Much has been made recently of the increase in electric rates Wisconsin customers pay to their local utility companies. For consumers in a recovering economy and with other costs of living – such as gasoline – on the rise this is an absolutely legitimate concern. But before consumers rush to judgment a bit of perspective is in order to help understand why rates rise and what we’re getting for the investment.
Comparisons with other Midwest states frequently show Wisconsin rates slightly outpacing those of our neighbors such as Illinois and Michigan. These comparisons are misleading since those states have been under long-term, legislatively-mandated rate freezes, set to expire in the next few years. A more enlightening comparison would show how Wisconsin’s power providers stack up against utilities throughout the U.S.
According to the Edison Electric Institute’s Typical Bills and Average Rates Report – Winter, 2005, Wisconsin’s electricity rates, as reported for all sectors (residential, commercial & industrial) remain significantly below the national average at 6.9 cents per kilowatt hour compared with the U.S. average of 7.6 cents. In fact, those rates have remained below the national average for the last 15 years because Wisconsin utilities have avoided over-building our electric system infrastructure. Power plants and transmission lines are extremely capital-intensive projects. Keeping premature investments in these assets off the backs of customers has kept our rates in check.
At the same time, Wisconsin utilities have been able to maintain a reserve margin of 18-22% to ensure system reliability. Thus, our state has never suffered a system-wide failure such as occurred in California in 2001 and across the Northeast in August, 2003.
Wisconsin utilities and state regulators have also aggressively sought to contain costs and manage electric demand through internal and state-run conservation and efficiency programs and those efforts will continue. They’ve worked with the Public Service Commission, the Legislature and the Governor to pass legislation to provide more flexible financing options to build power plants so resulting savings can be passed along to customers.
As our economy and population expands and energy demand rises, Wisconsin utilities are entering a building phase. They are constructing more efficient, environmentally-friendly electric generating units and rebuilding and expanding the transmission system to move electricity from where it’s made to where it’s needed. Inevitably, these building projects and rises in the cost of fuel to run these plants mean slightly higher rates for customers. But they should also be recognized as the investments they are in both system reliability and environmental improvement.
Reliable, more efficient and environmentally-friendly sources of electricity at reasonable rates are the value Wisconsin’s utilities provide to their customers. With them, our state will continue enjoying economic growth for decades to come.
–Bill Skewes is the Executive Director of the Wisconsin Utilities Association, a non-profit organization that represents Wisconsin’s investor-owned gas and electric utilities before the State Legislature and regulatory agencies.
