Loading...
6.3 ERMUSR 03-13-2018 Elk River Municipal Utilities UTILITIES COMMISSION MEETING TO: FROM: ERMU Commission Troy Adams, P.E.—General Manager MEETING DATE: AGENDA ITEM NUMBER: March 13, 2018 6.3 SUBJECT: American Public Power Association Legislative Rally Update ACTION REQUESTED: No action requested DISCUSSION: Commissioner Stewart and I attended the American Public Power Association(APPA)2018 Legislative Rally in Washington, D.C. This year the rally was held February 26-28. We were among approximately 50 Minnesota municipal utility representatives. The Minnesota Municipal Utilities Association (MMUA) organizes Minnesota specific events in coordination with this conference. Through the MMUA Government Relations Committee which I am currently the Chair, MMUA develops Federal position statements. These are communicated to all of the Minnesota elected officials and their key and/or energy policy staff. These position statements are developed over a number of committee meetings and are prioritized for the members. The MMUA 2018 Federal Position Statements are attached. Typically but not always,these positions are consistent with the APPA Issue Briefs, which can be found on the following website: https://www.publicpower.org/policy-positions Our three top key messages this year were regarding: Infrastructure—maintaining tax exempt financing and increasing federal dollars for projects. Pole attachments—maintaining local control over pole attachment process and fees. Power Marketing Administrations—protecting Minnesota municipal utilities that depend on the Western Area Power Administration (WAPA) MMUA had booked meeting rooms and scheduled a large group meeting for Wednesday. Unfortunately,the passing of Rev Billy Graham affected our schedules as his casket was at the Capitol for viewing. This resulted in all meeting room reservations being canceled. MMUA did an incredible job to reschedule everything. However,this resulted in fewer large group meeting and small group meeting. Feedback from MMUA and the other Minnesota municipal utility representatives in attendance was that the meetings with elected officials were generally successful despite the changes. Page 1 of 2 231 Additionally, the rally serves as an opportunity to network and discuss industry issues with topic experts from across the nation. Commissioner Stewart and I also attended the annual Midwest Municipal Transmission Group (MMTG)meeting. ATTACHMENTS: • Minnesota Municipal Utilities Association 2018 Federal Position Statements Page 2 of 2 232 Mlit'if ALAI, A IFIGIIAg`rilablii .... , . O Minnesota Municipal Utilities Association •-- ...'. FEDERAL , ...._ . . .... , . ..._ ,,,- I• 11 ... . ...... ..,____ ., , .. .... POSITION STATEMENTS .., . 4**1 . .. , . , .,, it l' .3 -'3.A' • ' 1 1 - 1. 1. '. 3 i i 3 3 . 3.•' .‘t,' ,•'iP,1.'"''., -....i.,"S"...., t•- t ._-:' 4 i ,?#' ''.,..* - - p,,,,,,c; , ,,, ..•,,,i4,,..„ "...1; •: "- -;....,. #110 .4. -. '. ,,,,,,..„*, ,:,,,.;:„ ,,; .,,,,, , N'Stlf,'; --, 7'...? ' t " *--4..!'t- ,-.'....":' ,...,,k"."..*::: . .7-:. ' „,-.: -431 -3. , ,, ------"-"::.,,,•••:;--37i;...3..3-,.."',';'.*-:14*';'-, '-"*.f-'`.• 3-3-3•--;',-f." ', ,'2: ..,...-f.,-:io,..?..;...... :.'..4 , , ,. , : ,; , =- 3,.......„*. •.•';'-. :;'3. -.--.- t.•- * '''.--; ''''•-••. -rke•-• .,-• 3- - ,33,-"33,-.•,3•33.1,3•3.• -- -?'..---3-3..",-,,,i,,,,•',,,,-....*=•3.34- - -, .3- ,... a,r. ., N.,--*----..:„, . -„ ,..;.: Op„„ . kw,.3 ,;;•' . * 't‘>-•-•-•*:' ' - '3- ' •.3,-..- ••-•33,•:- 4,,,,,0-:. , „.....-.., , - ,,,,..-40( „..T..r. ..,t tr,,vr-1i1.,. . PA• — ,, - .„„.....„•• ,5, '......",„.-•'• ',':•• „. ..-4..,,,,, , ==4.,,)4, -,,,- •.,., .c.- -,' ...:'-v-e•ori44:r - P -'2".'44. "''1'1** '- 7''.;'-...'::::.S.:•":'-.,:':_ .'"Tw;14..). ,.„,..,:4.. A.... • A ' -' ,:'<;, .. '' '''' -— 1 .+51:4,7,:i :'''. `..,..„.,....;-•. I''.,* ''4'.,Irt ' '''' , '71":°:‘,71::.11:-„*- „..:,4114-c. 'ge:'4."..AZ'„; ,•• ,,.. f*'..•2.3.3, 33. ,,,,- :••,,„.• -=0„.„.”, ' ,,.:, ", :_=== ..,. ,„,,,, ,, '-,, '•-l-, , , - f,,f,'",7!„ .• =.:,:` ° . 1 ', -1..r. ,t:„e'e,e1:4- 7* - - f4i. L .'- L' •.'".1 '.L,;...'LL: ' ' ° . '''..."..;:l‘L"..^:.:;:":'..,:- ''.."'-',••:` • ..,,-.."„r.p ' .,,,,.._. : ., ... : ,-, .".: -:..,-- ' -..,- - ,-'1',„„::7,.. 77..70:11(. 44' .Z-0::: --'...- -.' '-''-'7Z-*:!:. - ' ''; ,;.- ' ;""••*--- t.-': !:'-'2*•"••••"`: .'" ''-‘;.•;';`'.' l' - • •••••;-:;;;"4,•".•.--- : ,4==''.4:... ' ,=•.: '' 7;:;;;.•=• ''-•':' -•''': - 7••••'": -.... „ , ' ; 1=:'t !",- -' - ' . •:,-•,,,,Ti.:,.[==', • - ,,,,,,,,,,r, , ,.4,.', , '.•,•' * 7'. -., ., t.,:,...., - ""--......4.,+.,'.,"-NTf10,,L. ' ' - '" ' ....4,,„, .1. .. ,,,j,i4-', ,..'' .4, — -- --4.' • ......,. -- . .... **1....ri,:..Z.reccr.,;'"Er „ .....„.••i'2•7!„--..,-"--‘2kN,..„-:;"4-1, ,,, -= ;.- L'i -,=:/'1;‘'',•-•'=,,,"?-,•=r7,-= " • ' V.F.'",i,;- .,....,`‘f,'",.•,=* -,0::• ' .' "4..1.1,71.;,%." ',,,1; atiratill '''' - - .:..'';,"*,-,,L " „,,,,,,,. . l':42P.,,,,!11 ,',,•„,''' ,,' ,, , :•"';`,1,4:. ,„:`,,14....,''1'.','' .,,, --‘•-. -'.6. ' ,'': ' , ,__, ......tial"--t-.....7:-.,17...-ote,4t;„'"' •= ',:t= ,.. *"...„,t,.:er-= •-•,,====fr. ' '''-vor;01...:,- . -4k '''''''L.L. : * -: - ''':',: flort,„,. _. 4 '..' •- : '',IFII.", ) '"*":, s."' - „ 233 Table of Contents Infrastructure 3-5 Preserve Local Control of Pole Attachments 6-7 Protecting the Interests of WAPA Customers 8-9 Energy Capacity Markets 10-11 Reasonable and Effective Environmental Regulation 12-13 Municipal Utilities' Right to Grow With Their Cities — A State Issue 14 Why Public Power? 15 Photo/graphic credits: Cover-U.S. Architect of the Capitol Page 3- Minnesota Pollution Control Agency Page 4 bottom - Minnesota Municipal Power Agency Page 4 top-West Central Tribune Page 5- MMUA Page 6- MMUA Page 7 - MMUA Page 8-South Dakota Missouri River Tourism Page 9- MMUA Page 10- MMUA Page 11- MMUA Page 12- MMUA Page 13- Minnesota Municipal Power Agency Page 14- MMUA Page 15 -Owatonna People's Press Back Cover-U.S. Architect of the Capitol 234 1MIMILf Arinnylifiv Position Statement Infrastructure • The Administration budget for public utility New caUectto+r. S7/b.01,6% u' fined "'•' infrastructure needs more funding, more detail and ��,�,,,�Unarm Nev.eneeeteYt�4 %el m.53vv�.o% less reliance on private interests. rJrertluw{CS0).. SWISJ6t.6% Undefined Wattmeter OAS a% reetnune.540.1N1,1% secandertr • Much of the country's infrastructure is $1T2f4a ne' significantly past its expected lifespan. The need to modernize our infrastructure is rapidly becoming a national crisis. • Increasingly stringent federal regulation of air .n� and water is a major driver of the need to update local government infrastructure, as well as a factor Sewer System f e1uRililation. in increased costs and rates. Advanced $2.640s7.sex Treatment,$214.95 5% urf , ' • The Administration's proposed funding only • averages $400 million per state per year, and would The Minnesota Pollution Control Agency has identified more cover only 13% of project costs. This is insufficient to than 1,050 wastewater infrastructure projects at a cost of meet the needs of cash-strapped local governments. almost$5 billion dollars(shown above in millions of dollars) in future wastewater treatment and collection system needs • Tax exempt bonds play a critical part in financing over the next 20 years. infrastructure needs and should not be further restrained by federal tax law. The opportunity to use advance refunding for tax-exempt bonds should be major driver in the need to build expensive new restored. water and wastewater facilities is the continual evolution of federal water quality regulation. Plants • Privatization is not the answer to our built to meet federal regulations become obsolete infrastructure crisis. more quickly than anticipated because of the need to meet more stringent federal regulations. Background Municipal electric, natural gas, water and Water wastewater utilities are the key local agents in Based on recent surveys conducted by the providing, utilizing and maintaining local public Minnesota Pollution Control Agency (MPCA), utility infrastructure across the country. These Minnesota Department of Health and the U.S. facilities provide the essential public services that Environmental Protection Agency, Minnesota's form the underpinnings of modern society. drinking water infrastructure needs exceed $7 billion over the coming 20-year period. These needs In the decades when much of the nation's existing include replacing aging treatment plants and public utility infrastructure was built, federal funds underground infrastructure, upgrading treatment paid for as much as 80% of it with 20% matching plants to meet new requirements, and expanding funds coming from state and local government. The systems in some areas to accommodate growth. current near-crisis condition of much of the nation's infrastructure is in large part due to a shift away Wastewater from this funding arrangement toward reliance on Much of Minnesota's wastewater infrastructure more state and local financing. was built with federal grants during the 1970s and 80s and is reaching the end of its effective Minnesota's need for infrastructure improvement design life. In response to the MPCA's survey, 715 is significant and growing year by year. And the continued on next page 2018 Federal Position Statements/3 235 communities (85% of those surveyed) identified nearly $5 billion in infrastructure needs over the • y next 20 years—a 15% increase in need from the "�""' "'. �`'+ 2015 survey. Most of the need is for replacement of aging infrastructure. Wastewater treatment facilities' major structural components have an expected useful life of 40voippp. 4,1,f years. As these structures deteriorate, effectiveness ''° • declines, leading to additional operating and maintenance costs and a greater potential for t .� permit violations and unintended discharges. Currently, 20% of Greater Minnesota's treatment The city of Willmar/Eagle Lake Sanitary District wastewater facilities are more than 40 years old. Of the sewer treatment facility went into service in 2010,serves approximately 20,000 people and carried a price tag of systems that carry wastewater to those plants approximately$80 million. in, 32% are over 50 years old, which is typically beyond the end of their useful life. Tax exempt bonds have financed $2 trillion in Electric new investments in infrastructure in the last The growing demand for renewable energy requires decade, including $112 billion in new investments greater investments in transmission to carry wind in electric power generation, transmission and power from its source to Minnesota's customer. distribution. Bonds have been and will continue to The retirement of much of the nation's coal-fired be vital to maintaining the electric infrastructure generation fleet with replacement by natural gas and other public facilities of the nation. power plants and renewable generation is already irreversible despite the new administration's Administration's Budget and restraint on further regulation. Further, regulatory Congressional Action requirements have greatly increased costs, We are encouraged by the renewed federal focus doubling them in some cases.As an example, the on maintaining and developing the nation's core EPA's Reciprocal Internal Combustion Engines infrastructure. There appears to be recognition at (RICE) rule required municipal utilities to install last from Washington of the urgent situation facing expensive catalytic converters on diesel generating local communities. While attention to the problem units that operate only a few hours per year. is welcome, the Administration's FY2019 budget causes us concern. If efforts to reinstitute the former 80/20 federal- local sharing arrangement are unsuccessful, f we still urge support for something better than the proposed 13/87 split. That relatively small proportion of federal investment in the ��. "` Administration's budget will not suffice to "' _ • ,a construct, repair and improve the infrastructure as needed to keep our communities safe and developing without significant increases in local taxes and utility rates. Shakopee Energy Park,owned and operated by the Minnesota Municipal Power Agency, is a new natural gas- fired electric generating plant adjacent to Canterbury Park. 2018 Federal Position Statements/4 236 iffilarff Ay 43 IvI,,Iwe , , ; : ; ;P t ,;r f. /r' r . . Detroit Lakes Public Utility j/ f ; / dedicated its community solar plant during Public Power / / "~Y/,c,,� is I ►� 1. 0 .R Week, October 2017. f 1 .L jI g . r yfi a. t Ar fifrot 7 - ,„ s t r Unfortunately, despite appeals from public MMUA Position infrastructure proponents, Congress and the For communities to maintain safe, sanitary and Administration in 2017 repealed the authority to reliable utilities, we urge Congress to match its advance refund municipal bonds. This will only add moral support for infrastructure by increasing the to the final expense of existing and future public federal proportion of utility infrastructure project infrastructure projects. We urge support of HR funding. 5003, bipartisan legislation that would restore our ability to advance refund bonds. If utility infrastructure funding must compete with transportation funding, then significantly more The Administration's budget extends the scope of resources need to be put on the table than the $200 infrastructure funding to include "a broader range billion budgeted by the Administration. We urge of infrastructure needs,” including railroads and Congress to keep funding focused enough to make it airports. While these infrastructure areas are, effective or increase federal resources significantly. of course, important, they are not matched with sufficient additional funds necessary to include We urge Congress not to take any action that them along with funding for utility infrastructure. further limits the usefulness of tax-exempt The proposed $200 billion investment over ten municipal bonds for financing public infrastructure, years would provide on average only $400 million and to pass legislation restoring the authority for per state per year—only ten percent of Minnesota's advance refunding of such bonds as introduced identified need. in the House by Representatives Hultgren and Ruppersberger (HR 5003). Public-private partnerships provide welcome solutions in certain utility situations like extending Public-private partnerships should be utilized broadband to places that private industry is unable where appropriate and not used to profit private or unwilling to reach alone. However, we have interests at public expense where public service concerns that privatization, as a driving force, is continues to make more sense. Furthermore, being marketed in the budget as simply leveraging public-private partnership should not be confused private funds. with privatization. The Administration's plan to distribute funds We are skeptical of proposals to put states for rural infrastructure as grants to states for in competition with one another for rural governors to allocate may be cause for concern, infrastructure grants and ask Minnesota's making Minnesota compete with other states for delegation members to be wary of them. funds under an undefined scheme that could be inequitable or political. 2018 Federal Position Statements/5 237 DMDMIJ/ //////S/�'► Position Statement Preserve Local Control of Pole Attachments • The municipal exemption from FCC pole attachment rates and other pole attachment regulations must be retained, and any attempt to grant the FCC authority to regulate public power utility poles must be rejected. :111 PPP • The exemption recognizes the public nature and — — - • °' accountability of municipal utilities. t • The FCC has not shown a single example in z" _ which local control or fees have been an impediment`~ to broadband deployment. • Granting the FCC authority over public power ? r : utility poles would be a backdoor method of preempting local control over pole attachments and % their related rates. "" Background ..._. Municipal utilities are exempt from Federal - „ .; I41, 4.* '"' Communications Commission (FCC)jurisdiction .'< {* . I `'' over pole attachments. This exemption was expressly granted in 1978 based on the recognition of the public process and accountability to constituents involved with adopting local �» ; + regulations and setting fees, and it has been ". ' retained in multiple updated versions of the federal f41- F Communications Act. Further, Section 224 of ••• the Communications Act prohibits the FCC from * 1 -4ra • regulating public power utility poles. Local technical, health, reliability, and safety Municipalities have zoning,land use,and technical considerations(including the National Electric Safety Code) considerations, need to be considered when that justify local authority over the use of our infrastructure. establishing appropriate pole attachment regulations. And with the FCC pole attachment rate having been lowered to the cable rate, a (R—South Dakota), chairman of the Senate municipality is unlikely to recover the maintenance Commerce Committee, and Senator Brian Schatz and management costs for the attached facilities. (D —Hawaii,) developed draft legislation to grant Thus, the authority to regulate pole attachments the FCC authority to regulate municipal power and to set applicable rates must remain at the local utility poles, a move widely viewed as an attempt to municipal level. backdoor the authority of the FCC to regulate pole attachments and rates. Since 2010, the FCC has repeatedly recommended to Congress that the municipal exemption from In 2016, Mobilitie, a major manufacturer and FCC regulation of pole attachment and rates supplier of wi-fi equipment and networks, be repealed. Last year, Senator John Thune petitioned the FCC for a declaratory ruling 2018 Federal Position Statements/6 238 1111111117111,8 torirtirlaredv interpreting the "fair and reasonable compensation" November 2017 the FCC issued a partial response provision of the federal Communications Act, to the Mobilitie case by excluding certain capital Section 253. This section provides the FCC costs from pole attachment rates, establishing"shot with some authority to preempt enforcement clock" deadlines to respond to pole attachment of any state or local government action that complaints, and excluding certain poles from may inhibit the ability of an entity to compete historic preservation rules. It did not, however, effectively in providing telecommunications expressly address the municipal exemption nor the services. In its request for comments, the FCC restriction on the FCC 's jurisdiction over public expanded the inquiry to include Section 332 of power utility poles. the Communications Act, which addresses the expansion of wireless facilities. The FCC sought The Minnesota legislature also considered input on several items, including local government legislation in 2017 that would have preempted practices that may have an effect on prohibiting local control on a number of issues related to the providing wireless service, whether the "reasonable expansion of.5G service and what is known as period of time" for small cell siting should differ small cell wireless, but in the end the legislature from macro cell siting, and what qualifies as a exempted municipal utilities from the new small cell. regulations regarding the siting of small cell antennae and the fees which can be charged. MMUA and the League of Minnesota Cities jointly submitted comments to the FCC to emphasize the MMUA Position need for maintaining local control of siting wireless We urge Congress to oppose any repeal or facilities. Municipalities have zoning, land use, weakening of the current municipal exemptions and technical considerations (including National from FCC regulations over pole attachments and Electric Safety Code requirements) that justify applicable rate charges. This includes opposing any local authority over the use of its infrastructure. effort to grant the FCC regulatory authority over public power utility poles and the fees which can be Despite not being able to show a single example of charged. where local control and the existing exemption from FCC rate control over pole attachments has proven to be an impediment to broadband deployment, in Safety and aesthetics are legitimate local government t ,«r.,..�,_. ...... concerns. Pole 11 « attachments can a be particularly - troublesome in cities li . �` - _ " where much of the T ��4 ,,, .. <r�; *' �V�� V "` utility infrastructure F sTOP has already been i 4' ` . placed underground. lit,'"'"'es 4,!:...„&-T"'-..— , 1 a .., . r ' _« " - ' Pictured here is - _� Barnesville. . o,gs a' 2018 Federal Position Statements/7 239 ir 4,8 IVIIVIP1J Position Statement Protecting the Interests of WAPA Customers • The Administration's proposals to sell off PMA transmission assets and require PMA power to be sold at market rates should be rejected. • Selling off PMA transmission assets would provide a one-time infusion - -- of$9.5 billion out of a projected $4.5 -- � .� . ' 7 � �� trillion budget and lead to decades of higher transmission rates for dozens '�- of small municipal utilities in western Minnesota. _ • Abandoning the long-standing policy of cost-base rates and moving ' ' to market-based rates would result in . a $1.9 billion rate increase for PMA customers. The Oahe Dam powerplant,just north of Pierre,South Dakota,provides Background electricity for much of western Minnesota and the north-central United States. The four federal power marketing Along with power,the project provides flood control,irrigation and navigation administrations (PMAs) deliver benefits estimated by the Corps of Engineers at$150 million per year. reliable, cost-based hydroelectric power to various regions of the 200,000 people in the western part of the state. United States. Approximately 1,200 public power The relationship between WAPA and most of the systems and rural electric cooperatives throughout Minnesota municipal utilities it serves has been in the country buy low-cost, zero-emissions place since the 1950s. hydropower from the PMAs that market this power from the federal multi-purpose dams. The Administration's Budget Proposals Unfortunately, the Administration's FY 2019 The Western Area Power Administration (WAPA) budget seeks to disrupt this long-standing is the PMA that delivers power to a 15-state relationship with two troubling proposals. region of the central and western United States that also includes the western third of Minnesota. First, the Administration proposes privatizing WAPA's 17,000-mile transmission system carries WAPA, Southwestern Power Administration and electricity from 55 hydropower plants operated by the Bonneville Power Administration transmission the Bureau of Reclamation, the U.S. Army Corps assets, as well as The Tennessee Valley Authority. of Engineers and the International Boundary and The budget estimates that: Water Commission. Minnesota is served by WAPA's Upper Great Plains Region office which provides • Selling Western Area Power Administration's electricity from the seven dams of the Pick-Sloan transmission assets will raise $580 million; Missouri River Program established by Congress in • Selling Southwestern Power Administration 1944. transmission assets will raise $15 million; • Selling Bonneville Power Administration WAPA is critical to Minnesota municipal utilities, transmission assets will raise $5.193 billion; and providing about one third of the wholesale power • Selling Tennessee Valley Authority transmission needs of 47 public power systems serving over assets will raise $3.671 billion. 2018 Federal Position Statements/8 240 IMMIIJJ The $9.5 billion that the federal government might receive for selling off these publicly-owned transmission assets will not move the needle much in a $4.5 G trillion budget, but the negative impact - R on the public and not-for-profit entities that rely on those assets will be felt for decades. D N A 11 t Many of these transmission assets i . •� � . have been in place for years and are t "` substantially depreciated. A new owner, likely a for-profit transmission company, would seek to recover the full purchase price plus a rate of return in rates. The result will likely be sharp increases in transmission costs for public agencies, WAPA power is crucial to the 47 Minnesota municipal electric utilities, small town municipal utilities, and rural including the city of Madison,that serve over 200,000 people in the electric co-ops. The modest one-time western part of the state. benefit from selling these assets is simply not worth the ongoing increased cost to not-for-profit entities across the country. because hydropower is a renewable resource and most dams were constructed long ago, when Second, the Administration estimates that the material and labor costs were much lower than federal government could raise an additional $1.9 today. billion over 10 years by charging PMA customers market-based rates instead of the current cost- The Administration's proposal would impose an based rate structure. This proposal would violate unwarranted $1.9 billion rate increase on small current federal law in addition to upsetting the municipal utilities and other not-for-profit and long-standing beneficial partnership between government PMA customers. WAPA and its preference customers. MMUA Position In accordance with federal law, PMA"cost-based" MMUA urges Congress to reject proposals that rates are set at the levels needed to recover the would disrupt the stable, low-cost, and emission- costs of the initial federal investment (plus interest) free power that WAPA provides to so many in the hydropower and transmission facilities. Minnesota communities. For well over half a The PMAs annually review their rates to ensure century there has been a successful partnership full cost recovery. None of the costs are borne between federal power marketing administrations by taxpayers. If a deficit is projected, rates are and the communities that receive a federal adjusted to eliminate any deficit. Power rates also hydropower allocation, which has helped keep help to cover the costs of other activities authorized costs low for our customers. The Administration's by these multipurpose dams such as navigation, proposals to sell off PMA transmission assets and flood control, water supply, environmental require PMA power to be sold at market rates programs, and recreation. PMA power is generally should be rejected. low-cost in relation to other sources of electricity 2018 Federal Position Statements/9 241 111111171/8 IVIIVIWJ Position Statement / ,r _7c,__ / - g 1 1 ti E eVr: — «A �a t m 'f � 4� t i ''—1* 4:e:4,27--,----, '.:^.tt-.7,------i,—:.... .'...- -...#~r ,rx—.., fid"` .....'' ,'" arts41,.4.'"::-,,,,-.:- x'kt,: �, ,� ,z. ' >r ,,,,---r--;-,17:- dry��.. .?4..,-- . -24---1 Operation of wholesale electricity markets is closely tied to the operation of the region's electric grid. Energy Capacity Markets • A mandatory capacity market in the MISO region volatile, but as the market has matured it has is unnecessary and would only lead to increased become more stable. costs for consumers. In 2012 FERC approved a voluntary capacity • Congress should exercise its oversight authority at market for MISO but ruled against mandatory FERC to guard against unwarranted imposition of participation or a minimum offer price rule in a mandatory capacity market in MISO. that market. In 2016 MISO proposed to develop a mandatory capacity market for just those utilities Background that no longer own generation to serve their The transmission grid in our region of the country customers' load. FERC rejected MISO's proposal is run by one of the nation's seven federally out of concern that such a bifurcated market would designated Regional Transmission Organizations result in inefficient and volatile pricing. (RTO). All seven RTOs are quasi-governmental entities under supervision of the Federal Energy Mandatory Capacity Markets Regulatory Commission (FERC). Ours is called Inflated capacity prices in mandatory capacity the Midcontinent Independent System Operator markets have increased the cost of electricity (MISO). and account for a significant share of the total electricity costs paid by consumers and In addition to managing the region's transmission businesses. Though they are intended to incent the system, MISO operates mandatory day-ahead development of new generation resources, these and real-time markets for purchase of wholesale markets have not demonstrated that they incent electricity. During the early years of MISO's investment in either the generation necessary to energy market in the last decade, prices were often achieve a reliable and diverse supply of power, or 2018 Federal Position Statements/10 242 1/1D/1/I.4/ firlinrigolive generation where it is most needed. Mandatory A solution in search of a problem capacity markets do not exhibit any of the Power suppliers in our region have an excellent features of competitive markets, and are instead record of developing new generation resources as administrative constructs requiring elaborate rules needed to meet load growth or make up for the and processes. retirement of old plants that have outlived their usefulness. This has been true through the entire These markets have high costs: in the PJM RTO history of our industry and it continues today as capacity market, approximately $102 billion utilities bring new generation on line and plan for has been paid or pledged to capacity suppliers future additions. There is no need in our region for through the middle of 2021, which works out a mandatory capacity market that would only serve to approximately $1,700 per man, woman, and to artificially raise prices for consumers. child living in PJM's 13-state area. In 2016 the PJM capacity market added $120 per year to the MMUA Position average electric bill of a homeowner, $915 for a One of the important roles Congress fulfills is that retail establishment, and $19,000 for an industrial of a watchdog over federal agencies. FERC created facility. And only a small portion of the $100 billion RTOs and is supposed to control them for the spent or committed is actually financing new benefit of the American public. While there may not generation capacity. be any direct action currently under consideration in Congress to rein in RTOs, it is extremely Artificially inflated prices important for Minnesota's delegation members to Mandatory capacity markets employ a variety of be aware that the concept of mandatory capacity techniques to artificially inflate capacity prices. markets has been creeping westward and has "Minimum offer price rules" (MOPR) require the already been considered by MISO.A mandatory RTO to replace low-cost capacity bids from new capacity market in the MISO region is unnecessary natural gas plants with higher price offers, making and would only lead to increased costs for it more difficult for these new plants to clear consumers. the capacity auctions. "Capacity performance" requirements or"performance incentives" subject rt. generators that are not operating or providing reserves during periods of scarcity to stringent Y ,, 1 w , , penalties encouraging resources to submit higher offers for capacity. 0 '" '1:*04: .,'''y i,,licp....i.11::Piell'41:1°,"',.." Potential impact on public power ,,. 5 ', �11 ` In addition to raising prices for consumers, these ., ` ir r artificially inflated mandatory capacity markets ;p' f could have a devastating effect on a public power ' system that develops its own generation to meet its capacity needs. If self-supplied capacity is required i - ` to be offered at a higher price under buyer-side mitigation rules, that capacity might not clear the auction, but the utility would be required to Electric utility facilities,such as Southern Minnesota purchase capacity that had cleared the auction. Municipal Power Agency's new gas-fired generating facility in Fairmont, are very expensive to build. There is no reason Thus, the buyer-side mitigation rules could force to artificially inflate prices in our region with a mandatory a public power system to pay for capacity twice— capacity market. first in paying for the construction of its own power plant and then again as a capacity payment to a generator that did clear the auction. 2018 Federal Position Statements/11 243 1MDMIIJe ,VIIVIWJ Position Statement Reasonable and Effective Environmental Regulation • Minnesota's municipal � � � ' utilities are strong supporters of clean air and water. • We are investing in new, clean, and efficient generating resources to position ourselves for a changing market and improve our air quality, t; and we continue to explore and develop innovative new �• I technologies. • Under the previous ' administration EPA had a pattern of overreach in i '" -•,- w developing overly broad Municipal utiliites are strong supporters of reasonable,effective environmental air and water regulations regulations. Pictured here is the Two Harbors breakwater. with questionable legal underpinnings. gas generating station online in Fairmont in 2013, and will commission another natural gas plant in • We appreciate EPA's consideration in repealing Owatonna this year. Minnesota Municipal Power rules such as the Clean Power Plan and Waters Agency (MMPA) brought a similar natural gas of the U.S. rules (WOTUS), and look forward to plant on line in Shakopee last year. These clean working with EPA on reasonable and effective and efficient plants can respond quickly to changes replacements. in electric load and are well-suited to support and back up renewable generation. Background Minnesota's municipal utilities are strong All of our municipal joint action agencies have supporters of clean air and water. Our municipal substantial wind resources in their portfolios, water and wastewater facilities are on the front and are on track to meet Minnesota's Renewable lines of maintaining Minnesota's high level of water Energy Standard. Our joint action agencies are quality. As water quality regulations change, our active in developing other new renewable resources cities meet the challenge of developing new and as well. Both utility-scale and community solar ever more expensive treatment facilities to meet projects have been developed or are coming on line. the new standards. Our public power systems are exploring other renewable resources, as well. SMMPA operates Our municipal electric utilities are also active a methane-to-electricity facility in Mora. MMPA in working to improve air quality. Most of our utilizes anaerobic digestion technology to produce municipal diesel generation plants have invested biogas from agricultural and food processing in expensive catalytic converters to reduce air wastes in LeSueur. Missouri River Energy Services emmissions. Southern Minnesota Municipal (MRES) will begin producing electricity from the Power Agency (SMMPA) brought a new natural Red Rock Hydroelectric Project next year. 2018 Federal Position Statements/12 244 1MiIMII// We recognize the need for appropriate and effective MMUA Position regulation of both air quality and water quality, Minnesota's municipal utilities are strong and we have a long history of working with supporters of clean air and water. We are doing both federal and state regulators to meet those what we can back home to improve both air and regulations. But to be effective, regulation must water quality. consider the available technology and the need for the regulated community to have appropriate Our public power systems are investing in new, timelines to address the technological and fiscal clean, and efficient generating resources to position burdens of meeting new standards. themselves for a changing market and improve our air quality. We have made a lot of progress and we A pattern of overreach will continue to explore and develop innovative new In recent years EPA has shown a pattern of technologies. overreach in developing environmental regulations that are overbroad and overly burdensome. EPA's Under the previous administration EPA had a Clean Power Plan went far beyond EPA's prior pattern overreach in developing overbroad air practice in directing electric utilities to produce and water regulations with questionable legal sharp reductions in greenhouse gases. If the underpinnings. We appreciate EPA's consideration regulation had gone in effect, it would have been in repealing rules such as the Clean Power Plan subject to years of litigation over its questionable and Waters of the U.S. rules. We look forward to legal underpinnings. EPA's Reciprocal Internal working with EPA on reasonable and effective air Combustion Engines (RICE) rule was developed and water quality in the future. without considering the concerns of hundreds of municipal electric utilities in the Midwest that operate diesel-powered generating stations. On the water side, the Waters of the U.S. (WOTUS) rule was widely criticized for its overreach. It would have ` subjected millions of acres to federal regulation with little or no legitimate underlying federal purpose. Trump Administration Response EPA has repealed both the Clean Power Plan and the Waters of the U.S. Rules. We appreciate the Administration's actions on these rules. We look forward to working with EPA on air and water regulation going Municipal utilities,acting through joint action agencies, have substantial windpower forward. resources. Pictured is the Minnesota Municipal Power Agency's Oak Glen Wind Farm. 2018 Federal Position Statements/13 245 DM1MII/ priffrow,e Position Statement Municipal Utilities' Right to Grow With Their Cities-- A State Issue The designation of electric utility service Minnesota Municipal and Co-op Customers territory has historically been, is, and 1974-2016 needs to remain solely a state issue. Sac coo In recent years, the Farm Bill has become 809000 a target for attempts to preempt state 700,E regulation of service territories. Any such efforts should continue to be denied. 600,000 Background 509 ,000 Municipal electric utilities work t4 400 OW very closely with their rural electric cooperative and and investor-owned utility 300,000 (IOU) colleagues colleagues on many issues. 200,000 Unfortunately, one issue on which electric utilities sometimes disagree is the process 100,000 by which service territory boundaries are modified when property locatedet* e% r �, ge Q� gy ga b ti �o {y tip ti� within a co-op or IOU's service territory '` ,�' , �� �R '� �% '� ,�' ��ti � tititib ti� tia tib is brought into, or is incorporated as part —PAu"icpa9 Total -C oop Taal of, a municipality, usually, as a result of annexation. growth, which has largely come from the expansion of cities that do not own their electric service, has Like most issues relating to retail electric made co-ops the fastest-growing segment of the distribution service, the designation of service electric industry in Minnesota. territories has long been governed by each respective state's statutes. Most state statutes have Over the years, some cooperatives have recognized the right of a municipal utility to grow unsuccessfully tried to secure federal legislation along with the growth of the city's boundaries. preempting the right of the states to determine the In Minnesota, municipal electric utilities have best way to handle service territory issues in their had the right to serve annexed areas since the communities which would also deny municipal inception of the industry more than 100 years ago. utilities their right to grow with their cities. More This right was preserved in the 1974 state law recently, such efforts have come in the form of that established the current regulatory scheme. requested amendments to the periodic Farm Minnesota law does provide that the utility Bill.As it is time to once again pass a Farm Bill, previously serving the annexed area—be it an there are concerns that the co-ops might try this investor-owned utility or a rural co-op—must be approach again. provided with fair compensation. MMUA Position This right of a municipal utility to grow with its We urge Congress to reject any attempt to preempt city has not had a significantly negative effect on states' rights to regulate service territory issues, or electric co-ops or IOUs. In Minnesota, the co-ops which would otherwise deny municipal utilities the have enjoyed tremendous growth in the years since ability to grow with their cities. the service territory law was enacted. In fact, their 2018 Federal Position Statements/14 246 1MMII/ I,II,IW Position Statement Why Public Power? w4:4,qp �' rr'i it v "; ‘P. 4cs • .. „, 4a� I x�. a t.' ti • Y ‘1,1 . \ 'fir :rfik d l' iryt\ 2- ;',1'141, .1 ':'. ***''''''''''''' ',,,,,,,v* ,17::1.4.:,,,. It..,.. 1litm.- 11 One hundred twenty-five Minnesota cities benefit We're not in it for the money. Municipal from having a locally owned and locally operated utilities are not-for-profit and operated in the municipal electric utility. Thirty-three cities have public interest. Our goal is long-term community a municipal natural gas system. Of our 87 county benefit, not short-term gain. We work hard to save seats, 50 are served by a municipal electric or gas you money. system. A not-for-profit municipal electric or gas utility is a tremendous asset. Here are some of the We're the yardstick for the industry. For reasons why: generations, public power systems have set standards for rates and service that other utilities We have great service. We're part of the have had to meet. community and our policy makers, managers and workers are part of the community. Our crews are We'll be there. Most Minnesota's municipal always on hand in the event of emergency. You electric utilities have served their communities for don't need to call an 800 number to talk to us. more than a hundred years. In an era when new competitors come and go faster than we can learn We're locally regulated. Members of the their names, you can count on us. We will be there community who live in the community set rates when you need us. and service practices. If you have a problem, you know who to talk to. We're Public Power. We're here for you! We're owned by our customers. There is no tension between the interests of customers and the interests of stockholders. Our focus is Main Street, not Wall Street. We work for you. 2018 Federal Position Statements/15 247 • it 1 1 \ \ k. 4Ya �. 1 �» a s` a} f .N^ y f-' ' m ' q 1 ", 1 1 ♦ 7P g$ i ((} Ye i f w Y # 4 f f t " ! t ` y{ x y 'tee_:: j„ ' Is. 1 1 1 _.,_",-...' . ____------,__ - 1,.......:4„. ,:c_,,,,,, .,.,„:„. - .2. , ,:r„.1,1;7:„..k..„40 :;-.; } ,. „_,,,,,,,,.„.4., _ ..,, ,„,.. . 0_ „.„::...4...,_„_,....._--,.. ,,_, ,,...,..:,,___, ,_r ' .,� 6 , ' -. , ., , ,pp 3 • • A drawing of the U.S.Capitol Building,circa 1830,showing its original dome which was made of brick,wood,and copper and designed by Architect of the Capitol Charles Bulfinch. ilMillAY1111 ivimwv Minnesota Municipal Utilities Association 3025 Harbor Lane N., Suite 400, Plymouth, MN 55447 www.mmua.org 248