by: Roger Warehime, Director, Field Operations, Energy Management & External Relations
I attended the Minnesota Municipal Utilities Association (MMUA) legislative conference this spring. This annual event gives municipal utilities the opportunity to meet and discuss legislative issues which will impact our customers. We also travel to the state capitol to meet with the representatives and senators from our districts as well as the house and senate leadership. This was a truly unique year in that there were substantially no bills being introduced which would impact municipal utilities. Therefore, we took the opportunity to educate the legislators we met with about how municipal utilities are different from investor utilities, and how bills introduced to direct the large investor-owned utilities can have unintended, negative consequences for municipal utility customers.
Minnesota’s investor-owned utilities (IOUs) are often referred to as “regulated utilities” because the Minnesota Public Utilities Commission is charged with administering their rates and interpreting the many statutes that determine how the utilities should be operated in order to balance the interest of customers with the utilities’ shareholder’s interest.
Municipal utilities such as OPU, which are owned by the customers we serve and are operated not-for-profit, are also regulated. However, we are regulated at the local level. In the case of OPU this is by a commission of five citizens appointed by the mayor. We are still subject to a whole host of state laws – from labor laws to consumer protection statutes to conservation and efficiency requirements. Unlike other utilities, we are also subject to open meeting laws and government data practices.
We conveyed three main reasons as to why consumer-owned and IOUs should continue to be looked at differently from a statute and regulation perspective.
First, IOUs are large and vertically-integrated, while municipal utilities largely concentrate on providing electric service at retail. We generate very little of our own power and typically do not own transmission lines. Mandates that add costs can have a much greater rate impact in small utilities. It is difficult to design a program that will work well for municipals and also work well for a large urban utility such as Xcel.
Second, municipal utilities vary among one another in significant respects. Of the 125 municipal utilities in the state, sixty-seven of us have annual loads that peak in the summer, 30 are winter peaking, and 26 have summer and winter peaks that are virtually equal. Our power supplies come from a wide array of different resources – even up to 96% hydropower. Our customer make up varies – from 11% residential to 96% residential; 3% commercial to 73% commercial, and 0% industrial to 83%.
Third, municipal utilities are closer to their customers than IOUs. Energy policy in cities with municipal utilities is established by a public body composed of local residents who know the community and its needs. Municipal utilities are not-for-profit and are operated in the public interest. Municipal utility policymakers and staff not only have career interests in their community’s success, they have a personal stake in the city where they have chosen to live and build life-long relationships.
For very sound reasons, investor-owned, state-regulated utilities and consumer-owned, locally regulated utilities have long been governed under different, parallel, and equally effective regulatory structures. These dual modes of regulation have been in place for many years and have served Minnesota well. The legislators we met with seemed to understand this message and I am hopeful that they will continue to respect the long tradition of local regulation for consumer-owned utilities when they craft new legislation.