Is The Wisconsin Bill Really Hiding A Secret Bonanza For Energy Companies?

February 23, 2011 6:13 a.m.

While most of the attention over the last few weeks has been on the parts of Wisconsin Gov. Scott Walker’s budget bill that would strip most state workers of their collective bargaining rights, some have started to sound the alarm about another provision in the bill, one allowing the state to sell the power plants it owns.

A blogger at Daily Kos calls it “The Koch Brothers’ End Game in Wisconsin.” A blogger at, who appears to have been the first to call attention to the provision, calls it “a highlight reel of all of the high-flying slam dunks of neo-Gilded Age corporatism: privatization, no-bid contracts, deregulation, and naked cronyism.” The local NBC affiliate in Milwaukee says the “budget bill could payoff big for one of Governor Walker’s biggest campaign contributors.”

So is there really a hidden bonanza for the Koch brothers and other energy companies tucked into this bill? People with knowledge of Wisconsin’s energy issues contacted by TPM say not so much.The provision in question reads as follows:

16.896 Sale or contractual operation of state−owned heating, cooling,
and power plants. (1) Notwithstanding ss. 13.48 (14) (am) and 16.705 (1), the
department may sell any state−owned heating, cooling, and power plant or may
contract with a private entity for the operation of any such plant, with or without
solicitation of bids, for any amount that the department determines to be in the best
interest of the state. Notwithstanding ss. 196.49 and 196.80, no approval or
certification of the public service commission is necessary for a public utility to
purchase, or contract for the operation of, such a plant, and any such purchase is
considered to be in the public interest and to comply with the criteria for certification
of a project under s. 196.49 (3) (b).

The state of Wisconsin owns several dozen power plants, most of which are used to power government facilities and the University of Wisconsin infrastructure. And while some have raised questions about the general language of the provision, and the no-bid aspect, no one reached by TPM suggested anyone stood to make very much money by buying these plants.

“When you actually zero in on this particular issue, I can see where people who don’t like Walker and don’t like his budget ideas would probably say that,” David Hoopman, who works on regulatory affairs for the Wisconsin Electric Cooperative Association, told TPM. “But to take it the next step and say that this is a bonanza waiting to happen for private business, I think is a bit of stretch.”

“If I were an independent power producer, I don’t know if I would come swooping in,” he added.

Charlie Higley, executive director of the Citizens Utility Board, which “fights for reliable and affordable electricity and telephone service on behalf of Wisconsin customers,” echoed Hoopman.

“There’s all sorts of people that are worried about this,” Higley said. “I’m less worried about it the more I look at it.”

One group that did raise issue with the provision is the Customers First! Coalition, a “broad-based alliance representing Wisconsin customer, environmental, labor, business and low-income groups,” which wrote a letter to Walker last week asking for “a more thorough evaluation of the value of the state’s power assets and a comparison of whether state or private ownership is in the best interest of the taxpayer” and more time to debate the issue.

Higley told TPM that many of the plants owned by the state are old, coal fired, and some may soon fall out of environmental compliance, while others have already done so. The University system in particular relies on these plants to provide steam heat, according to Higley, and no one has yet figured out a good way to update the system.

“It’s going to take a case by case analysis to figure out whether the campuses can do something else,” he said. Higley praised the Senate finance committee for adding an amendment to the provision that calls for a cost-benefit analysis of any sales.

Hoopman, meanwhile, suggested that the idea behind the provision was for the state to “round up some cash.”

“There’s not to me an obvious reason why this wouldn’t work, but I think you’d have to look at it in the context of each plan individually,” he said.

Something else also suggests that the provision is not a new secret plot being executed by the Koch brothers through Walker — a similar provision has actually come up in a Wisconsin budget before. In 2005, the following provision was included in the state budget, only to be vetoed by then Gov. Jim Doyle (D):

16.896 Sale or contractual operation of state−owned heating, cooling, and power plants and wastewater treatment facilities. (1) Except as provided in 2005 Wisconsin Act …. (this act), section 9101 (4), and notwithstanding ss. 13.48 (14) (am) and
16.705 (1), no later than April 1, 2007, the department shall sell each state−owned heating, cooling, and power plant and wastewater treatment facility or shall contract
with a private entity for the operation of each such plant or facility for the period beginning no later than April 1, 2007. Notwithstanding ss. 196.49 and 196.80, no
approval or certification of the public service commission is necessary for a public utility to purchase, or contract for the operation of, such a plant or facility.

When this year’s provision first came up a few weeks ago, the Milwaukee Journal Sentinel reported that it’s “unclear what the market value of the plants would be today. The Fiscal Bureau analyzed the facilities in 2005 and estimated the value of the 34 plants at $235.9 million, offset by $83.9 million in debt.”

According to the Journal Sentinel, when Doyle vetoed the 2005 provision, he said a requirement to sell all the facilities “regardless of individual circumstances, feasibilities and benefit-cost economics is not a good business approach.” Higley points out that the language of the provision has been softened. Instead of saying the state “shall” sell the facilities, it now says the state “may” sell them.

Higley suggests the overall idea isn’t about profit at all, but about political ideology..

“It comes from the idea that the state shouldn’t be owning power plants and things,” Higley said. “If you will, kind of a Republican idea.”

Jennifer Feyerherm, of the Sierra Club in Madison, told the Journal Sentinel something similar.

“How the governor thinks he can put lipstick on that pig and sell huge financial and environmental liabilities to someone else, good luck,” Feyerherm said. “Bottom line, those plants need to be cleaned up.”

Additional reporting by Ian Power-Luetscher

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