1
WIEG’s 2005 Spring Energy Conference Wisconsin’s Competitive Position
A.J. (Nino) AmatoPresident, WIEG, Inc.
April 27, 2005
A Business Partnership for A Reliable A Business Partnership for A Reliable and Cost Competitive Energy and Cost Competitive Energy
EnvironmentEnvironment
Wisconsin Industrial Energy Wisconsin Industrial Energy GroupGroup
2
WI’s Competitive position – 1997-2004
8 State Regional Comparison Factors behind $767 Million in rate
increases in Wisconsin: 1998-2003 Rates of Return Comparison
3
Industrial Rates (cents/kWh)
Source: U.S EIA Electric Sales & Revenue, Electric Power Monthly
4.91 4.914.74 4.73 4.7
4.39 4.39
4.14
4.97
3.72
4.16
5.29
4.33
3.95
4.46
3.91
0.00
1.00
2.00
3.00
4.00
5.00
6.00
Michigan Wisconsin Ohio Illinois Minnesota Iowa Missouri Indiana
Eight Regional States
cen
ts/k
Wh
2004
1997Up 32% Up 9%
Up 11% Up 6%
4
Industrial Rates:Percent Change 1997 - 2004
-2%
6%
11%
9%
14%
32%
-11%
-1%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Michigan Wisconsin Ohio Illinois Minnesota Iowa Missouri Indiana
Per
cen
t C
han
ge
1997
- 2
004
5
Commercial Rates (cents/kWh)
Source: U.S EIA Electric Sales & Revenue, Electric Power Monthly
Eight Regional States
7.73 7.667.51
7.22
6.80
6.32 6.29
5.86
7.847.67
7.93
5.60
6.61
6.236.04 6.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Michigan Ohio Illinois Wisconsin Iowa Minnesota Indiana Missouri
Cen
ts/k
Wh
2004
1997Up 29%
Up 3%Up 1% Up 4%
6
Commercial Rates:Percent Change 1997 - 2004
-10%
-1%
-5%
29%
3%1%
4%
-2%
0.1%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Michigan Ohio Illinois Wisconsin Iowa Minnesota Indiana Missouri
Per
cen
t C
han
ge
1997
-200
4
7
Residential Rates (cents/kWh)
Source: U.S EIA Electric Sales & Revenue, Electric Power Monthly
9.1 9.06
8.51 8.478.06
7.327.06
6.88
8.218.57
10.43
8.63
7.236.94 7.09
8.55
0.00
2.00
4.00
6.00
8.00
10.00
12.00
Wisconsin Iowa Michigan Illinois Ohio Minnesota Indiana Missouri
Eight Regional States
Cen
ts/k
Wh
2004
1997
Up 32%Up 10%
Up 11%Up 5%
8
Residential Rates:Percent Change 1997 - 2004
32%
10%
-0.2%
-18%
11%
5%
-0.4%-2%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Wisconsin Iowa Michigan Illinois Ohio Minnesota Indiana Missouri
Per
cen
t C
han
ge
199
7 -
2004
9
Factors Behind $767 Million in Rate Increases 1998-2003
Source:Public Service Commission of Wisconsin
Indeterminate18%
ATC13%
Nuclear6%
NOX2%
Employee Benefits1%
Conservation 1%
Depreciation3%Reliability
3%
O&M3%
Y2K3%
Fuel48%
10
Survey of Rates of Return
According to the Public Utilities Fortnightly (2004), a survey conducted of 26 states regarding rates of return indicated that Public Service Commissions approved highest returns on investment for these states since 1998 excluding Alabama
11
Rate of Return Comparison – Wisconsin Utilities
Source:Major Rate Decisions, Jan 1990 – Dec 2004
Electric Utility Industry Average MG&E WEPCO WPL WPSYear Return on Equity (ROE) ROE ROE ROE2004 10.70% 11.50% 11.50%2003 11.00% 12.00% 12.7%(*) 12.00% 12.00%2002 11.20% 12.30% 12.00% 11.50%2001 11.10% 12.30% 12.30%2000 11.40% 12.90% 12.10%1999 10.80% 12.20%1998 11.70% 12.20% 12.10%1997 11.40% 12.20%
Average 1997-2004 11.16% 12.18% 12.37% 12.10% 11.92%
(*)WEPCO under a rate freeze; ROE in 2003 associated with two new coal plants
12
Changes in WPL Bills Since 1995
Source: PSCW Commission, 2005
13
Residential Bills for Various Utilities to date
Source: PSCW Commission, 2005WPL 2005= current; WPL Proposed = Rate case filed with PSCW
14
Commercial Bills for Various Utilities
Source: PSCW Commission, 2005
15
Industrial Bills for Various Utilities
Source: PSCW Commission, 2005
16
Governor Doyle’s Grow Wisconsin Plan, September 2003
Focus on four key areas: Create a Competitive Business Create a Competitive Business
ClimateClimate Invest in People Invest in Wisconsin Businesses Reform Regulations and Make
Government Responsive
17
Governor Doyle’s Grow Wisconsin Plan – September 2003
Safeguard reliable, low cost energy and the environment A low cost, reliable, environmentally sound
energy policy is the cornerstone of economic growth and job creation in Wisconsin
That policy must balance the need for additional investment in our infrastructure with the need to protect our competitive rate structure, while enhancing conservation and renewables efforts
18
Need for Regulatory & Legislative Reforms
Strengthen the Ethical Standards and Regulatory Procedures of the PSCW
Strengthening PSCW Regulatory Oversight as Wisconsin’s consumer protection agency
Improving Economic Retention for Wisconsin Industry
19
Wisconsin Industrial Energy Group
Energy Ratepayers Bill of Rights