Subsidies for Distributed Generation

Background:

Over the years, investor-owned utilities in Wisconsin have built a statewide system of electrical generation and distribution that has served the needs of residential, industrial and commercial customers with low-cost, reliable power. This infrastructure, largely financed with private investment capital, earns a fair rate of return subject to strict rate regulation from the Public Service Commission.

Billions of dollars of private investment has been deployed to meet the energy needs of our individual homes, our communities and our growing economy. Utilities have also invested shareholder dollars to meet renewable energy mandates and increasing environmental standards.

Some are now suggesting that ratepayers and investors subsidize unregulated energy production that would operate on the infrastructure our investments built over decades.

Issue:

Utilities incur both variable costs and fixed costs. Variable costs differ depending on consumption and include fuel, maintenance and often purchased power costs. Fixed costs are associated with the underlying investment in capital assets such as power plants and distribution systems. Traditionally utilities recovered most of their fixed and variable costs through a rate structure based on consumption.

Now, some customers are generating their own power, selling excess power back to the utility and using utility power when their system falls short. In both cases they rely on the comprehensive electrical infrastructure developed by investor-owned utilities over decades.

  •  Infrastructure – All customers should be responsible for a reasonable share of the fixed costs associated with providing and distributing electrical power. Rate structures need to be modified to ensure that infrastructure costs are shouldered by all who use the system.
  • Purchase Power – Utilities should be free to purchase power at market rates to ensure that customers who don’t generate their own electricity and investors aren’t forced to subsidize distributed generation.
  • Consumer Fairness – Low-cost, reliable power is a benefit to all consumers. Laws and regulations should not be used to unfairly force the majority of consumers to subsidize those who choose to generate their own power.

Subsidizing non-regulated third party generation would overcharge ratepayers, hurt individual investors, and reduce the ability of the PSC to ensure reliable energy at a fair cost.

 

05/15