ON TRACK
	BUYING INTO BIO
	EDITORIAL
	Wisconsin Favorites UP IN THE AIR

On Track
Shippers mark progress on railroad issues

 

Eighteen months ago, the Wisconsin Electric Cooperative Association (WECA), parent organization of this magazine, went public with its resistance to skyrocketing freight railroad costs and declining quality of service. Rising energy costs related directly to higher rail rates for hauling power-plant fuel and less reliable deliveries were the primary concern, but all manner of cooperative businesses dependent on bulk shipping of raw materials or agricultural products were adversely affected.

The ill effects haven’t gone away, but one thing that should be gone is any sense of hopelessness people may have felt when the time came to challenge the nation’s dominant railroad companies. Over the past year and a half, the grassroots efforts of Wisconsin cooperative members have begun to yield results. Co-op voices are being heard in Washington, D.C., and, of equal importance, they’re undoubtedly being heard by the railroads.

Regulatory policies, federal laws, and business practices affected by them appear to be in the process of changing. By the standards used to gauge such things, 18 months is a remarkably short period of time in which to be able to report genuine progress.

The Springboard

Wisconsin’s electric cooperatives have been among the leading advocates for railroad reform, and with good reason. Almost 80 percent of them have La Crosse-based Dairyland Power Cooperative as their wholesale supplier, and in 2005 Dairyland learned that the following year it would face a 93-percent aggregate increase in the rates it had been paying to have coal delivered to its power plants by rail.

Co-ops outside the Dairyland system purchase wholesale power from investor-owned utilities, who themselves have experienced large shipping-rate increases and higher costs resulting from fuel-switching forced by short or tardy coal deliveries.

These problems translate, inevitably, into significant retail rate increases for members of local distribution cooperatives, and in the summer of 2005 WECA developed plans to fight back.

The first public display of resistance came in a September 2005 Wisconsin Energy Cooperative News cover story detailing increased rates and anticompetitive practices by major railroads taking advantage of “captive shippers,” those who have no realistic competitive alternative to moving goods by a dominant railroad.

Soon after, at the November annual meetings of WECA, the Wisconsin Federation of Cooperatives, and Minnesota Association of Cooperatives in Minneapolis, the National Rural Electric Cooperative Association (NRECA) furnished a speaker to give participants a crash course in rail issues. Co-op directors and managers signed petitions requesting congressional action.

More such petition and letter-writing campaigns were conducted in conjunction with distribution co-op annual meetings, and by the spring of 2006, WECA and the Federation of Cooperatives succeeded in recruiting the Customers First! Coalition (CFC) to coordinate the activities of co-ops, municipal and investor-owned utilities, and some of the state’s biggest businesses and trade associations under the umbrella of Badger-CURE (Consumers United for Rail Equity).

By early summer last year, Gopher-CURE was organized in Minnesota.

The First Win

The Surface Transportation Board (STB) is the federal agency with regulatory oversight of the nation’s largely deregulated railroads, and for a long time, STB rulings that favored shippers were scarce as hen’s teeth.

But at the end of January, consumers scored a notable victory, when the STB gave the nation’s major railroads 90 days to come up with new fuel cost-recovery practices that treat shippers fairly and end double billing.

After considering railroads’ and shippers’ comments received since an initial hearing in May 2006, the STB concluded that existing fuel surcharges, computed as a straight percentage of base shipping rates, constitute “an unreasonable practice” that fails to address actual fuel costs and forces some shippers to subsidize others.

Railroads charge varying rates depending on the cargo and shippers’ demand, so a surcharge boosting all rates by an across-the-board percentage “stands virtually no prospect of reflecting the actual increase in fuel costs” for hauling a particular load, the board’s decision explained.

In addition, the STB ordered railroads to stop levying on the same traffic both a fuel surcharge and shipping-rate increases based partly on fuel costs, a practice the board also labeled as “unreasonable” and “double dipping.”

The decision was welcome but incomplete in the view of WECA Statewide Manager David Jenkins: “It’s too bad the STB didn’t make the railroads refund these overcharges. Clearly this was price-gouging, they got caught, and there is no penalty. It’s no wonder that railroads are realizing record profits.”

Even so, the decision serves as a conspicuous shot across the bow for railroads that have long enjoyed a very comfortable relationship with their regulators.

Gaining Momentum

New impetus for reform seems to be growing in Congress as well. The 109th Congress saw bipartisan legislation introduced to make regulatory redress before the STB more accessible—past shipper grievances had consumed years and millions of dollars with little success in winning rate adjustments—but the bills went nowhere. A similar story could be told about proposals to subject the railroads to the same antitrust laws as other American businesses. (They were exempted by the 1980 legislation deregulating them—when the options facing the U.S. rail industry were pretty much to reorganize or die.)

But the upheaval of the 2006 elections changed every committee chairmanship in both the House and Senate. In the 110th Congress, reform proposals continue to benefit from bipartisan support and also from a new element that may be even more important in the long run: committee chairs who are inclined to move them along.

Rep. James Oberstar (D–MN) co-authored a bill to revise STB procedures in the previous Congress. He now chairs the House Committee on Transportation and Infrastructure that reviews such proposals.

He is joined there by freshman Congressman Steve Kagen (D–WI). Kagen succeeds former Congressman Mark Green, who had sponsored bipartisan legislation to crack down on anticompetitive railroad practices. In his successor, Wisconsin obtains a voice on a committee with the power to review, modify, and advance or kill those bills, and who, like Green, represents a district with a large Badger-CURE constituency.

In the Senate, the Subcommittee on Antitrust, Competition Policy, and Consumer Rights will examine railroad competitiveness and alleged anti-competitive practices. The subcommittee’s plans were announced jointly at the end of January by Senators Herb Kohl (D–WI) and Orrin Hatch (R–UT).

Now chairing the subcommittee, Kohl said the panel would study whether shippers, communities, and small businesses dependent on rail transportation have been victimized by the market power of major railroads.

Kohl indicated he would continue pursuing legislation removing the railroads’ federal antitrust exemptions, so shippers with a grievance would have a better chance at relief.

It’s been a busy 18 months, and Wisconsin’s cooperative interests can rightly claim a share of credit for getting things on track. It’s a claim that’s backed by the co-ops’ role in assembling what’s now the largest statewide rail reform coalition in the country.—Dave Hoopman

 

Buying Into Bio
Plan would fuel energy independence

As the push for more domestically produced renewable energy has gathered momentum in recent months, more and more public officials, energy developers, and pundits have adopted the rhetorical device of claiming their respective states have the potential to become “The Saudi Arabia of Wind” or “The Saudi Arabia of Ethanol.”

The analogy works as long as you don’t focus too closely on the real objective, which is to not be the Saudi Arabia of anything. And in any case, a better analogy may be in the works. A plan now making its way through the Legislature could someday have folks in other states striving rhetorically to become “The Wisconsin of Biofuels.”

By a combination of straightforward executive actions and through his state budget proposal for the coming two years—presented to the Legislature in mid-February—Governor Doyle has set forth an ambitious agenda aiming to put Wisconsin at the head of the pack in terms of the state’s commitment to development of renewable energy sources.

The Investment

Described in a statement from the governor’s office as “part of a broad effort to make Wisconsin the nation’s leader in energy independence and create thousands of jobs in our state,” the budget bill’s energy agenda defines a $40 million program, with biofuel development a high priority. Solar power, wind energy, and hydrogen are also on the list. Altogether, the administration seeks to advance six individual initiatives.

Unveiled in the State of the State address at the end of January, the proposal spells out how Doyle would go about meeting his earlier commitment to obtain 25 percent of Wisconsin’s electricity and transportation fuels from renewable sources by 2025, also known as “25 by 25.”

According to the administration, the “centerpiece” of the proposal is creation of a new Governor’s Office of Energy Independence. The office would coordinate the state’s activities in trying to stimulate growth of the bio and renewable economies. It would also advise the governor and cabinet agencies on methods of reaching the goals of the state’s “Declaration of Energy Independence,” signed last July by Doyle in making the 25 by 25 commitment.

An executive director would head the office with staff support from the Department of Administration’s Division of Energy; the Department of Agriculture, Trade and Consumer Protection (DATCP); Department of Natural Resources (DNR); and the utility-regulating Public Service Commission (PSC).

Another component of the agenda unveiled in the State of the State message is creation of the Governor’s Task Force on Global Warming. The group is to include representatives of business and industry, environmental groups, local governments, and private citizens. Members will be assigned the task of developing what the administration called “a state plan of action to explore state and local solutions to global warming.”

A core item in the budget bill is the Wisconsin Energy Independence Grant and Loan Program. This $30 million initiative would provide financing for companies and researchers developing new technologies to increase renewable energy, accelerate commercial development of resulting innovations, and further the goal of energy independence.

The Doyle administration says it expects the program to leverage as much as $300 million from private investors—that assumption being based on the results achieved by a recent $1 million biogrant program and agriculture diversification grants administered by DATCP.

A key focus of the program will be the drive to make Wisconsin the first of the 50 states to produce cellulosic ethanol, derived from woody forest and timber materials, as ethanol production increases demand for corn and producers begin looking for ways to diversify their raw materials. To that end, $5 million in grants are to be earmarked for purposes of locating the nation’s first cellulosic ethanol plant here.

Also part of the budget bill is a $10 million increase in tax credits for angel and venture capital investment. Adding that amount would bring the total of available tax credits to $23 million. According to the administration, the new credits would be targeted to both renewable energy projects and commercial applications deriving from biomedical and stem cell research.

Another tax credit would seek to make E-85 ethanol and biodiesel fuel more widely available at the retail consumer level.

As of the end of January, 65 Wisconsin filling stations were selling E-85 and just 14 were selling biodiesel. The budget bill calls for tax credits available to locally owned gas stations and private fleet operators for investing in E-85 and biodiesel tanks and pumps. Tax credits totaling $2 million would be authorized—at a maximum credit of $5,000 per pump—to cover one-fourth of the cost of retrofitting old pumps or installing new ones.

The Payoff

Federal statistics indicate the U.S. spends more than $430 billion on petroleum products every year, with the bulk of that money ending up in other countries. The U.S. Energy and Agriculture departments say almost one-third of the nation’s petroleum consumption could be supplanted with renewable fuels by 2030.

Closer to home, the Doyle administration notes that motorists in Wisconsin now use about 102 million gallons of renewable fuels annually—and more than 2.5 billion gallons of gasoline. That translates into a $15 billion outflow of Wisconsin’s wealth to pay for fuels produced elsewhere. On the flip side of that is the potential inflow associated with biofuels. The administration estimates capturing 10 percent of the bio-industry market could add more than $13 billion to the state’s economy.

That won’t be achieved without facing some stiff competition. On the same day that Doyle delivered his budget address to the Legislature, former Iowa Governor Tom Vilsack, a recent entrant into the 2008 presidential sweepstakes, was telling a public policy organization in San Francisco that U.S. national security is tied to development of alternative fuels.

Vilsack had a hand in making Iowa the leading state for renewable energy production. With its abundant corn, it’s the top ethanol producer and ranks third in wind-energy production, outdone only by the giants California and Texas.

Iowa’s current governor used his state budget message last month to talk about efforts to turn his state into the “energy capital of the world.”

The Wisconsin goal may be a bit more modest. Here, Governor Doyle offered the prospect that, “With new technology, and a commitment to renewable fuels, Wisconsin can lead the way—reducing global warming and helping this nation kick its addiction to foreign oil.”—Dave Hoopman

EDITORIAL
by Perry Baird

A Banner Year

The banner that has hung for the past several years above the entrance to Rock County Electric Cooperative Association’s (RCECA) annual meeting declares, “Welcome, we appreciate you, our members.”

This April, as members file under the sign to attend a gathering hosted by RCECA, there will be a notable difference: far more members to be welcomed than before.

With several pen strokes on February 6, leaders of the cooperative consummated a deal that nearly tripled the Janesville-based utility’s membership roster. Rock County Electric Co-op formally bought from Alliant Energy the territory and facilities of South Beloit Water, Gas and Electric—a purchase involving $24 million, two-and-a-half years, a morass of regulatory obstacles, and the addition to the Janesville-based co-op of nearly 10,000 residential and commercial electric and natural gas customers in four northern Illinois counties.

RCECA Chairman Stan Dybevik called the two-year run-up to the acquisition “the most exciting and interesting period” since the co-op’s inception in 1936. It might not be overstating things to comment that the successful transaction marks a turn for the electric industry itself.

Nervous Laughter

My very first issue of this publication as editor—October 1987—featured a main story detailing how a Colorado investor-owned utility had failed in its aggressive move to take over a neighboring electric cooperative. Drawing national attention, the attempted buyout attracted a co-op task force of 120 volunteers from around the country—several from Wisconsin—who traveled to Colorado to help turn back the sale by energizing co-op members to vote down the proposition.

It was a time when such takeover threats caused electric cooperatives nationwide to keep a vigilant eye on companies that might make a play for new customers.

In the midst of this concern, I recall hearing Sheldon Petersen, then a regional representative of the electric co-ops’ Cooperative Finance Corporation (CFC), make an off-the-cuff remark to co-op leaders that his lending institution stood ready to loan electric cooperatives money for the purpose of buying out facilities of investor-owned utilities. Most who heard him laughed; the statement then seemed little more than a fanciful joke, so preoccupied were the cooperators in simply protecting their existing service territories.

Non-predatory

But circumstances in the succeeding two decades—including unsuccessful nationwide experiments in deregulation, failed attempts at retail competition, and catastrophic results from allowing Enron and others to impact energy markets—have perhaps changed some attitudes in the utility industry. Far from the predatory type of actions we reported 20 years ago, this most recent deal was a relatively straightforward case of a utility announcing it wanted to sell its Illinois territory, and Rock County Electric Co-op bidding and buying.

Rock County Electric Co-op CEO Shane Larson is now able to credit CFC with making good on that early, seemingly unrealistic offer to finance the purchase of investor-owned utility assets. “They took care of us in a way that only another cooperative association could do,” Larson said of CFC’s involvement in the recent acquisition.

Most important to Larson and the RCECA board members, in keeping with their banner slogan, is that all co-op members—old and new—stand to benefit.

Who ever dreams of flying a plane or a spaceship? Who wants to know how such modes of transportation are built or how they handle? Who is interested in the history or future of flight? Who remembers World War II or likes to read or watch accounts of its air battles? Who just wants to go up, up, and away through the limitless sky?

Anyone answering “yes” to one or more of these questions—and this takes into account most everyone, young and old, male and female—would enjoy a visit to the Experimental Aircraft Association (EAA) AirVenture Museum in Oshkosh.

The EAA, which also sponsors the world’s largest aviation event (AirVenture, scheduled for Oshkosh’s Wittman Regional Airport, next to the AirVenture Museum, on July 23–29 this year), has put together a museum you’ll never forget. Visitors are treated to world-class displays and galleries that make aviation history come alive through a collection of more than 250 historic airplanes. Among some of the favorites are accurate replicas of Orville and Wilbur Wright’s “Wright Flyer” and Charles Lindberg’s “Spirit of St. Louis.”

Witness a piece of history at the Eagle Hangar, a tribute to World War II aviation. Among the warbirds on display is a replica of Richard Bong’s P-38 Lightning and a scale model of the aircraft carrier U.S.S. Enterprise. In the Aerobatics Gallery, visitors can take the controls in the MaxFlight Simulator or peer inside the replica of the globe-circling Voyager.

Get “hands on” at Hangar X, an exciting interactive gallery for kids of all ages. New exhibits include KidVenture Gallery, where youngsters can take the “Chopper Challenge,” make rocket fuel, and find themselves in a hang-glider sling or a hot-air balloon.

To take a break in gallery-hopping, spend time in one of the museum’s five movie theaters. And in the warmer months, take a ride in a vintage plane at Pioneer Airport, billed as a real working aerodrome right out of the “golden age” of aviation.

Bring your family or friends and see how the EAA AirVenture Museum can make your imagination take flight! Admission is good for all day, so you’re free to leave and return. Buckle your seatbelts; your flight of fancy is about to begin! —Linda Hilton

The EAA AirVenture Museum is located just off Highways 41 and 44, adjacent to Wittman Regional Airport south of Oshkosh. The museum is open daily except for New Year’s Day, Easter Sunday, Thanksgiving Day, and Christmas Day. Hours are 8:30–5 Monday through Saturday, 10–5 on Sunday. Pioneer Airport is open daily from Memorial Day through Labor Day and on Fridays, Saturdays, and Sundays in May, September, and early October. For further information, visit www.airventuremuseum.org or call 920/426-4848 (museum) or 920/426-4867 (Pioneer Airport). The web site also features a virtual tour of the museum.