Members of MREA are electric cooperatives – Community-Based Energy Companies
- Private, locally-operated electric utility businesses.
- Owned and rate regulated by our customers.
- Established to provide at-cost electric service.
- Governed by a board of directors elected from the membership, a board that sets policies, procedures and rates implemented by the cooperative’s professional staff.
Cooperatives are rural economic drivers
- The distribution and generation and transmission cooperative members of MREA employ 5,968 people. These are good jobs with good wages and benefits.
- We serve 813,000 customers or about 1.7 million Minnesotans. The median-sized co-op is 8,366 members. Cooperatives range in size between just under 1,900 to more than 129,000.
- We supply over 14.7 billion kWh per year (about 18 percent of the state’s total kWh sold) and generate $1.5 billion in revenues.
- We operate at close-to-cost (a certain level of margins is required by lenders), which provides competitive energy costs for rural and suburban Minnesota businesses and consumers.
- Revenues above our operating costs are returned to members through capital credits. An average of $26 million a year is returned to customers by the state’s electric cooperatives.
- We invest in our communities. Minnesota cooperatives typically are near the top of the 50 states in the use of Rural Economic Development Loans and Grants issued by the USDA.
Cooperatives face different challenges than investor-owned utilities or municipal utilities
- We provide electricity for 85 percent of the geographic area in Minnesota
- Our distribution network (lines and substations) is the largest in the state by far, with more than 148,000 miles of electric distribution. That’s significantly more than Xcel Energy’s Minnesota operation (28,718), or the four private power companies in Minnesota combined (40,722), which reflect significantly higher capital costs.
- We average 7.4 consumers per mile of distribution line, compared with 38 consumers per mile for investor-owned electric utilities and 48 customers per mile for municipal electric utilities.
- Our revenue per mile of line nationally ($15,000) is a fraction what it is for investor-owned ($75,500) and municipal utilities ($113,000), making it harder to spread out the cost of investments in renewable energy and conservation.
- 79% of co-op consumers have a per capita income below the state average, meaning that rate increases impact their budgets significantly.
- We have significantly fewer commercial and industrial accounts, which means conservation programs are more costly and difficult.
Sustainable Conservation Improvement Program Improvements For Consumer-Owned Utilities
Minnesota’s Conservation Improvement Program (CIP) has achieved significant success toward reducing Minnesotans’ energy spending, catalyzing green industries in the state, postponing new electric generation construction and reducing emissions. It has helped our members and citizens use electricity more wisely and have facilitated the successful widespread adoption of new efficient technologies.
The continuing effectiveness of the program depends increasingly upon changes to it and the law governing it. Its scope and design no longer match its purposes, given its successes, its limitations and the evolution of our energy industry and society. Many of the things it incentivizes have now been deployed to a point of saturation. People buy energy-efficient appliances without rebates. LED lighting is increasingly not only the preferred option, but the only option. Perversely, beneficial electric usage (including electric vehicles) is discouraged since it results in higher energy sales. The existing CIP program fails to support and advance emerging technologies. Many consumer-owned utilities are capable of advancements the current program does not recognize. In its current format the CIP program is unsustainable and increasingly ineffective. In order to continue meeting the multiple goals of the program we need to develop an improved, sustainable Comprehensive Efficient Energy Program (CEEP) for our new energy environment
Principles for a New Approach
For consumer owned utilities, CIP should be replaced with an initiative (CEEP) that:
- Reflects that consumer-owned utilities have a valuable role to play in Minnesota energy policy that can be better actualized through an improved approach
- Recognizes multiple purposes: generation (kW) avoidance, end use emissions reduction, customer cost savings, utility efficiency, and economic growth.
- Emphasizes end use total energy efficiency rather than an absolute reduction in kilowatt hours. Recognizes total energy system efficiency improvements across sectors (E.g., Transportation, Agriculture, Public, etc.)
- Recognizes efforts that advance any of Minnesota’s energy policy priorities, including utility innovation, distributed generation support, consumer education, Minnesota energy sustainability and resiliency
- Uses reasonable, credible metrics for illustrating success.
- Ensures the needs of low-income consumers are effectively addressed while placing an increased focus on multi-family residential buildings.
The goal of consumer owned utilities is to develop a sustainable CIP for the people we serve, by preserving the program’s benefits while expanding the opportunities to incentivize tomorrow’s innovations. Consumer owned utilities are working with their respective memberships and stakeholders on improvements to CIP in 2018 and plan to bring a solution to the legislature in the 2019 session. We appreciate legislative support of a sustainable CIP for cooperative and municipal utilities.
Cooperative Choice in the Minnesota Energy Market
Minnesota Energy Marketplace
The wholesale energy marketplace in Minnesota is a fully competitive market. Utility scale generation resources need to be cost competitive to survive. The generation and transmission cooperatives that serve Minnesota cooperative member-owners compete in this Minnesota energy marketplace and have rapidly escalated their renewable energy portfolios in the process. We have long had established territorial boundaries with an obligation to provide affordable and reliable service to retail customers, which eliminates costly duplication of infrastructure and allows for rational planning. Some 3rd party energy providers advocate disrupting this successful approach by picking and choosing which customers to serve, breaking the longstanding compact establishing the utility within each territory has an obligation and a right to provide electric service. Allowing 3rd parties this right to pick off customers they can make the most profit from, often by creating complicated financing arrangements, will result in higher costs and degraded electrical service for everyone.
Minnesota electric cooperatives are member-owned and member-governed utilities. Member-owners create the cooperative they want for their community with the choices and options that suit their needs. This Cooperative Choice has led to industry leading innovation including:
- Energy Choice Programs: Delivering affordable and reliable renewable energy options to members who want more than the current renewable energy mix provided by their locally-owned cooperative. Many cooperatives offer electric vehicle owners all renewable energy options for charging their vehicles.
- Energy Storage: Energy storage projects are often paired with cost effective renewable energy. These energy storage projects are carefully designed to be economically fair to entire membership of the cooperative.
- Community Solar and Storage: Minnesota electric cooperatives led the country in community solar and now nearly all Minnesota electric cooperatives have some cost-effective community solar option. Community storage projects capture the storage capability of grid-enabled water heaters to store wind and other renewable energy when it is produced.
- Green Energy for Minnesota Businesses: Minnesota cooperatives work with their business member-owners to develop cost effective renewable energy projects and offer businesses the option of getting all of the energy needs from cost effective and reliable renewable energy.
- Minnesota electric utilities have an “obligation to serve” this means electric utilities in Minnesota provide universal access to essential energy services, non-discriminatory rates, and consumer protections, while avoiding duplication of costly infrastructure, and strong safety and reliability standards.
- In 2007, the Legislature passed a Renewable Energy Standard (RES); which requires 25% renewable energy by 2025 for all of the electric utilities in Minnesota. Cooperatives are on-track to meet or exceed the standard. At it’s peak time in 2017, 68% of the energy in this region of the country came from wind and hydropower resources.
- 3rd party providers would not have the same service requirements and consumer protections that other utilities must have. We have seen recent schemes and scams from untrustworthy developers; allowing 3rd party sales would aggravate this problem.
- Minnesota electric cooperatives are not-for-profit returning ALL profits or margins to their member-owners as capital credits.
- Electric cooperative choice programs are member driven and designed to limit the financial impact on the entire membership.
- Minnesota electric cooperatives provide choice to ALL member-owners within their mandated service territory.
- Choice programs at electric cooperatives are creating local jobs. These local jobs aren’t being funded through higher energy rates or cross-subsidization, instead they are the product of cost effective energy marketplace innovation driven by cooperatives.
- While electric cooperatives are local community partners and economic development engines they also provide an essential service: reliable, safe, affordable, and ever-increasingly renewable energy.
Support your electric cooperatives and the member-owners that drive industry leading choice and innovation in the Minnesota Energy Marketplace.
Don’t allow third parties to cherry pick the most desirable loads, tear down the territorial compacts serving us so well, and leave vital electric service more expensive and less reliable across our communities.