Initial Recommendations Pursuant to Laws of Minnesota, 1997
Chapter 191, Article 1, Sections 11 & 12

The 1997 Minnesota Legislature directed the Legislative Electric Energy Task Force (LEETF) to review and analyze issues relating to electric industry restructuring, and to present the 1998 Legislature with the task force's initial recommendations by January 15, 1998. Specifically, the LEETF was to review the impacts of restructuring on:

• various types of electricity customers
• the state's economy
• the reliability and safety of the electric grid
• the state's environment and
• the various types of electricity suppliers in the state.

In addition, the task force was required to establish an interim subcommittee on utility taxation to analyze issues relating to the imposition of personal property taxes on the state's gas and electric utilities.

Beginning in early summer, and throughout the fall and winter of 1997, the LEETF held a series of public meetings to solicit opinions and information from interested parties on these issues. As the task force members' familiarity with and understanding of the complex issues of electric industry restructuring developed, many members expressed the concern that the benefits of deregulating the electric industry supply in Minnesota may not outweigh the risks associated with deregulation. Issues of specific concern to the members of the LEETF include the effect of restructuring on: the price of electricity in the state; the reliability and safety of the regional electric grid; the state's environment; and the provision of universal access and affordability of electric service.

Price. Minnesota consumers currently enjoy electric rates well below the national average. Although one of the primary reasons advanced by proponents of electric industry restructuring is that deregulation and competition should reduce the cost of electricity to consumers, the LEETF heard testimony indicating that electricity prices in the state could actually increase under competition. While it is by no means certain that prices will rise under deregulation, the effect of restructuring on prices in Minnesota will have to better understood, and strategies developed to minimize the risk of price increases (such as guarantees of price stability or price decreases), before the LEETF can recommend that the state move forward on deregulation.

Reliability. The current regulatory system provides for safe and reliable generation, transmission and distribution of electricity to Minnesota consumers. The LEETF heard testimony indicating that authorizing retail competition in the state may threaten the provision of safe and reliable electricity, with the technology and practices that are currently being deployed in the region. These issues are currently being addressed, at the national, regional, state and utility levels. It is critical that parties work together to address these concerns prior to the introduction of retail competition in Minnesota. Our current level of reliability and safety cannot be compromised.

Environment. Testimony provided to the LEETF indicated that competition could have both positive and negative effects on the state's environment. Strategies must be developed to ensure that a move to retail competition does not degrade the Minnesota environment.

Universal service and consumer protection. Minnesota has a long and proud tradition of providing universal access to affordable electric service. In addition, Minnesota consumers have come to expect protection from consumer fraud, negligent or deceptive business practices and anti-trust violations. Proponents of restructuring will have to demonstrate to the LEETF that the rural electricity consumers in our state, as well as the state's low-income consumers, will continue to have affordable access to electric service. Furthermore, standards and practices will need to be developed to provide Minnesota consumers with the protections they expect.

On the basis of the testimony presented to the LEETF during the 1997 interim, the LEETF finds that it does not have the information necessary to recommend that the state move forward with electric industry restructuring at this time. Thus, the initial recommendations of the LEETF are that:

1. no legislation related to comprehensive policy change with respect to electric industry restructuring be acted on in the 1998 legislative session;
2. the legislature and the LEETF continue to study and analyze the issues relating to electric industry restructuring, and that the LEETF provide an update on these issues to the legislature by January 15, 1999;
3. the LEETF monitor restructuring activities in the many states that have enacted restructuring legislation, in order to learn from their experiences as these states implement their legislation;
4. the LEETF monitor the activities of the United States Congress regarding electric industry restructuring, in order to be prepared to implement deregulation of electric supply should states be ordered to do so by the federal government;
5. the LEETF continue to provide leadership on developing a Minnesota approach to restructuring;
6. parties interested in the electric industry restructuring issues continue to meet and work on these issues, in an effort to develop a broad consensus on restructuring the state's electric utility industry, and that the state's Public Utilities Commission, Department of Public Service and the Office of Attorney General continue to play an important role in this effort;
7. LEETF members and staff continue to be briefed, included and consulted at all stages of efforts undertaken to develop this broad consensus; and
8. the recommendation of the interim subcommittee on utility taxation be adopted and incorporated by reference.