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Deregulation in Minnesota's Energy Future
By Marisa Helms
January 8, 2000
Part of Minnesota Public Radio's This Cold House series
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Energy officials say Minnesotans could be in for higher prices and even blackouts if the state doesn't address an electricity shortfall projected for later this decade. The Legislature is expected to consider several proposals for dealing with the shortage.


Proponents say:
  • Customers will be able to choose their own energy supplier.
  • Competition will lead to lower prices.
  • Energy deregulations will spawn new technologies.

    Opponents say:
  • Deregulation could favor large industries with economic clout to the disadvantage of less profitable customers such as small businesses, residential customers, and low income households.
  • Current electricity costs in Minnesota are lower than in many parts of the country. Nationwide leveling of costs through competition may not be to Minnesota customers' advantage.
  • Deregulation will result in a decrease in conservation and renewable energy programs and in increase in air pollutant emissions from generation facilities.
    Source: Legislative Research Bureau
    (Photo: Department of Energy)
    THE MID-CONTINENT AREA POWER POOL - an association of over 100 utilities and regulators - estimates the Upper Midwest region could have a shortage of 5,000 Megawatts of generating capacity by summer 2006.

    MAPP officials say that would mean dipping into the region's energy reserves, and that could lead to rolling blackouts, where specific areas of the power grid are shut off for a period. It could also mean finding more power at potentially higher cost from outside the region.

    Blame the anticipated shortage on the region's economic growth and the resulting increase in the use of everything from computers to air conditioners to consumer electronics.

    "We have the largest economic center and tend to be biggest energy user, so a fair amount of that 5,000 megawatts is attributable to Minnesota," according to Linda Taylor, the deputy commissioner for energy at the Minnesota Department of Commerce.

    During, this session of the Legislature, the commerce department will offer a plan that would speed the up the process for building the first new power plant in the state since 1987.

    Just one plant wouldn't be enough. The biggest power generator in Minnesota is the SherCo site in Becker. Its three plants have a 2,500 megawatt capacity.

    So the proposal also calls for stronger conservation efforts and encouraging the development of new technologies.

    The POWER Coalition - a group of environmental, labor and consumer groups - hopes to get another proposal before lawmakers calling for stepped-up investment in renewable energy sources such as wind and biomass power. It also seeks assurance that the poorest Minnesotans have access to electricity.

    "This is a bill to ensure that the state continues to enjoy low electric costs with good reliability but in way that protects the environment, protects consumers, and protects the workers that keep all of this going for us," says Bill Grant, director of the Isaac Walton League and one of the drafters of the proposal.

    Looming just as large as the power shortage is the debate over deregulation of the power industry. About 25 states are in some stage of deregulation, and some say it's inevitable Minnesota will go the way of retail competition.

    Legislative leaders say deregulation is a dead issue this session, in part because of the crisis in California. Since that state deregulated its power industry, there have been rolling blackouts and a spike in energy prices.

    Still, Minnesota's power companies plan to push for restructuring, arguing deregulation can help alleviate the electricity shortage.

    Xcel Energy is working with the Minnesota Chamber of Commerce on legislation that proposes a timeline for deregulation.

    Xcel's vice president of government and regulatory affairs, David Sparby, concedes legislative apprehension over what's happened in California is well placed. But he says Minnesota should look at states, like Pennsylvania and Illinois, that have seen the benefits of increased competition - streamlining the process of building power plants.

    "Many, many thousands of megawatts of power today are underway in the construction process surrounding the Chicago area, which under a traditional regulatory framework a few years ago, was short on energy supply," he says.

    Sparby says if Minnesota decides to address the shortfall by building new power plants, it will have to attract investors to put up the nearly $1 billion for each large plant. Investors, he says, are only interested in putting their money into states that have already moved to retail competition.

    Observers say some solution must be found this legislative session, because time is running out with the state's energy reserves.