State to study rising coal price: Energy regulators also will examine rail delivery disruptions

WISCONSIN - State energy regulators will investigate the impact that the rising price of coal and disruptions to rail deliveries are having on Wisconsin utilities and electric rates.

The state Public Service Commission announced it will study the rising cost of transporting coal used to power Wisconsin power plants coming from the Powder River Basin in Wyoming.

The state's utilities saw higher costs of about $50 million last year because of disruptions caused train derailments last spring in Wyoming. Those derailments caused fewer shipments of coal, leading utilities to conserve coal and rely more heavily on natural gas-fired power plants rather than coal plants.

But the impact of the derailments could extend far longer because the railroads still are not finished fixing the tracks that were damaged last year and because the higher price of transporting coal is driving up the price as utilities negotiate new long-term deals.

"The first thing we need to do is understand how big the problem is," said Dan Ebert, commission chairman. "We know the costs have escalated as a result of the supply disruptions... but the significant challenge is going to be the new contracts that are escalating in a very significant way."

Several state utilities, including We Energies of Milwaukee, Wisconsin Power & Light Co. of Madison and Wisconsin Public Service Corp. of Green Bay, received approval last year to bill customers at a later date for the higher costs they're facing because of the supply disruptions.

The commission also issued a final report concerning the need for new interstate power lines. The commission said that because of rising electric rates, the state should move cautiously before approving expensive new transmission projects.

"The current construction cycle in Wisconsin has placed strong upward pressure on rates," the report says. "Electric rates that are not competitive with other states in the region will have adverse economic development impacts in Wisconsin."

Any project that comes before the commission should have a thorough cost-benefit analysis and should take into account regional planning for new transmission lines in surrounding states, the report says.

"I call it the Goldilocks and Three Bears rule of transmission," commissioner Mark Meyer said. "How much transmission is too much, how much transmission is too little, and how much transmission is just right?"

Meyer hopes the commission's review "will help us find the 'just right' in new transmission," he said.

Pewaukee-based American Transmission Co. will move forward with plans to develop a 35-mile, 345,000-volt power line between Illinois and south central Wisconsin, said Mark Williamson, the company's vice president of major projects.

The line to Illinois, which would extend from southeastern Dane County through Rock County to the Illinois border, would cost $69 million.

In an analysis last year of American Transmission's proposals, the commission said the benefits of building a power line to northeastern Iowa didn't appear significant enough to justify spending $352 million to build a 149-mile line.

In its final report, the commission said all the lines proposed ATC need more rigorous analysis and review.