March 27, 2001

Controversial Deregulation Provision Removed From House Bill

While California debated just how much to raise electric rates due in part to its failed experiment with deregulation, the Minnesota House Environment and Natural Resources Policy Committee unanimously voted to eliminate a controversial deregulation component in the Minnesota Energy Security and Reliability Act (House File 659). If Minnesota deregulates prematurely, many expect to see in Minnesota the same problems now being experienced in many other states that began this experiment.

"We're delighted at the unanimous committee vote to remove the deregulation provision," said Ray Hayward, Executive Director and CEO of Southern Minnesota Municipal Power Agency. "There is a growing consensus in Minnesota and elsewhere that to deregulate before ensuring that there is adequate generation and transmission is bad public policy, bad for consumers, and could threaten the reliable and affordable electricity that Minnesotans have come to expect."

Others indicating that this is not the time for deregulation in Minnesota have included several investor owned utilities, municipal utilities, cooperative utilities, consumer groups, environmental groups, the Chairman of the Minnesota Public Utilities Commission, Greg Scott, the Minnesota Department of Commerce, and the Minnesota Attorney General, Mike Hatch.

The primary supporters for the provision were the Minnesota State Chamber of Commerce and large industrial users.

The controversial provision would have allowed the state's largest customers (those with usage in excess of 5 MW) to bypass the regulations, which protect all consumers, and change their generation supplier.

"With the deregulation provision defeated for now, the focus is finally where it needs to be," said Hayward, "looking for opportunities to encourage investment in generation, leveraging conservation and renewable resources where possible, and ensuring the reliability of the transmission system."

Minnesota's transmission system is already strained, and cannot adequately handle all requested transactions. Allowing large customers to change suppliers would increase transactions, further straining the system, and could lead to interrupted supply as well as price spikes.

The action by the committee to delete the deregulation provision has been described as a sign that the political system can work. "Minnesotans who talked to their legislators about their concerns with deregulation should be pleased that the legislators not only heard, they responded," Hayward said. "But consumers will need to remain vigilant. With hundreds of millions of dollars at stake, deregulation proponents will be back."

News Release