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~~~~~.~/ <br />~iiriv~~ <br />Pa~iti®n St~t~m~~t <br />Minnesota Municipa/ Uti/ities.4ssociation <br />Electric Utility Service Territories - <br />A State Issue <br />In recent years, electric cooperatives have attempted to secure the passage of federal <br />legislation that would have severely restricted the ability of municipal electric utilities to <br />grow with their cities. These efforts were unsuccessful, but similar attempts to add <br />service territory language to federal legislation tnay be made in the future. <br />There is simply no need for Congress to become involved in electric utility service <br />territories. Like most issues relating to retail electric distribution service, the designation <br />of service territories has long been governed under state law. Minnesota's municipal <br />electric utilities have had the right to serve annexed areas since the inception of the <br />industry more than 100 years ago. This historic right was affirmed and preserved in the <br />1974 state law that established the current regulatory scheme. Our law, like that of many <br />states, provides that a municipal electric utility has the right to serve areas annexed by the <br />city. The law also provides that the utility previously serving the annexed area must be <br />provided with fair compensation. <br />Here are some important facts to remember about Minnesota's designated service <br />territory law: <br />• The co-ops needed the 1974 service territory law in order to obtain funding to <br />build the Coal Creek project, which still serves today as one of their primary <br />sources of wholesale power. To secure passage, they agreed to and supported <br />the municipal annexation provision in the law. <br />• The co-ops have enjoyed tremendous growth in the years since the service <br />territory law was enacted. Their growth, which has largely come from the <br />expansion of cities that do not own their electric service, has far outstripped <br />that of the municipal utilities. In fact, co-ops are the fastest-growing segment <br />of the industry in Minnesota. <br />• The co-ops are poised to capture much of the growth around communities <br />served by investor-owned utilities, as well as around those communities <br />already served by co-ops. This has been happening for some time in the Twin <br />Cities Metro area, and is beginning to occur in other parts of the state as well. <br />• In addition to enjoying their own rapid growth, the co-ops receive fair <br />compensation under the law when a city purchases service rights following <br />annexation. <br />The designation of electric utility service territory is fundamentally a state issue, <br />fully governed by state law in Minnesota and in other states. There is no <br />justification for Congressional involvement in the service territory issue. <br />Minnesota Municipal Utilities Association <br />February 2006 <br />