Jun. 11--Think Wisconsin's power plant and power line building boom is nearly done?

Think again.

Wisconsin has spent billions on new power plants and new power lines, but utilities have plenty more projects in mind for the next decade.

That includes the likely addition of new major power plants by We Energies, Wisconsin Public Service Corp. of Green Bay and Wisconsin Power & Light Co. of Madison, between now and 2015 -- not including the coal-fired power plants already under construction. Add to that at least $3 billion more spent on new and improved transmission lines by American Transmission Co., including major power lines in north central Wisconsin, Dane County and another link between Wisconsin and Illinois.

The result is that state ratepayers will continue to pay more due to upward pressure on electricity prices because of construction, with the hope remaining that some relief will come from the high cost of natural gas used to make electricity.

More plants may be needed

In separate question-and-answer sessions with the Journal Sentinel, executives from the four Wisconsin-based utility holding companies, American Transmission Co. of Pewaukee and two customer groups discussed key energy issues.

The utility executives agree that much has been done to avert the power reliability crisis that hit the state in the late 1990s. But they see a need to build even more power plants and transmission lines to meet demand that's rising by 2% a year.

Leaders of customer groups agree that more power plants may be needed, but ask whether energy efficiency and conservation can play a bigger role to hold prices down.

The talk of the continued need to build even more plants comes amid sharp jumps in electricity prices in recent years that have raised questions about the state's energy competitiveness. Wisconsin ranked lowest in rates among eight Midwest states as recently as the 1990s, but now ranks highest in residential rates, second highest in industrial rates and fourth-highest in commercial rates, according to federal Energy Information Administration data. The state Public Service Commission and utilities caution that price increases in other states could help the state's competitiveness. That includes rate increases that hit customers in Michigan earlier this year and will hit Illinois residents as soon as next year.

Following are excerpts of the Q-and-A sessions:

Q: What's the biggest issue your company and the state face when it comes to energy and electricity in particular?

Gale Klappa, Wisconsin Energy Corp.: Our biggest challenge is execution on the construction program (of new coal plants), and continuing to focus on customer satisfaction in a very difficult price environment. It's really the same challenge (for the state as a whole) that we're facing, because other utilities are needing to go build infrastructure, so basically it's going to be to execute on the construction plans that have been approved.

Larry Weyers, WPS Resources Corp.: The biggest challenge in Wisconsin for the next few years is to get our transmission system put in place, because with the Midwest Independent Transmission System Operator, MISO, we have access to a much larger regional resource of generation, if we just have the transmission capacity to get the energy in.

Besides that, we're going to have to decide what type of generation is going to be built in the future. Are we going to build more coal-fired plants in this state? Are we going to seek to build nuclear plants? Are we going to use more gas in the state?

Bill Harvey, Alliant Energy Corp. "The biggest challenge that still confronts our state is its transmission infrastructure. It has been deficient for decades. It is still deficient today. . . . The creation of the American Transmission Co., which is singularly focused on development of transmission infrastructure in the state of Wisconsin was a great institutional step in the right direction, but ATC still has to go through the process of siting, certificating and building transmission infrastructure in this state.

I begin to perceive increasing levels of public resistance to that occurring.

And as an old guy that's been around this industry for a long time, I flashback very quickly to the early to mid-1980s where we saw the same sort of dynamic occurring: What happened in response to that dynamic . . . was everybody threw up their hands and said the heck with it: It's impossible to get meaningful levels of new transmission built in this state. I hope that doesn't happen again, because the needs of the state have been obvious for decades, and it's going to take a lot of courage on the part of American Transmission Company, a lot of courage on the part of Wisconsin regulators and elected officials to stay the course to getting the infrastructure built in this state that's been so sorely needed for so long.

Gary Wolter, MGE Energy Inc. The biggest challenge is the infrastructure challenge, and infrastructure in constructing plants and constructing transmission and those challenges include how to get it approved, how to finance it, rate impacts, the siting questions, environmental, so there are a lot of subsets to the challenges and then getting them built so they can operate, which is huge also.

So I think both on the generation and the transmission side, we have those infrastructure challenges, and we also have the regulatory challenges of an entirely new market -- sorting the MISO market out so it works for the state of Wisconsin.

Jose Delgado, American Transmission Co.: The biggest thing is that we proceed in looking forward. It is very easy to get stuck in the moment. But if you don't act now you have to forecast the consequences.

We are in a market network. It used to be that it wasn't. Since transmission has opened there is market, in Wisconsin. We need to be better connected, and we need to be able to move energy around, so there's more options. Whenever you have options, you can control your costs better.

Charlie Higley, Wisconsin Citizens' Utility Board: It's the rising cost of producing electricity from conventional means, and then right behind that is the shock of new infrastructure -- utilities proposing to build new facilities. Tightly woven with that are rising prices for fossil fuels. The cost of energy, the cost of electricity and then the cost of the infrastructure: Those are going to continue to be concerns going forward. We're in a rising cost era and we're all going to see more plans by utilities for power lines and power plants.

Todd Stuart, Wisconsin Industrial Energy Group: It's cost and rates and what we do with conservation and efficiency to help blunt or help mitigate the rate impacts. Energy policy seems to swing from going between one ditch to another -- you're only in the middle as you're careening toward each side. Ten years ago we were worried about reliability and now that we're starting to build to meet energy demands and reinforce system reliability, now we've got to bear that cost. . . . We need to have reliability, but we need to do it in a way where our rates are cost-competitive.

Q: What do you think Wisconsin consumers may not understand or you would like them to understand about rising energy costs in general, or rising electric rates in particular:

Klappa, Wisconsin Energy: I don't think customers understand that we've absorbed all day-to-day cost increases. With our rate agreement with the commission we're not going to change base rates through 2007. That is a major effort to improve the efficiency and effectiveness of the corporation.

And then on fuel, we have -- because of the policy decisions that were made by the state in the '90s -- we've become overly reliant on imported power from natural gas, and because these construction programs take so long, there's no near-term fix. We can't begin to fix that until '09 and 2010 (when the new coal-fired power plants in Oak Creek open). But we're on the way to fixing it.

Weyers, WPS Resources Corp.: Customers need to fully understand that rates have been rising for the past five years in Wisconsin because we are in an expansion program where we're building new generation and new transmission to serve our reliability needs in the future. Those construction programs are going to be coming to an end, at least for our company, very soon. In 2008, we will complete Weston 4 (power plant) and the Arrowhead-Weston transmission line. The upward pressure on rates will be relieved to some extent."

Harvey, Alliant:

Electric customers have gotten a double whammy over the course of the last four years. They're paying for new bricks and mortar as a part of the utility rate base and they're paying substantially increased costs for both fuel for those plants and purchased power that's bought in the wholesale marketplace. That's why we've seen what we've seen happen to Wisconsin rates over the last several years. That comes on the heels of the state having been an extraordinarily low-cost provider of electricity.

Wolter, MGE Energy: In any construction cycle over the last 40 years you've had significant increases when you're building infrastructure. We do what we can to mitigate those consequences, but frankly we're seeing across the country, we're seeing more increases (in other states). We hope we get through the cycle and get back to those periods we've had from the mid-'80s to mid-'90s where your rates are more or less flat and certainly a lot less than inflation. That's where we all would like to get to.

Delgado, ATC: We have to make sure that in the environment of rising fuel prices we have options that on the average reduces our costs. We have always done that -- through efficiency, through the diversity of fuel, the ability to move energy around. If you think short term you make some very stupid decisions in this business. Some people say when costs are going up, don't invest. In this business you can't do that. When the costs go up you do invest so you have a better day. You've got to have a better day, and if you don't invest, all you're doing is floating up and down like a cork in the ocean.

Higley, CUB: We kind of dodged the bullet this past winter that it was milder than expected, that made a big difference on natural gas heating bills, the electric bills are a lot more difficult -- there is outcry about the growing electric bills but it's also kind of like a shrug of the shoulders because people have a hard time knowing how to deal with that. How can they fight back? So that's one reason why we're here to help with that fight.

Stuart, WIEG: The biggest thing people don't understand is that there's no free lunch -- that energy policy rarely is right on -- totally balanced. . . . My members are looking for ways of controlling those costs.

Do we need to build in certain areas? Can we conserve more? Can we use alternative financing mechanisms? The way we purchase fuel -- is that being done in the most prudent way possible -- we've got to give hard analysis to everything. Are the utilities' organizations as lean as possible? Are they conserving as much as they can? Those are the questions we've got to ask.