Minnesota’s e21 Initiative to Redefine Its Regulatory Framework

In February 2014, a diverse group of Minnesota leaders began a collaborative process to define Minnesota’s 21st century energy system. The goal is to identify a new regulatory environment that will resolve the fundamental misalignment between the traditional utility model, technology advancements, and public policy goals. e21 participants recently completed Phase I of the effort by developing several recommendations that, if adopted, would offer customers more choices on how and where their energy is produced and reward utilities for the achievement of agreed-upon performance goals.

Key Details

  • Participants included representatives from utility, consumer advocate, energy technology, business, environmental, academic, and government organizations
  • The new regulatory framework recommendations fall into four categories: performance-based rate-making, customer option and rate design reforms, planning reforms, and regulatory process reforms
    • Utilities would operate in an environment that emphasizes providing energy services and options that align with customer expectations (energy efficiency, renewables, distributed generation, etc.) rather than on the volume of electricity sold
    • The framework would require collaboration between all stakeholder entities and leverages an integrated resource analysis rather than an Integrated Resource Plan
    • The framework would enable both state and federal policy goals to be met AND ensure that utilities have a viable business model
    • Rate-making processes would change significantly. The strict accounting cost of service approach would be eliminated in favor of a performance-based, forward-looking framework. This would take the form of a business plan that aligns with metrics, policy goals, and technology advancements, ultimately taking into account what should be paid to achieve the outcomes wanted by society
  • Phase II of the initiative will focus on defining the details of the Phase I recommendations
    • Unanswered questions raised during Phase I must be addressed (e.g., how to best modernize Minnesota’s electric grid)
    • Additional participants will be brought on to assist with Phase II, including those directly impacted by the recommendations who did not participate in Phase I
    • The implementation timeline has not yet been completely developed

Implications

The Minnesota e21 Initiative may have a significant impact on the future of electric utilities by defining new options for how the electric system is modernized and how the regulatory compact and the utility business model are structured. This initiative is forward looking, and tough questions are being broached and analyzed. The result may be a system that is no longer consistent with regulatory framework and utility model that have been in place since the early 1900s. With four other states also focusing on “the utility of the future,” at the very least there will be increased opportunities for stakeholder discussions and, in some instances, collaboration on this intriguing topic.

More Information

This report is part of the Regulatory Minute series. To view all featured Minutes, please click here.

View More

May we suggest:

The Energy Industry Update - Volume 16 - Issue 2

The energy industry is changing, and its regulatory and financial moorings are shifting. Competitive markets combined with other factors may lead to early nuclear unit retirement. Continuing changes in energy supply and demand patterns create a complex operation environment for electric utilities. Federal and state policy lines are beginning to blur as states have been increasingly intervening in FERC domain seeking favorable outcomes for their citizens and other local constituencies. In our Update, themed “As Yogi Berra Might Say…,” we look at the unusual picture drawn by the juxtaposition of these changes.
Report

Welcome to ScottMadden!

Sussex Economic Advisors is now part of ScottMadden. We invite you to learn more about our expanded firm. Please use the Contact Us form to request additional information.