Minnesota’s “Legislative Energy Commission” vs public participation

The Minnesota Legislature has a “Legislative Energy Commission” (LEC) made up of Senators and Representatives. The law establishing it says:  “The commission shall continuously evaluate the energy policies of this state and the degree to which they promote an environmentally and economically sustainable energy future.”

Before the LEC met January 8, 2014, I sent a note to the co-chairs, Sen. John Marty and Rep. Melissa Hortman, asking whether public comment or testimony would be allowed.  Getting no response, I went to the meeting to see for myself.  No public comment was on the agenda, or was invited.   In general, it seems to me that Minnesota is more reluctant to hear from its citizens than many other states.  Public comment is perhaps more the exception than the rule at official meetings.  Does this have consequences?   How could it not?

The first presentation was by Martin Kushler of the American Council for an Energy Efficient Economy.  This is a credible organization and what Dr. Kushler said–by telephone, he wasn’t physically there–made sense, though it wasn’t new or innovative.  He said that efficiency is by far the cheapest source of electricity, and would continue to be so even when the price of natural gas goes up, which it will.  He said most corporations won’t invest as much in energy efficiency as they might because of their short-term investment criteria.  All true.  He advocated “decoupling.”  More about this below.

Next came the Citizens League, with one of the worst, most insulting presentations I’ve ever seen.  Just what interests this Citizens League represents I am not sure, except it’s obviously not citizens.  Here’s a description from the Citizen’s League website:

Phase 2 is guided by an advisory committee, including: Ellen Anderson (Senior Advisor to Governor Dayton), Bill Black (MN Municipal Utilities Association), Jessica Burdette (MN Dept. of Commerce – Division of Energy Resources), Rick Evans (Xcel Energy), Ben Gerber (MN Chamber of Commerce), Mike Gregorson (Great Plains Institute), Jeremy Kalin (Eutectics Consulting), Joel Johnson (MN Rural Electric Association), Nancy Lange (Center for Energy and Environment), Jerome Malmquist (University of MN – Energy Management), Ken Smith (District Energy St. Paul). Thanks to the sponsors of Phase 2 of this project: University of Minnesota – Energy Management, District Energy St. Paul, Xcel Energy, and Target. – See more at: http://www.citizensleague.org/electrical-energy/#sthash.ysmkjM6D.dpuf

LEC members (all are legislators) seemed puzzled as to what the Citizens League was talking about.  A handout gave some hints:  “In 2010, the Minnesota Department of Commerce Officer [sic] of Energy Security approached the Citizens League to partner … Citizens League recommends that Minnesota move from a predominantly investment-based electrical regulatory framework to a performance-based electrical regulatory framework …”  What did this mean?  The Citizens League team had trouble explaining, but it should be obvious that being drawn into the orbit of the Department of Commerce is not a citizen-oriented move.

Why was the LEC wasting its time with this bullshit?  Perhaps because on Sept. 25, 2013, the LEC voted to hire Annie Levenson-Falk of the Citizens League as its Executive Director?

Next came our old friend “Fresh Energy.”  Fresh Energy plays an inexplicable role in Minnesota as the “go to” org for pontifications about energy policy.  Inexplicable because Fresh Energy doesn’t seem to actually know much about energy policy. (Could that explain the vague, feel-good name?  Better than “Stale Energy,” don’t you think?)   Fresh Energy, like Minnesota as a whole, has two conflicting objectives:  (1) reducing carbon emissions, and (2) promoting “local” energy sources presumed to be beneficial to Minnesota’s economy.  This seems reasonable on its face, as there is no oil, gas, or coal under Minnesota–it’s all imported.  Of course, there is plenty of wind and sun over Minnesota and using this makes sense.  The problem lies in the desire to exploit “local” sources such as trees, garbage, chicken poop, and ethanol.  These fuels all tend to be dirtier than coal in both greenhouse gas emissions and health-damaging air pollutant emissions.  So, “clean, local, energy” as the term is commonly used by Fresh Energy and other energy-wonk orgs, is an oxymoron.   Will Nissen‘s presentation “Decoupling in Minnesota” was mercifully brief.

Next and last came the ever-present elephant in the room, Xcel Energy.  Xcel’s reps–I couldn’t hear everything they said–said Xcel likes decoupling and is trying to work it into Minnesota energy policy via rate cases now going on before the Minnesota Public Utilities Commission.

So what’s this “decoupling” all about and why were these parties pushing for it in lockstep with Xcel?

Decoupling, or “revenue decoupling,” means in simplest terms that utility revenues are decoupled from sales.  The stated purpose is to “remove the disincentives” for the utilities to promote efficiency.  This is theoretically sound and can work.  Consider:  Xcel makes its money by selling gas and electricity.  The more it sells, the more profit for the stockholders.  So, for example, the present “polar vortex” cold snap is big money in the bank for Xcel.  As are summer heat waves.  So Xcel has every reason to pretend to promote conservation/efficiency while actually trying to sell more gas and electricity.

Under a decoupled system, Xcel would have the same revenues regardless of how much electricity or gas it sold.  If it sold “less,” rates per unit would go up.  If it sold “more,” the excess revenues would–supposedly–be returned to customers.  Note that this is supposed to “remove the disincentive” to promote efficiency, it doesn’t necessarily create an incentive to do so.  Changing the rules can change behavior, but not necessarily in the directions we are hoping for.

Another brief description from the Solar Energy Industries Association.

Decoupling can work, BUT the devil is in the details, and these details are likely to be understood clearly by the utilities and vaguely if at all by legislators and advocates.

California began decoupling for gas and electricity in 1981 (But decoupling is only part of the very complex California regulatory setup.).  in 2010, California used 6,721 kilowatt hours per person, the lowest in the US.  Minnesota used about twice as much: 12,845.  (The national average was 12,146.)  Of course, a milder climate and other factors are involved, but the numbers are still pretty striking.  Minnesota does need to reduce energy consumption as rapidly as possible and should look carefully at the experiences of other jurisdictions.

So the basic scenario of decoupling is presumed to be higher rates but lower consumption due to more conservation/efficiency.   If customers increase their efficiency faster than rates go up, they will be winners.  But if they live in rental housing, or have no money for efficiency improvements, or are a big industrial user locked into certain energy-intensive uses, they may be losers.  One can bet that the big industrial users can get themselves exempted or subsidizing or otherwise protected.  But these days, advocacy for low-income consumers seems weak or absent in Minnesota.  Certainly none was on the agenda of the recent LEC meeting.

Decoupling is not a new idea in Minnesota.  Here’s a 2008 report from the “Regulatory Assistance Project.”

So, it seems to me that decoupling is potentially a good idea if done right.  Pretty clearly the LEC is working up to it and doesn’t intend to hear questions or informed dissent.  Utilities, of course, would like a “heads we win/tails you lose” decoupling setup.  They would like to “recover lost revenues” but not give back any excess.  So a key question is:  Are the Minnesota Legislature, and the Minnesota Public Utilities Commission (PUC), robust and independent enough to set something up that works for Minnesotans, while giving a fair but not overly generous deal to utility stockholders?  As an answer to this I offer the following (not for the first time):  Wholesale electricity costs are way down, but retail rates are zooming upward, with the approval of the PUC and the consent, at least through inaction, of the Governor and Legislature.

Decoupling is counterintuitive to the public–paying more for less doesn’t feel right to people.  One way to sell the concept is to create confidence that the public interest is really being protected.  Do Minnesotans have confidence in the PUC or do they think it dances to tunes played by utilities and utility lackeys?  It would be interesting to see some survey research on this point.  The people I talk to are cynical (or realistic) about the Minnesota PUC.

So, if decoupling is to happen, Job One should be to strengthen utility regulation.  Appoint smarter and more independent PUC commissioners.  Appoint people Xcel and the Rural Electric Association don’t want appointed.  Take the staff work out of the Department of Commerce, with its cultural bias towards big business, and re-establish a for-real Minnesota Department of Public Service.  (Abolished during the Gov. Jesse Ventura administration?)

But, back to the original question:  Does it matter that entities like the Legislative Energy Commission disallow public comment? That their meeting are filled with presentations by mainstream, known-quantity organizations with a common, pre-approved pitch.  Orchestrated dog-and-pony shows?  I think it does matter, in several ways:

By excluding challenging ideas, independent voices, contrarian thoughts, it ensures that Minnesota’s energy policy will be mediocre.  Not trailing edge, perhaps, but not leading edge either.

The cranks, the Tea Partiers, the fossil-fuel-industry stooges … will be further empowered in their claims of exclusion.  The toxic polarization, the alienation so obvious in Minnesota and US politics will be a little bit further enhanced.  Example:  See Carol Overland’s post: Hate solar? I really don’t get it…

Minnesota, in years past, earned a reputation for progressive policies that benefiting most or all sectors of the population and economy.  But in the present-day, independent voices and contrarian ideas often seem systematically marginalized rather than folded into public policy.   What’s changed?

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