The Northwoods Policy Network (NPN) is continuing the analysis of recent legislation from Senator Quinn and Representative Gustafson concerning large energy users like AI data centers and policies to reduce costs for ratepayers while meeting the demand of critical technological growth. Last week, NPN discussed the first part of bill pertaining to companies supplying their own energy infrastructure. Today’s topic concerns issue two: stranded assets.
Keep Energy Sources Online For Their Full Lifecycle
This should be a priority facing uncertain demand growth from AI, societal electrification, and manufacturing reshoring efforts
Ratepayers Are Facing Hikes
With expenses rising quickly for Wisconsin families and businesses, paying utility companies a profitable margin on retired power plants is wasteful
Future Protection for Changes
Some worry that AI is another economic bubble. Should the industry someday experience shock, stranded asset expenses would far exceed the current $1 billion
Recent analysis from Wisconsin Watch found that Wisconsin’s ratepayers are on the hook for $1 billion of retired power plants owned by utility companies. This debt is still charged to, with a rate of return on equity, to ratepayers even though they are no longer receiving any benefit or electricity from them. As firms continue to explore build outs of new energy sources across the spectrum, ratepayers will increasingly find themselves paying for what they no longer have and what they have now.
This legislation simply removes the ability for utilities to recover returns on these retired electric generating facilities. NPN finds this to be an extremely strong first step in addressing Wisconsin’s energy portfolio and affordability.
Further, Wisconsin could look to states like Wyoming and Utah where retired, or soon-to-be retired, plants are required to be sold on the marketplace. Here, large users like data centers could entertain purchasing and existing power plant to produce the energy they need today, with no cost increase on ratepayers, as they build out future energy sources.
There is some disagreement on why this stranded asset issue has become so large and expensive. Some believe utilities overleveraged coal investments that became expensive and inefficient. Our analysis, and that of others, is that a large part of these costs came from these companies upgrading their plants to accommodate new environmental standards and carbon capture technologies. After these upgrades, companies quickly divested and pivoted towards other generation sources like natural gas, solar, and wind.
There is skepticism surrounding the true demand for AI, data centers, and reindustrialization. As we covered, this bill allows firms to bring their own power outside of the traditional grid. If companies do not, or cannot, build out their own power sources it will be on the incumbent utility provider. Should the AI bubble actually burst someday, Wisconsin’s ratepayers would be on the hook for all that infrastructure. The stranded asset provision of this legislation would ensure that ratepayers are insulated. A great formula for local and county governments would be ensuring their grid and ratepayers are not negatively impacted from expansion, now and in the future, while also welcoming tens of millions of new tax revenue to relieve property taxpayers and sustain or expand services.
Ultimately, these converging issues make Wisconsin less competitive and less affordable. Wisconsin policymakers and its regulators need to work diligently to ensure ratepayers are paying for what they are actually getting, that our rates attract investment opportunities, and that we look to the future to ensure price certainty and stability.
Next, NPN will review the permit transparency portion of this legislation, creating a publicly accessible dashboard for permit statuses. Permitting dashboards are showing great promise in states like Virginia. We’ll explore how and why Wisconsin would benefit from a similar policy.
