Reliable Energy and Consumer Choices

The Ventura administration recognizes the shift from the present regulatory structure to a competitive structure of providing energy services to Minnesota consumers. The competitive structure will, at a minimum:

• Provide for access to service, reliability of service and competitive pricing.
• Encourage development and utilization of renewable energy sources.
• Provide energy consumers with market choices in all types of electric generation such as natural gas, wind, hydro and nuclear.
• Recognize the need for environmentally, economically and socially responsible generation and transmission development in the region.
• Encourage development of responsible generation and transmission infrastructure within Minnesota by allowing attractive returns on investment for developers and providers of all energy services.

The Big Accounting Initiative Score

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Investment in energy generation, by number of megawatts added to capacity.

Investment in the reliability of the electric transmission grid, by miles of new lines to critical areas.

Time between project proposals and regulatory approvals.

Level of investment in energy conservation, by actual energy savings.

Overall energy cost burden for households at or below 50 percent of state median income.

Proportion of renewable energy in the state's energy mix.

Wind energy turbines and megawatt output.

Cost and consumption of natural gas.

Cost and consumption of electricity.

Investment in energy generation, by number of megawatts added to capacity.

Note: Utility owned plants may also serve surrounding states. Numbers do not include privately owned plants (by paper, steel or other companies).

Investment in the reliability of the electric transmission grid, by miles of new lines to critical areas.

* Source: 2001 Update to the 2000 Regional Plan prepared by MAPP/Transmission Planning Subcommittee, November 30, 2001, Form 1, transmission projects located in Minnesota only (some variance in project year may occur).

Note: Electric transmissions are the major power arteries that carry electricity through the state and across state lines. Over many years Minnesota has built over 6500 miles of lines in its transmission grid. To increase and expand service throughout the state, additional shorter but critical linkages must be built to serve newly developed areas; to strengthen existing transmission capacity; or to allow alternate routing of electricity in the event of one transmission line going out of service. This indicator reflects the necessary linkages that have been identified for the next few years.

Reliable electric transmission means that:

• New residential, commercial or industrial areas can be developed with assurances that reliable electric power will be available to serve the needs of new customers.
• New (and clean) generation capacity can be built in the best locations, even if it is not close to where the power is most needed. New or reinforced transmission ensures that those new megawatts get to where they are needed.
• The odds of having customers' lights go out (and freezers thaw out) due to storms or other disturbances are diminished for any extended period over a wide area.

Time between project proposals and regulatory approvals.

Conservation Improvement Program Proposals Regulatory Processing Timeframes

*For the first time, Xcel filed a joint biennial filing for its electric and natural gas utilities rather than two separate filings as had been done historically. The examination and final decision process on this joint filing took 226 days-approximately 90 days over the limit of 135 days.

Note: The Conservation Improvement Process (CIP) is the only energy-related approval process that resides in the Department of Commerce. In 1998, Commerce updated its Practice and Procedural Rules. Since that time, the department has taken other steps (such as fine-tuning internal procedures) to ensure that proposals are analyzed and approved in a timely manner. Commerce has also worked with regulated utilities and other parties to analyze and approve projects in a timeframe and form that proves most beneficial to customers.

Target: The department's target for the present and future years is to process all of its CIP filings in all categories within the allotted time limits or sooner.

Level of investment in energy conservation, by actual energy savings.

Note: The department's analysis has consistently shown that investment in conservation measures is far more cost-effective than building new energy facilities to supply reliable energy service, primarily electricity, to Minnesota's citizens. Therefore, the department is committed to continuing its work with utilities and parties to develop and enact conservation measures. Also, Commerce encourages (and will offer help to) Minnesota's Cooperative Electric Associations and Municipal Utilities to more rigorously pursue cost conservation projects already proven by regulated utilities to be cost effective and beneficial to the energy system.

The graph represents only conservation investment and energy and capacity savings for investor-owned utilities; the state does not have data for municipal and cooperative utilities.

Note: Increased investment in conservation results in actual energy savings. Energy savings will reduce the need for additional generation and transmission capacity. For the last three years, Minnesota natural gas utilities have invested over $10 million per year in energy conservation.

The graph represents only conservation investment and energy and capacity savings for investor-owned utilities; the state does not have data for municipal and cooperative utilities.

Overall energy cost burden for households at or below 50 percent of state median income.

Note: This indicator addresses the relative burden that energy costs place on low-income Minnesotans. It measures the percentage of annual income that has to be spent on energy (heat and electric) for a family of four who earn less than 50 percent of the state median income (that is, less than $ 33,339). In 2001, these families spent an average of 13.4 percent of their income on energy, while families at the median level spent only 2 percent of their income on energy.

As a comparison, the national average energy burden for people at less than 50 percent of median income is 12.9 percent, while median-level income families pay 3.4 percent.

The Ventura administration is committed to lowering the energy burden for low-income Minnesota families to 10 percent at most in the next few years.

Proportion of renewable energy in the state's energy mix.

Note: Average installation cost for wind energy is $1,000 per megawatt. In 2003 Minnesota's approximate total investment in wind energy installation will be $825 million. All of wind energy development has come through private investment.

Wind energy turbines and megawatt output.

Cost and consumption of natural gas.

Note: The indicators above compare the average annual cost and consumption of natural gas in Minnesota to the U.S. as a whole. Even though Minnesota is located far from any natural gas production areas, we still have lower prices than the average of the fifty states.

One of the reasons for Minnesota's consistently lower-than-average prices is the active oversight by the Department of Commerce.

The Department:

• Monitors natural gas prices and utilities' gas purchasing actions to insure that prices charged to Minnesotans are reasonable.
• Analyzes gas prices every month and provides reports monthly, quarterly and annually to regulators to ensure timely regulation of gas prices and purchasing actions.
• Investigates any questionable actions and recommends corrective actions to regulators as warranted.

Cost and consumption of electricity.

Note: The indicators above provide an overall electricity picture for Minnesota during the years of 1990 though 2000. The bar chart shows that Minnesotans have consistently paid less than the U.S. average for their electricity. Also, what price increases have occurred in Minnesota are quite moderate considering the rather dramatic electric consumption increases experienced over the same period.

One of the reasons for Minnesota's consistently lower-than-average electric prices and moderate price increases is the active oversight by the Department of Commerce.

The Department:

• Analyzes and makes recommendations to state regulators on major electric power purchases by Investor Owned Utilities as soon as the purchase is made.
• Monitors on a monthly and annual basis the electric prices charged to customers by Investor Owned Utilities to ensure that overall prices charged to customers are reasonable.
• Reviews the viability of any proposals by Investor Owned Utilities to construct new large facilities to generate or transmit electricity, in order to insure that the utilities' customers pay only reasonable costs for services provided by these facilities.

The cost chart indicates that prices in Minnesota have increased somewhat in recent years. These increases, while moderate, reflect several factors. Increased demand for electricity can put upward pressure on the price. Also, because existing capacity is being used more fully, utilities have relied increasingly on purchased power obtained through the wholesale market. Purchased power is frequently more expensive.

Finally, the most important factor in increasing costs may be that the Federal Energy Regulatory Commission (FERC) has taken significant steps to make it easier for unregulated marketing companies (Enron, Duke, Mirant, etc.) to gain access to utilities' transmission lines. FERC's goal is to create more competitive markets. While there may be long-term benefits, FERC has acknowledged recent criticism by the General Accounting Office that FERC has not provided sufficient consumer protection against marketing abuses.