6.6. ERMUSR 01-11-2005 - Laserfiche WebLink

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CAPX 2020 INTERIM REPORT DECEMBER 2004 ATTACHMENT E STATE PLANNING AND REGULATORY ISSUES To determine whether current regulatory processes can facilitate the implementation of needed transmission, CapX 2020 is undertaking a review of Minnesota statutes and rules. This effort is intended to determine whether any change would be appropriate to these processes to ensure: ^ Reliability. ^ That timely additions and upgrades to the transmission grid can be implemented to deliver needed energy and capacity. ^ Compliance with state policies, such as a good faith effort to meet the Renewable Energy Objective. ^ Access to generation and markets to lower the costs of electricity for customers. ^ Consistency with the current regulatory landscape, given significant changes at the federal and regional level. We present a brief summary of the various issues under review. INDUSTRY STRUCTURE As previously noted, significant changes in the industry are underway with the evolution and implementation of regional transmission organizations (RTOs), and the need for significant new transmission investment is great. It is appropriate to consider different approaches and opportunities presented under the RTO structure that may help facilitate the significant investments that will be required. It is possible that investment by individual utilities at the levels anticipated to be required under this effort is not the most efficient or cost-effective approach available and all reasonable possibilities should be explored. COST RECOVERY Utilities recover investment in transmission through retail and wholesale rates. Investor- owned utilities' retail rates are regulated by the Minnesota Public Utilities Commission (PUC), while rates of cooperative and municipal utilities are set by their local regulatory/governing bodies. Rates for investor-owned utilities' transmission services to small utilities, such as municipal utilities, are regulated by the Federal Energy Regulatory Commission (FERC). For investor-owned utilities, recovery of transmission investments generally requires the utility to file with the PUC a general rate case after construction is completed and the transmission lines are in service. General rate cases are 10-month, contested-case processes where all utility costs are reviewed for appropriateness of cost recovery. Rates set in this process would recover all prudent transmission investments, including those made since the time of the last rate case. (The one statutory exception to this process applies to Xcel Energy and allows direct recovery of transmission investments needed to accommodate mandated renewable energy.) 19