Meet Minnesota's Municipal Utilities

Current Industry Structure
The electric utility industry is comprised of municipal utilities, cooperatives and investor-owned utilities.

Municipal utilities are governed by the city council or appointed utility commission. Municipals are non-profit. Capital is raised through operating revenues or sale of tax-exempt bonds. There are 126 municipal electric utilities in the state, and they serve approximately 320,000 customers. Regulation is largely through the local council or commission. Various safety and service issues are regulated by the state PUC or federal government. Municipals also occasionally address wholesale power and transmission transactions at the Federal Energy Regulatory Commission.

Cooperatives are governed by an elected board of directors. Those cooperative customers whose name appears on a bill are eligible to vote for these directors. Traditionally, cooperative boards set their own rates.

Investor-owned utilities, also known as IOUs, are governed by a board of directors elected by stockholders. IOUs are a state-regulated monopoly. They exist to make a profit for their stockholders while serving the public. Capital is raised through stock sales, taxable bonds and through operating revenues. Five IOUs operate in Minnesota. They serve approximately 1.3 million customers. IOUs are regulated by the Minnesota Public Utilities Commission (PUC).

Customer Mix
Municipal electric utilities serve approximately 265,000 residential customers, 41,000 commercial customers, and 2,600 industrial customers. Total population of municipal electric utility cities is approximately 645,000.

Cooperatives serve approximately 560,000 residential customers, 37,000 commercial customers and 770 industrial customers.

Investor-owned utilities comprise the largest segment of the industry in Minnesota. They serve approximately 1,150,000 residential customers, 144,000 commercial customers, and 8,500 industrial customers.

Big and small (but mostly small)
There are 126 municipal electric and 31 municipal gas utilities in Minnesota. These utilities are located throughout the state. See the state map for their locations.

By far the largest municipal electric utility is Rochester, which serves a city of over 85,000 people. The next largest municipal, Moorhead, is less than half the size, with 32,200 population. Rochester, Moorhead, Austin, and Anoka are the only utilities with more than 10,000 customers. About 85% of Minnesota's municipal utilities have fewer than 5,000 customers; about 45% have fewer than 1,000 customers, and about 20% have fewer than 500 customers.

The average municipal electric utility operates in a city of 5,104 people and has 2,560 customers. The median municipal electric utility operates in a city of approximately 2,340 and has approximately 1,215 customers. The smallest municipal electric is tiny Whalan, with a population of 64.

The largest municipal gas utility is Duluth, which serves 24,000 gas customers in a city of 87,000. The next largest municipal gas utility is Austin, which serves approximately 10,000 gas customers in a city of 23,300. Due to these larger cities, the city population for an average gas utility is 11,500, but the median municipal gas utility operates in a city of only 3,100.

While no new municipal electric utility has formed since 1965, a number of municipal gas utilities have formed in recent years (including Randall and Westbrook), and more are in the process of forming today.

Local Control
A majority of U.S. consumers believe municipal utilities are more concerned about the environment, offer lower rates, allow more control over utility operations, and have better service than private power companies. (Findings of APPA poll conducted in 1985.) Americans also strongly favor a competitive, diverse electric utility industry. Municipal utilities provide this competition and diversity. Municipals are efficient. The Department of Energy annually reports that municipal electric systems have significantly lower management and operating costs than do private companies.

Serving Local Needs
Municipal utilities offer energy services tailored to their local needs. These services range from construction and maintenance of municipal water pumping, street lighting and heating assistance programs to a wide range of energy efficiency and conservation projects, such as: lighting retrofits and rebates, residential compact fluorescent lighting programs, loans, air conditioning tune-ups, load control, tree planting, audits, public education, distribution and/or installation of water heater blankets, infra-red camera surveys and power factor improvement activities, to name a few. Minnesota municipal utilities also operate the largest residential co-generation heating system in the world, the first hot water district heating system in the U.S., and also fostered the first commercial wind electric generating plant in Minnesota.

Regulation
Municipal utilities are governed either by a local utility commission or by a city council. Governance in the 126 municipal electric utilities is nearly evenly split between these two methods. Where municipal utilities are governed by a local utilities commission, commissioners are generally appointed by the city council. In two cities - Blue Earth and Austin - commissioners are elected. Municipals are subject to all the state’s laws regarding public bodies, including the Data Practices Act, Open Meeting Law, public bidding laws and the recently-enacted government ethics laws. No other utility invites as much public input or operates in such an open, democratic manner. Open, accessible, governance is one reason municipals are also known as ‘public power’ utilities.

Low Costs
Municipal utilities have, on average, some of the lowest rates in the state. This is especially noteworthy, since Minnesota has some of the lowest electric rates in the nation. The U.S. average revenue per kilowatt hour for all sectors, by state, in 1993 was 6.93 cents. The Minnesota average was 5.60.

Reliable Service
When there is a problem, response time from utility personnel located in the city is quicker than calling a utility with personnel spread over a wide distance.

The Halloween ice storms of 1991 highlighted the reliability of municipal systems. According to the Austin Daily Herald, "In Austin, the power outages lasted a few hours before restored. In the countryside and rural towns, it would be days or even weeks before full power was returned."

A reprise of that storm in March of 1992 led to an outage of 14 hours for residents in parts of southwestern Minnesota. In Worthington, according to the Daily Globe, "The power was off for a total of two minutes."

Contributions
In addition to providing reliable, low-cost power, municipal electric utilities also return money to the city general fund. This helps a city keep down its property taxes. In many cities, municipal utilities contribute financially to local development efforts, provide free or discounted service to the city, and contribute time, equipment, and materials to city projects. Allowing a municipal electric utility to serve throughout the city keeps all citizens on an equal footing as far as taxes and electric rates, and thus helps prevent local political problems..