News > CEO’s Message – February 2023

CEO’s Message – February 2023

Legislative Affairs: Co-op Focuses on Reliability and Affordability in 100% Carbon Free Legislation

Greetings. This month, I would like to take some time to build upon our legislative affairs efforts that were introduced in the November 2022 Power Connection by Vicky Herkenhoff, Vice President of Administration and Finance. Vice President Herkenhoff explained that legislative affairs are a crucial part of the cooperative business model, and that Stearns Electric Association works closely with local elected officials and the Minnesota Rural Electric Association (MREA) to promote state policies in support of electric cooperatives and their members. Herkenhoff identified priority issues that Stearns Electric and the MREA were ready to educate and engage elected officials on in 2023. Those priorities included defending the longstanding property tax exemption for electric cooperative distribution equipment and dissuading the Minnesota Department of Labor and Industry from requiring costly permits to replace old load control receivers with new ones. However, since Minnesota’s 93rd legislative session began in January, there have been nearly 2,500 bills introduced in the House and Senate. This has been one of the busiest starts for the legislature in state history. We will continue to educate and engage policy makers on the issues identified above, but there was another issue that quickly rose to the top of our priority list in January.

A bill that recently passed the House and the Senate and has been signed by the Governor is one requiring Minnesota utilities to generate or procure 100% of their electricity from carbon-free sources by 2040. The original bill also included interim goals of 80% carbon-free by the end of 2030 and 90% by the end of 2035. In addition to setting the carbon-free standard, the requirement for generating or procuring electricity from renewable energy sources was extended to 55% by 2035. The bill provides the same “off-ramps” that currently exist in the renewable energy standard (RES), which means the Public Utilities Commission is the deciding authority for all utilities in the state, including electric cooperatives, in determining future compliance with the standard.

The transition to clean energy and reaching 100% carbon-free has never been the concern. In fact, no other state has reduced electric sector carbon dioxide emissions more successfully than Minnesota and plans were already in place to be over 70% carbon-free by 2034. The new requirements and associated timelines will push utilities to retire existing power plants before necessary transmission, renewable generation and battery storage technology is available. Instead of responsibly attaining the carbon-free goal, this mandate will all but ensure that reliability of the electric grid will diminish, and electricity costs will rise steeply along the way.

Through discussions with legislators and grassroot efforts by electric cooperatives and members across the state, the MREA was able to secure a few changes to the bill before it was approved by the House and Senate. One of the biggest modifications being that the 2030 milestone was changed from 80% to 60% for electric utilities, not including investor-owned utilities. This modification, along with a few others, will provide the means for a somewhat more responsible clean energy transition, but reliability, affordability and even local cooperative governance are still significant concerns of ours moving forward as it relates to meeting the requirements of this carbon-free mandate. Thank you to everyone who participated to ensure your voice was heard.

I also want to share with you a brief update about our ongoing review of the Cooperative’s finances. As I shared in the December Power Connection, Stearns Electric is feeling the full impact of rising inflation across all operations and investments − from the cost of wholesale power and labor to transportation and equipment.

Our forecasts suggest additional revenue will be needed to maintain operations and support investments in the long-term reliability of our distribution system.

We launched a Cost-of-Service study with an independent firm to analyze our revenue requirements over the next five years to help us determine a rate adjustment to address these economic challenges (read more on page 6). This analysis will provide the additional data and information we need to develop a rate adjustment plan that minimizes the impact on members while ensuring that we continue to serve as a safe and reliable source of electricity for years to come. In the weeks ahead, I will work to keep our members informed as we review the results of the Cost-of-Service study and consider our best options.

Sincerely,

Matt O’Shea
Chief Executive Officer