WECN November 2004

Aiming High
Will Wisconsin adopt a more ambitious renewable-energy mandate?

Sometime in November, the Doyle administration planned to formally receive the report and recommendations of the Governor’s Task Force on Energy Efficiency and Renewables. Finalized in September, the report’s release had been expected before the end of that month, but planning for a suitable roll-out and questions about implementation methods led to delay.

Wisconsin Energy Cooperative News obtained a pre-release copy of the report and talked with task force members about challenges to be met before its recommendations can be adopted.

On the surface, increased use of renewable energy wouldn’t seem a tough sell. An apple-pie issue if ever there was one, the appeal of cleanly sourced electricity is beyond dispute. But no energy source is perfect and no desirable end is reached without cost, so when the time comes to forge policy decisions and perhaps statute law from the task force’s work, controversy won’t be entirely absent.

Upping the Ante

Wisconsin law already mandates the development of renewable energy, but the task force recommendations set higher goals. Current law specifies that power providers in this state must obtain 2.2 percent of their electricity from renewable sources by 2011. That’s already been exceeded and today more than 4 percent of the electricity used in this state comes from renewables.

The task force recommends more than doubling the share of renewables presently in use—multiplying the actual statutory quota by a factor of four-and-a-half, to 10 percent by 2015.
That’s for all Wisconsin electricity usage as a whole. For Wisconsin government, the task force would push farther and faster. It calls for state agencies to “purchase at least 10 percent of their electricity from renewable sources by 2006 and at least 20 percent by 2010.”

That would be no small thing. There’s clearly a market for renewable energy, still comparatively small but growing as power providers respond to public demand. On the other hand, a legislative mandate seeking to accelerate the trend would seem to be a straight path toward higher electric bills for cash-strapped Wisconsin government.

Sustained high natural-gas prices have helped make renewables more competitive, but the playing field still isn’t level. At the World Renewable Energy Congress in Denver this fall, Xcel Energy CEO Wayne Brunetti estimated that, after benefiting from the recently renewed federal production tax credit, wind power would cost between $25 and $35 per megawatt-hour. “Without production tax credits,” Brunetti said, “those prices could double.”

Some see a state mandate further increasing the cost of renewable electricity. That was the view of a task force member who told us methane-fueled generation using gas captured from landfills is now price-competitive with coal-fired generation, but he warned that a mandate driving increased landfill-gas demand could bring that to an end.

Wind, Water, and Fire

Wind is the renewable resource almost everyone thinks of first, but it’s a small part of Wisconsin’s energy mix. In 2003, 55 turbines at five sites produced slightly more than 100 million kilowatt-hours. Wisconsin utilities purchase additional wind-based electricity from sites in other states.

The Evergreen Energy program has been growing strongly toward its goal of enlisting 1 percent of Dairyland Power Cooperative’s customers by the end of next year. The target—typical of green-energy programs nationwide—represents approximately 2,000 customers, and by this fall the number participating passed 1,600. Evergreen buys energy from a wind farm in southwest Minnesota, where conditions are more favorable than in Wisconsin.

Wind-energy production within this state has more than doubled since 2000 and last year met the electricity needs of the equivalent of about 12,000 households.

But hydropower is by far Wisconsin’s dominant source of renewable electricity. Hydro yielded 1,971 million kilowatt-hours in 2003. That was down considerably from 2002, when in-state hydro facilities produced 2,515 million kwh. The difference was variation in rainfall, with which hydro production levels are closely linked. Last year’s official rainfall for Wisconsin was 28.4 inches, down from the 35.2 inches of 2002 and also from the annual average of 33.4 inches since 1990. (All statewide numbers in this section are from Wisconsin Energy Statistics 2004, published by the Energy Bureau of the Wisconsin Department of Administration.)

Hydro generating capacity can expand, but probably not by a lot. The idea of developing new dam sites attracts political opposition, so the potential appears limited to upgrades at existing sites. Recognizing this, the governor’s task force limits the range of hydro projects classifiable as “renewable energy” to those with a capacity of 60 megawatts or smaller.

Though there are those who resist labeling as renewable anything that involves combustion, biogas—clean-burning methane fuel derived from plant or animal wastes—is another growing energy source that accounts for considerably more in-state electricity production than does wind.

Biogas yielded almost 253 million kilowatt-hours in 2003. That’s double the figure for 1999 and roughly triple the production at the beginning of the 1990s.

Those numbers are destined to keep growing. La Crosse-based Dairyland is well along in developing five anaerobic manure digesters at large dairying operations, the first wave of a planned 25 megawatts from on-farm generation within the next several years.

And if there is reluctance to put the renewable stamp on anything that burns, it’s worth considering things that don’t happen when biogas is turned into electricity. Agricultural runoff is reduced. Unpleasant odors are reduced. Methane, a far more potent greenhouse gas than carbon dioxide, is captured and made into something useful instead of simply wafting into the atmosphere or being burned off from landfills with no further purpose.

But the bottom line remains that renewables are still a small component of the energy portfolio, in Wisconsin and elsewhere.

Tradeoffs Inevitable

Boosting the statewide percentage of renewable energy isn’t as simple as it sounds. A big reason is that wind power is frequently unavailable. In October, Refocus Weekly, an international renewable-energy magazine, acknowledged that because of variable weather conditions, a wind facility could be counted on for generation only 20 percent of the time. This was in the context of a report saying wind is “winning recognition as a valuable option for power generation.”

What this means is, adding wind requires adding an equivalent amount of backup generation that isn’t wind and isn’t likely to be renewable. Moreover, the sites most conducive to wind generation tend to be, as Refocus notes, “located in remote areas far from population centers and transmission network facilities.” Thus, obtaining the benefit of renewable wind power will often necessitate new transmission lines. In Germany, wind-power expansion dictates the addition of almost 900 miles of new transmission lines over the coming decade, according to a report cited by Refocus.

Brian Rude, Dairyland Power’s director of external relations, served on the governor’s task force and points out that its recommendations include escape hatches to help avoid mandating unintended consequences.

The “Renewable Portfolio Standard” (RPS) can be delayed with Public Service Commission approval if meeting the RPS would impinge on system reliability or inflict undesirably high rate increases, Rude notes.

Also, he says, the commission can delay the standard if a utility can show it’s unable to arrange siting, obtain necessary permits, or access transmission to deliver the additional renewable energy.

If all goes as planned, this will be of purely academic interest for Dairyland. The generation and transmission cooperative already anticipates having a 10-percent mix of renewables by 2012, three years ahead of the task force’s schedule.

Can it Pass?

Raising the RPS is the Legislature’s call, and proponents can be encouraged by the presence of four high-profile, energy-conscious lawmakers—two from each house and each party—on the task force. The two-dozen members also included utilities, business, labor, and environmental groups, and they unanimously endorsed the recommendations sent to the governor.

Mike Vickerman, executive director of the advocacy group RENEW Wisconsin and a task force member, calls the recommendations “realistic and workable.”

“If the Governor takes this vehicle as is and applies the power behind his office to make the thing work, he can get it across the finish line,” Vickerman said. “How energetically the Governor embraces the recommendations is the critical variable here.”

Vickerman cites other states adopting similar standards, crediting Governor George Pataki with taking the lead to shepherd a 10-percent-by-2015 standard through the New York Legislature.

Rude, a veteran lawmaker before joining Dairyland, cautions that many details remain to be worked out and that utility representatives gave their blessing to the recommendations at least partly because they anticipated being deemed in compliance with the state’s Energy Priorities Statute, which attempts to steer power providers toward non-combustible renewables in planning to meet future energy demand.

Vickerman says the recommendations hold out the prospect of such relief. Noting that Minnesota aims for 10-percent renewables by 2016, while Colorado voters last month approved a 10-percent-by-2015 target, he hears opportunity knocking.

“Wisconsin could join an elite group of far-sighted states,” Vickerman says.—Dave Hoopman

David Versus Goliath
The Snohomish County Public Utilities District’s Fight with Enron

This is a story about a Washington State public electric utility’s courageous fight against energy-marketing giant Enron and how it brought to light Enron’s naked attempt to profit from an artificial shortage of electricity during the summers of 2000 and 2001.

Everett is a manufacturing community set on a series of forested hills along the east side of Puget Sound north of Seattle, Washington. The Snohomish Public Utility District, or PUD as it is known locally, provides electricity for 290,000 homes and businesses in the area. Two of the area’s largest employers are Boeing and Kimberly Clark and both companies set up manufacturing facilities in Everett because of the then cheap and plentiful electricity.

The PUD operates much like a cooperative, as is emphasized by signs displayed in the headquarters building that note the PUD is owned and led by its member–customers.

The utility owns one small hydro plant that provides about 8 percent of its electricity requirements. Its remaining power needs are satisfied by the federally administered Bonneville Power Administration, through purchases on the open market, and by a small amount of power from renewable energy sources including biogas and wind. In 1980, the PUD contracted for its power needs for 20 years, but the contract expired at a time when much of the West Coast of the United States was following California’s lead in attempting to deregulate the energy industry.

Energy Crisis Impacts

In 1996, California Governor Pete Wilson signed legislation to open California’s electricity market to competition and the law became effective on March 1, 1998. In May 2000, electricity prices on the California spot market began to increase rapidly. By June, there were rolling blackouts in California and by August, Governor Gray Davis was calling for an investigation into wholesale electric-price manipulation.

Partly due to a drought, the Bonneville Power Authority about that same time determined that it could not provide the Washington-based utility with all of its electricity needs from hydropower produced in its Columbia River system, so the PUD had to turn elsewhere. In January 2001, the utility entered into several contracts, including one with energy marketer Enron that would run until the end of 2009—for 25 megawatts of capacity at $109 per megawatt-hour (mwh). While high, the rates were lower than the rates that would have been charged had the PUD agreed to a shorter-duration contract.

There were two significant provisions in the Enron contract: a termination charge if either Enron or the PUD canceled the contract early and the requirement that Enron remain “investment grade” during the life of the contract. In other words, the PUD could cancel the contract if Enron suffered serious erosion in its financial position.

That same January, as California experienced rolling blackouts in the northern and central parts of the state, PUD representatives met with Federal Energy Regulatory Commission (FERC) officials to argue for federal wholesale-energy rate caps to help protect businesses and residential consumers from tremendous price increases. FERC denied the utility’s request.

The PUD responded by raising consumer rates by 35 percent in anticipation of higher wholesale prices. However, it became clear that even this significant increase would not come close to covering its costs of buying wholesale electricity. The PUD then raised consumer rates a further 18 percent in October 2001.

By July 2001, wholesale electricity prices dropped back to $30 to $40 per mwh, significantly less than Enron’s $109-mwh contract rate.

That August, Enron Chairman Ken Lay resigned and allegations of phony Enron profits were revealed. By November, Enron’s credit rating fell below “investment grade” and the PUD cancelled its contract with Enron. Under the contract, Enron was required to respond to the cancellation within 48 hours, but the PUD heard nothing. In fact, it did not receive a response from Enron for nearly five months, according to Wisconsin native and PUD General Counsel Michael Gianunzio. In the meantime, Enron filed for bankruptcy that December.

Enron’s Suit and the Tapes

Finally, in April 2002, the PUD received a letter from Enron seeking a $122 million termination payment. The utility rejected Enron’s claim, projecting the fee would cost every Snohomish County ratepayer $420. Enron filed suit against the PUD that summer.

Enron and other energy marketers routinely taped their traders’ conversations as a record order to forestall future disputes with clients. Suspecting there might be something on those tapes that could be used as ammunition against Enron’s lawsuit, PUD attorneys were able to obtain tapes via subpoena. The utility’s management decided to spend $100,000 transcribing the conversations involving Enron traders that had been recorded in Enron’s West Coast trading desk in Portland, Oregon, during a key three-month span in 2000 and 2001. The PUD set up a “listening room” with 12 temporary staff transcribers sifting through 2,600 hours of conversations. According to General Manager Ed Hansen, they were taking a “real shot in the dark.” However, this process would soon pay off and the transcripts caused a nationwide media frenzy in early June of 2004.

U.S. Senator Maria Cantwell, a member of the U.S. Senate Energy Committee and a Snohomish County resident, commented, “The tapes very clearly show that Enron and its traders were well aware of the havoc they were wreaking on Western energy markets and that they took advantage of the situation for financial gains.”

FERC— Ineffective Federal Regulator?

On June 17, 2004, the commission directed staff to review recently submitted materials regarding Enron’s behavior during the 2000–2001 energy crisis as well as all Enron proceedings currently pending before FERC. The commission directed staff to make recommendations as to what additional procedural steps, if any, it should take with respect to the pending “Enron” proceedings. This review is pending.

This past July, FERC ruled that it would look into requiring Enron to disgorge its illegal profits from 1997 to 2003. The PUD hopes FERC will decide to order a return of $140 million to the PUD, including the $122 million termination penalty being sought by Enron. However, it is clear PUD legal staff are concerned about FERC’s desire to impose penalties on Enron. Assistant PUD General Counsel Eric Christensen calls FERC “toothless” and said the agency has “proposed a bunch of half measures and fixes that only make matters worse.” He added, “FERC has tried hard not to do its job because it is too tied to deregulation.” He concluded, “I think it’s scandalous that federal regulators who were supposed to be in charge of protecting consumers are still pursuing the Enron agenda even though Enron has been dead for two years.”

A U.S. Court of Appeals recently ruled that FERC has the authority to cancel energy contracts, and a U.S. District Court judge in New York ruled that Enron must respond to allegations that it, in bad faith, sought a termination payment from Nevada Power Company. Both cases provide hope to the PUD that it will eventually gain cancellation of Enron’s $122 million termination penalty.

Dramatic Local Economic Impact

The Everett School District’s power bill increased by $900,000 in one year. Together, all Snohomish County school districts are spending about $1.75 million more per year for energy than prior to the energy crisis, an increase of more than 50 percent. Kimberly Clark is reporting that its energy costs in Snohomish County are now the fourth highest of its 31 plants. The facility employs nearly 900 workers and the PUD is concerned the company may relocate product lines to other plants or to even close the Everett facility. In yet another example, a local start-up biotech firm substantially delayed development of a drug for septic shock as a result of the skyrocketing power prices.

Deregulation Lessons for Wisconsin

In 1998 and 1999, after significant input by Wisconsin’s electric cooperatives and others, the Wisconsin Legislature and state energy regulators decided Wisconsin would not follow California’s lead and would, instead, move much more slowly and deliberately down the energy-deregulation path. Given the lessons of Enron in Washington State, this has proven to be a much wiser course.—Bill Oemichen, with information provided by Neil Neroutsos, public relations liaison for the Snohomish County PUD

Selected Taped Conversations

The taped conversations are graphic, and they support the allegations that Enron was manipulating the West Coast energy market. Several of the more interesting taped conversations are cited below and are edited to remove words that may be objectionable to WECN readers.

About taking busy generators out of service to increase prices:

David: There’s not much, ah, demand for power at all and we’re running kind of fat. Um if you took down the steamer, how long would it take to get back up?

Person 2: Oh, it’s not something you want to just be turning on and off every hour. Let’s put it that way…and it depends on time, ah, how long it’s off and what you have.

David: Yeah. Well, I don’t know, my guess is these cuts are going to keep goin’ on for another couple hours and ah, if – we shut down, could you bring it back up in three – three or four hours, something like that?

Person 2: Oh, yeah.

David: Well, why don’t you just go ahead and shut her down, then, if that’s OK.

About power overcharges and market manipulation in California:

Kevin: So the rumor’s true. They’re f_____ takin’ all the money back from you guys? All those money you guys stole from those poor grandmothers in California?

Bob: Yeah, grandma Millie, man. But she’s the one who couldn’t figure out how to f___ vote on the butterfly ballot.

Kevin: Yeah now she wants her f____ money back for all the power you’ve charged right up— jammed right up her a__ for f_____ 250 dollars a megawatt hour. [laughter]

About potential shortages created by a fire:

Person 1: The magical word of the day is “Burn Baby Burn.”

Person 2: What’s happening?

Person 1: There’s a fire under the core line (power line) it’s been derated from 45 to 2100.

Person 2: Really?

Person 1: Yup.

Together: Burn baby, burn.

Editorial
by Perry Baird

Tales of the Tape

Preserving conversations on tape or digital recordings can be a mixed blessing, as Enron (in our feature story on page 14) is discovering. The bankrupt energy giant has realized a definite downside to audio archiving, but as a tool for preserving an accurate, vivid historical record, you can’t beat capturing people’s vocal expression.

One of the longest feature stories run on the pages of this statewide publication was the transcript of a taped conversation with Art Larson, former manager of Jackson Electric Co-op. Art, whose obituary appears on the facing page, piloted a bomber that was shot down over Germany during World War II, and he spent 18 months as a prisoner of war. Wounded by bullets from a fighter plane, Art was first hospitalized and then sent to a series of POW camps in Germany, finally escaping a couple of months before war’s end. His story—directly from our tape recording—was published in four installments during the spring and summer of 1972.

Capturing the Captured

One fall afternoon in 1994, I switched on my trusty tape recorder to capture a conversation with electric co-op director Bob Bilskemper, another WWII prisoner of war. The resulting story about his confinement by the Germans after he was seized at the Battle of the Bulge ran 10 years ago this month on the 50th anniversary of the conflict.

So now it’s the battle’s 60-year anniversary, and Bob—a Riverland Energy director from Onalaska—told me recently that he went before a microphone to tell his story again. This time it was part of a project organized by the Library of Congress.

The Veterans History Project is a comprehensive cataloging of oral histories and first-hand documents supplied by vets and involved civilians from World War I through the Gulf Wars. The Folklife Center at the Library of Congress is assembling a national collection to be used by researchers, teachers, students, and anyone else who wants to learn about the human efforts involved in war.

The project enlists the help of veterans’ groups, schools, and individuals to gather materials for the archive, with more than 25,000 recorded oral histories already catalogued. Bob’s contribution was a videotaped interview done by high school students in cooperation with a La Crosse area American Legion organization and Rotary Club.

Gaining Ground, Urgently

A spokesperson for the Library of Congress noted there has been an upswing in submissions this year; staff is working a backlog of histories to be archived. Bob’s recording is among those awaiting a permanent spot in the collection.

In 2000, Wisconsin Congressman Ron Kind was principal author of the legislation that authorized the project, and for the past several years his office has encouraged veterans and organizations to get involved and submit materials. As the project’s web site (www.loc.gov/folklife/vets) observes, there is a “sense of urgency” to gather histories, considering the advancing age of some potential contributors.

Bob is one of Congressman Kind’s constituents, and for sharing his story with the Veterans History Project he received a certificate and a consecrated American flag. But those of us who gain insight and inspiration from narratives given by the likes of Bob Bilskemper—and Art Larson—are receiving so much more.

Holidays meet History at Hearthstone

Early in electrification’s history, an Appleton mansion, Hearthstone, was designed by architect William Waters and erected for prominent businessman Henry J. Rogers. On September 30, 1882, Hearthstone became the first residence in the world to be lighted by a centrally located hydroelectric station using the new Edison system.

Today, Hearthstone is being restored to closely resemble its appearance during the dawn of the electrical age, when the Rogers family occupied the residence. Original paint colors, elaborate ceiling decorations, and period furniture and arts are being added.

Hearthstone’s rare, original Thomas A. Edison light switches and period “electroliers” are still in use. Nine charming fireplaces, stained glass windows, and woodwork carved from native Wisconsin woods still add to the elegance of this splendid late-Victorian mansion.

Hearthstone is now a museum, offering visitors an opportunity to immerse themselves in the past, visit the gift shop, and learn in the Hydro Adventure Room, which features hands-on electrical displays.

Hearthstone is especially dazzling during the holiday season, when the museum holds its annual Victorian Christmas display. Unlike previous years, in which the program highlighted vintage manufactured ornaments, this year’s “Parade of Ornaments: A Victorian Christmas” showcases Victorian-style ornaments made by students from more than 10 area schools. Some of the ornaments popular in the 1880s—those the school children will re-create for this year’s trees—include both handmade and factory-made items, many of them German in origin. Local businessmen sponsored the trees, paying for the materials used by the children in crafting the ornaments. The exhibit opened November 23 and will continue through January 16.

In conjunction with the holiday season, Hearthstone will sponsor several other special events. Evening tours are offered at 6 p.m. on December 2, 9, and 16, letting visitors enjoy the warm glow of the electroliers as they learn about hydroelectricity and warm up with a cup of hot cider. On December 8, bring your lunch for a noon lecture about “The Victorian Christmas Season.” And whole families are invited to Hearthstone on January 6, 4–7 p.m., to celebrate the end of the Christmas season at the Twelfth Night Party.

However you celebrate the holidays, you can make them even more special with a visit to Hearthstone.

Hearthstone is located at 625 W. Prospect Ave., Appleton, at the corner of Prospect Ave. and Highway 10 (Memorial Dr.). Its Victorian Christmas display is open through January 16; the museum will then close until February 15. Call 920/730-8204 on weekdays or visit www.hearthstonemuseum.org for more information. Groups of 10 or more should call to schedule a tour.—Linda Hilton