Stabilizing Wisconsin's Energy Situation

Corporate Report Wisconsin, Jun 2006 by Crawford, Mark

Our annual report on the state's supply of electrical energy

Wisconsin is energy challenged. It has some of the oldest energy infrastructure and most constricted power lines in the country. Only four high-voltage transmission lines connect it to sources of power in other states. And it can't produce its own fossil fuels. All of these factors translate into higher energy costs.

"Affordable, reliable electricity keeps our stores open, factories running, and payrolls being made," says RJ. Pirlot, director of legislative relations for the Wisconsin Manufacturers & Commerce. "Stabilizing Wisconsin's energy is key to Wisconsin's long-term economic health."

Luckily, these issues were considered critical back in the late 1990s. Since then Wisconsin has been working hard to correct them, not only by building new infrastructure, but also by passing legislation that speeds up the whole process. Time continues to be of the essence if Wisconsin wants to beat the odds of having a large-scale energy failure.

"We've already invested $1 billion in transmission improvements and it will take another $4 billion to finish the work," said Mark Williamson, vice president of major projects for American Transmission Co. "This will take care of Wisconsin's energy needs for at least a generation."

Blame the glaciers

Wisconsin's predicament is largely due to its unique geography. "Wisconsin is bordered on two sides by Great Lakes and to the west by the Mississippi River, which is difficult to cross with transmission lines," said Scott Smith, manager of communications for Alliant Energy.

That only leaves southerly routes to Illinois and Iowa and a few paths into Minnesota for interstate transmission of electricity. As a result, Wisconsin only has four high-voltage transmission lines connecting it to the national power grid; in comparison, Illinois has 24 and Minnesota 18.

Wisconsin's four incoming lines do not have the capacity to meet our increasing demands for electricity, which are growing about 2% to 3.5% per year. That's the equivalent of needing to build a new 350 MW generating plant every year for the next seven years to keep up with demand.

Even with the completion of the Arrowhead-Weston high-voltage line in 2008 from Wausau to Duluth, Minn., which will add a fifth interstate link, Wisconsin will still be narrowly constrained. The federal government defines a system as being constrained if it has a minimum of 500 hours of restricted flow. Williamson indicated that Wisconsin's grid, with about 2,500 hours of restricted flow, is one of the most constrained systems in North America.

Tackling the problem

In response to this crisis, ATC was formed in 2001 when the state's largest electric utilities and many municipal ones transferred their transmission assets - the high-voltage power lines that connect power plants to local distribution systems - to it in exchange for a share of ownership. ATC did not include the northwest portion of the state where Xcel Energies and Dairyland Cooperative still hold sway. Small parts of Michigan's Upper Peninsula and northern Illinois are also in ATC's territory.

As the first multi-state, transmission-only utility, ATC owns and operates about 9,000 total miles of transmission line (including 1,023 miles of extra-high-voltage line) and 460 substations.

Since its inception, ATC has invested heavily in upgrading Wisconsin's power grid. From 2001 ATC has worked on more than 500 projects. In 2004 it invested $227 million in new capital projects and $43 million in maintenance capital projects.

Looking ahead 10 years, ATC has outlined $3.4 billion in construction plans, including 517 miles of new transmission lines and improvements to 1,025 miles of existing line. Building infrastructure isn't cheap: it costs about $2 million/mile for a 345 kV line and $1 million/mile for lower voltages.

"Electric rates in Wisconsin will continue to increase as new power plants and transmission lines are built," said Roy Thilly, president and CEO of Wisconsin Public Power Inc. "Wisconsin's rates have been remarkably stable over the last 20 years, but this cannot be sustained with soaring fuel costs, growing consumption, and retirement of older plants."

Coal is still king. Even with the keen interest in natural gas, renewables, and nuclear energy, coal is still the clear favorite. The federal government estimates that utilities will generate 3% more electricity from coal in 2007 than they did in 2005, while electricity from natural gas-fired plants is expected to drop by 2%.

Yet even coal is not without risks. In 2005 there were significant delays in coal shipments from the western states because of railroad problems. Constriction also affects the coal industry - only two Class-I railroads serve the Powder River Basin in Wyoming, which supplies 60% of Wisconsin's coal. The PSC estimated that coal problems cost Wisconsin utilities nearly $50 million in 2005.

Wisconsin's power grid today

"For Wisconsin, 1997-99 was the low point in electricity reliability," said Dan Ebert, chairman of the Public Service Commission of Wisconsin. "We hadn't built a power plant or significant transmission line for at least 25 years. Since 2003 the PSC has approved three coal-fired baseload plants, which will provide nearly 2,000 MW of energy, and approved $1 billion in improvements to the transmission infrastructure."