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Tuesday, March 25, 2014

City of Milwaukee Explores Energy Independence

Could it pull the plug on We Energies?

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The city of Milwaukee is exploring becoming energy independent—not just by reducing its electricity use and increasing its renewable energy portfolio, but perhaps by severing ties with We Energies.

The discussions are very preliminary right now, but last week a Common Council committee requested a study on its options, a request that will come before the full council on April 2.

Committee members discussed the wisdom of sending millions of dollars each year to We Energies, whose primary energy source is coal, when electricity rates are increasing far faster than inflation.

And although the city has reduced its energy consumption in the past decade, it’s paying more for electricity because We Energies, like all investor-owned utilities in Wisconsin, is a regulated monopoly that is guaranteed by the state’s Public Service Commission to earn a profit through a guaranteed markup on the electricity it sells. Therefore, critics claim, We Energies has no incentive to encourage users—whether it’s a homeowner or a large consumer like the city—to become more energy efficient.

Matt Howard, the director of the Office of Environmental Sustainability, told the Shepherd the energy independence discussion is part of the city’s broader goal of reducing its energy use by 20% by 2020 and increasing its reliance on renewable energy to 25% by 2025, a vision outlined in the ReFresh Milwaukee sustainability plan, released last December.

“The long-term issue is that rates are going to continue to go up, and we have a utility—and in general in this state have utilities—that rely primarily on fossil fuels that they ship in from other states and from Canada,” Howard said. “And those fossil fuels are facing increasing demands from other states as well. So the long-term outlook is that we are going to continue to see rates go up.”

 

Firehouse Electricity Rates Spiked 87% in a Decade

Driving the discussion is the best use of the taxpayers’ dollar.

According to data presented to the Public Works Committee last week, the city paid We Energies $16.7 million for electricity in 2013.

In 2005, the city paid We Energies $11.8 million for 168 million kilowatt hours (kwh). In 2012, it spent $14.2 million for 156 million kwh, or a 20% rate hike despite a 6.9% reduction in electricity usage. That’s because the average rate city government paid rose from 0.07 per kwh in 2005 to 0.091 in 2012, a 29.1% increase.

Even worse, some Milwaukee-owned facilities are subject to higher rates. For example, firehouses pay the small business electricity rate, which has increased an eye-popping 87% since 2003.

“That’s a hell of a lot more than the property tax has gone up,” Alderman Robert Bauman, chair of the Public Works Committee, told the Shepherd.

Although the city is a government entity, it pays We Energies’ commercial rates and isn’t allowed to negotiate rates with the utility, even though it’s a huge consumer. Nor is the city allowed to shop around and purchase energy from another utility.

What’s more, Bauman said We Energies isn’t helping the city grow, and pointed to its lack of support for the streetcar development.

“They basically have become an enemy of economic development in this city,” Bauman said.

So the committee voted to take matters into their own hands and commissioned a study on the legal and regulatory issues involved in becoming energy independent, as well as renewable energy options the city can harness.

Does that mean that Milwaukee might own its own utility?

“No comment,” Howard told the Shepherd.

Cathy Schulze, spokeswoman for We Energies, didn’t seem to be too threatened by the city’s exploration of energy independence.

“I think whether the city wants to go off the grid should be determined by what is the best option for taxpayers,” Schulze said. “It would seem unlikely that the city could generate its own electricity at a cost that would be competitive with We Energies.”

Bauman said he was open to the city creating its own utility, although it would be difficult.   

“We Energies has made sure that it’s very difficult legally at this time,” Bauman said.

But he said that the rising cost of energy, and the city’s dependence on We Energies, means that it’s worth exploring “because at this point there are no viable alternatives.”

 

Water Works Might Go Solar

Howard from the environmental sustainability office said that Wisconsin provides a “smorgasbord” of options for utility ownership, from private investor-owned utilities such as We Energies to those owned by a municipality or a co-op.

For example, WPPI Energy, based in Sun Prairie, is a regional, not-for-profit power company with 51 locally owned electric utilities that provides electricity to 200,000 homes and businesses in Wisconsin, Upper Michigan and Iowa. Members include Cedarburg, Hartford, Jefferson and Oconomowoc; in 2013, it expected to meet almost 40% of its power supply from carbon-free resources, such as solar, wind and biogas.

But even if the city didn’t set up its own utility, the state makes it difficult for renewable energy producers to earn a return on its investment. For example, one route toward energy independence is generating electricity through solar or wind, and then selling excess energy to the local utility’s grid to offset costs. But Howard said state law requires utilities to purchase only a very small amount of this sold-back energy at retail rates. That decreases the small producer’s incentive to generate excess electricity to reduce its costs.

So-called third-party generation isn’t allowed in Wisconsin, either, although it’s permitted in other states. This model allows, for example, a solar power producer to set up a system, then lease it to consumers, allowing them to lock in long-term rates and potentially buy the system. The third party is able to take advantage of a 30% federal tax credit and pass the savings along to consumers.

Other options are worth exploring, Howard said. Since the Water Works is the city’s largest energy consumer, the city just completed an assessment of its water facilities for potential solar generation on site.

“That might be a good marriage for a larger solar installation,” Howard said. “And they probably need all of that energy so we wouldn’t be in the situation of not getting any money from selling excess energy to the grid.”

Howard said the city has seen a big benefit from changing its stoplights to LEDs, with energy savings around 75%. He said streetlights are being converted to LEDs as well, with some popping up in the Third Ward and Bay View. He added that increasing the city’s use of renewable energy would also spur job development.

“We know that every dollar that we spend on renewable energy installations in the city of Milwaukee is a dollar that we spend on a job for a Wisconsinite,” Howard said. “That same adage is applicable across the state. We don’t have any fossil fuels in Wisconsin and we spend about $12 billion a year bringing that in. Why not spend a portion of that on renewable energy systems that are built, shipped, run and installed by Wisconsinites?”

Bauman said he’d like to see more solar and wind generation on city-owned sites as well, such as the city-owned property at Century City, or additional wind turbines erected at the Port of Milwaukee.

“I think all of this should be on the table and all of this should be explored,” Bauman said. “Would it be cost-effective? I don’t know. Is it possible that we could end up paying more per kilowatt than we pay now? Maybe. But we want to know all of that.”