When energy strategies go awry, individuals pay the ultimate price. Not just in the cost of electricity and gas, but also in the inconvenience and expense of living without. My wife just received this e-mail from her dad who is retired and living on the Northern California coast: “I have my generator primed and ready to go, plus the propane tank is full. Looks like the politicals really screwed up the power situation here. When the air conditioners go on in the next month or so, the lights will start going out.”
With a state that has essentially no generation reserves, the summer of 2001 looks particularly bleak for the state's 34 million citizens, and neighboring states are in no mood to assist. Up in Oregon, Bonneville Power Administration (BPA) has announced it will “do nothing for California that will adversely affect the reliability of the Northwest's electrical system, the Northwest's environment or BPA's financial health.”
You might recall that California's energy strategy required local utilities to divest much of their generation assets and to purchase electricity on a supposedly open market. Stage 3 emergencies, blackouts, price spikes and a utility bankruptcy followed.
Now, other states are reflecting on their own energy policies. States that modeled deregulation plans on the California model might yet figure out how to put Band-Aids on their deregulation plans and avert a similar fate. But maybe now would be a good time to bring out the drawing board and come up with Plan B.
I'm of the mind that the state of Wisconsin just might have a strategy worth exporting. Instead of forcing utilities to divest of generation, the state passed Wisconsin Act 9, which encouraged utilities to turn over transmission assets to a for-profit independent transmission company. I recently returned from a visit with José Delgado, who was named CEO of American Transmission Co. (ATC) in December 1999. I discovered that no utilities were forced to join the ATC. Although membership is voluntary, holding companies that transfer transmission assets to the ATC are granted liberalized limits in non-regulated investments, while retaining ownership shares of the transmission company. If, as planned, the company goes public, participating utilities will have the option of remaining invested in transmission or in selling their shares.
I've been digging back into the past, wondering why Wisconsin chose a different path. Here is my premise.
Remember back in the summer of 1997 when the Midwest had several nuclear plants out of service resulting in power outages? Wisconsin, a net importer of generation, discovered that under specific conditions, it had insufficient transmission to meet the needs of the state. Regulators responded by positively supporting Wisconsin utilities in building both transmission and generation. This support included rate hikes where justified. In 1998, for example, the Public Service Commission granted Wisconsin Electric Power Co. (WEPCO) a 12.3% increase to ensure the company would have the financial resources to properly maintain the reliability of the electric system.
Delgado told me that a transmission company only becomes a viable entity when it owns assets. So, based on that definition, the ATC went live Jan. 1, 2001, when the transmission assets of Alliant Energy East, Madison Gas & Electric, WEPCO, Wisconsin Public Power Inc. and Wisconsin Public Service Corp. were transferred to the limited liability company (LLC).
I'd like to review the status of just one ATC project. Load growth in downtown Milwaukee is being driven by a renaissance of sorts. Certain areas are in a redevelopment mode, while the downtown area is being reshaped into a major convention center. WEPCO already had proposed that the city loop the 138-kV system feeding downtown Milwaukee, and the ATC inherited the project along with WEPCO's existing transmission assets.
Having previously acquainted myself with the sordid details of outage-induced rebuilds in Chicago and New York, I was intrigued as to how the Milwaukee upgrade came about prior to unwanted national attention.
Delgado admitted the city did indeed have a near miss:
“Wisconsin Electric has one of the biggest co-generating facilities in the country located in downtown Milwaukee. This plant provides steam and electricity to the city. We had a stormy winter day in January 1996, when an event resulted in the city being islanded. We managed to balance generation and load for the most part. The lights didn't go out, but there were lights out. That was a real wake up call. We took a close look at our system and recognized that load growth would soon leave us unable to take lines out of service in the summer. We also realized that we could be in real trouble if certain critical circuits failed.”
WEPCO developed the plan and worked closely with Black & Veatch to design the facilities to upgrade the 138-kV downtown transmission system, with the intent to tie five major substations together with a series of high-pressure fluid-filled pipe-type cable circuits. The utility built a solid case for the upgrade and worked cooperatively to locate routes, address community concerns and coordinate construction activities.
Timing helped sell the project, as Delgado held the formal press conference in collaboration with WEPCO and city and county officials one day after a major outage hit downtown Chicago.
Ken Copp, director of engineering maintenance and construction at ATC, joined in on our discussion and provided me with additional details on the downtown redevelopment project. In total, the rebuild is costing somewhere in the neighborhood of US$37 million. ATC is holding down costs by installing a significant portion of the 5 miles (8 km) of steel pipe in city streets just ahead of scheduled city repaving.
Downtown Milwaukee already had several transmission lines coming in from the south, the west and the north. A robust 13-kV radial-distribution system had been relied upon to supply power to the city. Once the distribution system was fully loaded, action was necessary to meet second contingency criteria during summer months. Studies indicated that the most cost-effective solution would be to loop the 138-kV transmission supply system. The Harbor and Haymarket Square substations are each being retrofitted with a ring bus. Underground 138-kV pipe-type cables soon will tie the Harbor, Haymarket Square, Everett, Valley and Center substations together. The majority of cable runs consist of 1750 or 2000 kcmil copper conductors, sized to allow operators to shift load as maintenance schedules or outages demand. Siemens provided the circuit breakers, DisTran the substation equipment and structures, Okonite the cable and accessories, and Pirelli the pumphouse.
I asked Copp to provide a little perspective about what it was like to work for a transmission company. This is what he had to say:
“The bulk of the employees at ATC came from contributing utilities. None of us had additional training. We hit the ground running. If we didn't already have close contacts in the participating utilities, it would be very tough. We prize our independence, while we collaborate with participating utilities. We realize we must treat all our network customers the same. We've come to understand that contributing utilities are our customers, our contractors, our investors and our friends. I personally worked 29 years at Wisconsin Electric, and I still know a lot of people there. Every once in awhile our negotiations with our partnering distribution utilities get contentious, but we are committed to keeping our friendships alive as well.”
I'll be keeping a close eye on progress at ATC and at other forming transmission companies. If these transmission companies stick true to their commitment and provide nondiscriminatory access, we just might see the emergence of a successful Plan B.
Of course, success requires more than a good plan, it requires hard work and dedication to the task at hand.
Delgado sums it up this way, “We've found that transmission is the energy business link between generation and distribution. Transmission takes the longest to build, it is the most sophisticated, and it requires we stay ahead of the eight ball.”
Note: A “Decision Maker” article based on the interview with José Delgado begins on page 38 of this issue.