power Provider (RP3) awards and APPA Safety Awards on April 22 during APPA’s Engineering & Operations Technical Conference.

APPA’s Reliable Public Power Provider (RP3) program recognizes public power utilities that demonstrate proficiency in reliability, safety, training and system improvement. Nationwide, 84 public power utilities earned RP3 recognition from APPA this year for providing consumers with the highest degree of reliable and safe electric service.

Only three utilities nationwide received the highest RP3 level, Diamond in 2008. The 54 utilities earning RP3 status at the Platinum level (the next highest) include four MEUW Members: Kaukauna Utilities; Menasha Utilities; Stoughton Utilities; and Sun Prairie Water & Light Commission.

This is the third year that the American Public Power Association has offered the RP3 designation, which is good for a term of two years. Kaukauna and Stoughton were also honored at the Platinum level in 2006. River Falls Municipal Utilities achieved Diamond Level recognition in 2007. Also in 2007, Oconomowoc Utilities and Two Rivers Water & Light achieved Platinum Level recognition, and Cedarburg Light & Water was honored at the Gold Level.

If your utility would like to apply for APPA’s RP3 designation, applications are due by September 26, 2008. MEUW will hold a conference call for interested members on Tuesday, July 22 at 10:00 a.m. More information about joining the call, and about APPA’s RP3 program, will be sent to your utility in mid-June.

Eighty-eight public power utilities, including nine in Wisconsin, earned APPA’s Electric Utility Safety Award for safe operating practices in 2007. 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 2007. Terry Huval presented the awards on April 22 during the APPA Engineering & Operations Technical Conference in Indianapolis.” Implementing safe utility practices requires the commitment and hard work of the entire utility,” said Huval. “This collaborative effort to ensure the safety of employees is well demonstrated by these recognized utilities.”

The incidence rate, used to judge contest entries, is based on the number of work-related reportable injuries or illnesses and the number of worker-hours during 2007, as defined by the Occupational Safety and Health Administration. MEUW Members who received APPA Safety Awards, in eight categories based on size, are: Group A (Utilities with less than 15,000 worker-hours of exposure): First Place - Richland Center Electric Department; New Holstein Utilities; Columbus Water & Light. Honorable Mention - Waunakee Utilities. Group B (Utilities with 15,000 to 29,999 worker-hours of exposure): First Place - Rice Lake Utilities. Honorable Mention - Stoughton Utilities. Group C (Utilities with 30,000 to 59,999 worker-hours of exposure): First Place - Sturgeon Bay Utilities; River Falls Municipal Utilities; Oconomowoc Utilities.

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