Wisconsin Public Service Commission, We Energies argue the case for

Daily Reporter (Milwaukee), Mar 31, 2005 by Jeremy Harrell

The state's largest utility company and government energy regulators made a final attempt Wednesday to revive the biggest construction project in Wisconsin history.

Before a packed state Supreme Court chamber, We Energies LLC, Milwaukee, and the Public Service Commission asked the justices in oral arguments to overturn a lower court ruling nullifying the $2.15 billion coal-plant expansion in Oak Creek. The seven-member court, with one judge not participating, is expected to return a verdict later this spring.

In November, Dane County Judge David Flanagan sided with a challenge backed by the deep pockets of S.C. Johnson & Son Inc., Racine. The judge agreed with S.C. Johnson and environmental group Clean Wisconsin that the PSC rushed to approve the power plant project before finalizing We Energies' application.

Flanagan said the PSC issued a construction permit without considering alternative sites, alternative fuels, transmission-line requirements and environmental permits in hand. The PSC and We Energies appealed the decision and, earlier this year, won the right to move the case quickly to the Supreme Court.

Making a case

Wednesday's arguments continued a debate that began when We Energies first proposed the Oak Creek plant several years ago. The utility and the PSC asserted that the state faces a shortage of baseload capacity and that the only way to meet that shortage is through construction of coal-fired power plants.

It is the backbone of the state's energy supply, said Edward Marion, an attorney for the PSC, referring to baseload capacity.

In the course of approving the plants, the PSC considered and rejected the idea of requiring cleaner fuel sources such as natural gas. Marion said the PSC determined that natural gas would be too unreliable and too volatile for baseload plants, given the fuel's price and supply fluctuations.

The evidence is overwhelming that natural gas is not the appropriate fuel, Marion said.

Justice Pat Roggensack took up the PSC's argument, peppering S.C. Johnson's attorney with questions about the reliability of natural gas.

How can it be feasible if you can't get it all the time? she asked.

But Carl Sinderbrand, who represented S.C. Johnson and Clean Wisconsin, said the PSC fundamentally missed the boat when it approved the Oak Creek project. Wisconsin's energy law puts coal at the bottom of the list of fuel priorities, and Sinderbrand said the PSC overlooked gas as a cheaper, cleaner option for the project.

The PSC made a policy decision not backed up by law in determining that coal is the only fuel for baseload capacity, he said.

Calpine Corp., San Jose, Calif., also entered the case, arguing that the PSC should order We Energies to buy power from Calpine's approved but not-yet-constructed gas-fired plant near Fond du Lac. Peter Gardon, Calpine's attorney, said the gas plant would meet at least half of We Energies' projected electricity needs, and it would comply with the state's energy-priority law.

Winding down

We Energies needs to see swift resolution to this case, a main reason the utility and the PSC sought to expedite the appeal to the Supreme Court. We Energies' contract with builder Bechtel Construction Co., San Francisco, expires in July, and renegotiations would push the price tag $260 million higher, according to the utility.

The project's air permit also runs out this summer, and the PSC's construction permit required We Energies to have the first of Oak Creek's two generating units operational by 2009. Construction will take at least four years.

If We Energies and the PSC win the appeal, the utility would begin construction this summer.