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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 125
municipal electric utilities in the state, and they serve approximately
357,000 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. Cooperatives are non-profit entities but make a ‘margin’
on sales. Cooperatives often access funds through the federal Rural Utilities
Service, or the National Rural Utilities Cooperative Finance
Corporation (CFC), a privately owned, non-governmental organization. Traditionally, cooperative boards set their own rates.
Cooperatives serve approximately 741,000 customers.
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 more than 1.44 million customers. IOUs are regulated by the Minnesota
Public Utilities Commission (PUC).
Customer Mix
Municipal electric utilities serve approximately
308,000 residential customers, 46,000 commercial customers, and 3,000
industrial customers. Total population of municipal electric utility cities
is approximately 643,000.
Cooperatives serve approximately 686,000 residential
customers, 51,000 commercial customers and 4,200 industrial customers.
Investor-owned utilities comprise the largest segment of
the industry in Minnesota. They serve approximately 1.3 million residential
customers, 169,000 commercial customers, and 1,500 industrial customers.
Big and small (but mostly small)
 There are 125 municipal
electric and 31 municipal gas utilities in Minnesota (some cities with
municipal electric utilities also operate municipal gas utilities; other cities
operate a gas utility but not an electric utility). 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 100,000 people. The next largest municipal,
Moorhead, is much smaller, with a 35,900 population. Anoka, Austin, Moorhead,
Owatonna, Rochester and Shakopee are the only utilities with more than 10,000
customers.
Of Minnesota's municipal utilities. 82% of have
fewer than 5,000 customers; about 38% have fewer than 1,000 customers, and
about 20% have fewer than 500 customers.
The average municipal electric utility operates in a
city of 5,142 people and has 2,856 customers. The median municipal electric
utility operates in a city of approximately 2,500 people and has
approximately 1,800 customers. The smallest municipal electric is tiny Shelly,
with a population of 61.
The largest municipal gas utility is Duluth, which
serves in a city of 85,000. The next largest municipal gas utility is Austin,
which serves in a city of 23,700. Due to these larger cities, the city
population for an average gas utility is 7,040, but the median municipal gas
utility operates in a city of only 1,200.
While no new municipal electric utility has formed since
1965, a number of municipal gas utilities have formed in the 1980s and 1990s
(including Randall and Westbrook).
Benefits of ‘public power’
Municipal utilities, also known as
‘public power,’ are an important, contemporary American institution. From
small towns to big cities, wherever public power exists, it is an expression
of the American ideal of local people working together to meet local needs.
It is an expression of the local control that is at the heart of our
federalism system.
Public power is also a strong
competitive force that provides a "yardstick" for consumers and
regulators to measure the performance and rates of private power companies.
This continuous competition helps all electric consumers, not just those
served by public power.
However, a public power utility
has many distinct characteristics that benefit the consumers of the
individual community it serves.
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 125 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 typically have some of the
lowest rates in the state. This is especially noteworthy, since Minnesota is
generally considered a state with moderate electric rates. The U.S. average
revenue per kilowatt hour for all sectors, by state, in 2007 was 9.13 cents.
The Minnesota average was 7.83 and the municipal average was 7.79.
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. ccording 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.
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