11-13-2002 Council Agenda - Laserfiche WebLink

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In recent years, many have begun to promote "deregulation" or "restructuring" of the industry, meaning that electric service would no longer be a franchised monopoly. A number of 3 states, primarily those with high electric rates, have taken steps to move toward such 4 restructuring. In most of these cases, transmission and distribution remain regulated with retail 5 competition allowed for generation source. 6 7 Advocates of restructuring argue that such competition will lead to lower rates. However, 8 estimates by the federal Energy Information Agency are that while the upper Midwest, including 9 Minnesota, will experience slightly lower rates in the short -term, longer -term rates may actually 10 be higher under restructuring. Concerns have also been expressed as to whether residential 11 customers, and those in rural and other harder -to -serve areas will actually experience decreased 12 reliability and increased rates. 13 14 Local elected officials have the primary responsibility to citizens to make certain 15 restructuring that allows retail competition is as beneficial to the citizens as it is to the industry. 16 Beneficial to the citizen means that all Mi.nnesotans experience the same reliable, high- quality, 17 universal, and low -cost service they experience under the current system of electric power 18 delivery. 19 20 City residents have a strong interest in the outcome of this important public policy 21 debate. Cities are substantial consumers of electric power. Many cities have a significant portion 22 of their property tax base in electric industry property, while others collect franchise fees and /or 73 sales taxes on electric purchases within their boundaries. Citizens in 126 Minnesota communities currently receive economical electric service from municipal utilities, which make payments -in- z5 lieu of taxes to help support city services. Significant increases in the cost of electric power for 26 city operations or losses of these traditional sources of revenue will result in property tax 27 increases. 28 29 Response: The federal government should not mandate restructuring; the decision 30 should be left to the states. 31 32 The Legislature should continue to follow a slow, deliberative approach, taking time 33 to consider how alternative models for delivering electric power will affect the state's 34 traditional benefits of reliable, universal, high- quality and low -cost service. The public 35 policy discussion should be focused on actual benefits to citizens, rather than on ideological 36 arguments, stakeholder interests, and over- reliance on simplistic objectives like "consumer 37 choice." Those advocating a change should bear the burden of proof to demonstrate that 38 restructuring and deregulation will, at a minimum, maintain Minnesota's high - quality, 39 low -cost, and reliable service. Only when that burden of proof has been met should 40 restructuring occur. 4l 42 The following public policy goals should be incorporated into any legislation 43 restructuring the electric industry: 44 .45 48 39