Cheaper power; higher costs

From an article by Judy Newman in the Wisconsin State Journal:

Demand for electricity has dropped nationwide this year, holding down the price of power that one utility sells to another.

That is translating into a bit of a price break for Wisconsin consumers, but not a huge one, utility officials and regulators said.

Wholesale electricity prices in parts of the U.S. fell as much as 40 percent from a year ago as the need for power dipped 4.4 percent during the first half of 2009, according to a recent report by Monitoring Analytics, which assesses results of PJM Interconnection, a regional transmission company covering 13 states and the District of Columbia. (Wisconsin is not a PJM state.)

In Wisconsin, though, the five major utility companies - including Wisconsin Power & Light and Madison Gas & Electric - are asking for a total of about $300 million in rate increases to take effect in January. WPL alone is seeking about $94 million from its electricity customers.

"What drives rates are fuel prices and construction," said Robert Norcross, administrator of the gas and electric division for the state Public Service Commission.

Wind power projects are in the works, such as WPL's Bent Tree wind farm planned in southeast Minnesota, and the Oak Creek coal-fired plants owned primarily by We Energies, Milwaukee, are scheduled to come online in the next year and a half.

In addition, WPL needs to cover past construction project costs, said spokesman Rob Crain. He said the PSC did not authorize higher rates for the Madison utility company for 2009, expecting that increased revenues would pay at least part of the expense of installing the Cedar Ridge wind farm in Fond du Lac County and the natural-gas-fueled Neenah power plant. Instead, sales "dropped significantly," Crain said, so "there are fixed costs we are not recouping on those two capital investments made on behalf of our customers."

Numerous factory closings and curtailments have reduced the need for electricity, such as the General Motors plant in Janesville, which ceased most production last December. But that just leaves utilities with fewer ratepayers to carry the costs.