5.3. ERMUSR 07-17-2012 - Laserfiche WebLink

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11111/111411 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. _,v At. Like most issues relating to retail electric . . distribution service, the designation of service from the expansion of cities that do not own their territories has long been governed by state law. electric service, has far outstripped that of the Minnesota's municipal electric utilities have had municipal utilities. In fact, co-ops represent the • the right to serve annexed areas since the inception fastest-growing segment of the electric industry in of the industry more than 100 years ago. This Minnesota. historic right was preserved in the 1974 state law that established the current regulatory scheme. • The co-ops, who by their own estimates serve 85% Our law, like that of many states, provides that of Minnesota's land mass, are poised to capture a municipal electric utility has the right to serve much of the growth around communities served by areas annexed by the city. The law also provides investor-owned utilities, as well as around those that the utility previously serving the annexed communities already served by co-ops. This has area—be it an investor-owned utility or a rural co- been happening for some time in the Twin Cities op—must be provided with fair compensation. Metro area, and is occurring in other parts of the state as well. The history of the 1974 Minnesota agreement was based on consensus, fairness, and understanding: • In addition to enjoying their own rapid growth, the co-ops receive fair compensation under the • The co-ops needed the 1974 service territory law when a city purchases service rights following law in order to obtain funding to build the Coal annexation. Creek project, which still serves today as one of their primary sources of wholesale power. To In past years some cooperatives have secure passage, they agreed to and supported the unsuccessfully tried to secure federal legislation municipal annexation provision in the law. denying municipal utilities their right to grow with their cities. There are concerns that the co- • The co-ops have enjoyed tremendous growth ops might attempt such an effort again as they in the years since the service territory law was unsuccessfully attempted to do during conference enacted. Their growth, which has largely come committee deliberations on the 2002 Farm Bill. • 16/ 2012 Federal Position Statements