The column below reflects the views of the author, and these opinions are neither endorsed nor supported by WisOpinion.com.
The combination of rising bills with the emergence of AI data centers has spawned an affordability awakening, as voters paying their energy bills demand change.
When Wisconsin became the first state to regulate the utilities more than 100 years ago, the goal was to create a system that established balance between the wishes of a utility to make money and the ability of Wisconsinites to afford an essential life-sustaining service.
The Wisconsin visionaries in the early 1900s knew there was an element of common sense for having monopoly utilities. It made no sense to have a half dozen different companies stringing wires on their own poles down the streets of our towns and cities. So, the state in 1906 granted local monopolies to utilities to create efficiency, and in exchange the utilities agreed to have their prices set by a state regulatory agency, the Public Service Commission.
Now, 120 years later, our utility system has lost that needed balance – and common sense.
As politicians campaigning around the state talk about affordability while seeking your vote on Nov. 3, CUB is in the throes of litigating cases that will decide what customers in eastern Wisconsin pay starting in January. If utilities We Energies and Wisconsin Public Service get their way, residents from Kenosha to Rhinelander will see prices rise by about 15% by 2028, a rate that’s three times the forecasted increase in the overall cost of living.
Thousands of pages of legal briefs and testimony have established one thing: something in our system is broken. Common sense and balance have been lost from Wisconsin’s approach to regulating utilities.
The CUB team is advocating for common-sense decisions in the name of affordability. Our team found not just one but five glaring examples of imbalance between the way we’ve regulated utilities and what that means for affordability and energy burden across the state. Consider:
1. Dead coal plants: Utilities are allowed to send us a bill every month for $1 billion worth in piles of rubble that used to be power plants, in what’s known as the “stranded assets” problem. What’s more: utility companies earn nearly 10% profit on those piles of rubble.
2. Off-the-charts profits: Utilities are permitted to earn nearly 10%, a level that rewards shareholders in Wisconsin greatly while forcing those paying the bills to pay up. Utilities earn far more than what they need to be what was envisioned when Wisconsin first regulated the utilities 120 years ago. Finance experts from Morningstar and other big firms say the amount they actually need is far less, below 8%. Returning that extra money to customers could save millions every year.
3. Overspending drives more profit: A big issue in the rate cases is the fact that utilities’ costs to build new power plants spiked well above the amount authorized by state regulators. CUB is asking tough questions that raise questions about how transparent the utilities were in informing regulators about the cost increases and why those project costs soared. But the bottom line is that if the utility gets its way, they will not only get to recoup all of their cost overruns from customers – but also earn that nearly 10% profit on every dollar they spent that busted the budget.
4. Paying for boards of directors: In a case two years ago, CUB’s team learned for the first time that utility customers are footing the bill for utilities’ corporate board of directors. Here again, that defies common sense. After all, the purpose of a board of directors is to serve the interests of shareholders! Why should customers pay $7 million over the next two years for these boards?
5. Customer incentive programs: At CUB’s urging, We Energies and WPS finally re-introduced energy savings programs that give customers bill credits for agreeing to hold down their energy use when power demand spikes. But the utilities can do so much more, and we’re forsaking opportunities to save by focusing on building new power plants.
Add all these up, and CUB’s common-sense proposals would save customers hundreds of millions of dollars over the next two years.
These are just a few examples of the way the system is oriented for utilities to earn more in profits. But this incentive is built into the system itself. Utility profits are driven not by providing affordable and reliable service, but by the money they invest in building new stuff — especially new power plants and power lines.
So that creates an inherent lack of equilibrium between supply and demand. The incentives to build supply are embedded into the fiduciary responsibility that companies have to their shareholders, all focused on maximizing shareholder value.
And all signs point to profit growth: WEC Energy Group, the parent of We Energies and WPS, on Thursday announced record profit of $1.5 billion over the past nine months, Also Thursday, the company revealed to investors that it has updated its capital plan and now expects to spend $47 billion over the next five years, most of it on new power plants and transmission lines that will all earn that nearly 10% return.
In states with a balanced approach, utilities don’t just present those plans to spend billions of dollars of customer money to Wall Street. Instead, they need to ask for approval by the monopoly regulators at the Public Service Commission. And it would be the regulators’ job to ensure that balance by evaluating the growth aims of the utility against the rising prices being paid by Wisconsinites. And it would be the regulators’ job to ensure that balance by evaluating all cost-effective ways to save money and energy against the build-build-build mantra from the utility.
What has the lack of balance cost us over the last 10 years? Consider the results from WEC’s annual report: an 184% return to shareholders since 2015. Its annual report brags that WEC outperformed the other utilities across America.
Here’s the math: If an investor put $1,000 into a typical utility stock 20 years ago and reinvested the dividends, they would have $4,800, which is a handsome return. But it pales in comparison to what they would have earned if they had put that same $1,000 into WEC Energy Group stock, which would have yielded $7,100. That came from the pockets of customers.
The goal of the Wisconsin visionaries who first regulated the monopoly utilities was balance. But under current policies investors are getting the benefits and customers are paying the cost.
In the coming days voters will make decisions on who will guide the PSC, and who will set the energy policies of the state over the next two years. Soon after, the current PSC commissioners will decide the fate of the big rate hikes being sought by We Energies and WPS.
What can you do? Help us make restoring balance a priority, and to make Affordability Job One. Ask candidates for local and statewide where they stand on affordability, balance and utility planning before you go to the polls. After the election, stay engaged. Learn more by attending CUB’s Consumers Forum on Energy Affordability on Nov. 17 in Madison, or sign up for the CUB e-newsletter.
Tom Content is executive director at the Citizens Utility Board of Wisconsin, the nonprofit consumer advocate for homeowners, renters and small businesses in cases involving monopoly utilities. He also serves as the vice president of the National Association of State Utility Consumer Advocates.
