Christopher Hailstone, with extensive experience in energy management, renewable energy, and electricity delivery, is here to provide insights on grid reliability and security, as well as the political intricacies surrounding utility expansion projects in the Midwest. Today, we will discuss the controversial right-of-first-refusal (ROFR) legislation, the positions of various stakeholders, and the potential impacts on Wisconsin’s grid projects.
Can you explain the current political situation surrounding the grid expansion projects in Wisconsin?
Midwest utilities are advocating to have exclusive, no-bid rights to build regional power lines, arguing they can do it better and at a lower cost than out-of-state competitors. They have lobbied Wisconsin lawmakers to grant them a right-of-first-refusal (ROFR), but have faced opposition, primarily from free-market groups and consumer advocates who argue the proposal is unconstitutional and anti-competitive.
Why do Midwest utilities believe they are better suited to build regional power lines than out-of-state competitors?
Midwest utilities claim that their experience within the region enables them to build power lines more efficiently and at a lower cost. They argue that their familiarity with local regulations, geography, and existing infrastructure positions them better than out-of-state developers who might lack this contextual expertise.
What is the right-of-first-refusal (ROFR) legislation, and why do utility companies in Wisconsin want it?
The ROFR legislation would grant incumbent utilities the first right to construct new transmission projects that tie into their existing service areas. Utilities in Wisconsin support this legislation because it would allow them to secure these projects without facing competitive bidding, thus ensuring they retain control over the development and reap the associated profits.
How do the utility companies claim they will save Wisconsin consumers money if they are granted exclusive rights to the grid projects?
Utility companies argue that if they are granted exclusive rights to build the grid projects, they can leverage federal cost-sharing rules to shift some of the project costs to consumers in other states. This, they claim, would lower the financial burden on Wisconsin ratepayers, leading to overall savings.
What is the role of federal cost-sharing rules in the utility companies’ argument to save consumers’ money?
Federal cost-sharing rules allow utilities to distribute a portion of the costs for infrastructure projects across multiple states within the regional transmission organization, such as MISO. Wisconsin utilities argue that this mechanism enables them to reduce the cost impact on Wisconsin consumers by spreading expenses to neighboring states.
What opposition are utility companies facing from free market groups regarding the ROFR legislation?
Free market groups argue that the ROFR legislation is unconstitutional and anti-competitive. They assert that it stifles competition and protects incumbent utilities from potentially cheaper out-of-state developers, ultimately preventing cost savings for consumers that could result from a competitive bidding process.
Why do consumer groups like AARP, the Wisconsin Industrial Energy Group, and Citizens Utility Board of Wisconsin oppose the ROFR legislation?
These consumer groups contend that the ROFR legislation primarily serves to increase utility companies’ profits rather than benefit ratepayers. They argue that utilities should compete in an open bidding process to prove they can provide the promised cost savings, rather than being awarded projects without competition.
Can you explain the argument that utilities are motivated by boosting their own profits rather than saving money for ratepayers?
Critics, including several consumer groups, argue that utilities have a history of increasing rates and that their primary concern is improving their own profit margins. They believe that awarding utilities exclusive rights to projects without competitive bidding will likely result in higher costs for consumers, contrary to the utilities’ claims.
What are the primary arguments being made against the ROFR legislation by groups such as the Wisconsin Industrial Energy Group?
The Wisconsin Industrial Energy Group argues that more competition in the energy sector, not less, is needed to drive down costs. They believe that utilities should participate in a competitive bidding process, which would incentivize them to control costs and innovate, ultimately benefiting consumers through lower rates.
What is ATC’s study about, and how does it claim that federal cost-sharing rules give the company an advantage over other developers?
ATC’s study indicates that federal cost-sharing rules allow incumbent utilities to allocate a portion of the fixed costs of new transmission projects to other states within the MISO region. This would give Wisconsin utilities a cost advantage over out-of-state developers, who don’t have these existing costs to spread, potentially leading to substantial savings for Wisconsin consumers over the life of the project.
On what grounds do critics argue that the ATC study is based on flawed assumptions?
Critics argue that the ATC study relies on assumptions that overestimate the savings potential and underestimate the costs that Wisconsin consumers would actually bear. They assert that competitive bidding would more effectively control costs and deliver true savings, contrary to the study’s conclusions.
How has the Federal Energy Regulatory Commission’s Order 1000 impacted right-of-first-refusal policies?
FERC’s Order 1000 eliminated the federal ROFR for regionally planned transmission projects but allowed states to enact their own ROFR laws. This has led to a patchwork of state-level ROFR regulations, with some states adopting such laws and others facing legal challenges.
How do state-level right-of-first-refusal laws differ from federal regulations?
While federal regulations under FERC’s Order 1000 prohibit ROFR, states have the authority to enact their own ROFR provisions. This means that state laws can grant incumbent utilities priority in developing new transmission projects within their service areas, overriding the federal prohibition.
Why have some states had their ROFR laws challenged or blocked by federal courts?
Federal courts have blocked or challenged state ROFR laws on grounds of anti-competitiveness and potential violations of interstate commerce regulations. Opponents argue that these laws unfairly protect local utilities and inhibit the free market principles intended by the federal regulations.
What is the significance of MISO’s recent initiative to build out the regional power grid in relation to the ROFR debate?
MISO’s initiative, which involves significant investment in regional power lines, amplifies the stakes of the ROFR debate. With billions in new projects, incumbent utilities’ exclusive rights to these projects under ROFR laws could mean substantial profits and influence over the regional grid development.
How might the approval of right-of-first-refusal legislation impact the bidding process for new transmission projects in Wisconsin?
If ROFR legislation is approved, incumbent utilities would have the exclusive first right to undertake new transmission projects, bypassing the competitive bidding process. This could lead to less competitive pricing and potentially higher costs for consumers compared to a system where multiple developers compete for the projects.
What has been the role of organized labor and economic development groups in supporting the ROFR legislation?
Organized labor and economic development groups have supported the ROFR legislation, arguing it would secure local jobs and stimulate economic growth by ensuring that Wisconsin utilities, which are more likely to hire local labor, are awarded the transmission projects.
Why do free-market groups and conservative commentators oppose the ROFR legislation?
Free-market groups and conservative commentators oppose the ROFR legislation because they believe it undermines competition, violates constitutional principles, and ultimately harms consumers by potentially leading to higher electricity costs.
How have conservative media and commentators portrayed the right-of-first-refusal legislation?
Conservative media and commentators have been highly critical, comparing utilities to monopolistic “cartels” and characterizing the ROFR laws as “corrupt bid-rigging” that unfairly protect incumbent utilities at the expense of competition and consumer interests.
Can you explain the recent actions of Wisconsin legislators in reaching out to former President Donald Trump regarding the ROFR legislation?
Wisconsin legislators reached out to former President Trump, arguing that the ROFR legislation contradicts his administration’s executive orders promoting competition and innovation. They are seeking his intervention to prevent the passage of the ROFR laws.
Are there any federal executive orders that conflict with the right-of-first-refusal legislation, as suggested by Wisconsin legislators? If so, which ones?
Yes, Wisconsin legislators claim that the ROFR legislation conflicts with executive orders from the Trump administration that emphasize the importance of protecting competition to foster innovation and reduce costs. Specific orders likely include those focused on regulatory reform and reducing barriers to competitive markets.
What is your response to comparisons of utilities to drug cartels and the characterization of ROFR laws as “corrupt bid-rigging”?
Such comparisons are hyperbolic and detract from the substantive policy debate. While it’s fair to scrutinize the motivations behind ROFR laws and their impact on consumers, equating utilities with criminal organizations does a disservice to the complexities of energy infrastructure development and regulation.
What is your forecast for the outcome of the ROFR legislation debate in Wisconsin?
Given the strong arguments on both sides, the outcome of the ROFR legislation debate in Wisconsin remains uncertain. If utilities succeed in demonstrating clear cost benefits and securing political support, the legislation might pass. However, persistent opposition from consumer groups and free-market advocates could prevent its enactment or lead to significant modifications.
