WisBusiness/ WisPolitics forum: A balancing act as climate change legislation is formulated
Having addressed a reliability crisis in the 1990s, Wisconsin's energy policymakers are now turning their focus to global warming legislation and regulation.
As they struggle to find the right way to limit carbon emissions without hurting recession-wracked businesses, they're torn between enacting strong policies and keeping costs down for ratepayers.
Todd Stuart, executive director of the Wisconsin Industrial Energy Group, told a WisPolitics.com-WisBusiness.com energy event Thursday that pending utility rate increases pose a crisis for industry that could be exacerbated by renewable energy mandates.
"We have a huge balloon of costs that are coming right now" because utilities need to make up profits lost during the recession, he said.
"That's a real kick in the teeth for large manufacturing right now," Stuart said. "The next crisis is a self-inflicted one. Even before we tackle climate change, we've got a giant amount of capital costs coming to pay for infrastructure."
Stuart added that the current 10 percent renewable mandate was driving up ratepayers' bills and that regulators should be looking at the cost.
"We've got to take a breath here," he said. If the state adopts the 25 percent renewable mandate part of the Governor's Global Warming Task Force legislation, Stuart believes that Wisconsin is faced with easily "a billion a year in capital expenditure.''
Opinions at the forum were divided on how federal "cap and trade" legislation would fare. But Wisconsin Public Service Commission Chair Eric Callisto said the initial Obama administration bill -- "not workable" in his words -- had been improved in the House and would be tweaked further in the Senate and conference.
Assembly Natural Resources Chair Spencer Black said Wisconsin shouldn't wait for the feds.
“Good policy making is not dealing with crises, but avoiding them. We are cognizant of national and international trends. We are at a point now with an orderly process where we can develop legislation to avoid crisis and not be forced to react and take corrective action,'' said Black, a Madison Democrat who's a key player in shaping legislation stemming from the global warming task force.
“It would be wrong to wait for the federal government,” Black said, adding, “If we act first, it will put Wisconsin in a good position to deal with federal changes.''
Black said “the group that is drafting the (state) bill is following the consensus religiously. It is taking the task force report and putting it into regulatory language. Where there is lack of specificity, we are pragmatic in translating that into legislation.”
Tom Scharff of NewPage Corp. reminded Black that he cast one of the dissenting votes against the task force report and cautioned legislators against penalizing industry with added cost.
"Some of the items in the Governor's Task Force [report] will significantly increase the costs for manufacturing. When you triple or quadruple costs for our required contribution, that's millions of dollars of additional costs at a time when we are under international competitive pressure in the paper industry," Scharff said.
Callisto answered: "I completely agree that when you take an additional pound of flesh from the ratepayer there has to be commensurate benefit that comes back to them. Nobody wants to take a shot at the paper industry that's on its knees among other large industrials. We've got to design this in a way that helps them and helps everybody get it done."
Callisto and former PSC Chair Ave Bie, now with the Quarles and Brady law firm, discussed their roles in developing Wisconsin’s energy policy and dealing with previous crises.
“Wisconsin is situated in a better spot,'' Bie said. "Many states moved toward deregulation in the 1990s. We were in a place where reliability was first and foremost a concern to us. That was our crisis. We dealt with reliability, we beefed up the infrastructure and it gave us the opportunity to look at a more competitive or more robust marketplace.''
"Under Ave Bie’s leadership and those who followed, we have done some very good things to shore up this state’s reliability situation,'' added Callisto. "We have spent admittedly about $2.3 billion since 1990 to shore up the transmission grid. We have spent billions more to build up generation of all sorts -- wind, coal, natural gas generation. ... If reliability was the crisis at one time, we are now in a very good place.''
A top Midwest transmission expert says improvements in infrastructure and transmission capacity have shown that state regulatory boards such as Wisconsin’s could develop policies that helped their regions.
David Hadley, vice president of state regulatory relations for Midwest Independent Transmission System Operator, or MISO, said big changes came after the August 2003 grid breakdown blacked out many eastern states and changed the relationship between state and federal approaches to energy policy.
“We had to quickly find a way to improve this. Technology was pretty significant, but equal in technology was the policy aspect that allowed that to happen,” he said.
By 2005, high-speed information technology could manage the grid. “We had a lot of changes and a lot of changes very fast,” Hadley said.
“The implications were pretty significant for local utilities and local regulatory commissions and their constructs. They decided they needed to continue being in a leadership role. With the leadership of your state commission chair, the upper Midwest states, five of them, said we need to start thinking about our problem a little bit bigger than just our borders and recognize that five us, at least, think the same way,” Hadley said.
Hadley said the energy policy developed at the state and regional level can influence federal energy policymakers.
“When you think of federal energy policy and climate change, the drivers can come from federal policy and also from the local state regulators,” he said.
* Listen to Hadley's keynote
* Listen to the panel discussion
*UW-Madison: Study reveals dynamic Wisconsin climate, past and future