5-BS-256

Docket 5-BS-256 concerns the application by Wisconsin Public Service Corporation (WPSC) and Madison Gas and Electric Company (MGE) to acquire, own, and operate the Red Barn Wind Energy Center, a 92 MW wind power project located in Grant County, Wisconsin. The project is being developed and constructed by a wholesale merchant (Allete Clean Energy), and the utilities will only acquire the facility after its construction is completed and commercial operation has begun. WPSC will acquire 90 percent (about 83 MW) and MGE 10 percent (about 9 MW) of the facility 1.

Because the project is under 100 MW, it does not require a Certificate of Public Convenience and Necessity (CPCN) and is not subject to the same construction and siting reviews as larger projects. Instead, the seller is responsible for obtaining all necessary local, state, and federal permits prior to and during construction. The utilities’ acquisition is subject to compliance with these permits and local ordinances, including noise, decommissioning, and setback requirements under Wisconsin’s wind siting rules 2.

The Public Service Commission evaluated the acquisition as part of the utilities’ efforts to transition to lower-carbon resources. Economic modeling by MGE and independent review by Commission staff found the acquisition to be a least-cost option compared to alternatives. The Commission approved the acquisition at a cost of $162 million (excluding AFUDC), with a process in place to review excess costs in the event of force majeure events such as those caused by the COVID-19 pandemic or supply chain disruptions 1, 3.

The Commission did not require an Environmental Assessment or Environmental Impact Statement for this acquisition, as the construction-related environmental reviews are handled by permitting authorities and the transfer itself is considered a Type III action under state administrative code 2.

Key events and scheduled submissions in the Red Barn Wind Energy Center proceeding include:

- March 29, 2021: Application filed with the Public Service Commission (PSC) by Wisconsin Public Service Corporation (WPSC) and Madison Gas and Electric Company (MGE) to purchase the Red Barn Wind Energy Center 1.
- May 4, 2021: Original Purchase and Sale Agreement (PSA) for the Red Barn project executed between buyers and seller 2, 2.
- April 15, 2021: Supplemental information provided to the PSC as Appendix E to the application 3.
- December 1, 2021: Commission authorization and written order targeted/received to allow applicants to proceed 1.
- January 2022: Notification to Allete Clean Energy (ACE) to proceed with the project and execution of the operations and maintenance agreement 1.
- Early 2022: Construction scheduled to begin 1, 4.
- December 31, 2022: Target date for commercial operation of Red Barn to qualify for 80% production tax credits 1, 1, 1.
- February 15, 2022: PSC final decision issued, authorizing acquisition at $162 million, excluding AFUDC 2.
- March 8, 2022: First amendment to PSA executed 2, 2.
- June 3, 2022: Second amendment to PSA executed 2, 2.
- January 18, 2023: Third amendment to PSA executed 2, 2.
- December 19, 2022: Seller requests schedule relief due to force majeure events (COVID-19 impacts and supply chain issues) 2, 2.
- March 1, 2023: Fourth amendment to PSA executed to address schedule impacts from force majeure events 2, 2.
- March 4, 2023: Amendment with ACE signed to document contract milestone date changes resulting from turbine equipment delays 2.
- April 3, 2023: Force majeure notification and updated schedule information submitted to the PSC 2.

This timeline outlines the key regulatory filings, contractual milestones, and major project schedule adjustments.

The docket identifies several key areas of growth and outlines important considerations for each:

1. Renewable Energy Transition
- WEC's Generation Reshaping Plan (GRP) aims to replace older, high-carbon generation with renewable resources like wind and solar. The Red Barn Wind Energy Center is highlighted as a significant step in this broader strategy.
- Key considerations: The transition is expected to save customers over $1 billion in 20 years, help meet carbon reduction targets (WEC: 70% by 2030, MGE: 65% by 2030 from 2005 levels), and maintain high electric reliability. Decisions are influenced by improvements in renewable technology, favorable interest rates, and available tax credits, providing both cost benefits and a hedge against future fossil fuel price volatility and carbon regulation risks 1, 1, 2.

2. Capacity Needs Due to Asset Retirements
- MGE is projected to need over 250 MW of new capacity by 2024 because of planned retirements of legacy generating units and expiring power purchase agreements.
- Key considerations: The addition of Red Barn and similar projects is intended to fill this capacity gap with clean energy sources, supporting both system reliability and environmental goals 1.

3. System Load Growth
- Both WEC utilities forecast modest load growth from 2021 to 2030, followed by flat demand for the rest of the study period.
- Key considerations: Load growth is not a significant driver of new capacity; instead, the main factor is the replacement of retiring coal and gas units. Modeling allows for generic units or market capacity to be considered, optimizing future portfolio decisions 3.

4. Economic and Regulatory Environment
- The economic modeling considered uncertainties such as fuel prices, capital costs, technology changes, and regulatory factors. The cost-effectiveness of renewables is currently supported by technological advances, stable/low interest rates, and federal tax credits.
- Key considerations: Renewables provide protection against fuel price swings and potential future carbon regulations, with the expectation that these factors contribute to long-term customer savings 1, 2.

5. Environmental and Siting Considerations
- The project acquisition process includes compliance with local, state, and federal environmental permitting but does not require a full environmental assessment or impact statement due to the project's size and acquisition structure.
- Key considerations: The seller is responsible for all construction and environmental permits; after acquisition, the utilities must adhere to ongoing permit requirements and are subject to complaint processes for operational compliance 4, 5, 6.

In summary, the docket focuses on growth in renewable generation, capacity replacement due to retirements, modest load growth, economic/regulatory dynamics, and environmental compliance as primary areas of consideration for the utilities’ future planning.

The primary financial and timeline risks and concerns discussed in the Red Barn Wind Energy Center docket include:

Financial Risks:
- Cost overruns due to force majeure events, such as the COVID-19 pandemic, supply chain disruptions, and inflation affecting component and material costs. The seller (Allete Clean Energy) submitted a force majeure notification seeking cost and schedule relief for these impacts, prompting a tentative agreement on a cost increase to maintain the original project schedule. The Commission approved acquisition costs at $162 million, with provisions for potential recovery of additional costs in future rate cases if justified by a force majeure event 1, 2.
- Ratepayer exposure to financial risk during construction is mitigated by structuring the acquisition so that the utilities only take ownership after construction is complete and commercial operation has commenced. This arrangement aims to protect ratepayers from risks associated with construction delays, cost overruns, or permitting issues 3, 4, 5.

Timeline Risks:
- The force majeure claim specifically cited the need for cost and schedule relief due to pandemic-related disruptions and inflation. The utilities and seller tentatively agreed to a cost increase to preserve the original schedule, targeting in-service operation by the end of 2022 1.
- There is an explicit requirement that the seller must construct and operate the facility before transfer, with the utilities only acquiring the asset upon commercial operation. This approach is meant to reduce the utilities’ direct exposure to timeline risks during the construction phase 4, 5.

Overall, the docket highlights that while financial and timeline risks do exist (mainly from external factors like supply chain issues and inflation), the acquisition structure and Commission oversight are designed to minimize utility and ratepayer exposure to those risks. Any excess costs directly attributable to force majeure events are subject to further review in future rate cases rather than being automatically accepted 2, 1.

The stakeholders in the Red Barn Wind Energy Center docket (5-BS-256) include:

- Wisconsin Public Service Corporation (WPSC) and Madison Gas and Electric Company (MGE): Joint applicants seeking approval to purchase the Red Barn Wind Energy Center. They support the acquisition proposal 1.

- Allete Clean Energy: Intended builder and seller of the project; supportive as they stand to sell the completed facility to WPSC and MGE 1.

- Renew Wisconsin: A renewable energy advocacy group, submitted comments supporting the project, commending its process and noting the lack of discernible opposition during siting approval 1.

- Citizens Utility Board (CUB): Intervened in the proceeding and expressed concerns about the analytical rigor of the application, recommending the commission require more information in support of the project to ensure consistency with the public interest. CUB does not outright oppose, but is skeptical and calls for more diligence 2.

- Local residents and landowners (e.g., Linda Grice): Some individuals have petitioned to reopen the docket, citing concerns about health impacts, insufficient community notification, and the need for updated wind siting research. These stakeholders oppose the current approval and call for a pause until further research and community engagement occur 3.

- Grant County/local government: Responsible for siting approval and issued the necessary conditional use permits. The local government has approved the project's siting, making it generally supportive 1.

Summary of positions:
- For the acquisition proposal: WPSC, MGE, Allete Clean Energy, Renew Wisconsin, Grant County/local government.
- Against or expressing concerns about the proposal (or its process): Citizens Utility Board (analytical rigor), some local residents/landowners (health, notification, research concerns).

No evidence of organized opposition from local authorities; resident opposition centers around procedural and health impact arguments rather than siting per se.