Minnesota utility regulators getting pushback on economic stimulus initiative

Minnesota utility regulators made an unusual call this spring.

They asked the state's electric and gas utilities to pitch investments that could help jump-start the state's economy, which has been hit hard by the coronavirus pandemic. Xcel Energy responded with a multibillion-dollar plan that it said could create 3,000 jobs.

Now, there's debate over how much of Xcel's proposal is needed — at least in the short term — and whether it could overwhelm ratepayers.

Plus, the state Attorney General's Office and Department of Commerce, while generally supporting the initiative, have raised questions about utility regulators' ability to effectively measure economic-stimulus plans.

The desire to bolster Minnesota's economy is "commendable," Minnesota Attorney General Keith Ellison's office said in a regulatory filing. But the Public Utilities Commission (PUC) "now finds itself in uncharted waters."

Ellison's office noted the "tension" between the PUC's call for an economic catalyst and its duties in approving utility rates.

"The commission is expert at regulating utility service, but it lacks similar experience with the macroeconomic questions that a statewide economic-recovery effort would entail," the Attorney General's Office said in a filing.

It also said the state's residential ratepayers are already "struggling both with the recession and rising utility rates."

The Commerce Department similarly said the PUC's expertise is not in "the ability of a project to stimulate economic development."

The PUC's main role is to ensure reliable service and protect Minnesota ratepayers — who ultimately fund most utility investments.

"Impacts on rates will be very carefully scrutinized," said Katie Sieben, chairwoman of the PUC. "It is important to keep in mind that right now these are proposals and they will be scrutinized by the commission to see if they are in ratepayers' best interests."

Most Minnesota electric and gas utilities submitted rather modest plans to the PUC, but Xcel proposed $3 billion for a cornucopia of accelerated investments, a number that has since been whittled to about $2.5 billion.

How exactly all that would be paid for isn't clear.

Xcel, the state's largest electric utility and its second-biggest natural gas supplier, said in a PUC filing it plans on mitigating rate increases. One method: using tax credits already due ratepayers to help pay for COVID-19 projects.

"We're focused on investments that can deliver cleaner energy and also help to keep our customers' bills low," the Minneapolis-based company said in a statement.

Exclusive of its COVID-19 relief plans, Xcel last week proposed a three-year electricity rate increase for Minnesota of $597 million, or 20%, with more than half hitting in 2021.

However, Xcel also proposed postponing the rate case for a year while focusing on its COVID-19 proposals. If this were to occur, residential customers would see a small increase.

The PUC in May — acting on a proposal by Commissioner Joe Sullivan — asked Minnesota's utilities to identify investments and projects that could assist economic recovery from the coronavirus pandemic.

The PUC's parameters include spending that would create jobs; provide "significant utility system benefits;" cut carbon emissions; increase access to clean energy; and "use women, veteran or minority-owned businesses to the extent possible."

The PUC's aims have been supported by environmental groups, the renewable-energy industry, labor unions, a ratepayer watchdog group and several social and economic justice organizations.

More than 20 advocacy groups filed joint comments urging the PUC to push utilities toward projects "in which at least 40% of benefits accrue to BIPOC (Black, Indigenous and people of color) communities to account for historic and ongoing marginalization."

Xcel has proposed two "tranches" of accelerated investments.

The first and more immediate batch would include $334 million for investments in Xcel's electricity transmission network. It also features a $150 million rebate program for electric vehicle (EV) purchases — $100 million for buses and $50 million for cars and light-duty trucks.

Auto drivers would be eligible for rebates of up to $2,500 per vehicle.

Xcel's second batch of proposed investments focus on two large renewable-energy projects: a $650 million solar energy plant near Becker that would be four times larger than the state's largest solar farm; and a $750 million effort to "repower" several Minnesota wind farms.

Repowering means investing in new equipment that make wind turbines more efficient, saving customers money, Xcel said.

The Attorney General's Office said in a filing that the PUC should "decline to grant expedited reviews of very large investments, as Xcel is requesting."

Meanwhile, the commerce department said many of Xcel's first phase of investments "are simply too vague" to be assessed under the parameters set by the PUC. And the attorney general recommended the PUC reject Xcel's EV proposal, saying it lacks a cost-benefit analysis.

The attorney general also agreed with comments on Xcel's EV proposal submitted by the Minnesota Citizens Utility Board (CUB), a ratepayer watchdog group.

The rebates will disproportionately benefit higher-income ratepayers who are less likely to be economically stressed by COVID-19, both organizations said.

Xcel has proposed several projects targeting diversity and economic deprivation.

Those include grants of up to $4 million for workforce training for people of color and women; a $3 million pilot rooftop solar program specifically for low-income customers; and $17.5 million in bill credits for its most indebted customers.

In Xcel's proposal, the bill credits would be paid for by all Minnesota ratepayers over two years, adding 51 cents per month to the average residential customers' electricity bill.

But the commerce department said in a filing that ratepayers shouldn't bear all costs of the bill credits; the company should pay 50%. "Shareholders should not be exempt from sharing a portion of the burden of rate relief."

The commerce department said, too, that Xcel shareholders should share the costs of the proposed workforce grants, too.