The Lowdown on Minnesota Utility Laws
Utility laws in Minnesota—historically designed to protect consumers—are ways for the state to regulate how utility service providers operate, and ultimately, whether those providers are allowed to continue providing services. Utility service is a huge money-generating portion of our economy. The consistent availability of gas, electric, and water service is vital to our quality of life and – for many businesses and individuals – is literally a life-or-death necessity. Furthermore, all Minnesotans are consumers of these utility services and regulated utilities are able to use franchise tax-paying discretionary income to maintain monopoly provider status for their services.
Therefore, in order to reduce the "temptation" of utilities to try to make as much profit as possible, Minnesota has a highly regulated system for policy-making by utilities. Generally speaking, regulated utilities must get approval from the Minnesota Public Utilities Commission for just about anything they want to do. For example, the Public Utilities Commission must approve a rate increase before it can be implemented.
To start things off, it is important to note that utility laws are set out in parts 216A through 218A of Minnesota’s Statutes and most Minnesota utility law is also heavily influenced by federal government policy. Minnesota utility law is therefore guided by a system of checks and balances between the federal and state governments. Indeed , almost all of Minnesota’s statutes in this area have been passed in response to federal legislation governing utility service.
Federal law has historically been aimed at protecting consumers, attempting to ensure consistent community availability of utility service, and preventing monopolistic practices among utilities. Rate regulation is an essential tool for achieving these goals. The same goals can be seen in Minnesota rules, which focus on ensuring that utility services are available to everyone within a utility company’s service area on reasonable rates and without discriminatory practices.
Moreover, a utility’s operational and accounting practices are closely monitored by the Public Utilities Commission. If a utility fails to comply with applicable law, a number of penalties are possible. Ultimately, if a utility repeatedly violates public policies related to energy use or the provision of utility services, the Public Utilities Commission can issue an administrative cease and desist order, hold public hearings about the utility’s potential unlawful practices, or even revoke the utility’s certificate of public convenience and necessity, thereby forcing it out of business.
This overview of the law is very basic, so what follows will be a detailed analysis of Minnesota law broken up into five categories – electric, natural gas and propane, water, telecommunications, and railroads.
How Electricity Providers Are Governed By Minnesota Law
Electricity providers in Minnesota are required to follow a set of regulations that govern the provision of energy to consumers. The regulatory framework is overseen by the Minnesota Public Utilities Commission (MPUC), which is responsible for ensuring that consumers have access to reliable and affordable electricity, while also protecting the interests of utility stakeholders.
One of the key regulations imposed on electric companies in Minnesota is the requirement to file general rate case petitions with the MPUC every three years. Rate case filings include details about customer rates and charges, as well as an analysis of revenue requirements and reliability standards. The MPUC reviews these filings to determine whether rates are reasonable and whether companies are adhering to the state’s rules.
Electricity providers are also subject to strict compliance requirements regarding their service areas and the category of services they offer. Companies must ensure that they are properly licensed to serve specific areas and that they don’t engage in anti-competitive behavior. Failure to comply with these requirements can result in sizable fines and restrictions on utilities that engage in prohibited activities.
In recent years, policy changes to encourage alternative energy sources have reshaped the industry. That being said, many companies are still required to have long-range resource plans approved by the MPUC. This policy includes requirements for renewable energy and long-term power supply reliability. Depending on the type of resource plan, electricity providers may be required to host public meetings to discuss their proposed plans and how they will prepare for future energy needs.
Electricity providers in Minnesota are also subject to an energy conservation rule that seeks to eliminate or avoid costs due to non-efficient practices. Under Minnesota Statute §216B.241, RS 13.7.3LE17, energy providers that primarily generate electricity must adopt and implement a value of conservation reaching 1.5 percent of retail sales. To comply with this requirement, providers develop cost-effective conservation programs and submit verification plans to the MPUC. Verified programs are expected to produce verifiable savings, which are submitted for review.
The regimen of regulations governing electric companies in Minnesota continues to evolve as new policies emerge due to environmental, economic and social influences. In addition to the aforementioned requirements that providers must follow, Minnesota Statute §216B.02, RS 13.7.3LE17 formally defines the scope of what constitutes electricity service, including kilowatt hour and load forecasts, demand side management and other factors. The MPUC has authority over electricity services sold across the state, while local government has jurisdiction over services that only apply within a specified municipality.
As innovations in the energy market continue to develop, it is likely that the regulations governing electricity companies in Minnesota will continue to evolve in order to reflect and promote new technologies.
Laws Regulating Natural Gas Utilities
Like electric utility, natural gas utility is governed by Minnesota Statutes Chapter 216B and Minnesota Rules Chapters 7820-7825. Minnesota’s statute governs the public policy of the state on "the development of an adequate and reliable supply of natural gas at fair and reasonable rates. Minnesota has a substantial interest in the development of an adequate and reliable natural gas supply, and the development of the supply requires coordinated planning for large and small consumers, residential, professional and industrial, to promote orderly development and to assure that rates and services are fair and reasonable." Minnesota has adopted by reference portions of the American National Standards Institute’s National Fuel Gas Code, ANSI Z 223.1-1984. This code addresses those aspects of natural gas distribution systems that present hazards due to fire or explosion by minimizing such hazards, providing adequate means of control, and requiring practices to be followed in the manufacture and installation of components. The code and certain other related standards and regulations are adopted and provided in Minnesota Rules Chapter 7825 titled Gas Utility. Minnesota Public Utilities Commission ("Commission") oversees the safety, adequacy, and reliability of natural gas services provided by every state distribution utility, in addition to enforcing various standards and regulations as required by state statute.
Making Sense of Water Utilities Under Minnesota Law
Minnesota law mandates that water utilities provide quality water and reliable service to all customers. The Minnesota Department of Health is required to regulate water quality under both federal and state law. It does this by establishing drinking water standards which establish maximum allowable levels for harmful substances and which impose treatment and treatment-free requirements, to ensure that supplies are safe to drink.
Minnesota law was revised in 2007 to encourage water utility consolidation, to help ensure that all Minnesota residents have safe, reliable water supplies. Under the statute, the Commissioner of Commerce may require a supplier to consolidate its water utility system with an existing system only if the proposed consolidation will provide greater water supply reliability, will reduce the number of small systems, or will improve the cost effectiveness or efficiency of providing water service to customers. There are certain criteria that the Commission will consider in determining whether to condition the request for consolidation on improvements to service, including whether the proposed consolidation will increase water supply costs to customers; impair water supply reliability to customers; and increase the number of customers served by a single system.
Telecom and Other Utility Law Issues
In Minnesota, telecommunications laws are distinct yet become intertwined with utility laws in the context of internet service and landline telephone services. The Minnesota Public Utilities Commission ("Commission") has broad authority to regulate these services. Utilities providing telecommunications services can be classified as local or interexchange. Local means that the utility provides telephone service within a specific service area and interexchange applies to utilities operating outside the local service area.
The Commission’s regulatory authority is limited by statutes and regulations passed down from the Federal Communications Commission ("FCC"), from which they receive most of their rulemaking authority. Regardless, the Commission regulates the market in many ways. In 2014 , the Commission approved a petition for waiver from traditional regulatory methods proposed by the telecommunications utilities operating under an alternative regulatory plan. The plan’s key provisions are: (1) the Commission no longer prescribes the rates telecommunication utilities can charge customers but instead reviews rates and provides guidance prior to implementation; (2) it essentially eliminated the requirement that telecommunications utilities obtain a Certificate of Need before constructing a large portion of capital improvements; and (3) the Commission no longer reviews construction cost and capital expenditures but sets guidelines for accelerated depreciation and amortization to remove obstacles to infrastructure upgrades.
Internet service providers ("ISP") are companies that provide internet services that include broadband, dial-up, and DSL internet access. In Minnesota, ISPs are not treated as utilities and are not generally regulated by the Commission. Federal regulations that focus on the ISP marketplace also do not apply in Minnesota. However, although the Commission does not regulate ISPs, ISPs in Minnesota are required to register as a telephone corporation under the Minnesota statutes regulating common carriers. Registration allows the Commission to track internet services available in Minnesota and help ensure that the services are provided on a nondiscriminatory basis.
Important Environmental Factors In Utility Law
The intersection of Minnesota’s environmental laws and its utility regulation is increasingly prevalent in our energy and water industries. In short, energy must be generated by facilities that cannot cause significant harm to the environment. In addition to the environmental considerations that utilities must take into account when constructing and operating their facilities, utilities are also obligated to address the environmental concerns associated with proposed projects initiated by third parties. Environmental issues can arise during contested case proceedings, general rate cases, facility siting proceedings, and other regulatory matters. Thus, Minnesota’s utility laws have an important impact on efforts to protect and preserve Minnesota’s natural environment.
One major example of Minnesota’s integration of environmental considerations into its utility laws is a requirement that utilities generate a significant percentage of their power from renewable sources. Minnesota Statutes section 216B.241 ("the RES Law") requires utilities to generate a significant percentage of their retail power sales from renewable sources (such as solar, wind, or biomass) or comply with alternative compliance payments. The RES Law’s initial targets for 2012 were 12 percent for Xcel Energy, 8 percent for Minnesota Power, and 7.5 percent for Otter Tail Power Company. Other utilities in the state were also required to develop specific levels of renewable energy; as of 2014, Xcel Energy derived 22.9% of its total energy generation from renewable sources, Minnesota Power derived 16.8% of its total energy generation from renewable sources, and Otter Tail Power Company derived 14.6% of its total energy generation from renewable sources. The RES Law establishes goals until 2025, at which time utilities will be required to derive 31.5 percent of their power from renewable sources.
To ensure compliance with the RES Law, the Minnesota Public Utilities Commission ("MPUC") establishes biennial targets for utilities. The MPUC also promulgates rules and regulations for reporting compliance to the MPUC. Furthermore, the MPUC has jurisdiction to determine whether utilities are making good faith efforts toward achieving their targets, and may impose a penalty of $50/MWh for failing to make good faith efforts. However, utilities may avoid this penalty by demonstrating they have made good faith efforts toward compliance and would have met their target but for extraordinary cost factors.
In addition to renewable energy requirements under the RES Law, utilities face additional environmental regulation from Minnesota Statutes section 216B.68 (known as the "Supplemental Environmental Projects Act"). The Supplemental Environmental Projects Act ("SEPA") gives the MPUC authority to require utilities to devote up to one percent of their annual gross operating revenues to projects that aid the environment in the state of Minnesota. SEPA provides examples of acceptable projects for utilities to fund, including soil and groundwater clean-up programs, recycling and hazardous waste clean-up programs, energy conservation projects, and other initiatives to address the environmental impact of air, water, or land pollution. To date, utilities have funded several initiatives under SEPA, including funding a Minnesota Department of Agriculture program to control the spread of thousand cankers disease in walnut trees, providing equipment for a St. Paul Public Library to allow access to the internet during the summer, and funding pedestrian and bicycle trails.
Furthermore, in its general rate cases, Xcel Energy has dedicated funding to the Environmental and Conservation Focus Areas, which provides educational and professional development grants throughout Minnesota. The fund has provided grants to, among other organizations, the Minnesota Zoo, Macalester College, and River Bend Nature Center. Similarly, in Xtream Carbon Capture 2020 Project, Docket No. E002/GR-08-1065, Xcel Energy agreed to provide approximately $3,000,000 in funding to a collaborative carbon sequestration program with the Minnesota Project. The program urges participants to reduce global warming gas emissions such as carbon and methane and to pass the responsibility on to policy makers. Projects funded through SEPA are not subject to Minnesota’s State Environmental Policy Act ("SEPA").
The MPUC is in the process of drafting amendments to its rules to implement the environmental project funding program, and anticipates issuing a draft order on these proposed rules later this month.
Legal Solutions To Problems With Your Utility Company
When disputes arise between Minnesota consumers and utility providers, there are several avenues for resolution. The first step is typically to communicate directly with the utility company to resolve the problem. For electric, natural gas, water and waste collection services, for example, providers all have consumer assistance representatives who can listen to and try to resolve complaints through customer service departments. Problems can include billing errors, service disruptions, high usage and more. The Minnesota Public Utilities Commission provides a valuable Consumer Complaint Guide for readers that details these avenues.
For electricity, Minnesota Statutes Section 216B.161 gives the public utilities commission an independent right to inquire into any complaint against a utility company. The commission will investigate complaints "upon a verified written application . . . or upon its own motion." Complaints against a public utility may be filed by any customer or any of the Minnesota local governments in the jurisdiction of the commission.
While generally rare, utilities can also initiate proceedings against consumers for nonpayment (e.g., under Minnesota Statutes Section 216B.96). Utilities must provide a notice of intent to disconnect and opportunity for hearing on the merits of the planned disconnection in order for such measures to proceed legally. The notice requirements vary by utility type; perhaps most notably, a disconnection notice for a residential electric service must be "hand delivered or mailed by regular and certified mail" at least 10 days prior to the date at which disconnection may occur.
When those options fail to yield satisfactory results, Minnesota Statutes Section 216B.16 provides an additional forum. It allows any person or group "injuriously affected" by a public utility’s violation of a statute or a commission order or rule to institute proceedings against the utility. In certain cases, the person or group can receive a payment up to $1,000 for each offense. However, the payment is not available to the person or group if the public utility has already paid the fine or received a reprimand. If the proceedings are successful against the utility, it must pay the person or group affected its reasonable attorney’s fees and costs.
Minnesota residents should understand the constitution that guides their interactions with utilities and the protection that Minnesota laws afford them.
Future Directions In Minnesota Utility Laws
As we look ahead to the future, there are several trends that could influence the landscape of Minnesota utility laws. These include a continued move toward technologically driven solutions, a greater emphasis on sustainability and eco-friendliness, and the potential for a more streamlined approach to regulatory oversight through legislative changes.
Technological Advancements:
The rapid development of technology has already influenced Minnesota’s regulatory oversight, with many industry experts calling for greater technological integration going forward. The trend toward technologies related to data collection, energy storage, and smart grid solutions all promise to shape how Minnesota utilities function in the years to come. For example, increased use of distributed energy resources would require regulators to issue more guidance on issues such as cost allocation, grid reliability, and interconnection practices.
Consumer Behavior:
Consumer behavior is also likely to continue to evolve and grow in importance when it comes to determining how utilities function in Minnesota. As consumers become more educated and concerned about their effect on the environment, they are likely to be more active in pushing for clean energy technology and competitively priced rates . Consumers may also play an increasingly important role in the advocacy process, particularly when it comes to the approval of new energy infrastructure.
Federal Influence:
Another interesting trend is the role of federal policy influences at the state level. In recent years, federal policies have energized various energy sectors, while others have fallen flat. One notable example is the Trump administration’s efforts to bolster coal use through federal legislation. While some policymakers have criticized this emphasis as inefficient—which likely led many Minnesota legislators to push for legislation that has a broader focus—there’s little doubt that Minnesota utilities have benefited (or suffered) under an increasingly dynamic federal system. Going forward, it will be interesting to see how federal policy influences the way that utilities operate and how accessible they are to customers.
The Future of Minnesota utility law is one of the most exciting areas of legal discourse to watch over the coming years. As technology continues to weave its way into our daily lives, legislators and regulators will be forced to adapt laws that reflect today’s realities, rather than the past.