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Legislative Electric Energy Task Force

January 15, 1999 Periodic Update of the Legislative Electric Energy Task Force to the Legislature

Introduction

Laws 1998, chapter 380, required the Legislative Electric Energy Task Force (LEETF) to conduct an extensive analysis of nine specified issues related to the issue of restructuring of the electric industry to provide for competition in the generation segment of that industry. The LEETF was required to convene several advisory work groups to assist it in its work. The LEETF was specifically directed to examine issues related to bulk power system reliability, the distribution system, prices, and universal service during the interim after the 1998 session.

Laws 1998, chapter 380, section 2, subdivision requires the LEETF by January 15, of each year to provide the legislature with an update on the progress of its review and analysis of restructuring issues required by chapter 380, including legislative recommendations as the LEETF deems appropriate. This is the update for January 15, 1999.

The LEETF has timely completed its 1998 interim statutory assignments. It has adopted a work plan more fully described below.

There is consensus among participants in the LEETF advisory work groups and among members of the LEETF that the analysis required by chapter 380 is a critical prerequisite to enable the legislature to acquire the knowledge to make an informed decision about whether and how to proceed with restructuring of the electric industry, and to be able to act in an informed manner in the event the federal government mandates electric restructuring prior to any action by the state. Not only is the LEETF acquiring information but also the process of the analysis has allowed a forum for stakeholders to gain an understanding of the diverse viewpoints of a broad array of interests. In addition, the process has been useful in terms of identifying issues that the legislature may want to address regardless of whether the state moves forward with restructuring, such as issues of regional governance and the likely generation shortfall in the next 3 to 5 years.

LEETF 1998 Interim Activities

The LEETF did perform the analysis in the 1998 interim that was required by law. Advisory work groups were convened on the issues of bulk power reliability and distribution and on universal service and pricing. Written comments were received from individual work group members on those issues. Individual meetings with work group members were conducted by LEETF staff on the issues of bulk power system reliability and distribution. One all day large group meeting was held with staff and all work group members on the issues of universal service and pricing. Staff prepared two written reports -one on bulk power and distribution, the other on universal service and pricing. Those reports were presented to the LEETF at public meetings called for that purpose.

The reports highlighted the agreements and disagreements of work group members on various issues. There was a consensus that the reports fairly presented the concerns of work group members and that the process mandated by Laws 1998, chapter 380 is important and is working.

Two separate areas of concern underlay most of the disagreements. First, there are those who are not convinced that introducing retail competition in electric generation or supply in Minnesota is a good idea for a variety of reasons. Second, there are multiple disagreements over how to proceed with retail competition if the decision is made that it is good policy in Minnesota. This second set of disagreements is not so much over what issues are important but rather over how to resolve those issues. For example, there is consensus that an independent operator of the transmission system is a prerequisite for robust competition. However, there is disagreement over the type of independent system operator that should be chosen.

There is also consensus that some states have made better decisions on certain issues regarding restructuring than have others. In other words there are a lot of choices to make if one decides to restructure and a principal purpose of the LEETF analysis is to ascertain the best choices for Minnesota.

LEETF Work Plan

There is agreement among LEETF members that the LEETF continue the analysis required under chapter 380. This includes performing an extensive analysis, with the assistance of technical advisory work groups, of the following issues:

  1. information disclosure and consumer protection;
  2. renewable energy, efficiency, and environmental sustainability;
  3. unbundled rates;
  4. competitive parity; and
  5. stranded costs.

The LEETF plans to establish technical advisory work groups on these issues and seek comments from work group members on the same by June 30, 1999.

In addition, the LEETF plans to conduct additional work on restructuring, including:

  1. continuing to monitor and analyze actions of the federal government and other states in the area of electric restructuring. The LEETF will pay particular attention to how electric restructuring is working in states that have started to allow retail competition.
  2. contacting the Center for Technical Information, a division of the National Conference of State Legislature, to assist it in its analysis of unresolved technical issues. This effort would build on the information provided by work group members and any relevant work already performed by the Public Utilities Commission and/or the Department of Public Service.
  3. possibly bringing in a panel of national experts to present information to the LEETF on unresolved issues raised by process set forth in Chapter 380.

After completion of its analysis of the remaining five topics as required by Chapter 380 and the additional work listed above, the LEETF hopes to be able to identify for the legislature a list of prerequisites to restructuring. The purpose of such a list would be to assist the legislature in its determination of whether, when and how the state should restructure the electric industry.

Recommendations

The LEETF recommends that Chapter 380 be left in place and the LEETF continue its critical work on electric restructuring issues. As discussed above, the detailed, extensive analysis of restructuring issues which the LEETF is in the process of conducting is essential to allow the legislature to make an informed decision about whether and how the state should restructure the electric industry.