A History Lesson

For nearly 35 years, Northern Thunder has stood for clean environment and sound energy policy in western Wisconsin. Recently, the media has been inundating us with dire predictions from the utility industry, describing rapidly increasing demand and insufficient capacity to meet this demand. The industry raised the same specter in the early eighties, in part to manipulate the licensing of several new nuclear power plants. One of Northern Thunder’s first major contributions, accomplished with several allies, was the cancellation of the Tyrone Nuclear Power Plant, proposed for siting on the Chippewa River. The ill-planned project was scrapped when NSP (now Xcel Energy) failed to demonstrate the project’s necessity; it could not be supported by the needs of Wisconsin’s electric consumers. Now this stretch of the Chippewa provides a much-used bike trail, a designated wildlife corridor and a popular canoe route. History has also proven our case with regard to energy policy: least-cost planning and moderate application of efficiency technologies superceded the demand for new power generation. And importantly, we were spared the economic burdens which come with overcapacity—conditions that so heavily taxed the ratepayers in Illinois, the Northeast and elsewhere that bought heavily into the promise of nuclear power generation.

Move up to 1985

Reduced demand in Wisconsin did not occur by accident. Concurrently with the cancellation of Tyrone, those who regulate Wisconsin’s utility industry pursued a thoughtful review of our overall energy policy. The Badger Safe Energy Alliance, now merged with Northern Thunder, had the foresight to invite the widely respected Amory B. Lovins of the Rocky Mountain Institute to address the Wisconsin Public Service Commission (PSC) [note 1]. Least-Cost Electricity Strategies for Wisconsin, Practical Opportunities to Save Over a Billion Dollars a Year proved to be the seminal document which governed our state’s energy regulatory strategy for the next 10 or 12 years. This policy demanded not only reliability and environmental prudence, but also that the choice among alternatives for any major utility project was to be predicated on the least-cost option for meeting our State’s energy needs—from the perspective of the ratepayer and the Wisconsin economy as a whole.

The net result of this enlightened policy was an extended period of

-- high levels of economic growth in the state
--no new demands for additional generation or distribution capacity
--unprecedented return on investment for the utility industry
--unmatched reliability of the system
--minimal degradation of the environment from our choices, and
--virtually level energy prices for consumers—even without adjusting for inflation.

Move Ahead 12 Years

By all accounts, the regulatory system operating from the mid-eighties to the mid-nineties resulted in excellent energy, economic, and environmental performance. From the perspective of the investor-owned utilities, they found themselves with an abundance of capital with little demand for additional infrastructure. Their frustration was that the regulatory system would not allow them to invest this new-found wealth in non-energy pursuits, or, beyond Wisconsin’s borders. The resulting industry demand for partial deregulation—for the right to join the great land and stock market rush of the ‘90s with its apparently unlimited returns—was voiced more and more frequently with ever-increasing urgency. However, with this call for free-market opportunism, support for efficiency and demand-side management programs plummeted.

In part to address the need for continued support for efficiency programs, the Public Service Commission’s Electric Advisory Committee was established —including some of the same groups and individuals on the present Governor’s Energy Task Force. They negotiated long and hard and managed to come to a compromise -–and to an agreement with the people of Wisconsin to forge a new utility regulatory policy. The policy that evolved from this process allowed the investor-owned utilities to go their own way and invest their capital however they saw fit… with a stipulation that, in return, a certain percentage of all ratepayer dollars (from investor-owned utilities) would be allocated to programs that would:

--reduce our energy needs
--assure reliability
--provide protections for those less fortunate than ourselves
--increase investment in sustainable technologies
--stimulate market transformation in efficiency and conservation technologies and businesses.

The Economic Benefits of Efficiency

News coverage of the past year or two has made the hard lessons of deregulation painfully clear. Consider two words: “Enron” and “California.” What are the implications for Wisconsin? A dollar spent on importing any form of energy is a dollar that leaves the state economy. The same dollar spent on energy efficiency is a dollar that circulates throughout the state economy and returns year after year as long as the conservation measures persist. Recent evaluations, limited as they are (see below), document that “…Focus [on Energy public benefit program] returns $5.70 in combined energy, environmental and economic benefits for every $1 spent. Thus a $47 million cut translates into more than $200 million in lost economic activity.” [Note 2] If you ask anyone in the business—whether they be an engineer, a utility executive or a PSC member or even a legislator—“What is the most cost-effective means of meeting our energy demand?” they will all give lip service to efficiency. So why are our legislative and regulatory bodies dead set on defunding the key efficiency program in the state? Why are they throwing all our resources into new supply-side projects, given all the known negative economic, social and environmental consequences?

The Environmental Benefits of Efficiency

I’m not even going mention them – both the global and local impacts are well known. Either people care or they don’t. It is recognized in true free-market theory that pollution equals inefficiency. [Note 3] Were the externalities of our supposedly market-driven regulatory structure honestly considered, the present course of our energy policy would prove severely wanting. [Note 4]

Who Won?

The investor-owned utilities got virtually everything they wanted. For some, this proved to be bitter fruit: Xcel, allowed to invest its resources outside the borders of its market territory, is now suffering devaluation of its economic viability. Upstart firms with little stake in Wisconsin communities are lining up to see who can be the first to build new generation or transmission capacity irrespective of local needs, forcing landowners to sacrifice their property rights for unneeded infrastructure. Wisconsin Public Service wants to unload its nuclear liability to an out-of-state holding company. WE Energies is calling for a rate hike to enable them to meet anticipated rising consumer demand. And some legislators are even proposing the elimination of economic analysis on any new nuclear power plants and setting ourselves up for the next high-level nuclear waste depository site. Where is the long-term benefit to Wisconsin residents in this scenario?

Stakeholders versus Stockholders

But the profit-driven utility executives and shareholders are not the only stakeholders in this process. The generally progressive program called “Wisconsin Focus on Energy” that emerged from this grand compromise was geared to benefit:

-- low-income homeowners
-- middle-class homeowners
-- renters
-- apartment owners and managers
-- industry
--municipalities
--builders
--remodelers
-- building supply manufacturers and dealers
--community action agencies
--HVAC installers & technicians
-- renewable energy manufacturers and installers
--consultants, engineers, designers and architects
--insulation contractors and manufacturers
--efficient equipment manufacturers, dealers and installers
-- retailers
--rural electric coops and their members indirectly benefiting from the infrastructure growth, and especially
--the ratepayers of the investor-owned utilities

In short, at first, it looked like the people of Wisconsin were winners—those who supposedly were also represented at that negotiating table. They were promised that their utility surcharge would be spent on providing state-wide efficiency programs, reducing demand and encouraging development of sustainable alternative energy resources. Good-faith efforts designed to meet that promise was short lived.

Focus on Energy; Designed to Fail

If you want a program to look bad, follow this simple formula:

1. Abandon all existing programs.
2. Start from scratch.
3. Promote the new program heavily as a panacea.
4. Disperse its services among disparate entities and don’t try to integrate their efforts.
5. Make it available to only some of Wisconsin’s citizens (investor-owned utility customers).
6. Throw lots of money at it initially, and
7. as soon as the program gets through it’s growing pains, has its infrastructure in place and has made lots of promises to subcontractors and consumers, introduce uncertainty by cutting back program funds.
8. Once the program has adjusted to operating under reduced funding opportunities, cut the funding even more.
9. Don’t look at the data to measure and prove the program’s effectiveness.

Efficiency and Renewables Betrayed

The promised dedication to efficiency didn’t last long. Before the Focus on Energy programs were one year old, ultra-conservative legislators were calling for scrapping the program. Before its second year passed, major portions of the funding for the public benefits programs was diverted. Some of those who have an important stake in maintaining some level of support from this program, are saying “Don’t challenge them; they may scrap the program entirely.” We were sympathetic to this concern until attending a recent Public Service Commission hearing on the “Energy 2010 Strategic Energy Assessment.” Although the public slide show gave lots of lip service to efficiency and renewables, in the best of times these components receive only a small fraction of the investment dollars spent on fossil fuels, nuclear subsidies and new transmission. The projections of the PSC on the future of these efficiency programs are not very promising and there is almost no support for restoring the diverted funding from either the PSC or even the investor-owned utilities collecting the surcharge from their own customers.

History Repeats Itself

I’ve been in the efficiency business since 1974 and I have seen this same pattern repeated over these thirty years: In reaction to the oil shortages of the early ‘70s, President Jimmy Carter called for the Moral Equivalent of War and demonstrated his commitment by having solar panels installed on the White House. Among Reagan’s first acts after his inauguration was to order the solar collectors removed. The utility-sponsored Residential Conservation Service (RCS) was highly promoted and then dropped. Solar rebates encouraged manufacture start-ups but then were abruptly withdrawn. Weatherization programs are constantly trying to do long-term planning in the face of the variability of roller-coaster funding opportunities. With threats of further defunding, the Focus On Energy program is threatened with its very survival even though we now have proven technologies and the ability to provide assurance of their efficacy.

“The Unexamined Life is Not Worth Living” --Plato

Wisconsin’s present dilemma is exacerbated because we can’t (or won’t) even project the potentials of the newer technologies and methodologies. Policy is guided strictly by politics, not hard science or economics. This plight is highlighted in the Public Service Commission’s draft Strategic Energy Plan.

It is not possible to determine if past and projected energy efficiency efforts are adequate. Funding for public benefits was determined by the legislature after considerable debate among various stakeholders. It was not based on an analysis of energy efficiency potential and the cost to achieve that potential. There is no current potential study upon which to determine the adequacy of energy efficiency efforts. The most recent potential study was completed in 1994. There have been considerable changes to the energy efficiency infrastructure since that time, including new energy efficiency technologies on the market, lower costs of many energy efficient technologies, and changes in avoided costs. These changes make the decade-old study unreliable to use to determine the appropriate level of energy efficiency activity. [Note 5]

This dearth of analysis is in stark contrast to the ongoing evaluation mandated by the PSC under the least-cost planning approach. Not only has no one performed analysis of our energy efficiency potential, we aren’t even measuring the savings we are getting from our present effort. Every home that comes into the program from one of the participating utilities has at least a two-year track record of its energy consumption on file. And virtually every other home touched by the infrastructure built by this program (customers of non-participating utilities) also has historic energy consumption records. But nobody is collecting or analyzing the data! The only analysis presently occurring is based on a fairly simplistic computer simulation on the measures for which incentive rewards are being granted. There is not sufficient room here to outline the vast amount of efficiency improvements that are overlooked by this narrow modeling, but suffice it to say, present measurement scales are no comparison to actual measured energy savings.
Do the utilities and the PSC know how to do this analysis? Of course they do; when the investor-owned utilities were being reimbursed for achieved energy savings under the least-cost planning model, they were out there tracking every kWh of energy savings. There is no reason that such monitoring cannot be accomplished today on 100% of the houses and other institutions served by this program. If savings are not being tracked, it is because someone doesn’t want to know. The only reason they wouldn’t want to know is because they don’t want the program to prove itself successful. That way, politicians are free to kill the program, allowing energy demand to escalate and, thus, fulfilling the utilities’ projections: we need to sell more electricity.

Who Lost?

The last biennial budget process effectively betrayed the people of Wisconsin (including the ratepayers of the investor-owned utilities and the other stakeholders), our environment, and the economic well-being of our state. Both Republican and Democratic legislators and the Governor agreed to rob these dedicated revenues for other purposes. They diverted some $47,000,000 earmarked for infrastructure growth to provide scientifically-guided advice to builders, homeowners, farmers and industry, encourage the installation of the best technologies that Wisconsin manufacturers can provide, deliver proven efficiencies, assure healthy homes and reduce the hemorrhage of energy dollars across our state borders. Rather than providing all these public benefits to the ratepayers of Wisconsin, these dedicated funds—now diverted—are paying for prisons, meeting interest payments on bonds for unnecessary road construction, and funding other politically favored projects.

This Theft is NOT the Same as the DOT Budget Diversion!

When Northern Thunder previously raised the issue of diversion of public benefits funds, the response was that all state programs took a hit to meet the state-wide budget shortfall including other engrossed funds such as the Department of Transportation (DOT) revenue sources. This response is particularly disingenuous; almost simultaneously with passage the biennial budget, the legislature also approved a bond for over a half billion dollars for road building, essentially taking the DOT expenditures off-budget. This, in turn provided the DOT with far more money than they were originally scheduled to receive and allowed the start up of numerous unpopular road building projects which had previously been put on indefinite hold.

An Unconstitutional Diversion of Funds

Denial of sound financial outlook and lack of concern for the well-being of the people of Wisconsin certainly justifies outrage. In addition, however, this budget theft is decidedly unconstitutional: Consider Article VIII. Finance Rule of taxation uniform; income, privilege and occupation taxes. SECTION 1 clearly states that “The rule of taxation shall be uniform.” When the Legislature, with the Governor’s approval, voted to absorb over one third of these public benefit funds into the general revenue budget it was the equivalent of imposing a tax only on those ratepayers of investor-owned utilities—not on the members of the numerous co-ops or municipal utilities who chose not to participate in the Focus Program. This is not uniform taxation and it directly contradicts the constitutional imperative in Article VII Section 1.

A Call To Action!

The Governor’s Energy Task Force is now asking us to persuade our legislators not to steal too much more from this program. We find this an insufficiently rigorous approach. The legislature and the Governor have broken state constitutional law; furthermore, they have directly repudiated the promise they made to the people of Wisconsin when they allowed the utilities to restructure.

We at Northern Thunder invite the collected stakeholders across the state to join us in considering the merits of a class-action suit against the State of Wisconsin to assure full restoration of all public benefits funds (retroactively to the passage of the last biennial budget) and return these resources to their rightful purpose of assuring efficient energy use in our state.

Our entire state energy policy has become politicized with the big contributors calling the shots. Northern Thunder, as a grassroots representative of citizen consumers, is not willing to grovel for crumbs from an energy policy with ever decreasing support for efficiency and investment in renewable sources. Politicians of both parties are apparently unwilling to look to sound science and the environmental and economic benefits for the people of Wisconsin; instead, they have pledged their allegiance to the profits of shareholders in the major energy holding companies. If this injustice is allowed to stand, then we have lost our place among the ranking of progressive states with forward-looking energy policy and programs. There is no other viable alternative: efficiency and renewables must be our first priority!

End Notes

1 Lovins, Amory B. Least-Cost Electricity Strategies for Wisconsin, Practical Opportunities to Save Over a Billion Dollars a Year, sponsored by the Badger Safe Energy Alliance, Sept 24, 1984

2 “State Budget ‘Taxes’ Focus on Energy,” Wisconson Renewable Quarterly, Vol 8, No. 3 Summer 2003.

3 Porter, Michael Porter and van der Linde, Claas, “Waste as a Measure of Business Efficiency,“ The Harvard Business Review, September-October 1995

4 See: Hawken, Paul, The Ecology of Commerce, Harper Business, 1993 and Orr, David, Environment, and the Human Prospect, Island Press, 1994.

5 Wisconsin Public Service Commission Strategic Energy Plan, “Analysis of Energy Efficiency Efforts”, p. 65, 2004.

6 2003 Wisconsin Act 33, the 2003-05 Biennial Budget Act, expanded the issuance of bonds. It stipulated that $565.5 million in general obligation bonds will be issued to fund, for the first time, rehabilitation projects and the southeast Wisconsin freeways program. Debt service costs for these bonds issued in the 2003-05 biennium will total $767.6 million through FY 2024-25. An Evaluation: Major Highway Program Department of Transportation November 2003 Report Highlights http://www.legis.state.wi.us/lab/reports/03-13highlights.htm

7 State of Wisconsin Constitution ARTICLE VIII. FINANCE. Section 1. Rule of taxation uniform; income, privilege and occupation taxes [As amended Nov. 1908, April 1927, April 1941, April 1961 and April 1974].

Return to NT Home Page