Wisconsin Forges Grid Model

Fortnightly Magazine - December 1999
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Transco law opens the door to munis and co-ops.

As the electric industry awaits a final rule from the Federal Energy Regulatory Commission on regional transmission organizations, Wisconsin has moved to create its own stand-alone transmission company, or transco.

In the process, Wisconsin will allow grid-dependent utilities to get a piece of the action.

The Legislation. On Oct. 27, Wisconsin Gov. Tommy Thompson signed Assembly Bill 133, an omnibus budget bill that incorporated original Assembly Bill 389. AB 389, or "Reliability 2000," is a comprehensive legislative package that, among other things, will restructure the state's electric grid. The new law, introduced in June, will consolidate ownership, operation and maintenance functions of four transmission owners in eastern Wisconsin. Grid expansion is encouraged, as the law allows the governor to offer incentives to local communities where new lines are planned.

The transco eventually would transfer operational control to the Midwest Independent System Operator. Assembly Bill 389 makes it all possible by amending the "asset cap" in the state's public utility holding company act, which heretofore had barred Wisconsin holding companies from holding nonutility assets through affiliate companies exceeding 25 percent of total utility company assets.

Under the carrot-and-stick approach in the new law, utilities will transfer both grid facilities and any associated deferred tax reserves. Thus, assets are transferred in a neutral way - at net book value. In return, the compensation for the utility is stock in the new company.

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