eLab Accelerator 2019
Financial Tools Supporting Coal to Clean in Wisconsin
Project Objective
Develop a deeper understanding of the mechanics of coal securitization.
Identify stakeholder perspectives and the key questions each of our organizations have about a coal-to-clean transition in Wisconsin.
Work together to develop an understanding of the potential role of securitization and other financial tools to address stakeholders' needs in a coal-to-clean transition. Likely to include, but not limited to:
- Develop a deeper understanding of the mechanics of coal securitization.
- Identify the components of a potential “grand bargain” (i.e., what needs to be true in order for securitization and/or other financial tools to be a viable solution for coal plant retirement in Wisconsin?)
- Identify other financial tools or approaches that address stakeholders’ needs.
Understand where and why it is important to work together moving forward, and develop next steps.
Team Members
- Elizabeth Katt Reinders, Sierra Club, Beyond Coal Deputy Director, Champion
- Corey Singletary, Citizen Utility Board, Financial Analyst, Ratepayer Advocate
- Scott Blankman, Clean Wisconsin, Director of Energy Program, Environmental Advocate
- Michael Bates, Wisconsin Public Service Commission, Financial Analyst, Utility Commission
- Ron Lehr, Consultant, Former Commissioner (CO)
- Richard Stasik, WEC Energy Group, Director, Regulatory Affairs, Utility
- Michael Greiveldinger, Alliant, Managing Attorney, Utility
- Uday Varadarajan, RMI, Principal, Energy Finance, Content Expert
- Todd Stuart, Wisconsin Industrial Energy Group, Executive Director, Large C&I advocate
Project Description
The challenge for Wisconsin is how to manage an equitable coal to clean transition that addresses the utilities’ desire for recovery of their coal plants’ undepreciated balances while minimizing cost impacts on ratepayers. We ask whether securitization (or other financial tools) may be a viable and broadly applicable solution.
Progress Made to Date
Pre-Accelerator
Thus far, there has been active communication and collaboration on the topic of securitization in one-to-ones and between small groups, involving environmental advocates, ratepayer advocates and industrial groups in the State. These discussions have been centered on securing interest, developing a common understanding and generating support for exploring the viability of securitization as a tool for transitioning Wisconsin’s electricity sector.
There is a willingness of the committed stakeholders to work together to explore the viability of securitization. Utilities are open to this discussion and are demonstrating a desire to be proactive rather than reactive to dealing with uneconomic coal assets. In addition, there is an existing Environmental Trust Financing Law in Wisconsin that is ‘securitization-like’ legislation. This law creates a unique opportunity for Wisconsin to explore securitization as a financial tool that addresses the risk associated with undepreciated plant balances and to more rapidly transition away from coal.
Post-Accelerator
At eLab Accelerator, the Wisconsin team (comprised of utilities, regulators, ratepayer advocates, environmental groups, and content experts) explored the feasibility and broad applicability of a set of financial tools to accelerate the retirement of uneconomic coal plants in the State. The team collectively identified the core components of any financial solution necessary for broad stakeholder buy-in. There was general consensus that securitization meets these criteria with capital reinvestment, and the team decided to focus their efforts on pursuing it as a tool that utilities can use to help address their uneconomic coal plants. The team committed to working together in the coming months to advance securitization in Wisconsin, including economic modeling, broader stakeholder engagement, and identifying required legislative actions.
Project Background Information
While coal generation dropped to 30% across the United States in 2018, Wisconsin’s electricity remains close to 60% coal, with higher electricity prices than neighboring states. Over the last 5-10 years, inefficient coal plants in Wisconsin have closed due to environmental controls. However, the larger, jointly owned and well-controlled coal units remaining have significant undepreciated balances.
The newly appointed governor in Wisconsin has announced plans to join the US Climate Alliance, in parallel to broad discussions circling around 100% clean energy resolutions. This change in the political economy along with low gas prices and competitive renewables is increasing the political and financial pressure in Wisconsin to retire legacy assets and transition the energy sector.
The challenge for utilities in Wisconsin is how to manage an equitable coal-clean transition that enables the remaining co-owned coal plants to recover investments made on the existing undepreciated balances. This is further complicated given that retiring these plants is dependent on balancing the financial situations of multiple utilities. Solutions need to be palatable to all stakeholders – including utilities, shareholders, communities, industry and ratepayers.
The team will be seeking to further understand and unpack the feasibility of securitization, as well as explore other potential financial tools that would support this transition for stakeholders.