Electricity and natural gas prices in Wisconsin far outpaced the rate of inflation over the last decade, with the sharpest spikes coming over the last five years, an Associated Press review found.

 

Wisconsin's five largest utilities have asked state regulators for nearly $1.4 billion in annual electric and natural gas rate increases since 1995, with $921 million of that coming since 2000. The state Public Service Commission has approved $810.7 million of those requests, including $690 million since 2000.

Utility and industry experts blame a combination of new power plant construction, high-priced power imported from other states and volatile natural gas rates.

"Yes, rates have absolutely gone up this year and it's been very frustrating for me as a commissioner," said PSC chairman Dan Ebert. "But at the end of the day, these are costs we can't just say no to. If we want reliability and we want the lights to go on, we've got to make the tough decisions."

Marcus Rizer, a 48-year-old Beloit telephone repairman, thinks he's just getting ripped off. His home electric bill was $140 in December, $30 more than the same time in 2004. He's tired of cutting back on vacations and eating out so he can pay his bills.

"The CEOs in this whole country, these guys don't care," he said. "We don't go anywhere no more like we used to. It's hard to save for something like that when you got these clowns. They do all the vacationing."

But Barry McNulty, a spokesman for We Energies, which provides power to much of southeastern Wisconsin, said the state's energy infrastructure needs improvements and utilities are at the mercy of natural gas suppliers.

"All of those things come to confluence and have an impact," McNulty said. "I can't expect people on the street to necessarily know."

The AP reviewed data compiled by the Energy Information Administration, the statistical arm of the U.S. Department of Energy, and records of the Public Service Commission, which regulates state utilities.

The Energy Information Administration portion of the review found that over the last decade, Wisconsin's residential energy customers have seen a 49 percent increase in electric prices and a 74 percent increase in natural gas prices. Businesses pay at least 36 percent more for electricity now than in 1995 and 94 percent more for natural gas.

Inflation over the last decade, meanwhile, has grown 22 percent in the five-county Milwaukee area, the only Wisconsin metro area where the federal government tracks the consumer price index.

The natural gas spikes reflect national trends. From 1995 through 2004, rates in every sector rose by at least 75 percent across the country.

Wisconsin's electric rates, however, easily outpaced national averages. The biggest percentage increase in any sector nationally over the decade was 13 percent.

Until the late 1990s, Wisconsin had some of the lowest energy rates in the Midwest. Natural gas was relatively cheap until then and utilities held off building new plants as states considered deregulation, said Dan Schoof, Ebert's executive assistant.

Around 1997, consumers started plugging in more home computers and air conditioners, creating more demand for electricity.

Utilities responded by launching the first improvements to the state's energy infrastructure in 10 years, covered by ratepayers. The utilities chose to build natural gas-fired power plants because gas was cheap and burns cleaner than coal, giving utilities a cushion if pollution standards tightened in the future.

"At the time those decisions were being made here in Wisconsin, they made absolute economic sense," Ebert said.

But what sounded good then created steeper bills for today's consumers as natural gas prices skyrocketed, leading to higher electric bills.

Utilities are still building, and that means higher bills as they recover their costs. Since 1997, the PSC has approved nearly $6 billion in projects to deliver more than 7,000 megawatts of new electricity - enough juice to power more than 2 million homes - and about $961 million in transmission projects and upgrades.

We Energies is building a $2.1 billion coal-fired complex in Oak Creek, outside Milwaukee. In 2005 the company finished building the first of two gas-fired generators in Port Washington. That project will run about $644 million by the time it's done.

Green Bay-based Wisconsin Public Service Corp., which serves much of northeastern Wisconsin, is building a $750 million coal-fired plant in Weston. The project marks the utility's first new plant construction since the early 1980s, said David Kyto, the company's rate case director.

"If we want to keep the lights on, we need to build plants," Kyto said.

Exacerbating the need for new construction is the high price of imported power. Utilities ship in about 15 percent of the state's electricity and all its natural gas because Wisconsin's aging plants don't produce enough electricity to meet demand, and the state has no natural gas sources.

"We can't survive by continuing to do that," Kyto said.

The biggest driver of high energy bills is natural gas. According to PSC data, increases in natural gas prices accounted for 64 percent of the $714.5 million in requested rate increases before the PSC in 2005 alone.

PSC spokeswoman Linda Barth stressed that the commission regulated only the portion of natural gas bills that pay for administration and upkeep of utilities' gas distribution systems. Over the last decade, that portion of natural gas costs has increased 28 percent.

The price of the commodity itself has gone up 165 percent, according to PSC figures.

"You're totally at the mercy of an unregulated market," said Bob Norcross, administrator of the PSC's gas and energy division.

Tancred Lidderdale, an Energy Information Administration analyst, said natural gas production has increased only about 10 percent nationally over the last 15 years, not enough to meet rising demand for electricity produced by natural gas. Searching out new sources of natural gas has grown more expensive as well.

Ebert said the commission tries to hold the line. The PSC has kept the rate of return, another term for profit, of Wisconsin's major investor-owned utilities hovering around 11 percent to 12 percent all decade, according to commission data.

Rates should level out a bit as utilities complete their construction projects, Ebert said, but there's little the commission can do about rising natural gas prices.

Erin Dammen, a spokeswoman for Madison-based Alliant Energy, said don't look for natural gas prices to drop because supply can't keep up with rising demand.

"Higher prices could be here to stay," she said.

That's not what Damaris Salazar wants to hear. The 29-year counselor's natural gas heating bill for her Milwaukee duplex is about $500 a month, she said. Last year her highest bill was $350.

She doesn't think her bill will go down soon.

"I'm hoping these months go super fast," she said.

Published: January 30, 2006