AFP Wisconsin Sounds The Alarm On Bid-Free Contracts For New Electricity Infrastructure

by | Nov 14, 2023 | It's the Economy, Stupid

Another assault on free markets

The Wisconsin chapter of Americans for Prosperity (AFP), a free-market advocacy group, has submitted testimony and issued a call to action against Senate Bill 481. This bill, if approved, would allow only existing, incumbent power providers to bid on projects to expand transmission lines in Wisconsin—a vital expansion of infrastructure to ensure reliable power service in and through the state.

AFP Wisconsin noted the anti-competition nature of this bill in its legislative testimony, saying:

Senate Bill 481would eliminate competition for building new large, regional transmission lines in Wisconsin, by only allowing current, incumbent companies to build these projects. Said in other terms, Senate Bill 481 increases costs for Wisconsin families and businesses, by eliminating the benefits of free market competition such as consumer-friendly financing packages that can include cost caps on overruns and delivering projects on time.

The group notes that Wisconsin state law allows a utility to earn up to a 10.52 percent “return on equity” for any new electrical line built. Return on equity is a fancy term for net profit, after the company puts out the expenses involved in building lines. Competitive bidding includes this number on any projects pitched for approval by the Midcontinent Independent Service Operators (MISO).

Why would the legislature approve a bill that disincentivized the competitive bid process? As AFP points out in its legislative testimony, a previous competitive bid to MISO for an electrical infrastructure project included a 9.8 percent “return on equity.” That bid resulted in costs $1.2 million lower per mile, a 26 percent savings.

SB 481 would eliminate several companies from competitively bidding on these types of infrastructure projects, costing ratepayers—and taxpayers—more money.

The question is: Why?

Less Competition = Higher Bills

According to AFP, proponents of the bill say it will save Wisconsinites money because incumbent service operators have built in savings; they also say incumbents provide more reliability in their construction projects.

As AFP notes, incumbents can submit competitive bids on any infrastructure project they wish, and let the chips fall where they may. It doesn’t make sense to arbitrarily remove capable entities from the pool of potential candidates to construct these projects.

The reliability argument, it seems, is a red herring. After all, every bid to MISO goes through a rigorous approval process to ensure reliability of the end product, as well as realistic goals in the bid.

AFP Wisconsin has set up a website, RatepayerRobbery.com, where residents can go to email their legislators asking them to oppose SB481. It reads, in part:

Email Your Legislator

Wisconsin businesses and families will see higher bills. Tell Legislators to stop ROFR legislation.

Senate Bill 481/470 Right of First Refusal (ROFR) legislation creates barriers to entry and locks in monopoly control of electric transmission construction. This means that any company not already providing transmission services in the state will be blocked from competing for construction of new regional transmission lines.

Eliminating competition leads to increased costs for businesses and families, while eliminating the benefits of cost caps and schedule commitments that free market competition brings.

In this era of Bidenflation, when the cost of everything from food to gas to utilities has skyrocketed, creating more anti-market, anti-competition public policy that leads to higher costs makes no sense. Instead of following the example of the Biden administration, and its massive expansion of the regulatory state, Wisconsinites would instead benefit from a rejection of these monopoly-protecting types of legislation. Costs will go down, liberty will expand, and markets will remain healthy, if Wisconsin chooses to allow the competitive bid process to continue.

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