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Senate bill will protect U.P. electrical consumers

Guest op-ed

August 26, 2012
JIM KOCHEVAR , The Mining Journal

On July 18, Sen. Tom Casperson, R-Escanaba, partnered with Upper Peninsula colleague Sen. Howard Walker, R-Traverse City, to introduce SB 1207.

This important piece of legislation will protect U.P. electric ratepayers by ensuring that all utilities serving customers in Michigan are subject to the same regulatory review by the Michigan Public Service Commission.

In short, the legislation will ensure that all Michigan ratepayers - including Wisconsin Electric's customers in the Upper Peninsula - are protected from paying for electric power that they do not use and that is not useful to them.

For the past five years, approximately 28,000 electric ratepayers in the Upper Peninsula have watched their electric bills rise as a result of new power plants constructed out-of-state, by Wisconsin Electric Power Company.

These new electric generating facilities - which were not needed to serve Wisconsin Electric's customers - added 2,180 MW of capacity to Wisconsin Electric's generating portfolio at a time when the demand for electricity declined.

For comparison, the generating capacity of these facilities is more than five times the current net generating capacity of the Presque Isle Power Plant.

These new power plants cost approximately $2 billion, and were the largest construction project completed in the history of the State of Wisconsin. Accordingly, Wisconsin benefitted from the job creation and tax revenues associated with these investments.

In Michigan, the Public Service Commission has authority to determine whether or not Michigan ratepayers will bear the cost of new electric power. In making this determination, the MPSC has traditionally applied the long-standing "used and useful" standard: if an electric power plant is not used and useful for serving Michigan residents, a utility is barred from charging customers to pay the costs of that plant.

Not so for Wisconsin Electric's new power plants.

The Michigan Public Service Commission has permitted Wisconsin Electric to charge Upper Peninsula residents and businesses for the cost of these facilities, which do not serve Michigan ratepayers, as a result of a unique scheme entered into by Wisconsin Electric.

Under this scheme, which was approved by a special Wisconsin law, an affiliate of Wisconsin Electric constructed new power plants, which Wisconsin Electric is now leasing under long-term lease agreements that it "negotiated" with its affiliate and wholly-owned subsidiary of Wisconsin Electric's parent corporation. This transaction is favorable and enriching to both Wisconsin Electric and its affiliate.

On June 26, 2012, the MPSC allowed Wisconsin Electric to increase rates in Michigan for the fourth time in five years. In its decision, the MPSC determined that Wisconsin Electric can avoid meeting the same regulatory standard that every other utility serving Michigan customers is required to meet, based solely on the fact that the power is leased, rather than owned.

As a result of this most recent ruling, the dollar impact of Wisconsin Electric's affiliate leases has now increased to $21 million per year for Wisconsin Electric's Michigan ratepayers, of which $15.8 million impacts the Tilden and Empire mines.

Approximately 28,000 Upper Peninsula ratepayers bear the cost of the remaining $5.2 million.

Senator Casperson and Senator Walker have taken a stand for the Upper Peninsula by co-sponsoring SB 1207, which will close this regulatory loophole and provide guidance to the MPSC to ensure that Michigan customers of Wisconsin Electric are afforded the same protections as every other Michigan ratepayer.

Cliffs Natural Resources commends our Upper Peninsula representatives for their leadership and courage. While this may seem to be a complicated issue, the principle is simple; all utilities serving Michigan customers should be required to meet the same regulatory standards.

We thank Sen. Casperson and Sen. Walker for being strong voices for the Upper Peninsula in Lansing and sponsoring legislation that will ensure Upper Peninsula residents, small and large businesses, receive the fair treatment they deserve.

Editor's note: James M. Kochevar is general manager of the Michigan Operations of Cliffs Natural Resources.



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