Madison – A coalition representing a large cross-section of Wisconsin consumers are concerned by rapidly increasing energy costs. While the organizations don’t always see eye-to-eye, they are united in our unified ask that lawmakers in the Assembly reject Assembly Bill 472 and vote NO if it were to come to floor.
The respective organizations had strong opposition to the construction work in progress (CWIP) provisions included in ASA2, which would shift precertification and construction costs from investor-owned utilities onto Wisconsin ratepayers.
Although AA 1 offered by the bill author removed the phrase “construction work in progress,” the concurrent capital cost recovery language does not change the meaning of Wis. Stat. § 196.371 (3) (a) 2 as first drafted in the ASA2. The CWIP language is deleted, but the overall bill still has the same result. Both versions provide a utility with the opportunity to concurrently recover capital costs in the construction of nuclear generation, which also includes a rate of return on those costs.
In other words, AB 472’s concurrent cost recovery language still allows a utility to bill ratepayers for the cost of building a power plant even if the project is never completed, plus a profit or return on equity (now 9.8% for most Wisconsin investor-owned utilities). In South Carolina, customers helped foot the bill for an $11 billion utility project that was ultimately abandoned. In contrast, under the accounting principles most often used in Wisconsin today, ratepayers aren’t billed until the energy infrastructure project is operational and providing a service to consumers.
AB 472 allows a utility to apply to the PSC to recover costs through utility rates for feasibility studies and project planning, licensing and permitting activities, engineering and design, land acquisition, and equipment procurement and construction. This seems to cover costs for just about everything. If the financing order is accepted by the utility, then the treatment of concurrent cost recovery shall be binding on the PSC. See Sections 26 – 29 of ASA 2.
The respective groups are concerned that this language would weaken cost discipline and transfer the financial risks away from utilities over to households and businesses. It would permit utilities to recover for assets before they are in service. Cost overruns could become profit opportunities rather than financial penalties. What happens if a nuclear power plant is ultimately abandoned?
AB 472 is silent on the regulatory treatment of any nuclear “stranded assets.” Wisconsin customers are already on the hook for at least $1 billion of stranded fossil fuel power plants.
Wisconsin customers have seen hundreds of millions of dollars of cost overruns on projects in recent years, creating enough of a concern that the state Public Service Commission recently launched an investigation aimed at curbing overruns (05-UI-124).
Customers are rightfully concerned about affordability. The bill fails to address “stranded assets,” removing barriers to “behind the meter” on-site generation and/or competitive bidding requirements.
One other section of the bill merits attention. Under Subdivision 3 if the very large customer (data center) is located within 75 miles of the nuclear power plant, the PSC shall approve the tariff “unless the commission finds on the record a countervailing reason not to approve the specified very large customer tariff.” In other words, unless there is a “countervailing reason” (not defined in the bill but which necessarily must be a reason other than harm to other ratepayers or shareholders, detailed in Subdivision 2) then the PSC could approve a tariff with cost shifts to other customers. This language appears to conflict with the language in AB 840, the bill passed this week to shield existing ratepayers from the cost of serving new data centers.
Wisconsin has had among the highest rates in the Midwest for 20 years. The respective groups believe we need more utility cost discipline than is provided in AB 472 as drafted.
The customer coalition respectfully urges legislators to oppose AB 472 if brought to the floor for a full Assembly vote.
