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<br />Position Statement <br />Service Territory <br />Background <br />Minnesota municipal electric utilities have had the <br />right to nerve their entire communities since they were <br />formed, many more than 100 years ago. Municipal <br />utilities grow with their cities for a number of reasons, <br />including: <br />• To treat all electric ratepayers and taxpayers in the <br />city equally. <br />• To preserve the financial stability and fiscal integrity <br />of the city's overall financial structure and credit ratings. <br />• To provide for greater efficiency of the city and <br />municipal utility through economies of scale. <br />• To facilitate intermediate and long range planning <br />for electric generation, transmission, and distribution <br />facilities-for the municipal utility and neighboring <br />utilities. <br />• To provide electric service to residents and users in the <br />city at terms and conditions subject to the control and <br />regulation of the city. <br />Cities grow because families and businesses want city <br />services. City services drive development. It is proper <br />that cities provide these services (including electric <br />service) throughout the city, including new areas ae <br />growth occurs. <br />Prior to 1974, there was no state regulation <br />of utilities in Minnesota. The regulation <br />that did exist was through the granting or <br />withholding of city franchises. Investor- <br />owned utilities wanted state regulation so <br />they could deal with one state entity rather <br />than each individual city. The cooperatives <br />wanted service territories to prove to their <br />banker-the federal Rural Electrification <br />Administration-that they would have <br />customers to pay for new power plants <br />and transmission lines. Municipal utilities <br />wanted only to preserve their existing right <br />to grow with the cities they serve. The <br />cooperatives testified in support of preserving <br />thin well-established right and practice. <br />The landmark service territory law of 1974 has allowed <br />Minnesota's electric cooperatives to protect their power <br />plant investments, to greatly expand their business, <br />and to secure generous compensation from municipal <br />acquisitions. The co-ops have attempted to use disputes <br />to derail the intent of the territory law by obstructing <br />the municipal electric utilities right to grow with their <br />cities. <br />The 19741aw has worked very well for the electric <br />cooperatives. Co-opa are growing faster than other <br />utilities. In fact, the co-opa' customer base has virtually <br />doubled since the enactment of the service territory law <br />in 1974. <br />Minnesota Public Utilities Commission decisions <br />concerning compensation for service territory acquired <br />by a municipal utility have increasingly resulted in <br />financial windfalls to co-ops. Cooperatives receive <br />reimbursement for facilities, payment for any <br />reintegration coats, and payment for lost revenue <br />from existing customers, along with compensation for <br />future customers not in existence at the time that the <br />municipal utility begins serving the area. Compensation <br />paid to cooperatives now amounts to more than $16 <br />million. <br />A number of co-opa have pursued increasingly extreme <br />positions in negotiations, demanding ever higher levels <br />of compensation. Several cooperatives have forced <br />70 / 2011 State Position Statements <br />