5.7. ERMUSR 03-13-2013 Elk River
Municipal Utilities UTILITIES COMMISSION MEETING
TO: FROM:
Elk River Municipal Utilities Commission Troy Adams, P.E. —General Manager
John Dietz—Chair
Daryl Thompson—Vice Chair
Al Nadeau—Trustee
MEETING DATE: AGENDA ITEM NUMBER:
March 19, 2013 5.7
SUBJECT:
2013 American Public Power Association Legislative Rally
BACKGROUND:
The 2013 American Public Power Association Legislative Rally in Washington, D.C. was held
March 11 — 14. The Minnesota municipal utilities meet with our elected officials on the last day
of the event. This is an opportunity to take the stories from Main Street Elk River and Minnesota
directly to our elected officials with the aggregate support of municipal public power. During
this rally's Legislative and Resolutions Committee, ERMU has the opportunity to vote on
APPA's policy on legislation, regulation, and other federal issues.
DISCUSSION:
Attached is the 2012 APPA Accomplishments publication. An update on the legislative rally
will be provided by staff at the time of the Commission meeting.
ACTION REQUESTED:
No action is required.
ATTACHMENTS:
• 2012 American Public Power Association Accomplishments
• 2013 MMUA APPA Legislative Rally Federal Position Statements
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2012 APPA Accomplishments
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Undoubtedly, these are challenging times for public
power. Issues that could change the complexion of the public power landscape
loom large, including: preserving tax-exempt financing; minimizing the impact of
environmental regulations; and, protecting the existing federal power marketing
administration (PMA) framework, to name a few. These issues impact utilities of all
sizes and, absent a strong, united front on the legislative and regulatory front, could
imperil public power's business model, which rests on the ability to provide reliable,
low-cost power in the future.
The association continues to operate in an efficient, lean fashion, while providing
the highest level of service to its members. With 1,314 utility and 228 corporate
members, the association's membership numbers have never been higher.
In addition to the work APPA performs on the federal legislative and regulatory front,
the association delivers premier professional development opportunities through the
APPA Academy and manages special utility programs, like the Reliable Public Power
Provider(RP3) program, which recognizes member utilities for their commitment to
best practices in the areas of distribution reliability, safety, work force development
and system improvement. APPA works hard to keep our members informed through
our numerous informational vehicles, including APPA's website, PublicPower.org,
several news vehicles (Public Power Daily, Public Power Weekly and Public Power
magazine), as well as via our robust discussion forum platform —the Hub. All of these
resources are provided at no additional cost to all member utility employees.
We thank you for your continued support and look forward to serving you as we
confront the challenges and embrace the opportunities that lie ahead.
APPA Accoiripl shmaits in new, costly and likely ineffective market programs in the
West that would further erode state and local control over
l: "" 1 n electricity costs; and create a top-down decision-making
' z s process that would move decisions now best made at the
bra t regional level to Washington, D.C. APPA and its members,
s working closely with the National Rural Electric Cooperative
Association,responded quickly in opposition to these
d '
I1-14s '° r ' ' -6 a proposals. As part of that effort,we brought our concerns
to the attention of Congress where many members of both
parties also expressed their opposition and concern with the
proposal through hearings in the House Natural Resources
i4" • _ Committee,letters to Secretary Chu,meetings with DOE
o- - staff, and a rider in the House-passed Energy and Water
�.:y Development Appropriations bill for FY 2013 that would
disallow use of funds to promulgate the proposals in the
Despite the press's moniker of a"do-nothing" Congress, memo,among others. APPA and NRECA also implemented
2012 was another very active year on public power's issues, a comprehensive program to coordinate activities at the state
given election-year politics on energy and environmental and regional levels to counter the DOE proposals, including
policy and the fiscal cliff negotiations at the end of the year outreach to the media, state and local policymakers,
that could have impacted our access to tax-exempt financing, and other stakeholders. Nevertheless, DOE continues to
among other items delineated in more detail below. vigorously pursue many of these proposals, and APPA will
Tax-exempt financing-Tax-exempt municipal bonds are continue to place a high priority on this issue.
the primary tool for financing public power infrastructure, Cyber security—APPA supports legislation to enhance
available to us as units of state and local government. They communication between the federal government and the
have traditionally provided public power with a stable, electric utility sector and to allow for the federal government
dependable and affordable source of capital. Denying or to direct utilities to act in cyber emergencies. APPA
limiting our access to tax-exempt bonds would increase our supported a cyber security information-sharing bill that
capital construction costs, resulting in increased electricity passed the House in 2012. In the Senate,we were initially
rates in many jurisdictions. Nevertheless, elimination or hopeful that broader legislation developed by Senators Joe
modification of the exemption from federal income taxes Lieberman, I-Conn., and Susan Collins, R-Maine, covering
from the interest earned on these bonds has been/continues multiple critical infrastructure sectors, would be crafted
to be under active consideration as one measure to increase
federal revenue. In 2012,APPA built upon activities
undertaken in 2011, on our own,with the Public Finance
Network, a coalition of state and local government groups,
and others allies we have identified, to educate members
of Congress on the importance of tax-exempt bonds,
including the jobs they support. APPA's efforts have included
numerous letters and visits to Capitol Hill from/by APPA and
from/by our members. We have also very actively engaged
our locally elected officials in this effort and they were
instrumental in ensuring that tax-exempt financing was not
included in the end-of-the-year tax agreement to avert the narrowly enough to draw support. However, APPA(and
fiscal cliff. These efforts will continue in 2013. the entire electric sector) had to oppose the version of
Federal power program --The ability for the federal power the bill that was considered on the Senate floor because it
marketing administrations (PMAs) and the Tennessee would have harmed the existing cyber security regime for
Valley Authority(TVA) to sell power at cost-based rates the electric sector. The bill failed to gamer enough Senate
remains a top priority for APPA. In March 2012, the very support,so ultimately no legislation was signed into law.
structure and core mission of the PMAs was threatened While APPA supports narrow, targeted uplic security
legislation that builds on, rather than duplicates, existing
in a memo issue by Energy Secretary Steven Chu. The
secretary's memo to the PMA administrators directed As the regulatory debate regimes, we do not support harmful in legislation.better
changes m the policies and operations of the PMAs that As the debate on this issue matures,e for are in a better
would: significantly and inappropriately increase costs; position to ensure a positive outcome Eor public power. In
fundamentally alter the successful partnership between 2012,APPA played a leadership role in the industry coalition
the PMAs and their customers; divert PMA staff and other on this issue, which requires working with numerous House
resources to activities that are inconsistent with their and Senate committees, and we will continue to play an
active role as Congress revisits the issue in 2013.
statutory obligations and priorities; require participation
Wholesale Elechicity Markets—APPA rook an active role in EMRI continued to work with its allies to raise awareness of
the discussions and decision-making on a proposed energy the problems of wholesale electricity markets operated by
imbalance market(EIM)for the western interconnection in regional transmission organizations(RTOs)and to educate
close cooperation with our members in the region.The efforts Congress on the Federal Energy Regulatory Commission's
included the production of fact sheets,attendance at public lack of supervision of RTO markets.
meetings and submission of comments.APPA sponsored
presentations and written materials by the economist Kenneth C API' Accn�nphshexm is
Rose to illustrate the potential danger of an EIM transitioning
to a regional transmission organization(RTO)and to critique
the National Renewable Energy Laboratory's analysis of the
•
estimated benefits of an EIM, the latter co-sponsored by "
National Rural Electric Cooperative Association.To date,the EIM
d
proposal has failed to gamer sufficient support to move forward (,I Milli 11114
EMRI maintained its focus on the highly problematic I Stil if S
capacity markets in the eastern RTOs.APPA has submitted s
comments and protests in a number of Federal Energy , )•
Regulatory Commission dockets involving the use of the ' "
capacity markets to impede public power's ability to self- F
supply and is participating in the Third Circuit U.S. Court , ' s,'"�� ''?°•
of Appeals review of the FERC orders on the minimum offer The House of Representatives,in particular,continued
price rule in PJM's capacity market,along with NRECA and a
to focus in 2012 on legislation to modify or delay
number of individual public power utilities and rural electric implementation of various Clean Air Act(CAA)rulemakings.
cooperatives. APPA also participated in several other dockets APPA supported some of these measures,particularly those
pertaining to RTOs, including newly proposed metrics for
that would provide additional time for compliance,but
non-RTO regions and the proposal for a full RTO in the recognized that passage in the Senate was unlikely APPA
Southwest Power Pool.APPA's influence is evident in some supported a House-passed bill that would ensure that a
of the positive aspects of FERC's June 2012 order on the power plant ordered by the federal govemment to run in
Midwest ISO's proposal for a new capacity market. FERC an emergency situation would not be penalized by the
ordered that utilities could not be required to purchase Environmental Protection Agency for clean air violations.
capacity from this market and rejected the proposed The bill did not pass the Senate in 2012,but is likely to be
minimum offer price rule, citing APPAs arguments in support revisited and,with its narrow focus,has at least a chance of
of this decision.
Senate passage in 2013 or 2014.
Several studies and white papers were produced under One other aspect to note is EPA's failure during the
EMRI in 2012, including a fact sheet on the high costs of rulemaking process to meet its legal obligations to consider
PJM's capacity market,an analysis of the primary financial the adverse impacts of proposed requirements on small
arrangements behind power plant construction, and a entities.The vast majority of APPA's members qualify as small
review of the New York state capacity market.The latter two entities under the Small Business Regulatory Enforcement
studies demonstrated that the primary drivers behind new Fairness Act(SBREFA),which requires EPA to provide them
generation and renewable energy are long-term contracts some relief and additional flexibility. However, EPA has barely
and utility ownership,not the RTO-operated markets. Two gone through the motions in its consideration of SBREFA's
articles were published under EMRI's auspices: "What Drives requirements and in some cases rather flagrantly ignored
New Generation Construction?" (The Electncity Journal, them. APPA has developed a good working relationship with
July 2012),and"Have Restructured Wholesale Electricity the Small Business Administration's Office of Advocacy,
Markets Benefitted Consumers?",co-authored with the as well as the Small Business Committee in the House of
Consumer Federation of America(ElecnicityPolicycom, Representatives to address this matter. In 2012,an APPA
December 2012).We also completed updates to the annual member testified before the committee on the shortcomings
rate comparison and financial analysis of merchant generation of EPAs SBREFA compliance with respect to the Boiler MACT
owners in PJM.
rule (which affects industrial boilers and coal-fired electricity and provide relief for small business and governmental
generator units less than 25 MW entities, as required by other federal statutes. We filed
In 2012, the House and Senate also made progress on briefs in the D.C. Circuit U.S. Court of Appeals in
bipartisan legislation to maintain the designation of coal October 2012. Oral arguments in the case are expected
in spring of 2013. A final decision by the court might
ash as a non-hazardous waste and to increase overnight not be announced until late 2013. Without either an
and regulation of coal ash management by the states.This administrative review resulting in additional time or a
legislation,supported by APPA,passed the House and came court-ordered change to the final compliance date, some
close to being included in a broad surface transportation public power utilities may face the prospect of operating
bill(given the use of coal ash byproducts in roads, that was in non-compliance, which could subject them to
appropriate),but did not make it into the final version. enforcement actions by the agency and citizen lawsuits.
However,discussions will resume in 2013. Regardless of
whether such a bill passes, interest in it by a bipartisan, Industrial,Commercial and Institutional Boiler MACT
bicameral group of members of Congress will certainly help Rule - On December 21, 2012, EPA finalized the
keep pressure on EPA not to regulate coal ash as hazardous. rule that had been twice reconsidered by the EPA for
RICE—APPA successfully advocated for reconsideration regulating mercury and acid gases from <25 MW power
by EPA of its original final rule on reciprocating internal plants. While only about two dozen of these units remain
combustion engines (or RICE) to allow for more hours in operation at public power utilities, these units are
of operation under both emergency and other conditions important sources of generation for those communities.
without modification or replacement. Several hundred Often these were electricity and steam providers to local
APPA members own these units, which are often called indus al customers or hospitals and establishment
upon for demand response, voltage support and other of reasonable standards that could be met in a timely
purposes. EPA re-proposed the rule in 2012 to include
more hours of operations and other provisions. APPA
testified at two public hearings, secured assistance from
the U. S. Small Business Administration (SBA)'s Office
of Advocacy, coordinated with allied organizations
seeking similar provisions, and participated in numerous
meetings and discussions with senior EPA staff. The EPA's .
final rule, announced on Jan. 14, 2013, provided 100
hours for electric utilities, a substantial improvement
over the 2010 rule, which allowed only 15 hours for non-
storm or non-emergency response conditions. EPA's final
rule also includes other features sought by APPA, such
as criteria related to operation of these units to maintain
voltage support.
•
Mercury MACT - In an unprecedented action, APPA
filed both a request for administrative reconsideration
and a lawsuit in federal court in response to EPA's final manner is critical for both public power utilities and
mercury rule (often referred to as Mercury MACT or their commercial and industrial customers. This issue
MATS) to reduce mercury and acid gases from fossil has been before the EPA since 2005. APPA has filed
fuel-fired power plants. APPA's purpose in the litigation numerous comments, held webinars, met with the EPA,
and reconsideration is not to challenge the regulation Office of Management and Budget, and Small Business
of mercury per se, but is to correct EPA's failure to Administration personnel. The EPA's final rule, while still
provide public power utilities with sufficient time to not perfect, did give these units until 2016 to operate
comply with the requirements of the rule in recognition and slightly adjusted the emissions allowed. Perhaps best
of the obligations (set in city ordinance or state law) of all changes was the establishment of the limited use
placed on our members for major capital expenditures, subcategory that allows units to run approximately 800
procurement procedures, financing, and building hours a year without installation of expensive controls.
new pollution-control equipment. The deadline for
2.5
compliance is May 2015, with an opportunity for one PM nd - APPA filed comments in August 2012 opposing
additional year for compliance if requested by a state. We secondary public welfare standards that tighten existing
regulations for emissions of PM 2.5 (particulate matter
have assisted some members in obtaining this additional
less than 2.5 microns in diameter). Although the
year. standards were tightened, APPA is pleased that EPA did
APPA's actions against the final rule are also based on so in a manner that does not easily lead to additional
EPA's failure to carry out its obligations to consider control requirements on power plants.
•
o c_AF PA Acco,,, sn„ „ts Advocacy at the Commodity Futures Trading Commission-
' . a e c The 2010 Dodd-Frank Wall Street Reform and Consumer
J. s. + Protection Act gave the Commodity Futures Trading
` :r ��,,u`'t' Commission(CFTC)oversight of the"swap"market.APPA has
worked to ensure that the CFTC's implementation of this new
:::'' t�O
'-.Li regulatory regime for"swaps"enables public power utilities to
hedge their commercial risks without unnecessary regulatory
;,- 113�V<15 disruptions or costs.This endeavor will continue in 2013,
4; ' as the CFTC has repeatedly missed deadlines established in the Dodd-Frank t $ s ': own rules,and failed postponed
to issue final rules in several important
�� proceedings or respond to industry petitions.
µ:
m r ._
4 "- � „. " ' a '�t . 4 APPAs advocacy efforts,however,continued to pay off in
2012.APPA argued—in its comments and in meetings with
Protecting Public Power's Image-In 2012,APPA and some CFTC staff and commissioners—for rules and interpretations
of its members were contacted by a number of retail electric that exclude forward commercial contracts(including power
consumers who had confused APPA or one of its members supply contracts) from the CFTC's oversight of swaps.A
' with a company named"Public Power, LLC." Public Power primary concern was that nonfinancial commodity contracts
LLC and its subsidiaries are retail electric power suppliers that contain option features would be considered swaps.The
in a number of states(including New Jersey,Maryland and CFTC's final rule defining"swap"includes interpretations
Illinois) that have implemented retail access. Unfortunately, that will exclude from CFTC oversight many types of
consumers unhappy with Public Power LLC's high pressure commercial contracts with"embedded options,"including
marketing tactics and poor customer service were Googling all-requirements contracts and netting agreements,and
the term"public power,"and then calling APPA to complain. contracts covering intangible commodities(such as emissions
APPA contacted its trademark counsel, but was informed that allowances and other environmental commodities).The
it would likely be difficult and expensive to challenge Public CFTC's final rule on commodity options also provides that
Power LLC's use of these words. "trade options," (commodity options used by commercial
entities to deliver or receive physical commodities in
Public Power LLC, however,subsequently filed an application connection with their businesses)are eligible for an
with the Federal Energy Regulatory Commission(FERC) exemption from most rules applicable to swaps. For example,
seeking authorization to engage in a business transaction. in many cases, the reporting requirement for trade options
APPA and the Public Power Association of New Jersey will be on a simple,annual form.
(PPANJ)used the opportunity that this application created to Finally,in 2012, the CFTC issued a proposed exemption
reach a settlement with Public Power, LLC intended to reduce order in response to a petition that APPA and other not-
the customer confusion created by the company's name.The for-profit electric utility groups filed, seeking to exempt
August 9, 2012,settlement agreement requires Public Power, from CFTC oversight transactions among public power
LLC and its subsidiaries to use the following disclaimer in utilities,cooperative utilities and federal power marketing
its marketing materials and on its social media sites: "Public administrations. Taken together, these rules,interpretations,
Power, LLC and its subsidiaries are not endorsed by or and exemptions significantly narrow the scope of the CFTC's
affiliated with the American Public Power Association (APPA) jurisdiction over public power utilities' transactions.
or its members, the Public Power Association of New Jersey,
or any government-owned, not-for-profit utility."Telephone APPA also worked with some in Congress to exert pressure
and in-person marketing and sales personnel must recite this on the CFTC to rethink one issue,in particular,related to the
disclaimer in sales pitches and marketing call scripts. Finally, threshold monetary level of transactions in the derivatives
the agreement also bars any new subsidiaries or affiliates of markets whereby public power's counter parties must register
the marketer from using"Public Power" in their name.APPA as"swap dealers."The CFTC has established a ludicrously
and PPANJ in cum agreed only to refrain from intervening in low threshold for banks and other counter parties to register
the FERC proceeding, thus allowing it to move forward on an as swap dealers when transacting with"governmental bodies,"
uncontested basis. such as public power utilities.Therefore, to avoid having
to register as swap dealers,many of our counter parties are
APPA continues to monitor Public Power LLC's compliance refusing to engage in hedging transactions with us.This is an
with the settlement agreement and assess whether these untenable situation,and has garnered the attention of House
measures are sufficient to distinguish APPA and its members Agriculture Committee Chairman Lucas(R-010,among others,
• from Public Power, LLC and its affiliates in the minds of retail who had APPA testify before his committee on this subject in
customers. APPA may take further action in 2013 if these 2012. It is clear that we will have to continue to exert pressure
issues persist. on the CFTC to reverse its decision on this issue in 2013.
Reformed FERC Transmission Rate Incentive Policy-In 2012, proposed mandatory market and MOPR will assist APPA
APPA continued to coordinate a large coalition of state members in the Midwest by giving them more flexibility
public utility commissions,public power utilities, industrial to develop new generation resources.They will avoid
customers,state consumer advocates and cooperatives to the possibility of having to pay twice for new generation
press the FERC to reform its policies on transmission rate capacity—once to defray the cost of developing a new
incentives. APPA started this effort in 2010,with the goal generation resource and a second payment to a mandatory
of getting FERC to reexamine its then-current policies. market because of the failure of that resource to clear due to
Under those policies,FERC was awarding FERC-regulated upward bid"mitigation" under the MOPR.
transmission developers very generous risk-reducing Statistical reports-APPA's policy analysis staff produces
incentives (100 percent of construction-work-in-progress, annual reports on management salaries and financial
abandoned project cost recovery, accelerated depreciation) and operating ratios. These reports provide members
and revenue-enhancing incentives(increased rates of return with benchmarking information that would otherwise be
on equity(ROEs), hypothetical capital structures, formula difficult and costly to obtain. APPA also summarizes electric
rates). In 2012,APPA's sustained efforts finally bore fruit: industry data to produce reports on new generating capacity,
the commission on November 15, 2012,issued a policy average revenue per kilowatt-hour, and the Public Power
statement in which it said it would expect applicants to take Annual Directory fr Statistical Report. In 2012,APPA also
"all reasonable steps to mitigate the risks of a project"before published a comprehensive guide to understanding and
seeking an incentive ROE. It made clear that if it did award evaluating payments in lieu of taxes and other payments
risk-reducing incentives to a project applicant,it would then and contributions to state and local governments. This
take those incentives into account in considering any request report serves as a guide to understanding APPAs biannual
for an incentive ROE. report on payments in lieu of taxes and other contributions.
This change in policy is important to APPA members because It also provides public power managers and goveming
even seemingly small increases in an ROE award can mean board members with a tool to evaluate and,if necessary,
substantially increased dollars included in rates over the life seek changes to the utility's policies and practices
of a transmission project. For example,if a$100 million concerning these payments. By equipping members with
transmission project is awarded an 11.5 percent ROE this information,APPA aids them in reaching reasonable
rather than a 12.5 percent ROE, then in the first year alone, contribution agreements with their cities and governing
assuming a 50-50 debt-equity capital structure, transmission boards.
customers would save approximately$800,000 in their CSWG/NIST Smart Grid Privacy Subgroup-The National
transmission rates. Since these are very long-lived assets, the Institute of Standards created a Smart Grid Interoperability
savings would continue to accrue over many years. Panel(SGIP) to help NIST carry out its mission to coordinate
Defeat of MISO's Mandatory Forward locational Capacity standards development for the smart grid.The SGIP in turn
Market- In an order issued in June 2012, FERC declined to formed a Cyber Security Working Group as a collaborative
order a mandatory forward locational capacity market for the effort to address cyber security issues,including those
Midwest Independent Transmission System Operator, Inc. related to the smart grid. In 2012,APPA policy analysis staff
(MISO),a large regional transmission organization (RTO) participated in the working group's privacy subgroup,a panel
serving many APPA members in the Midwest.APPA and aimed at creating recommended standards and best practices
its members have been quite concemed about the negative related to smart grid data privacy APPA worked to ensure that
impacts of such capacity markets on public power utilities the proposed standards were narrow in scope and did not
in eastern RTOs. APPA intervened in this case to attempt overly burden electric utilities as they implemented smart grid
to prevent MISO from implementing such a market for the programs.
Midwest. In particular, FERC rejected MISO's proposal to Electric Quarterly Reports-APPA filed comments in 2010
implement a"minimum offer price rule" (MOPR)similar to in response to FERC's initial notice of inquiry regarding its
that used by eastern RTOs--a pricing rule that has caused Electric Quarterly Report(EQR) filing requirements and then
significant problems for APPA members constructing new again in June 2011 in response to FERC's follow-on notice of
generation in those regions. FERC noted in its order that proposed rulemaking. FERC proposed to expand the scope of
it "has consistently rejected a one-s ze-f is-all approach to the EQRs to incorporate previously exempt non jurisdictional
resource adequacy in the various RTOs due, in large part, utilities,including public power utilities, cooperatives and
to significant differences between each region." In rejecting federal utilities.APPA recommended that FERC set a de
MISO's proposed MOPR, FERC said "Buyers within MISO minimis threshold for reporting based on the Small Business
are generally unlikely to benefit from exercising market power Administration's standard for electric utilities of 4 million
by subsidizing uneconomic entry and the resulting reduction megawatt-hours,but to apply that standard only to wholesale
in capacity prices in MISO's voluntary capacity market. . . sales, rather than through-put. FERC issued a final rule in
.because, as American Public Power Association and [state September 2012 that adopted APPAs proposed minimum
public utility commissions] note, utilities own the vast reporting standard. Twenty public power utilities with over
majority of capacity within MISO."The rejection of MISO's 4 million MWEI in total combined retail and wholesale sales
were excluded from the EQR filing requirements because a member of the White House cyber security staff to address
they fall under the wholesale-sales-only threshold.APPA also the January 2013 APPA Joint Action Workshop.APPA staff
succeeded in helping to ensure that joint action agencies' was also pivotal in NERC's decision to open up access to
sales to its members generally would not have to be reported NERC's voluntary Electricity Sector Information Sharing and
in EQRs,even if the joint action agency does have to report Analysis Center(ES-ISAC)to small APPA utility members that
wholesale sales.These exclusions will save APPA members are not subject to NERC reliability standards,helped staff
many hours in personnel time that would otherwise have APPA member participation in the NERC Electricity Sector
been dedicated to completing these reports. Coordinating Council,and served as vice chair of the NERC
Critical Infrastructure Protection Committee.APPA Policy
Reliability standards and cyber security-APPA policy analysis Department staff worked with the Education Department to
staff led the North American Electric Reliability Corp. (NERC) develop and deliver a popular series of webinars for members
Standards Committee initiative to develop and gain industry on reliability standards,compliance,cyber security and
approval for revisions to the NERC Standards Process performance tracking issues throughout 2012.
Manual.These changes should make NERC's reliability
standards development process more efficient and timely, AF'PA ccoin�rlis 1meets
while preserving NERC's industry-consensus-based standard- g,*, h
setting model.APPA policy analysis staff,in conjunction s
with member volunteers,played pivotal roles in NERC's
completion of nine standards projects in 2012,including
FERC approval of its first results-based reliability standard
(FAC-003,Vegetation Management).
At APPA staff and industry behest, NERC management in Li 444i ‘)(1\ICC'
2012 agreed to work with the industry trade associations
and the regions on a complete reform of its compliance i >i
and enforcement program, called the"Reliability Assurance
Initiative." NERC has also agreed to move ahead on the • \, „
next phase of NERC's Find, Fix and Track(FFT)proposal, k*
to Find,Fix and Record violations within the utility,without
concurrent reporting to NERC of such items as potential APPA devotes considerable staff resources to electric utility
violations. In 2012, Find, Fix and Track procedures reduced operations,from genera on trough utility metering.APPAs
engineering services staff half the number of NERC violations that lead to full FERC ff represents public power utilities to
enforcement filings. APPA staff have become a key trade federal regulatory agencies,such as the Department of Energy,
association contact point with NERC staff for the reliability Department of Homeland Security, Department of Labor,
assurance and FFT ni atives. Occupational Safety and Health Administration, National
Institute of Standards and Technology,and others.APPAs
The NERC Board of Trustees also adopted in 2012 Version Reliable Public Power Provider(RP3)program continues to
5 critical infrastructure protection standards that use bright grow and extend its reach throughout the United States. A
line criteria to tailor cyber security controls to the risks few of the 2012 developments in these areas include:
and vulnerabilities posed by various types of bulk electric
system assets.APPA policy analysis staff worked with Reliability
members and the NERC-appointed industry drafting team • Represented public power interests at the IEEE
to ensure that this NIST-based framework for cyber security Distribution Reliability Working Group and provided
standards substantially reduces or eliminates the regulatory comments on the IEEE 1782 "Guide for Collecting,
burden on small public power utilities that are subject to Categorizing and Utilization of Information Related to
other NERC standards,by either excluding them entirely Electric Power Distribution Interruption Events"and IEEE
from CIP Version 5 or emphasizing the development of 1366"Guide for Electric Power Distribution Reliability
organizational capabilities to address cyber security threats. Indices."
The CIP standards also incorporate requirements that shift the • Released APPAs biennial Distribution System Reliability
emphasis from forcing registered entities to document"zero and Operations Survey report.
defect" performance since their last audit to the development • Launched eReliability Tracker service to help public power
and implementation of internal programs designed to identify, utilities better collect,categorize and analyze outage data.
assess,and correct deficiencies on a forward-looking basis. • Provided public power review and comment for Lawrence
NERC staff is working to complete the regulatory filing of the Berkeley National Labs paper"Examination of Temporal
OP Version 5 standards with FERC for approval in 2013. Trends in Electricity Reliability Based on Reports from U.S.
APPA staff worked closely with the Department of Energy to Electric Utilities."
•
complete and publicize DOE's Electricity Sector Cybersecurity Participated in NERC's Spare Equipment Database that
Capability Maturity Model(C2M2),including arranging for began operation in 2012.
•
Reliable Public Power Provider Program (RP3) • Submitted multiple sets of comments to DOE on
• Achieved all-time high of 184 RP3-designated public the need for a new Grid Interactive Water Heater
power utilities. Standard and in reference to the International Energy
• Met with a variety of outside companies,including Conservation Code.
national insurance providers, to ensure that the benefits of • Worked with the National Rural Electric Cooperative
the RP3 program are understood beyond the public power Association and Edison Electric Institute to provide
community. feedback and submit comments on DOE's Unified
• Coordinated the RP3 webinar series to help educate Methods Project on evaluation, measurement and
membership on the program. verification of efficiency programs.
• Delivered RP3 presentations in California, Georgia,
Missouri, New Jersey, New York, Ohio, Oklahoma, Mutual Aid
Washington and Wisconsin, • APPA staff continued to organize a national mutual aid
effort in 2012. Preparedness was tested with Superstorm
Advanced Grid Technologies Sandy restoration in New York, New Jersey, Pennsylvania,
• APPA staff actively participated in NIST-led Smart Grid West Virginia,Ohio,Connecticut and Virginia.Storm
Interoperability Panel(SGIP) to encourage standards restoration efforts were substantially improved as a result
harmonization and provide a public power voice to the of the significant contributions of public power.
discussions, • Following Superstorm Sandy,APPA staff was embedded
• Acted as a peer reviewer for DOE's Smart Grid Research in the Federal Emergency Management Agency's National
and Development program. Response Coordinating Center in Washington to assist
• Developed APPA's Cyber Security Essentials—A Public FEMA, DOE, Department of Homeland Security,
Power Primer publication Department of Defense and other federal agencies with
• Represented APPA membership in classified briefings coordination of responders across the country
related to cyber and physical security for the electric power
industry in Electricity Subsector Threat Workshop. ?012 A PPA Accumpl sh,m en c;
• Participated in DOE's Grid Integration Distribution LL ;3 * �
Workshop to provide input on what R&D and
institutional activities DOE should be working on in fiscal L 41111,, 7L1V,.-%,
yeas 2014[0 2018. a im 3
Department of Energy
• Worked with transformer manufacturers and other industry 'A lCI
advocates in an attempt to keep the proposed"Energy
Conservation Standards for Distribution Transformer
Efficiencies"at levels that balance cost and efficiency. '
• This effort included drafting Letters to DOE Secretary
Steven Chu, participating in technical meetings, ,'
coordinating member submissions to provide baseline
for utility experiences,and requested,with industry APPA's Energy Efficiency Resource Central (EERCnet.org)
coalition, a meeting with Office of Management and continues to be a major source of online information and
Budget(OMB) that coincides with the disclosure of assistance to members, and its 37 joint action agency and
DOE's final rule. state and regional association partners continue to serve as
• Coordinated with water heater manufacturers and other channels for delivering information and education.
industry advocates to educate DOE staff in hopes of APPA's Energy Efficiency Management Certificate Program,
correcting the Energy Conservation Standards for Residential
launched in August 2010,is one of the association's most
Water Heaters. highly attended educational offerings,with more than 100
• Performed an extensive survey of the membership in program participants and 40 graduates. This week-long
early 2012 to gauge the impact of the current DOE program provides a complete overview of the need for energy
water heater rule on demand response (DR)programs efficiency programs, integrated resource planning, how to
and coordinated member comment submissions. develop and implement programs and measure the success
• Met with DOE staff on three occasions to educate of the programs. Our goal continues to be to train and
them on the unexpected impacts of the existing certify one individual in each APPA member utility in energy
water heater mule on DR programs using smart grid efficiency program management.
interoperability
•
APPA has also been working with several groups to advance PPA aa:ur p'I Hants
the interests of public power in the area of energy efficiency, ;Z;,
. :4 ',t
including: N
Partnering with the Clean and Efficient Energy Program r ' ^--4,
(CEEP),a collaborative venture between APPA, the Alliance to Save Energy and the Large Public Power Council. CEEP is
a nationwide effort to initiate and expand energy-efficiency Rest':lit:IL
programs offered by public power utility staff with access to l I)c■CI()r)
needed resources,technical assistance and training. CEEP has 1 s i
assisted in the development and delivery of several of APPA's a
energy-efficiency resources. Specifically, CEEP partially or fully ,J:-::
funded the delivery of APPAs Energy Efficiency Management ,;,,:
Certificate Program and other energy efficiency courses for five P.n--?_ , 44 ;'_ `• ,.,r.,',..
joint action agencies,state associations or groups of utilities. Demonstration of Energy&Efficiency Developments(DEED)
Working with the State&Local Energy Efficiency Action • Deployed a web-based grant management system to
Network(SEE Action), a program coordinated through the improve efficiencies for staff and members related to
Department of Energy,which was formed to assist state and the DEED grant and scholarship application process,
local governments in their implementation of energy efficiency evaluation of proposals,and other grant management
policies and programs. functions.
• DEED board's Strategic Planning Initiative in 2012
Y,i 1? F�PPA Accompl�sh�ienls resulted in:
E - � �_ • A new name: Demonstration of Energy&Efficiency
a ;)Ign 'r-Se:'2. Developments(DEED)
t - 4a , "r? • An increase in the funding limit, to$125,000, for
fi4-4 ' innovative DEED projects.
r A,s'4, a s € • Inclusion of a mentoring component for all DEED•
arc scholarships and travel funds to encourage public
ad t t(tt it r • T A power career exploration.
q=4,-,,, . k • Addition of an "Education Scholarship" to support
i s«i students entering technical fields characterized by short
,, '�.S,-.. •i: supply and high demand by public power utilities.
,;,, " ' °' • $629,543 in funding awarded: $541,543 for 19 utility
kr % grants and$88,000 for 19 scholarships to support student
arr.' - .44%,k, r xa x talent
•
Strategic communications is an essential component in 63 percent of grant proposals received were approved for
APPA's success in the public policy arena. Some of APPAs funding in 2012 (61 percent over he last 10 yews)
communications highlights in 2012 include: • More than 450 project reports are available in the online
DEED Project Database
• Delivered a press briefing at the annual Legislative Rally • 28 projects completed(18 grants and 10 scholarships)
to discuss APPAs 2012 resolutions resulting in numerous • APPA members purchased 569 DEED products and
trade press stories on public power's priorities for the DEED members saved$19,265 using their DEED product
coming year. discount on APPA product purchases
• Logged and answered more than 180 inquiries from • More than 868 registrants participated in 13 DEED
members of the press,resulting in increased exposure for webinars in 2012. DEED members saved more than
APPA and our priority issues. $67,000 in webinar expenses.
• Held a successful Spring Issues Roundtable meeting • Several projects from the DEED/DSTAR collaboration were
at APPA's offices where public power communicators released and published for all APPA members.
gathered to discuss topics related to internal and external • Iowa Association of Municipal Utilities received DEED's
communications. Award of Continued Excellence
• Continued to grow the Tree Power program—adding new • Four DEED members were honored with Energy Innovator
members and disseminating information on community Awards: Fayetteville Public Works Commission,North
tree-planting initiatives. Carolina; City of Leesburg, Florida;City of Tallahassee
• Secured APPA mentions in more than 1,000 online and Utilities, Florida;Wyandotte Municipal Services,Michigan.
print stories on our key public policy issues—a marked • Released three new resources: Cyber Security Essentials,
improvement from 2011. LED Street Lighting:A Handbook for Small Communities, and
eReliability Tracker
£'u'?APPA Accorr:pIishments distribution. Over 100 people participated in all four
webinars included in the series.
1".:,'
E C > *a #, " 1 • A series of seven governance-related webinars focused
s� ' on issues important to governing boards and elected
" officials.
• Webinars on a number of other topical issues such
I'.Clt o L as NERC compliance,EPA regulations,rating agency
all l(� I IUI 7r`i
outlook,among others.
Increased the APPA Academy's focus on safety training
l through full day courses and webinars,in addition to the
development of a safety webinar series to be held in 2013.
' a • Developed meeting applications for smartphones and
'
y \ notebooks for the 2012 National, Business&Financial
:, _ e.:, a2;_., -_ and Customer Connections conferences. Conference
attendees used the app to review the full meeting program,
APPA membership provides affordable access to first-rate including sessions,speakers and sponsors, develop their
electric utility education and professional development personal schedule for the conference,view maps of the
opportunities for all utility staff. In 2012,APPA produced expo and meeting areas and invite contacts on Apple,
and delivered over 100 training programs for more than Android and Blackberry devices.The app was downloaded
5,000 attendees.APPA continued to expand its popular by approximately 30 percent of attendees at the National
webinar series, hosting 45 issue-focused events that attracted Conference,more than 50 percent of attendees at the
over 2,600 participants,including 543 individuals who Business&Financial Conference,and over 60 percent
participated in an APPA event for the first time.APPA brought of the Customer Connections Conference attendees.
courses on-site to 15 utilities,joint action agencies and state Feedback was extremely positive.
associations through APPAs in-house program. • Conducted the 12th Annual Public Power Lineworkers
Other key education and training developments include: Rodeo in Cleveland, Ohio.The rodeo which featured
a day of classroom training followed by in the field"
• APPA continues to expand the APPA Academy-APPA's competition with 45 teams from APPA member utilities
one-stop resource for education and training. Through a from around the United States.
variety of delivery methods-live education courses, in-
house training, conferences,webinars,online courses and APPAs meetings department manages the logistics of over 25
work force development parmerships-the APPA Academy APPA meetings,events and conferences, including identifying
helps electric utility employees stay abreast of rapidly locations,hotels and convention centers; negotiating
moving industry technologies and regulatory requirements contracts;securing room blocks;providing logistical support
and working with hotels for all APPA meetings and evens.
in formats and price ranges that suit employee needs.
• Offered several conferences and workshops to educate
members on current issues and provide them with 7012 AFP' Accorrrplishrno;its
an opportunity to earn continuing education credits.
Conferences included: a
-APPA National Conference ' f 5= s 'al-Business&Financial Conference r ` 'ia
-Customer Connections Conference ;`'" x
- Engineering&Operations Technical Conference
-Legal `"
g a Seminar ^t ft'A d :a11 ••e:
-CEO Roundtable
-Joint Action Workshop
-Public Power Leadership Workshop may, c 4• n
-General Accounting, Finance&Audit Spring Meeting `-
• Partnered with George Mason University on the r± .
development of a new course on "Introduction to Using ——
Enterprise Risk Management in Evaluating Utility Business APPA staff provides resources to assist public power
Risk,"offered free of charge to APPA members in 2012. communities considering the sale of their utility and
This course is also being held free of charge for six joint communities exploring the public power option.
action agencies and state associations to bring in-house for
their members through the first quarter of 2013. In 2012,APPA updated its manual "Positioning Your Utility
• Expanded the Academy webinar offerings by holding: to Succeed in a Sellout Evaluation,"which helps communities
• An"Electric Utility 101" series of webinars that work through the major issues in understanding the value
covered generation, transmission, substations and of their community-owned electric utility, the importance of
running the utility effectively,helps identify warning signs that reliability standards,advanced grid technology's impact on
a utility may become a target of a sellout attempt and provides customer privacy,energy storage,demand-response programs
a starting point to help utilities make an informed evaluation and utility strategies for dealing with copper theft.The
on the retention and sale of the utility. magazine's"On the Road"series of feature stories about APPA
member utilities included articles about utilities in Maine,
APPA also worked with a number of communities exploring Idaho,Kansas,Georgia,Colorado, North Dakota,and Ohio.
the public power option in 2012,such as Boulder, Colorado;
Montgomery County,Maryland; Evart,Michigan;among The website,publicpower.org,is a vast resource of information
others.APPA staff updated a number of publications and for APPA members. It is a repository of up-to-date news
reports related to municipalization including: and the go-to resource for information and registration for
upcoming APPA conferences,webinars,education programs
• Straight Answers to False Charges Against Public Power and other activities.The website's vast historical resources
• Survey of State Municipalization Laws include Public Power magazine and newsletters dating back to
• Q&A for Communities Considering the Public Power Option; the 1940s,when APPA was established,along with minutes
and of APPA board meetings and the full collection of APPA
• Model City Charter Provisions resolutions.
�� 1' APPA Accomplishn eats Website staff completed a transition to the Hub,a new
• � 0 platform for electronic discussion groups.The Hub has more
' `' 4' `Ye A; { than 30 discussion groups and it is easy to create new groups
POW '' `z as needs arise.APPA members can manage discussion group
4th. ,_x subscriptions online,look at archived discussions and share
+- .,4-'-' documents. Each discussion group has its own document
S :4 library.
<CI I tibti<1llllm
s b. Video assumed a higher profile on the APPA website in 2012.
PublicPowerTV,part of the media section of publicpower.
org,is an advertiser supported repository for the association's
vt , �. w c � videos,including"Pride In Public Power,"an informative
t. *? high-quality video to introduce the general public to the
t. I yee {'.0 '''.;', _...4.1, history and benefits of public power utilities. In June,we
live-streamed APPA President&CEO Mark Crisson's speech
APPAs Publishing Department handles the association's news to members at the 2012 National Conference in Seattle. APPA
and information operations and develops and protects APPAs publishing staff also produced a series of short video clips
branding activities. Publishing team members include editors, based on content presented at selected National Conference
the director of information services(librarian),and graphic sessions and pre-conference seminars.These,and several
designers.The department manages the association's website, policy-focused videos produced in collaboration with APPAs
publicpowerorg;writes,edits and produces Public Power Daily government relations staff,are housed on PublicPowerTV
and Public Power Weekly newsletters,as well as Public Power (video.publicpower.org)for members to view and share at any
magazine and Public Power Annual Directory Sr Statistical time.
Report and provides editorial and production support for
three quarterly newsletters—the DEED Digest,APPA People Website infrastructure was upgraded by integrating online
o People(for human resource and training personnel)and event registration with APPA's membership database,which
Customer Connector. streamlines registration and payment processing.
News coverage in Public Power Daily and Public Power Weekly
focuses chiefly on top legislative, regulatory and other public
policy issues that affect APPA members. In 2012,coverage
was particularly focused on activities of the Federal Energy
Regulatory Commission, North American Electric Reliability
Corp., Environmental Protection Agency the Commodity
Futures Trading Commission and the U.S. Congress.The
newsletters also carry timely announcements about upcoming
APPA conferences and education and awards programs,along
with news about developments at APPA member utilities.
Public Power magazine articles offer more in-depth coverage
. of industry developments. Cover articles during the year
focused on regulation of coal-fired power plants,mutual
aid experiences, the public power business model, national
•
APPA 2013 Legislative Rally
Federal Position Statements
rJ' 11
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�F�, ( Minnesota Municipal Utilities Association
` MSIL Q
II/I
Minnesota Municipal Utilities Association
'ass, ,
Our Mission:
To unify and serve as a common voice for municipal utilities,
and to provide them with the support they need
to provide quality service to their customers and community.
iiirivg
•Minnesota Municipal Utilities Association
Table of Contents
Tax Exempt Municipal Bonds 4-5
Protecting the Interests of WAPA Customers 6-8
Rail Shipping: The Need for Reform 9-11
Cybersecurity in the Electric Industry 12-13
The Potential Impact Impact of EPA Rules on the Electric Industry 14-15
Municipal Utilities' Right to Grow With Their Cities - A State Issue 16-17
Why Public Power? 18
Municipal Electric & Gas Utility Map 19
flIMINI Lq
:nIIMvSig Position Statement •
Minnesota Municipal Utilities Association
Tax Exempt Municipal Bonds
Background ,
Municipal bonds are debt obligations ;It "f `.x
issued by states, cities, counties and other � I; .
governmental entities, which finance many ./
projects for the public good including schools,
bridges, hospitals, water and wastewater 111)
treatment plants, and publicly-owned electric 1 I\
utility facilities. These bonds are desirable to t ,
investors because the interest investors earn
from them is not subject to federal income ri,V-
i
• t
tax. 1 (..
The federal tax exemption on municipal _.
p
bond interest has been in lace since the l
1
enactment of the very first federal tax 'n'""r...°° —
code in 1913. This has allowed state and
local governments to save, on average, an air quality regulations. Without access to the
estimated two percentage points on their borrowing savings traditionally available through tax-exempt
to finance investment in public infrastructure, financing, project costs will be even higher. These
which translates into a 25 percent savings in added costs will be passed on to consumers in the
infrastructure costs over time. Over the past few form of higher taxes or utility bills.
decades, tax-exempt financing has generated
trillions of dollars of investment in vital public The increasing cost of building water and
infrastructure, saving state and local governments wastewater treatment facilities offers an
hundreds of billions of dollars in interest costs. important example of the continuing need for
tax exempt financing. For many years after new
Over the last century, state and local governments environmental standards for water and wastewater
have been willing partners (together with the were established in the 1970's, federal and state
federal government) in building the fabric of daily grants took care of up to 90% of the cost of building
American life—power plants, transmission lines, treatment facilities to meet the new requirements.
roads, bridges, elementary schools, universities, In the past few years, as the cost of these facilities
airports, docks, water systems, housing, rail and has soared to ever greater levels, state and federal
hospitals, all of which are financed with tax-exempt grants to fund these projects have shrunk to almost
bonds. nothing. In communities where new facilities will
be needed, the financial hardship caused by the
As we look ahead to the financing needs of state loss or reduction of tax exempt financing would be
and local governments in the relatively near particularly acute.
term, access to tax-exempt financing may be Simpson-Bowles Begins Challenge
more important than ever. Roads, bridges, and to Tax Exemption
other basic infrastructure must be repaired or
replaced at today's higher costs. Many municipal The most recent discussion about the value of the
utilities and municipal power agencies will have tax exemption began as part of the larger effort
to make major investments to upgrade or replace to reform the tax code and reduce the federal
electric generating facilities in order to meet new budget deficit. In 2010, the Simpson-Bowles Report
4/ 2013 Federal Position Statements
"'Minnesota Municipal Utilities Association
suggested eliminating the exemption altogether, violate the implicit and reasonable expectation of
and Republicans and Democrats on both sides of investors that Congress will not change the terms
Capitol Hill have offered proposals to curb the governing the taxability of interest for bonds
exclusion of municipal bond interest. already outstanding. In the nearly 100-year history
of the tax exemption, Congress has never applied a
The President's Budget Proposal retroactive tax to bonds already held by investors.
In his FY2013 Budget, (FY2014 has been delayed) Again, this new tax risk will result in higher
the president proposed a cap on the value of borrowing costs for states and local governments.
certain tax deductions and tax exclusions, It is estimated that state and local borrowing
including interest on bonds issued by state and rates could rise by as much as a full percentage
local governments, that is intended to limit tax point if the proposal is enacted. State and local
benefits for certain higher income taxpayers to the governments will have to pay these additional costs
equivalent of the 28% tax rate. Under this proposal, on every bond they issue, even though the tax is
investors with adjusted gross incomes exceeding intended to affect those considered "wealthy."
the thresholds set by the president's proposal
would no longer be able to receive the full benefit MMUA Position
of the tax-exempt interest they paid for when they While we support the greater goal of deficit
purchased the bonds. This could amount to an reduction, Congress must reject any proposal that
effective 7-percent tax on otherwise tax-exempt would eliminate or limit the income tax exemption
interest for many taxpayers who would be in the on state and local bonds. Retaining the federal tax
35% tax bracket. exemption on municipal debt is a critical element
with respect to the fiscal health of state and local
In the case of newly issued tax-exempt bonds, governments and the ability to rebuild the nation's
investors would likely demand higher interest infrastructure to compete in the 21st Century.
rates to make up for this new tax. Such a proposal
would have a direct and negative impact on
state and local governments and authorities, and
more importantly, the communities they serve.
The outcome would be higher borrowing costs y P 'i�j 4•„
for state and local governments, less investment d "ji k-21( � - �' 11)411"
g am., li pii 3 t , f. ��;��n - 1111".
in infrastructure, and fewer jobs. This comes '�J�tgpl! Ili �y } E� �„
at exactly the wrong time as state and local s�n�� q�,'J " gj �� j 1 i �' •
government finances remain under pressure, l ;a y ,s i -' 'e" �.
and infrastructure and education investment is ri E
woefully inadequate. -1 F
To make matters worse, the president's proposal
would be retroactive and would apply to interest J
on bonds governments have already issued �{
and investors have already purchased with the
understanding that they would be tax-exempt. 111`0 'y. -
The effect would be to substantially erode the �a ,A IY i...
value of bonds in investors' portfolios. This would
2013 Federal Position Statements/5
'Manna
Position Statement •
Minnesota Municipal Utilities Association
Protecting the Interests of WAPA Customers
Background
The four federal
power marketing
administrations
(PMAs) deliver
_
reliable, cost- `
based hydroelec-
tric power to vari- tea...-
ous regions of the -
United States. „
Approximately
1,200 public
power systems
and rural elec-
tric cooperatives ~ —;
throughout the
country buy low-
cost, zero-emis-
sions hydropower 1d
from the PMAs
that market this
power from the
federal multi- 4 �
purpose dams.
The Western Area Power Administration (WAPA) Congressional Action
is the PMA that delivers power to a 15 state region Every few years, various interests and agencies
of the central and western United States that also Propose to use WAPA and the other PMAs for pur-
includes the western third of Minnesota. WAPA's poses that depart from the original, vital goals of
17,000-mile transmission system carries electricity the federal power marketing program. While well-
from 55 hydropower plants operated by the Bureau intended, these proposals invariably come from in-
of Reclamation, the U.S. Army Corps of Engineers terests that undervalue the vital and enduring role
federal power plays in the communities it serves.
and the International Boundary and Water Com-
mission. Minnesota is served by WAPA's Upper During the last administration, the Office of Man-
Great Plains Region office which provides electric- agement and Budget (OMB) recycled a number of
ity from the seven dams of the Pick-Sloan Missouri proposals (over the course of several years) that
River Program established by Congress in 1944. were soundly rejected: reallocation of Pick-Sloan
irrigation costs to power customers; an adminis-
WAPA is critical to Minnesota municipal utilities, trative increase in the interest paid on new PMA
providing about one third of the wholesale power investments; and the requirement that PMAs sell
needs of 48 public power systems serving over power at market rates.
200,000 people in the western part of the state.
6/2013 Federal Position Statements
Nam in
nmandg
• Minnesota Municipal Utilities Association
Minnesota municipal WAPA customers
Ada Granite Falls Melrose Sleepy Eye
Adrian Halstad Moorhead Springfield
Alexandria Hawley Mountain Lake Staples
Barnesville Henning Newfolden Stephen
Benson Jackson New Ulm Thief River Falls
Breckenridge Kandiyohi Nielsville Tyler
Detroit Lakes Lake Park Olivia Wadena
East Grand Forks Lakefield Ortonville Warren
Elbow Lake Litchfield Redwood Falls Westbrook
Fairmont Luverne St. James Willmar
Fairfax Madison Sauk Centre Windom
Fosston Marshall Shelly Worthington
One of these proposals cuts to the heart of the fed- Another problematic proposal involves an ongoing
eral government's foundational role as a steady, debate over building PMA transmission lines for
affordable source of nonprofit power to nonprofit non-traditional purposes. A proposal to provide
wholesale customers, including municipal utilities. additional funds for both WAPA and Bonneville
Some policymakers, including both chairmen of the Power Administration was included in the stimulus
President's Deficit Reduction Commission, have bill of 2009 to build new transmission facilities, pri-
recommended switching to "market-based" rates for manly to connect non-hydropower resources to the
federal power as a way to help deal with America's
budget woes. grid. The Senate proposal, dubbed the Transmis-
sion Infrastructure Program (TIP), was debated in
Currently, and in accordance with federal law, the House in 2011 but no further action was taken.
PMA "cost-based" rates are set at the levels
needed to recover the costs of the initial federal Secretary Chu Proposal
investment (plus interest) in the hydropower and In a March 16, 2012 memo DOE Secretary Steven
transmission facilities. The PMAs annually review Chu set out a number of proposals that would
their rates to ensure full cost recovery. None of create new roles for WAPA, to include designing
the costs are borne by taxpayers. If a deficit is rate structures to promote electric vehicles,
projected, rates are adjusted to eliminate any providing incentives for renewable energy,
deficit. Power rates also help to cover the costs of expanding transmission for third parties, and
other activities authorized by these multipurpose serving as test beds for research.
dams such as navigation, flood control, water
supply, environmental programs, and recreation. These proposals were met with a storm of protest
PMA power is generally low-cost in relation to from WAPA customers when they were discussed
other sources of electricity because hydropower in a series of"listening sessions" in 2012. On No-
is a renewable resource and most dams were vember 19, DOE issued a Federal Register Notice
constructed long ago, when material and labor costs featuring draft recommendations specific to WAPA
were much lower than today.
continued on next page
2013 Federal Position Statements/7
wswsiirq
Minnesota Municipal Utilities Association
•
•
ti 4E
{ fit {
AMAIN 'tr �` w�`4 . - '.� f Aq1 9•
; 1■
L .," „
Lk�
. r i 'p �� " a V4 ; -il1l�� �� TriEA r
Ern:u
that are narrower in scope than Secretary Chu's supports the current framework under which
original proposals. We still see these proposals as the PMAs operate and will work to ensure these
a way of employing WAPA and its hydro resources processes continue unimpeded.
in the service of the "advancing the development
and integration of non-hydro renewable resources" MMUA urges Congress to:
objective. This can only be done at the expense of
WAPA's customers in the form of reduced access to • Support the continued existence and federal own-
federal hydropower and higher costs to the WAPA ership of the PMA program, including increased
system. customer involvement in funding, and
MMUA Position • Oppose legislative or administrative efforts that
The PMAs have provided clean, renewable, cost- could result in substantial and unnecessary rate in-
based hydropower for decades under the principle creases, including proposals to require the PMAs to
sell power at market rates.
that improvements to PMA operations should
be paid for by the customers who benefit from
the improvements. To socialize significant new
programs into PMA operations to accomplish a
system-wide "upgrade" is untimely, unwise, and
would increase costs to WAPA customers. MMUA
8/ 2013 Federal Position Statements
HSMNILf
IVIIVIU Position Statement
•Minnesota Municipal Utilities Association
Rail Shipping: The Need for Reform
Background
Railroad transportation is the
principal method of delivering
coal to the electric generation X ' --
facilities that provide power to 5 ,*
Minnesota municipal utilities imi I
�/ '
and their customers. This heavy k', I
reliance on rail has left these .f I �' I� 1', I l
utilities vulnerable to significant ���11
market power abuses caused by �� � � � b
the absence of competitors in the � �h i ' =a r - ■( I
railroad industry. Utilities and -' IT, ' ' -- ■
_ i -,_ .
other rail commodity shippers, I -:-k
including those who are served
by only one railroad and are
often referred to as captive
shippers, are facing significant
rate increases due to the lack train photos by Jim Ramnes
of competition in the railroad
industry. number of Class I railroad companies in the United
States was reduced from 42 to 4. This has resulted
Freight railroads have been exempt from the in a duopoly of two major railroads serving the
nation's antitrust laws since the mid-20th century, western regions of the U.S. and a similar duopoly of
but until 1980 they were subject to tight regulation two railroads serving the East.
by the Interstate Commerce Commission. By the
late 1970's, the industry was in poor financial The lack of real competition in the railroad
condition with an excess of capacity. In an effort industry, coupled with an absence of effective
to revive the rail industry, Congress in 1980 regulation of industry operations, has significantly
deregulated competitive rail service and allowed undermined the operations of many Minnesota
the railroads to shed their excess capacity. municipal utilities. Shipping costs are skyrocketing
Railroads were free to shed marginal routes as current contracts expire and unreasonably high
and enter into long-term shipping contracts. new rates are set with virtually no negotiation.
Unfortunately, in 1980, Congress failed to remove Furthermore, even as the railroads dramatically
the industry's antitrust exemptions. increase their rates, in a number of cases their
service has actually declined.
The consolidation of the railroad industry that has
occurred over the last 30 years has been stunning. While the railroads argue that any rail customer
When Congress passed the Staggers Rail Act in legislation is an attempt at re-regulation, the goal
1980, the resulting industry deregulation was of rail customers is not a return to the regulation of
supposed to usher in a new era of competition the 1970's, but rather a national rail policy that will
that would benefit customers. Unfortunately, the ensure reliable rail transportation and reasonable
legislation spawned a new era of unprecedented rates for all rail customers—particularly for
:onsolidation rather than competition, as the continued on next page
2013 Federal Position Statements/ 9
"""u
Minnesota Municipal Utilities Association
•
those customers without access to meaningful was about $8.1 Billion, or 35%, over book value,
competitive transportation alternatives. Berkshire Hathaway is attempting to pass the
acquisition costs on to rail customers. The STB is
Local case studies now in the process of deciding whether to allow this
There are a number of examples of the adverse pass-through by BNSF. Meanwhile, the additional
impacts caused by the lack of railroad competition cost of the acquisition premium to MRES and its
on joint action agencies and Minnesota municipal members amounts to approximately $430,000 per
electric utilities. year.
Missouri River Energy Services (MRES), a joint Southern Minnesota Municipal Power Agency
action agency supplying wholesale power to 24 (SMMPA) is another joint action agency supplying
municipal utilities in Minnesota, is a co-owner of wholesale power to 18 municipal utilities in
the Laramie River Station (LRS), a coal-fired power Minnesota. The agency is a 41 percent co-owner
plant near Wheatland, Wyoming. BNSF Railway of Sherco 3, an 884 MW coal-fired power plant
Company (BNSF) currently transports some 8.3 near Becker, MN. Coal is delivered by BNSF, the
million tons of coal per year approximately 175 only railroad that serves the plant. As a captive
miles from coal mines in Wyoming's Powder River shipper, SMMPA has little or no leverage should
Basin to LRS. After its contract for that service the railroad seek to take advantage of that position,
expired in 2004, BNSF established new rates that making Federal oversight and action the sole
more than tripled the prior rate and increased remedy.
transportation costs to MRES by about $7 million
per year, 400 percent higher than the direct costs Individual municipal utilities have experienced
being charged to shippers in competitive markets. similar problems with coal shipments to their
The coal supplier for LRS appealed to the STB, local plants. Hibbing and Virginia, two small
and in February 2009 the Board issued a judgment communities located on Minnesota's Iron Range,
providing $350 million in rate relief for coal enjoy the benefits of owning and operating their
shipments to the plant through
2024. — —
e
BNSF appealed the ruling to
the U.S. Court of Appeals for
the D.C. Circuit, which sent
the case back to the STB on a �I
technicality. In June 2012 the
STB responded by upholding
its original decision, which
BNSF appealed to the court
again in August, 2012. Final
comments are due in March of 11
this year. R
In the midst of this prolonged -
legal battle, BNSF sold °AEI lea
the railroad to Berkshire ;" » t� " e (t
13 . y, i:
Hathaway in 2010. Even , (r
though the purchase price
10/ 2013 Federal Position Statements
iffmarado
Minnesota Municipal Utilities Association
own municipal electric utilities. Both utilities that establish rail policy. Both amendments
have been forced to give up their rail service – were successfully attached to the House farm bill
they have resorted to trucking coal from Superior, reauthorization, led by the efforts of Rep. Tim Walz
Wisconsin to their respective towns to fuel small (D-MN).
coal plants rather than deal with prohibitive rail
transport costs. The Virginia Department of Public Unfortunately, these amendments were not
Utilities, for example, now pays upwards of$57 per included in the final farm bill due to an extension
ton of coal, but only $16 is for the coal itself. The of current farm policy during last year's lame duck
remaining $41 covers the costs of transportation. session.
Hibbing Public Utilities now pays $15.30 per ton
for coal but pays $48.48 per ton to have it delivered. There is likely to be more activity in the Senate
during the 113th Congress on both STB reform and
Congressional Action antitrust, in which both Minnesota's US Senators
Two main pieces of legislation—an antitrust bill are slated to play major roles. Senator Amy
and a measure aimed at reforming policy and Klobuchar, the new Chair of the Senate Judiciary
procedure at the STB—have been consistently Subcommittee on Antitrust, Competition Policy and
pursued by the rail shipper community for the last Consumer Rights, is expected soon to introduce an
several Congresses. In the 112th, the Senate took antitrust bill strongly supported by the Consumers
the lead. The Railroad Antitrust Enforcement Act United for Rail Equity (CURE). Senator Al Franken
of 2011, authored by Senator Herb Kohl (D-WI), will soon introduce new STB reform legislation,
3liminated the exemptions from antitrust law that which will direct the STB to ensure competitive rail
the railroads enjoy—including those under mergers service for all dependent rail shippers.
and acquisitions, collective ratemaking, and private
antitrust lawsuits. This legislation was passed out MMUA Position
of the Senate Judiciary Committee 14-1 in 2011. Lack of competition in the rail industry, coupled
with the lack of access to regulatory relief, has put
A bipartisan package of regulatory reform utilities in the untenable position of dealing with
provisions aimed at the STB, led by Sen. huge, unjustified cost increases in the shipment of
Jay Rockefeller (D-WV) and Sen. Kay Bailey their most important fuel source, coal.
Hutchison (R-TX), was ultimately added as part
of the Senate's highway reauthorization bill, but MMUA supports enactment of legislation in the
without the Kohl amendment. Eventually the 113th Congress that eliminates the exemptions from
STB package was dropped from the highway bill antitrust law that the railroads enjoy—including
that emerged from the conference committee those under mergers and acquisitions, collective
last year. Minnesota Senators Klobuchar and ratemaking, and private antitrust lawsuits.
Franken pushed hard for inclusion of both pieces of
legislation in the Senate bill. MMUA also supports enactment of STB reform
legislation that will direct the STB to ensure
In addition, Sen. Klobuchar was successful in competitive rail service for all dependent rail
including two amendments to the reauthorization shippers.
of the Senate's farm bill. One amendment would
require the Department of Agriculture to update Finally, MMUA urges members of the Minnesota
their previous study on rural transportation issues, delegation to contact the STB to urge a fair decision
including rail shipping; the other directs the head promptly on the May 2010 remand from the U.S.
)f USDA to participate in certain STB proceedings Court of Appeals.
2013 Federal Position Statements/ 11
.11171/11111 Position Statement .
Minnesota Municipal Utilities Association
Cybersecurity in the Electric Industry
Background ' . ,7: i .' �� %
Public Power, 8 � ' } " k
along with 41 44}}
g ,g `S •the rest of the b V/ l \ ���1,1%,=:„:,, e.s;v e /.: '
electric utility .��� i ,a
�.� /war xifr
industry, takes uti n� z V ° , . a b tits
seriously its �, �tr .0 d , ',
responsibility to i �/�,., i�"a t' , ,r o , ,.x
maintain and P ` �,�
protect a strong -��� v 1 f i4i:"� , r
electric grid, I �y ,° ' qe , i�i.0 ! 's'
a system that .' r ®/® A I v, 19V' c'
is absolutely +��` ns 'C era fe.''i)11&T a. '*,D - 4 t ,,£.
essential for a tr < ®,"%�1 f,re"I, .' ,' C
the welfare ,i ®� t –1.–.."' _ ,*
and security ti; I,
of the nation. Q�-4 O;� i
That is why the "ft-,0,/t' ''c�. 1 ®®MS'— `�',
industry worked -®
together to reach -' . I ' r
I,® �,
consensus on 1 ,� 7w;as, a -„i 'J
a mandatory
reliability plan As threats to the security and integrity of the grid
as spelled out in the Energy Policy Act of 2005 develop, everyone in the electric industry accepts
(EPAct05) and continues to work with the Federal the fact that new government authority will be
Energy Regulatory Commission (FERC) and the necessary to deal with cyber attacks.
North American Electric Reliability Corporation
(NERC) to establish and enforce comprehensive The industry itself, with NERC, has made great
standards to strengthen the grid. strides in addressing cyber security threats,
vulnerabilities, and potential emergencies. We
Under the current framework, cyber security recognize that emergency situations warranting
standards for the bulk electric system are drafted federal involvement may arise. The questions on
by industry experts through their participation in this issue going forward are: How much authority?
NERC –whose role is sanctioned by the Energy What will be asked of the industry? Who will
Policy Act of 2005. In accordance with this law, be in charge of this effort? The answers to these
FERC has the power to approve or remand these questions may go a long way in determining
standards, as well as the authority to direct NERC whether the nation's electric grid will have effective
to quickly develop additional standards in response cybersecurity protections with minimal impact
to newly identified threats. FERC also enforces on efficient utility operations or a cumbersome
these standards, and has the authority to issue expensive system beset by inconsistent, duplicative
substantial penalties for noncompliance. requirements.
12/ 2013 Federal Position Statements
flwhiin
IIIIIIIVIEti
•Minnesota Municipal Utilities Association
Congressional Action cybersecurity program. The Order permits agencies
The growing cyber threat has prompted a variety to use existing statutory authority to regulate
of proposals to buttress the nation's cyber defenses the cybersecurity of critical infrastructure and to
to be brought before Congress, which has been identify additional authority necessary to enhance
holding hearings on the cybersecurity issue since protection against security threats.
2007. Some call for the creation of voluntary
standards across all economic sectors, backed by MMUA Position
federal compliance incentives including liability MMUA supports narrowly crafted and targeted
protection, expedited security clearances, and legislation to address cyber security emergencies.
priority technical assistance. Others would enhance We do not support the addition of an unnecessary
information sharing between the government burden on the electric utility industry, that
and industry, or specifically seek to revise the duplicates current processes and may achieve only
cybersecurity framework governing the electricity limited results. We also strongly support enhanced
sector—in some cases imposing a top-down information-sharing,from the federal government
structure with FERC supplanting the role of to the industry.
NERC.
Executive Action
On February 12, 2013,
the President released the
ong-awaited Executive
Order on cybersecurity.
The President's Order
establishes a voluntary 'w,,.
program to support the
adoption of cybersecurity 1�
standards by owners t
and operators of critical 4i
infrastructure, which
obviously includes the ,,„
electric industry. The , yr
Order tasks the National _ t
Institute of Standards k
and Technology (NISI), r
within the Department i�.
of Commerce, to develop \t
a baseline Cybersecurity
Framework that
sector-specific agencies
would rely upon to
establish a voluntary
critical infrastructure
2013 Federal Position Statements/ 13
/I IVIUJt
Position Statement •
Minnesota Municipal Utilities Association
The Potential Impact of EPA Regulations
on the Electric Industry
Background and revise effluent discharge limits by lowering
Concern about global climate change has led state discharge temperatures.
and federal policy makers to consider the imposi-
tion of limits on the emissions of carbon dioxide These EPA proposals collectively constitute the
(CO2) and other greenhouse gases (GHG). There largest single imposition of EPA regulations
have also been attempts to craft an international on electric utilities, and the largest regulatory
approach to climate change through the Kyoto expense, in the history of the electric power
conference in 1997 and the Copenhagen conference sector. No complete analysis has been performed
in 2009. Despite these efforts and the best of inten- and released to the public to determine what the
tions by state legislators and members of Congress, combined costs will be to the consumer.
development of an effective and politically accept-
able climate change policy has proven to be an ex- Impact on Our Region
tremely difficult task. The issues are complex, the In the Midwest, impacts from the pending EPA
impact of regulation on local, regional and national regulations will be extensive. One result will be
economies would be significant, and new technology the costly replacement of an enormous amount of
that will be needed to achieve emissions reductions baseload power from coal-fired generation. The
is not yet commercially available. Midwest Independent System Operator estimates
that amount to be an incredible12,600 megawatts.
Executive Action This relatively sudden imposition of change will
In the past few years, the Environmental be particularly onerous to consumers of Minnesota
Protection Agency (EPA) has used the Clean Air municipal utilities, which depend on coal
Act (Act) to undertake an aggressive campaign generation for more than 70% of their wholesale
against coal-fired power generation. On December power needs. Retrofitting these plants with non-
7, 2009, the EPA issued a final finding that existent technologies to control greenhouse gases is
greenhouse gases pose a danger to human health not an option, leaving conversion to natural gas as
and the environment, clearing the way for a the sole remaining solution. This fuel switching will
Clean Air Act regulation limiting carbon dioxide be expensive, to say the least. Some of the plants
emissions from power plants, vehicles and other that will be forced to convert still have years left
major sources. before their construction costs are recovered from
revenues they produce. And the resulting reliance
The EPA has outlined more than a dozen major on natural gas as a fuel leaves utilities and their
environmental regulations to be imposed on ratepayers exposed to risks inherent in the complex
the electric utility industry by the year 2020. natural gas commodity market. Insufficient
These air, water, and waste regulations attempt pipeline capacity in the upper Midwest may lead to
to accomplish a remarkable list of goals. They shortages and distorted prices.
would: reduce hazardous air pollutants (including
mercury); reduce GHGs by capturing and storing Our members have assembled a diverse portfolio
them despite the lack of commercially deployable of energy resources that include solar, wind and
technology to do so; potentially regulate coal ash bio-fuels and are on track to meet Minnesota's
as hazardous waste; revise regulations on electric renewable energy standard of 25% energy sales
utility water use by imposing new intake devices by 2025. The municipal utility sector has also met
(including possibly requiring cooling towers); the energy conservation goal of conserving 1.5% of
14/ 2013 Federal Position Statements
illAVISII11
iiiiivSeg
• Minnesota Municipal Utilities Association
energy sales. The increased energy Environmental Regulatory Timeline for Coal Units
costs from these programs have
resulted in multiple rate increases
Ozone 502/NO2] CAIR Water
on our customers. These costs come mm g 30.2 Ramry
at an unprecedented time of reduced Rednd Cg1R Phase Bemnudrzl nMUC Effluent Guidelines P Seasonal Effluent GutMPnee
OMO Nos Cep °ne Proposed Reel mbeepetled
commercial and manufacturing MGa RM°B Ree'aaaeant Final CAIR G6 N6 Ozone m;m;nb Y.
CHIC Rule Epenled Replsemen, 9evaNVY NM08 ReNtlpn
activity, high unemployment, 'Vacated OA E.peeleo LAMBS „ ej CanpFnce
EMwnl 31fi1d1 ontlask 11 Ne elrpeen rule
reduced property values and tax R N6 a,de,nes eeponbd
revenue in cities, and concerns about nd s Ns l �dl,
economic vitality both locally and
0 0 0 0 0 0 0 0 0 0
nationally. The new EPA regulations
will only multiply these rate I "
PM 25 B gn PM2S
Y P y Sips due e g LAIR
" RU slPae So g gCAIR
increases. The new EPA regulations m' Rule a NAAOS I °fit 9nefions°B A °tl CAP Phase
g Annual^ SC Cap COBB IM o In CompIl a SD_8N0 Cops II Seasonal
are, simply put, "too much, too soon." NO.Cap mgro I Bag NOS Cap
Rpwmnenlsunder Complonce,m
Proposed Fine]CCB Rub 6PIB
Rub for CCBs Fns EPA (groundwater Replacement Rue
The Clean Air Act— Me-timed Nonaranman' monl B doable
rule eryecled Proposed CeYgnesoeo menden closure.
the Wrong Tool dry ash conversion)
PMZS Ash I I 1 i 1 rCt
When Congress enacted the major
provisions of the current Act, the
main focus of the legislation was addressing MMUA Position
improvements in the
traditional criteria pollutants, such as soot or MMU A supports continuin continuing im p
agricultural dust (particulate matter), smog and quality of the nation's air and believes that such
other hazardous air pollutants. There is no record improvements can be made in a sensible fashion
indicating that Congress anticipated these same without damaging the economy, so long as there
regulatory structures would one day be used to is a full understanding of the cost of the proposed
control a substance as ubiquitous as CO2, for which regulations. Credit for early adoption of measures
no effective control technologies exist even today. already taken needs to be included in any new
The recent court ruling to vacate the Cross State regulatory scheme.
Air Pollution Rule (CASPR) is an example of how
ill-suited the Act is for the broad purposes to which MMUA urges the Administration to recognize
the EPA is applying it. One of the law's principal the cumulative impact of all EPA climate change
authors, Rep. John Dingell (D-MI), famously said and air quality regulatory activity on jobs and
that using the Clean Air Act to regulate greenhouse American economic competitiveness. In doing so,
gases would result in a "glorious mess." Congress the Administration should draw on expertise not
did not intend it to be used to require reductions or only from the EPA, but also from agencies having
limitations on greenhouse gases blamed for global expertise in and responsibility for the economy and
warming or climate change, which arises from the electric system. The Administration should
global concentrations of GHGs, caused from sources Produce an objective cost-benefit analysis of all of
around the world. Without a change in direction, EPA's current and planned regulation.
EPA and the courts risk forcing untenable
requirements on the electric industry at the same MMUA further urges the EPA, Congress, and the
time the agency is already struggling to address White House not to impose any new air quality
an extensive menu of costly air pollution problems. regulations until the impacts of current regulations
The nature of the climate change issue demands a can be absorbed.
lifferent response.
2013 Federal Position Statements/ 15
ISNSILQ
.11111174020 Position Statement •
Minnesota Municipal Utilities Association
Municipal Utilities' Right to Grow
With Their Cities — A State Issue
Background
Municipal electric utilities work very closely with
their rural electric cooperative colleagues on
many fronts: we help each other out in times of
need; we work together on large transmission and
generation projects; and we agree on most public
policy issues, including preservation of the Power
Marketing Administrations, captive rail, tax credit
bonds, and climate change. Unfortunately, the one
issue on which we consistently disagree is known .
as"service territory" or"annexation"—the historic
right of municipal utilities to grow with their cities.
Like most issues relating to retail electric municipal utilities. In fact, co-ops represent the
distribution service, the designation of service fastest-growing segment of the electric industry in
territories has long been governed by state law. Minnesota.
Minnesota's municipal electric utilities have had
the right to serve annexed areas since the inception • The co-ops, who by their own estimates serve
of the industry more than 100 years ago. This 85% of Minnesota's land mass, are poised to
historic right was preserved in the 1974 state law capture much of the growth around communities
that established the current regulatory scheme. served by investor-owned utilities, as well as
Our law, like that of many states, provides that around those communities already served by co-
a municipal electric utility has the right to serve ops. This has been happening for some time in the
areas annexed by the city. The law also provides Twin Cities Metro area, and is occurring in other
that the utility previously serving the annexed parts of the state as well.
area—be it an investor-owned utility or a rural co-
op—must be provided with fair compensation. • In addition to their own rapid growth, the co-ops
receive fair compensation under the law when a
The history of the 1974 Minnesota agreement was city purchases service rights following annexation.
based on consensus, fairness, and understanding:
In past years some cooperatives have
• The co-ops needed the 1974 service territory unsuccessfully tried to secure federal legislation
law in order to obtain funding to build the Coal denying municipal utilities their right to grow
Creek project, which still serves today as one with their cities. There are concerns that the co-
of their primary sources of wholesale power. To ops might attempt such an effort again as they
secure passage, they agreed to and supported the unsuccessfully attempted to do during conference
municipal annexation provision in the law. committee deliberations on the 2002 Farm
The co-ops have enjoyed tremendous growth Bill. This is disconcerting, particularly because
in the years since the service territory law was Minnesota municipal electric utilities have made
enacted. Their growth, which has largely come such significant efforts to work out a solution
from the expansion of cities that do not own their to service territory disagreements on several
electric service, has far outstripped that of the occasions.
16/ 2013 Federal Position Statements
/1/IMIn
IIIIIM tg
.Minnesota Municipal Utilities Association
Efforts at Compromise Municipal and Co-op Customer Growth, 1974-2011
Municipal electric utilities have
made three recent efforts to 800,000
find a compromise with electric 700,000
cooperatives on the service
territory issue—as part of 600,000 - Co-op
discussions concerning industry 500,000
restructuring in 1998, an effort 400,000
at mediation in 2001 and a joint
task force that met in the spring 300,000
and summer of 2008. 200,000 Muni
100,000
The first of these efforts occurred
in 1998 and 1999 during a 0
series of meetings between 1974 1980 1986 1992 1998 2004 2010
representatives of municipal
and cooperative electric utilities, accommodate the the cooperatives, were not willing
which were held to discuss issues surrounding to relinquish the fundamental right of municipal
electric industry restructuring. While there was utilities to grow with their cities.
little difference in the positions of the two groups
)n restructuring itself, there was no resolution of The most recent attempt to find a compromise to
the disagreement regarding the service territory the service territory dispute occurred in the spring
issue. The co-ops insisted that any change in and summer of 2008. This effort was the most
state law allowing municipal electric utilities productive so far, with the municipal utilities and
to grow with their cities must include language the cooperatives making a number of significant
that municipal expansion would be restricted and concessions. In fact, by the time a joint task force
eventually ended. This position was completely had its last meeting in July 2008, the two sides had
unacceptable to municipal representatives. The reached agreement on nearly all the issues that had
co-ops' subsequent efforts to pressure municipal been brought up for consideration. Unfortunately,
utilities to accept their offer killed any further the process ended without achieving a resolution
discussion at that time. because the co-ops terminated the negotiations.
The second attempt to mediate service territory MMUA Position
disputes came in October 2001, in response to The designation of electric utility service territory
an appeal from state legislative leaders urging is fundamentally a state issue, fully governed by
both sides to come to terms on the issue. After state law in Minnesota and in other states. This
preliminary discussions between the Minnesota issue should be left to the states—where it's always
Rural Electric Association and MMUA, the been. There is no justification for Congressional
parties embarked on a new round of negotiations involvement in the service territory issue, whether
with a professional mediator. Unfortunately, the in the Farm Bill, an appropriations measure, or a
mediation effort ended rather quickly because the budget bill.
cooperatives seemed only interested in discussing
municipal concessions. The municipals, willing
and ready to discuss a variety of approaches to
2013 Federal Position Statements/ 17
IMIIIWt
Minnesota Municipal Utilities Association •
Roseau •Warroad
,Hallock \.,Gaudette
Stephen
t Argyle Newfohfen —, ✓Ly
(Alvarado "�
' 'Warren thief River Falls f `V`
t�East Grand Forks Ely, ��`
Clearbrook Mountain Iron •Grand Marais
Shell Poston Bagley Buhl. ,Virginia
Nielsville •Biwabik
Y Hibbing • 'Gilbert
Keewatin, .
.Ada Cohasset Nashwauk
Grand Rapids
.Two Harbors
'y Hawley Lake Park
Warhead -Detroit Lakes Duluth
Barnesville Proctor.,.
Perham r
•
New York Mills •Atlkin
,Wadena Moose Lake•
,Staples .Brainerd
Breckenridge Eagle Bend
' •Clarissa ,Randall
Elbow Lake Pierz .�-i'`
MIIIIIIII// -
Alexandria. Mare. „/
Sauk Centre
.Melrose Princeton North Branch- , Municipal Electric
Ortonville Benson Elk River ;�
Kandiyohi Grove City Buffalo Anoka ; & Gas Utilities
Delano ,Circla Pines
Madison Wilmer 'Litchfield North St.P aul
Hutchinson of Minnesota
Granite Falls Glencoe, Chaska.Shakopee
Olivia'
Winthrop Arlington '•.�
ty
Marshall, gedwood Falls Le Sueur•New Prague
Morgan• Fairfax Goodhue ac(-e i;l
New Ulm Saint Peter
Tyler, 'Sleep'y Eye •Kasota ,Kenyon
Westbrook Springfield Lake Crystal Janesville ��_
Mountain Lake •Madelia Waseca Owatonna Rochester �'\,�
'Saint James Kasson -Saint Charles`•
Dundee .Windom Truman -Blooming Prairie Peterson Rushford'-
Brewster, Lakefield •Wells Spring Valley Whalan
L -nos. Adrian Worthington • , .Alpha •Fairmont •Blue Earth -Austin Preston Lanesboro Caaetionia
Rushmore _ Jackson .Spring Grove
Bigelow RoundCake-Dubnell Cayloa- --.- _ — Mabel €lien •
18/ 2013 Federal Position Statements
/I Auhifl
/,1117W1
. Minnesota Municipal Utilities Association
Why Public Power?
O� Ip�
Ok`j4„
� J�I
" y
i1Ajir, AOq m
photo courtesy of the Owatonna People's Press
One hundred twenty-five Min- gency. You don't need to call an public interest. Our goal is long-
nesota cities benefit from hav- 800 number to talk to us. term community benefit, not
ing a locally owned and lo- short-term gain. We work hard
cally operated municipal electric • We're locally regulated. to save you money.
utility. Thirty-one cities have a Members of the community who
municipal natural gas system. live in the community set rates • We're the yardstick for the
Fifty of our eighty-seven county and service practices. If you industry. For generations,
seats are served by a municipal have a problem, you know who public power systems have set
electric or gas system. A not-for- to talk to. standards for rates and service
profit municipal electric or gas that other utilities have had to
utility is a tremendous asset in • We're owned by our cus- meet.
these uncertain times. Here are tomers.
some of the reasons why: There is no tension between the • We'll be there. Many of
interests of customers and the Minnesota's municipal electric
• We have great service. interests of stockholders. Our utilities have served their
We're part of the community and focus is Main Street, not Wall communities for more than a
our policy makers, managers Street. We work for you. hundred years. In an era when
and workers are part of the com- new competitors come and go
munity. Our crews are always • We're not in it for the money. faster that we can learn their
in hand in the event of emer- Municipal utilities are not-for- names, you can count on us. We
profit and operated in the will be there when you need us.
2013 Federal Position Statements/ 19