BEFORE THE
PUBLIC SERVICE COMMISSION OF WISCONSIN
Application of Wisconsin Power and Light Company
For Authority to Adjust Electric and Natural Gas Docket No. 6680-UR-116
Rates
DIRECT TESTIMONY OF MICHAEL J. VICKERMAN
ON BEHALF OF RENEW WISCONSIN
Q. Please state your name, occupation, and address.
A. My name is Michael J. Vickerman. I am Executive Director of RENEW Wisconsin, an organization whose directors and members support expanding the use of locally available renewable energy resources to meet the state's power needs. RENEW is located at 222 S. Hamilton St., Madison WI 53703.
Q. Please describe your professional qualifications?
A. Under my direction RENEW has advocated, and mobilized political support for, several pro-renewable policies adopted in the last 10 years, including the establishment of Wisconsin’s Renewable Portfolio Standard and a public benefits fund dedicated in part to renewable energy sources. I have been involved with many issues relating to renewable electricity, ranging from broad policy mandates and customer-driven green pricing programs to such technical issues as renewable energy credit trading and windpower permitting ordinances. I was RENEW’s representative on the statewide Task Force on Energy Efficiency and Renewables, which Governor Doyle convened in September 2003, and served as co-chair of the Renewables Workgroup. In that capacity I developed and negotiated several renewable energy policy recommendations for consideration by the full Task Force. These were: (1) a successor Renewable Portfolio Standard (RPS) that would result in a 10% renewable energy content by 2015 and (2) a State of Wisconsin commitment to source 20% of the electricity it uses from renewable energy sources. Both recommendations were included in a consensus package of proposed policy changes that were subsequently incorporated into a bill (SB459) that passed the Legislature and was signed into law in March 2006 (2005 Act 141) .
I have written and defended testimony in several PSC proceedings in recent years, including We Energies’ 2007 rate case (05-UR-1030, Madison Gas & Electric’s 2007 rate case (3270-UR-115), Wisconsin Power & Light’s application to build the Cedar Ridge wind energy installation (6680-CE-171), We Energies’ application to build the Blue Sky Green Field wind energy installation (6630-CE-294), Forward Wind Energy’s application to build a 200 MW wind energy installation (9300-CE-100), We Energies’ 2005 rate case (05-UR-102), Wisconsin Public Service Corporation’s 2005 and 2006 rate cases (6690-UR-117 and 6690-UR-118), and Wisconsin Power & Light’s 2005 and 2006 rate cases (6680-UR-114 and 6680-UR-115).
RENEW has been providing services under contract to Focus on Energy’s Renewable Energy program since its launch in March 2002. The services I provide to Focus on Energy include reviewing requests for financial incentives to underwrite the development of customer-sited renewable energy installations in Wisconsin.
Q. What is the purpose of your testimony?
A. The purpose of my testimony is to discuss the company’s proposed solar, wind and biogas energy buyback rates in the context of promoting customer-sited renewable generation facilities. Wisconsin Power & Light (WPL) proposes to acquire wind- and biogas-generated electricity at a price of 9.2 cents/kWh fixed over 10 years and solar electricity at a price of 25 cents/kWh fixed over the same duration.
Q. What are the estimated production costs for biogas and wind energy systems above 20 kW?
A. The data from Focus on Energy-funded wind and biogas energy systems in the past two years give us a clear picture of production costs. For biogas systems up to 500 kW installed this year, the break-even number is now 11 cents/kWh. Between 500 kW and one MW, the system cost drops to 10 cents/kWh. With respect to wind energy installations up to 100 kW, the break-even cost ranges from 18 to 25 cents/kWh range. For a 900 kW wind energy system, the production cost drops to 14 cents per kWh. These estimates are exclusive of federal renewable energy tax credits.
Q. Do you believe that the proposed tariffs will lead to the additional supplies of renewable distributed generation serving WPL?
A. At 9.2 cents, the biogas rate could result in new installations at dairy farms or food processing facilities, but only if the developer succeeds in attracting enough external funding from federal and state sources to cover the difference. Without a U.S.D.A Section 9006 grant or a Focus on Energy incentive in hand, the proposed rate is not likely to amortize a new 500 kW installation over its term.
As for the proposed wind tariff, I am skeptical that it could provide sufficient stimulus for leveraging independently owned installations, even with external funding. The gap between the rate and the system’s production costs is simply too great. It would take either exceptional fundraising talent on the part of the prospective wind turbine owner or a significant disinterest in cash flow to go forward with an installation through the tariff as proposed.
Q. Do you support WPL’s proposed solar electric buyback rate?
A. Yes I do. If approved WPL’s proposed solar tariff will spur additional installations in its territory, which help the utility manage its peak loads more effectively. Certainly that has been the experience with We Energies (WE) and Madison Gas & Electric (MGE). Customer installations of solar electric systems have increased dramatically in both WE and MGE territory since the utilities began offering solar specific rates. WE’s 22.5 cents/kWh rate took effect in January 2006, while MGE’s 25 cents/kWh hit the streets in January this year. The amount of solar electric capacity leveraged by WE’s solar rate is in the neighborhood of 600 kW. At MGE, about 200 kW of solar capacity has been applied for. Relative to other utilities, WE and MGE are attracting a disproportionate share of Wisconsin’s solar electric installations, a phenomenon that can only be explained by their solar buyback rates.
Q. Does the proposed solar tariff fit your definition of an Advanced Renewable Tariff?
A. It does in every way except for the price. Like a true Advanced Renewable Tariff, it is a fixed offering over a specified period of time that does not increase with higher retail rates. The solar tariff is certainly not based on utility avoided costs. However, it is not, by itself, high enough to capture the production costs of a typical photovoltaic installation. According to data gathered from Focus on Energy-funded PV installations, the tariff would have to be at least double that amount in order for the system owner to recoup the investment over a 10-year period. However, that estimate does not factor in the effect of federal tax credits, Focus on Energy incentives, or accelerated depreciation. When those external economic benefits are added on top of WPL’s proposed buyback rate, the overall package starts to approach the break-even point over a 10-year period, especially for larger-scale systems serving for-profit customers.
. Q. Is there a need for additional information on WPL’s renewable energy tariffs?
A. Yes. WPL has not indicated whether it will consider money paid to its renewable energy-producing customers as taxable income. With respect to those customer-generators that currently provide electricity to WPL under the utility’s net energy billing tariff, the utility has a policy of disclosing to the Internal Revenue Service any payments made to those customers. Customers who receive a Form 1099-MISC from WPL are legally obligated to include those payments as part of their taxable income. But not all utilities report these payments to the Internal Revenue Service. Those that don’t include WE, MGE, and Wisconsin Public Service (WPS). If WPL intends to send 1099-MISC forms to its renewable energy-producing customers, it should disclose that that information in the tariff language. I can easily imagine the irritation customer-generator would experience when he or she learns that their return on investment is suddenly subject to federal and state taxes. An even better approach would be to discontinue that practice. Judging from the prevailing practice at WE, MGE and WPS, there appears to be no need for WPL to penalize its customer-generators in this fashion.
Q. Does this complete your direct testimony?
A. Yes, it does.
From formal testimony submitted to the Public Service Commission of Wisconsin on August 11, 2008, by Michael Vickerman on behalf of RENEW Wisconsin:
In my testimony I will survey the windpower prospects under development by independent power producers (IPP’s) in the parts of Wisconsin served by WPL. This information will include an estimate of their annual production (in the aggregate) as well as the current permitting and interconnection status for each prospect. The second half of my testimony outlines RENEW’s concerns with WPL’s proposal to co-fire biomass at Nelson Dewey 3.
Open the attachment for complete testimony.