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Published byBrian Crawford Modified over 9 years ago
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The Perfect Storm Double digit rate increases & $18 billion to be spent on energy infrastructure
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2 Recent Rate Increase Requests 2007 Xcel-NSP 14% (10% Industrial approved) WEPCO 28% (1.5% Industrial approved*) MG&E 5.75% (8.8 Industrial approved) 2006 WPSC16% (4.7% Industrial approved) WP&L18% (7.4% Industrial approved) *$1 billion sale offset
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3 PSCW 2006 Strategic Energy Assessment, p. 52
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4 Costs and Rates Industrial Rates since 1997 have increased 59%. Average increase for industrials were around 7% each year. Wisconsin is now among highest rates in the Midwest.
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5 Costs and Rates $6 billion of energy infrastructure construction approved in last 4 years 40% increase in rates in last 5 years $18 billion in infrastructure in generation, transmission, renewables and environmental retrofits in the next decade.
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6 Cost Overview Generation $3.9 billion Transmission $2.8 billion Renewable Energy$7.6 billion Environmental $4.0 billion Total$18.3 billion *$4.5 billion collected annually in rates
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7 Other Cost Drivers $18 billion estimate does NOT include: Increasing and volatile fuel costs MISO deferred costs - $54 million Operations and Maintenance (O&M) such as salaries, health care, etc. Global Warming regulations?
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8 Soaring Fuel Costs Fuel costs nearing post-Katrina levels Last week, oil trading at $126 per barrel pushes natural gas to $11.40 mmbtu Natural gas up 80% since September and 30% since December 2007 Fuel impact on industrial electric rates: –WEPCO4% - 6% –WPSC 4% -5% –WPL 2% –NSP4% - 5% –MGE3.5% - 6%
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9 Perfect Storm Shortage of electric capacity nationally Rising electric demand Rising fuel costs Aggressive environmental & renewable mandates Cost of Global Warming regulations
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10 Global Warming Regulation seems inevitable Allocation vs. auction debate –Wholesale up estimated 50% to 80% –Retail up estimated 25% to 40% Add this to other “baked in” costs and your bill could easily double or triple
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11 Global Warming WPSC and WP&L examples $1 billion revenue requirement 10 - 15 million tons CO2 annually $10/ton = $100 million or 10% increase $50/ton = $500 million or 50% increase
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12 Demand Destruction No industrial load growth for some state utilities Demand Destruction = lost factories, jobs, production If rates get too high, companies may fail, leave or be unable to expand and grow Vicious cycle created or “death spiral”
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13 Higher Rates, Fewer Jobs Since 1999, the state lost 100,000 manufacturing jobs Factory employment in Wisconsin is now at lowest level in 17 years 21% of workforce in manufacturing in 1999 – 18% of workforce in 2006 Manufacturing pays 26% more than the average private sector job
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14 Recommendations Federalize global warming and air emissions policies Resist new/expanded renewable energy mandates & consider petition for the “off- ramp” Expand Environmental Trust Financing Consider “Special Contracts” Encourage Self-Directed energy programs
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15 Questions?
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