the perfect storm double digit rate increases & $14 billion to be spent on energy infrastructure
TRANSCRIPT
The Perfect StormDouble digit rate increases &
$14 billion to be spent on energy infrastructure
2
Recent Rate Increase Requests
2007
• Xcel-NSP 14% (8% Industrial approved)
• WEPCO 28% (1.5% Industrial approved*)
• MG&E 5.75% (8.8 Industrial approved)
2006
• WPSC 16% (4.7% Industrial approved)
• WP&L 9% (7.4% Industrial approved)
*$1 billion sale offset
3
PSCW 2006 Strategic Energy Assessment, p. 52
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.
5
Costs and Rates• $6 billion of energy infrastructure
construction approved in last 4 years
• 40% increase in rates in last 5 years
• $14 billion in infrastructure in generation, transmission, renewables and environmental retrofits in the next decade.
6
Cost OverviewGeneration $3.8 billion
Transmission $2.8 billion
Renewable Energy $3.2 billion
Environmental $4.0 billion
Total $13.8 billion
*$4.5 billion collected annually in rates
7
Other Cost Drivers$14 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?
8
Perfect Storm• Shortage of electric capacity nationally
• Rising electric demand
• Aggressive environmental & renewable mandates
• Cost of Global Warming regulations
9
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
10
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”
11
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