Chapter 196

196.485(1)(gm) (gm) “Transmission dependent utility” means an electric utility that is not a transmission utility and that is dependent on the transmission system of another person for delivering electricity to the electric utility’s customers.

196.485(1)(h) (h) “Transmission facility” means any pipe, pipeline, duct, wire, line, conduit, pole, tower, equipment or other structure used for the transmission of electric power as determined by the public service commission on the basis of factors for identifying a transmission facility that are specified in the orders of the federal energy regulatory commission under 16 USC 824d and 824e.

196.485(1)(i) (i) “Transmission utility” means a cooperative or public utility that owns a transmission facility in this state and that provides transmission service in this state.

196.485(1)(j) (j) “Transmission utility security holder” means a person that is a security holder of a transmission company, is an investor-owned transmission utility in the transmission area and has contributed its transmission facilities to the transmission company.

196.485(1)(k) (k) “Wholesale electric cooperative” means a cooperative that provides wholesale electric service to its members.

196.485(1m) (1m) Duty to provide transmission service.

196.485(1m)(a) (a) The duty of any electric utility that has contributed its transmission facilities to the transmission company to finance, construct, maintain or operate a transmission facility shall terminate on the date, as determined by the commission under sub. (2) (d), that the transmission company begins operations.

196.485(1m)(b) (b) After beginning operations, the transmission company shall, except for transmission service provided by an electric utility that has not transferred its transmission facilities to the transmission company, have the exclusive duty to provide transmission service in those areas in which transmission facilities have been contributed. The duty under this paragraph shall terminate on the date, as determined by the commission under sub. (2) (d), that the Midwest independent system operator begins operations, except that the duty shall revert to the transmission company if the transmission company withdraws from the Midwest independent system operator under sub. (3m) (b) 3. If the transmission company makes such a withdrawal, the transmission company shall assume any power or duty granted by state law before the withdrawal to the Midwest independent system operator.

196.485(1m)(c) (c) After beginning operations, the Midwest independent system operator shall, except for transmission service provided by an electric utility that has not transferred control over its transmission facilities to the Midwest independent system operator, and except as provided in par. (b), have the exclusive duty to provide transmission service in the transmission area and shall ensure that each transmission facility in the transmission area that is under its operational control is planned, constructed, operated, maintained and controlled as part of a single transmission system.

196.485(2) (2) Commission powers and duties.

196.485(2)(a) (a) By June 30, 2000, if a transmission utility has not transferred control over its transmission facilities to an independent system operator that is approved by the applicable federal agency or divested, with approval of the applicable federal agency and, for a public utility, the commission, its interest in its transmission facilities to an independent transmission owner, the commission shall, subject to pars. (am) and (ar), order the transmission utility to apply to the applicable federal agency to do one of the following:

196.485(2)(a)1. 1. Transfer control of the transmission utility’s transmission facilities to an independent system operator that has received the approval of the federal agency to operate in a region.

196.485(2)(a)2. 2. If the federal agency has not approved an independent system operator specified in subd. 1., transfer control over the transmission utility’s transmission facilities to an independent system operator that is intended to operate in a region.

196.485(2)(a)3. 3. If the transmission utility does not, or is not able to, to the satisfaction of the commission, transfer its transmission facilities to an independent system operator specified in subd. 2., divest the transmission utility’s interest in its transmission facilities to an independent transmission owner.

196.485(2)(am) (am) The commission may waive the requirement to issue an order against a transmission utility under par. (a) if each of the following is satisfied:

196.485(2)(am)1. 1. The transmission utility has filed an application with the applicable federal agency for approval to transfer control of its transmission facilities to an independent system operator or to divest its interest in its transmission facilities to an independent transmission owner.

196.485(2)(am)2. 2. The commission finds that the waiver is reasonably expected to result in a more expeditious transfer of control to an independent system operator or divestment of interest to an independent transmission owner than would result under an order issued under par. (a). In making a finding under this subdivision, the commission shall consider the need for a reasonably prompt transition period for the transfer of control or divestment of interest that ensures, to the maximum extent practicable, the continued reliability of the electric transmission system in this state.

196.485(2)(ar) (ar) The commission shall waive the requirement to issue an order against a transmission utility under par. (a) if the transmission utility shows, to the satisfaction of the commission, that a transfer of its transmission facilities to the Midwest independent system operator may have the effect of jeopardizing the tax-exempt status of the transmission utility or its securities under the Internal Revenue Code. A waiver under this paragraph shall be in effect until the commission determines that the proposed transfer does not have the effect described in this paragraph.

196.485(2)(b) (b) By June 30, 2000, the commission shall, except as provided in par. (bm), order each transmission utility in this state that is a public utility to identify and separately account for the cost of retail transmission service and to take all retail transmission service from an independent system operator or independent transmission owner.

196.485(2)(bm) (bm) The commission may issue an order under par. (b) after June 30, 2000, if the commission determines that a later date is necessary due to circumstances beyond the control of a transmission utility, including regulatory delays at the commission or applicable federal agency.

196.485(2)(bx) (bx) If the Midwest system operator fails to commence operations or ceases operations, the requirements of this section that apply to the Midwest independent system operator shall apply to any other independent system operator or regional transmission organization that is authorized under federal law to operate in this state. The commission shall require that any transfer of transmission facilities to such independent system operator or regional transmission organization satisfies the requirements of this section.

196.485(2)(c) (c) The commission has jurisdiction to do all things necessary and convenient to enforce the requirements of this section.

196.485(2)(d) (d) The commission shall determine each of the following:

196.485(2)(d)1. 1. The date on which the transmission company begins operations.

196.485(2)(d)2. 2. Whether the Midwest independent system operator has begun operations and the date on which such operations have begun.

196.485(3) (3) Independent system operator and independent transmission owner duties.

196.485(3)(a) (a) If an independent system operator that has control over transmission facilities in this state determines that there is a need for additional transmission facilities in this state, the independent system operator shall order any transmission utility that has transferred control over transmission facilities to the independent system operator to, subject to the requirements of ss. 196.49 and 196.491 (3), expand the portion of the electric transmission system that is in this state and under the control of the independent system operator or construct additional transmission facilities in that portion of the transmission system. An independent system operator may issue an order under this paragraph only if a transmission utility that is subject to the order is reasonably compensated for the costs incurred in complying with the order.

196.485(3)(b) (b) If an independent transmission owner determines that there is a need for additional transmission facilities in a portion of the electric transmission system of this state that consists of transmission facilities the interest in which has been divested to the independent transmission owner by a transmission utility, the independent transmission owner shall, subject to the requirements of ss. 196.49 and 196.491 (3), expand that portion of the electric transmission system or construct additional transmission facilities in that portion.

196.485(3)(c) (c) An independent transmission owner or an independent system operator shall operate transmission facilities over which it has control in a manner that does each of the following:

196.485(3)(c)1. 1. To the maximum extent practicable, eliminates advantages in electric generation, wholesale and retail markets that are otherwise related to ownership, control or operation of transmission facilities over which it has control.

196.485(3)(c)2. 2. Satisfies the reasonable needs of transmission users in this state for reliable, low-cost and competitively priced electric service.

196.485(3m) (3m) Transmission company.

196.485(3m)(a) (a) Duties.

196.485(3m)(a)1. 1. The transmission company shall do each of the following:

196.485(3m)(a)1.a. a. Apply for any approval under state or federal law that is necessary for the transmission company to begin operations no later than January 1, 2001.

196.485(3m)(a)1.b. b. Subject to any approval required under state or federal law, contract with each transmission utility that has transferred transmission facilities to the transmission company for the transmission utility to provide reasonable and cost-effective operation and maintenance services to the transmission company during the 3-year period after the transmission company first begins operations. The transmission company and a transmission utility may, subject to any approval required under federal or state law, agree to an extension of such 3-year period.

196.485(3m)(a)1.c. c. Assume the obligations of a transmission utility that has transferred ownership of its transmission facilities to the transmission company under any agreement by the transmission utility to provide transmission service over its transmission facilities or credits for the use of transmission facilities, except that the transmission company may modify such an agreement to the extent allowed under the agreement and to the extent allowed under state or federal law.

196.485(3m)(a)1.d. d. Apply for membership in the Midwest independent system operator as a single zone for pricing purposes that includes the transmission area and, upon a determination by the commission under sub. (2) (d) that the Midwest independent system operator has begun operations, transfer operational control of the transmission company’s transmission facilities to the Midwest independent system operator.

196.485(3m)(a)1.e. e. Except as provided under par. (b) 3., remain a member of the Midwest independent system operator, or any independent system operator or regional transmission organization that has been approved under federal law to succeed the Midwest independent system operator, for at least the 6-year transition period that is specified in the agreement conditionally approved by the federal energy regulatory commission that establishes the Midwest independent system operator.

196.485(3m)(a)1.f. f. Subject to subd. 4., elect to be included in a single zone for the purpose of any tariff administered by the Midwest independent system operator.

196.485(3m)(a)2. 2. The transmission company may not do any of the following:

196.485(3m)(a)2.a. a. Sell or transfer its assets to, or merge its assets with, another person, unless the assets are sold, transferred or merged on an integrated basis and in a manner that ensures that the transmission facilities in the transmission area are planned, constructed, operated, maintained and controlled as a single transmission system.

196.485(3m)(a)2.b. b. Bypass the distribution facilities of an electric utility or provide service directly to a retail customer or member.

196.485(3m)(a)2.c. c. Own electric generation facilities or sell, market or broker electric capacity or energy in a relevant wholesale or retail market as determined by the commission, except that, if authorized or required by the federal energy regulatory commission, the transmission company may procure or resell ancillary services obtained from 3rd parties, engage in redispatch activities that are necessary to relieve transmission constraints or operate a control area.

196.485(3m)(a)3. 3. Notwithstanding subd. 1. a., the transmission company may not begin operations until it provides an opinion to the commission from a nationally recognized investment banking firm that the transmission company is able to finance, at a reasonable cost, its start-up costs, working capital and operating expenses and the cost of any new facilities that are planned.

196.485(3m)(a)4. 4. If the transmission charges or rates of any transmission utility in the transmission area are 10 percent or more below the average transmission charges or rates of the transmission utilities in the transmission area on the date, as determined by the commission, that the last public utility affiliate files a commitment with the commission under sub. (5) (a) 2., the transmission company shall, after consulting with each public utility affiliate that has filed a commitment under sub. (5) (a) 2., prepare a plan for phasing in a combined single zone rate for the purpose of pricing network use by users of the transmission system operated by the Midwest independent system operator and shall seek plan approval by the federal energy regulatory commission and the Midwest independent system operator. A plan under this subdivision shall phase in an average-cost price for the combined single zone in equal increments over a 5-year period, except that, under the plan, transmission service shall be provided to all users of the transmission system on a single-zone basis during the phase-in period.

196.485(3m)(b) (b) Powers. The transmission company may do any of the following:

196.485(3m)(b)1. 1. Subject to the approval of the commission under s. 196.491 (3), construct and own transmission facilities, including high-voltage transmission lines, as defined in s. 196.491 (1) (f), in the transmission area or in any other area of the state in which transmission facilities that have been contributed to the transmission company are located. This subdivision does not affect the right or duty of an electric utility that is not located in the transmission area or that has not contributed its transmission facilities to the transmission company to construct or own transmission facilities.

196.485(3m)(b)2. 2. Subject to any approval required under state or federal law, purchase or acquire transmission facilities in addition to the transmission facilities contributed under sub. (5) (b) or purchase or acquire the right to provide transmission service over transmission facilities that it does not own.

196.485(3m)(b)3. 3. Subject to any approval required under federal or state law, withdraw from the Midwest independent system operator or any other independent system operator or regional transmission organization of which the transmission company is or becomes a member, if the commission determines that the withdrawal is in the public interest.

196.485(3m)(c) (c) Organization. The operating agreement, as defined in s. 183.0102 (13), of a transmission company that is organized as a limited liability company under ch. 183 or the bylaws of a transmission company that is organized as a corporation under ch. 180 shall provide for each of the following:

196.485(3m)(c)1. 1. That the transmission company has no less than 5 nor more than 14 managers or directors, except that the operating agreement or bylaws may allow the requirements of this subdivision to be modified upon a unanimous vote of the managers or directors during the 10-year period after the organizational start-up date or upon a two-thirds vote of the board of directors or managers after such 10-year period.

196.485(3m)(c)2. 2. That at least 4 managers or directors of the transmission company have staggered 4-year terms, are elected by a majority vote of the voting security holders and are not directors, employees or independent contractors of a person engaged in the production, sale, marketing, transmission or distribution of electricity or natural gas or of an affiliate of such a person.

196.485(3m)(c)3. 3. That, during the 10-year period after the organizational start-up date, each of the following is satisfied, subject to the limitation on the number of managers or directors under subd. 1.:

196.485(3m)(c)3.a. a. Each nontransmission utility security holder that owns 10 percent or more of the outstanding voting securities of the transmission company may appoint one manager or director of the transmission company for a one-year term, except that the requirements of this subd. 3. a. may be modified upon a unanimous vote of the managers or directors.

196.485(3m)(c)3.b. b. Each group of nontransmission utility security holders that, as a group, owns 10 percent or more of the outstanding voting securities of the transmission company may appoint one manager or director of the transmission company for a one-year term if the group has entered into a written agreement regarding the appointment and the group files the agreement with the transmission company, except that the requirements of this subd. 3. b. may be modified upon a unanimous vote of the managers or directors.

196.485(3m)(c)3.bg. bg. Each nontransmission utility security holder that makes an appointment under subd. 3. a. is not allowed to make an appointment under subd. 3. b. as a member of a group of nontransmission utility security holders.

196.485(3m)(c)3.br. br. Each nontransmission utility security holder that makes an appointment as a member of a group under subd. 3. b. is not allowed to make an appointment under subd. 3. a.

196.485(3m)(c)3.c. c. Each person that receives at least 5 percent of the voting securities of the transmission company under sub. (6) (a) 1. or 3. may appoint one manager or director of the transmission company for a one-year term if the person continues to hold at least a 5 percent equity interest in the transmission company during the one-year term and if the person does not make an appointment under subd. 3. a., b. or d.

196.485(3m)(c)3.d. d. Each transmission utility security holder may appoint one manager or director of the transmission company for a one-year term.

196.485(3m)(c)4. 4. That, during the 5-year period after the organizational start-up date, no public utility affiliate that contributes transmission facility assets to the transmission company under sub. (5) (b) and no affiliate of such a public utility affiliate may increase its percentage share of the outstanding securities of the transmission company prior to any initial issuance of securities by the transmission company to any 3rd party other than a 3rd party exercising its right to purchase securities under sub. (6) (a) 3., except that this subdivision does not apply to securities that are issued by the transmission company in exchange for transmission facilities that are contributed in addition to the transmission facilities that are contributed under sub. (5) (b) and except that the requirements of this subdivision may be modified upon a unanimous vote of the managers or directors.

196.485(3m)(c)5. 5. That, beginning 3 years after the organizational start-up date, any holder of 10 percent or more of the securities of the transmission company may require the transmission company to comply with any state or federal law that is necessary for the security holder to sell or transfer its shares.

196.485(3m)(d) (d) Commission jurisdiction. The transmission company is subject to the jurisdiction of the commission except to the extent that it is subject to the exclusive jurisdiction of the federal energy regulatory commission.

196.485(4) (4) Transmission utilities.

196.485(4)(a) (a) Except as provided in par. (am), a transmission utility may not transfer control over, or divest its interest in, its transmission facilities to an independent system operator or independent transmission owner unless, to the satisfaction of the commission, each of the following requirements is satisfied:

196.485(4)(a)1. 1. The independent system operator or independent transmission owner is the sole provider of all transmission service to all users of its transmission system in this state, including the provision of retail transmission service to users that are public utilities.

196.485(4)(a)2. 2. The independent system operator or independent transmission owner has authority over transmission facilities that is sufficient for the independent system operator or independent transmission owner to ensure the reliability of its transmission system.

196.485(4)(a)3. 3. The independent system operator or independent transmission owner has sufficient authority to carry out the duties specified in sub. (3).

196.485(4)(am) (am) Each transmission utility in the transmission area that is a public utility shall become a member of the Midwest independent system operator no later than June 30, 2000, and shall transfer operational control over its transmission facilities to the Midwest independent system operator. Each such transmission utility that has not contributed its transmission facilities to the transmission company shall elect to become part of the single zone for pricing purposes within the Midwest independent system operator and any phase-in plan prepared under sub. (3m) (a) 4.

196.485(4)(b) (b) A transmission utility that transfers control over its transmission facilities to an independent system operator shall, subject to the approval of the applicable federal agency, provide reasonable and cost-effective construction, operation and maintenance services to the independent system operator that are required for operation of the transmission facilities.

196.485(5) (5) Public utility affiliates.

196.485(5)(a) (a) Asset cap exception. Section 196.795 (6m) (e) does not apply to the eligible assets of a nonutility affiliate in a holding company system unless each public utility affiliate in the holding company system does each of the following:

196.485(5)(a)1. 1. Petitions the commission and the federal energy regulatory commission to approve the transfer of operational control of all the public utility affiliate’s transmission facilities in this state and in Iowa, Michigan, Minnesota and Illinois to the Midwest independent system operator.

196.485(5)(a)2. 2. Files with the commission an unconditional, irrevocable and binding commitment to contribute, no later than January 1, 2001, all of the transmission facilities that the public utility affiliate owns or operates in this state on October 29, 1999, and land rights, to the transmission company. A filing under this subdivision shall specify a date no later than January 1, 2001, on which the public utility affiliate will complete the contribution of transmission facilities.

196.485(5)(a)3. 3. Files with the commission an unconditional, irrevocable and binding commitment to contribute, and to cause each entity into which it merges or consolidates or to which it transfers substantially all of its assets to contribute, any transmission facility in this state the ownership or control of which it acquires after October 29, 1999, and land rights, to the transmission company.

196.485(5)(a)4. 4. Notifies the commission in writing that the public utility affiliate has become a member of the Midwest independent system operator, has agreed to transfer its transmission facilities to the Midwest independent system operator and has committed not to withdraw its membership prior to the date on which the public utility affiliate contributes transmission facilities to the transmission company under par. (b).

196.485(5)(a)5. 5. Petitions the commission and the federal energy regulatory commission to approve the contributions specified in subds. 2. and 3. and agrees in such a petition not to withdraw the petition in the event that the commission or the federal energy regulatory commission conditions its approval on changes that are consistent with state and federal law.

196.485(5)(b) (b) Contribution of transmission facilities.

196.485(5)(b)1. 1. A public utility affiliate may not contribute a transmission facility to the transmission company until the commission has reviewed the terms and conditions of the transfer to determine whether the transfer satisfies the requirements of this subsection and has issued an order approving the terms and conditions of the transfer. The commission may modify the terms and conditions of the transfer and take any other action necessary to satisfy the requirements of this subsection. An order under this subdivision that approves or modifies the terms and conditions of a transfer may allow a public utility affiliate to recover in retail rates any adverse tax consequences of the transfer as a transition cost.

196.485(5)(b)2. 2. The transmission company and a public utility affiliate that files a commitment to contribute transmission facilities under par. (a) 2. shall structure the transfer of the transmission facilities in a manner that satisfies each of the following:

196.485(5)(b)2.a. a. The structure of the transfer avoids or minimizes material adverse tax consequences to the public utility affiliate from the transfer and avoids or minimizes material adverse consequences on public utility rates that do not arise out of combining the transmission company’s facilities into a single zone in the Midwest independent system operator.

196.485(5)(b)2.b. b. To the extent practicable, the structure of the transfer satisfies the requirements of the Internal Revenue Service for a tax-free transfer.

196.485(5)(b)3. 3. The requirements under subd. 2. b. shall, if practicable, be satisfied by the transmission company’s issuance of a preferred class of securities that provides the fixed-cost portion of the resulting capital structure of the transmission company. The transmission company shall issue preferred securities under this subdivision on a basis that does not dilute the voting rights of the initial security holders relative to the value of their initial contributions.

196.485(5)(b)4. 4. If the transfer of transmission assets under this paragraph results in a capital structure of the transmission company in which the percentage of common equity is materially higher than that of the public utility affiliates who made the transfer, or if the cost of the fixed-cost portion of the capital structure of the transmission company is materially higher than that of the public utility affiliates who made the transfer, the public utility affiliates shall enter into a contract with the transmission company under which the public utility affiliates agree to accept from the transmission company a return on common equity based upon the equity rate of return approved by the federal energy regulatory commission and upon an imputed capital structure that assigns to a portion of the public utility affiliates’ common equity holdings an imputed debt return that is consistent with the requirements of this subdivision. A contract under this subdivision shall specify that the public utility affiliates shall be required to accept the return on common equity described in this subdivision only until such time that the federal energy regulatory commission determines that the actual capital structure and capital costs of the transmission company are appropriate and consistent with industry practice for a regulated public utility that provides electric transmission service in interstate commerce.

196.485(5)(b)5. 5. If, at the time that a public utility affiliate files a commitment under par. (a) 2., the public utility affiliate has applied for or obtained a certificate of public convenience and necessity under s. 196.491 (3) or a certificate under s. 196.49 for the construction of transmission facilities, the public utility affiliate shall do each of the following:

196.485(5)(b)5.a. a. Proceed with diligence with respect to obtaining the certificate and, except as provided in subd. 6., constructing the transmission facilities.

196.485(5)(b)5.b. b. If the commission determines that the cost of the transmission facilities is reasonable and prudent, transfer the transmission facilities to the transmission company at net book value when construction is completed in exchange for additional securities of the transmission company on a basis that is consistent with the securities that were initially issued to the public utility affiliate.

196.485(5)(b)6. 6. If the construction of a transmission facility specified in subd. 5. a. is not completed within 3 years after a certificate is issued for the transmission facility under s. 196.49 or 196.491 (3), the transmission company may assume responsibility for completing construction of the transmission facility. If the transmission company assumes responsibility for completing construction under this subdivision, the transmission company shall carry out any obligation under any contract entered into by the public utility with respect to the construction until the contract is modified or rescinded by the transmission company to the extent allowed under the contract.

196.485(5)(b)7. 7. Any transmission facilities that are contributed to the transmission company shall be valued at net book value determined on the basis of the regulated books of account at the time of the transfer.