The Pew Charitable Trusts

WASHINGTON - Like many other states, Wisconsin is considering restructuring its electric utility system. But its debate has some different wrinkles. A deregulation plan pushed by Republican Gov. Tommy Thompson would likely mean higher electric bills for households and businesses in the short run. And this makes for some strange political bedfellows. 

Asset caps strictly limit the amount of utilities non-energy holdings to 25 percent -- something the power companies claim hurts their competitiveness with out-of-state energy holding companies and saps their ability to provide good, low-cost service.

These asset caps would be eased under a different kind of electric utility deregulation measure now undergoing intense debate in the state legislature. The major sticking point: proposed rate boosts for consumers.

Under the measure, state utilities would transfer their transmission facilities, associated rights-of-way, easements and land to a new independent company called TRANSCO that observers say would be more willing to spend the money to expand the power network.

In return, existing utilities would get relief from the asset caps by being able to increase investments in non-utility energy and telecommunications assets.

One major state utility -- Alliant Energy Corp. asked Wisconsin's Public Service Commission on June 19 for an emergency order easing the asset caps, claiming it can't wait for the legislation.

Without immediate relief, Alliant said, it may have to start selling off major assets; it recently sold a multi-million-dollar share of its stake in a rapidly growing Iowa telecommunications firm, McLeod-USA, and paid off debt rather than have the proceeds count as cash and non-utility assets because of the asset cap.

The relief measure was negotiated by GOP Gov. Tommy Thompson with Alliant and other utilities, consumer and environmental groups, and a coalition of big energy users.

Thompson unveiled "Reliability 2000" in early June, but proposed rate increases in the negotiated package have brought opposition from Republican Assembly Speaker Scott Jensen. Thompson's most vocal political support has come from majority Democrats in the state Senate.

TRANSCO, to be managed by an independent board of directors comprised of utility and non-utility representatives, would be charged with determining the most effective energy network that could deliver reliable power to all corners of the state.

"The independent transmission company will give consumers access to thecheapest energy available in a highly reliable manner and moves us closer to a competitive marketplace," Thompson said in introducing the package. "The investments we are making in consumer programs will help keep energy bills down for our residents as well."

But estimates released by Thompson's office show that the average residential bill would jump at least $12 a year and the average business bill would go up at least $50 a year before conservation measures have their impact.

The package calls for energy providers to make 2.2 percent of their energy sales from renewable energy resources by the year 2010. The state's energy-regulating PSC would have increased authority to order new transmission facilities and encourage development of high-efficiency, smaller-scale power generators.

Thompson wanted the package to be included in the massive 1999-2001 budget bill now under legislative debate. But the legislature's powerful budget committee, with the backing of Assembly Republicans, surprisingly blocked that move.

Now the bill is on track to be considered separately; currently there are rival versions of the bill in the Legislature's two houses.

The major difference: the Assembly version of the bill doesn't include Thompson's proposed $47 million in new spending for energy conservation, renewable energy and low-income aid programs and the rate increases intended to pay for that increased spending.

Jensen, R-Waukesha, a potential candidate for governor in 2002 when Thompson is set to leave office, vows Assembly Republicans will never approve such rate boosts and has accused negotiators of including conservation and low-income energy "hush money" to pay for the silence of consumer and environmental groups."I have yet to find another state that raised rates as part of its restructuring," Jensen said. "I think it's wrong, and I don't think this house will do that."