ERMUSR OTHER BUSINESS 03-18-2003

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After many years of court cases, MPUC decisions, and individual agreements, and more than $2 million in legal fees, the service territory law is now well understood. Many municipal utilities and cooperatives have even signed territorial agreements and are working together. Now that the work has been done and a body of precedent has been established, this is no time to open up this Pandora's box. Cooperatives have been afforded many new growth opportunities because of the service territory law and the compromise that made it possible. They have retained huge service territories within which they have cultivated substantial growth, particularly in the Twin Cities metro area and around many non-public power cities in greater Minnesota. This has resulted in kilowatt-hour sales and new customer acquisition growth rates for cooperatives that are higher than those of other types of utilities in the state. This situation has also benefited cooperatives by giving them new urban area that is five times the size of the area absorbed by municipal electric utilities after annexation. In the past few years, cooperatives have been urging that municipal utilities be denied their right to grow with their city boundaries. As it became apparent that municipal utilities would not forfeit their rights,the co-ops have pursued increasingly extreme positions in negotiations. At various times, the cooperatives have proposed increasing compensation amounts or lengthening payment periods for lost revenue. These new proposals have been excessive, without supporting evidence, and far beyond what the co- ops have already gained through the generous precedents established through the MPUC or the courts. It has become obvious that the co-ops are attempting to use these new proposals as ploys to obstruct municipal growth as much as possible. Municipal utilities are also concerned about efforts to use state law governing such issues as annexation and land use planning as a vehicle for dealing with the service territory issue before the legislature. Any effort to link proposed changes in annexation law to changes in statutory language protecting municipal utilities' right to grow with their cities should be defeated. The landmark service territory law of 1974 has allowed Minnesota's electric cooperatives to protect their power plant investments, to greatly expand their business, and to secure generous compensation for municipal acquisitions. This law was passed as a result of a compromise with the municipal utilities, whose only requirement was that they be allowed to grow with their cities. The co-ops now want to end this arrangement without proving a need to change. It's time they abided by the compromise they wanted in the first place. It's time they kept their word. Municipal utilities are willing to work to simplify the current process and make the law easier to administer for all parties. We are not willing to forego the basic right that we have had since the inception of the industry—the right to grow with our cities. Minnesota Municipal Utilities Association February 2003