Management Message – November 2022
Election Complete: Education and Engagement with Elected Officials Resumes
Legislative affairs are a crucial part of the cooperative business model. In Minnesota, Stearns Electric Association works closely with local elected officials and the Minnesota Rural Electric Association (MREA) to ensure that state policies support cooperatives’ work on behalf of their members. On a national level, National Rural Electric Cooperative Association (NRECA) assists us.
When the 2022 Minnesota legislative session ended in late May, your Cooperative felt significant bipartisan support for our key issues, but as time ran out in the session, we were left with two Omnibus bills that did not pass.
Since 2022 was an election year, education and engagement with officials naturally slowed down after May. But now that the election is complete, Stearns Electric and MREA are geared up and ready to educate and engage elected officials on our top priorities.
KEY PRIORITY #1: DEFEND RURAL ELECTRIFICATION PROPERTY TAX EXEMPTION
As part of rural electrification legislation enacted in 1939, Minnesota electric co-ops pay a per member fee in lieu of property tax on co-op distribution equipment outside of incorporated areas. (Please note that cooperative’s do pay property taxes on substation equipment.) Although the law has not changed in over 80 years, the Minnesota Department of Revenue (MN DOR) is encroaching on that exemption and has started implementing property tax on certain equipment including meters, streetlights and load control receivers (LCR) in co-op market valuations. This violates Minnesota Statute 273.41, and ultimately increases Stearns Electric’s property tax.
Providing electric service to rural Minnesota remains significantly more costly than urban areas, and this property tax exemption is critical for ensuring rural Minnesotans receive affordable electric service. An agreement with MN DOR to exclude meters and streetlights, among other equipment, was included in the 2022 Omnibus Tax bill that unfortunately did not pass. Stearns Electric will continue working to educate officials to see that this provision passes in the 2023 session.
What is the impact to Stearns Electric? In 2021, our property valuation increased by 45% and property taxes increased by approximately $130,000 due to including rural meters as taxable. In 2022, LCRs were also taxed, and our property valuation increased an additional 22%, which increased taxes related to this issue by an estimated $290,000 in two years.
KEY PRIORITY #2: EXEMPT REPLACEMENT OF LOAD CONTROL RECEIVER OWNED BY CO-OP FROM UNNECESSARY STATE REQUIREMENTS
Minnesota electric cooperatives and municipal utilities all over the state engage their members in voluntary load control programs to help control electricity demand at peak times. This significantly reduces costs for all cooperative members and better integrates low-cost renewables into energy distribution systems.
Electric cooperatives and municipal utilities are in the process of replacing tens of thousands of LCRs in their members’ homes and businesses. The Minnesota Department of Labor and Industry has determined that each of these LCR replacements needs to be permitted and inspected – even when there are no changes to LCR wiring – creating a costly and unnecessary barrier that potentially makes these critical programs too expensive to operate.
An agreement by a broad-based set of stakeholders to exempt replacement of co-op and municipal-owned LCRs from this requirement was included in the 2022 Omnibus Commerce, Jobs and Energy bill that did not pass. This too, will be a key priority for us in the 2023 session.
What is the impact to Stearns Electric? Over the next several years, we estimate the Co-op will need nearly 14,000 permits at a total cost of $280,000. In 2022, Stearns Electric incurred over $10,000 in permit expenses.
You can certainly see how significant these key priorities are for Stearns Electric and our members. Rest assured, we are working every day on behalf of all of our member-consumers to address these top legislative priorities.
Vice President of Administration and Finance
November 30, 2022
In September 2022, the Stearns Electric Association Board of Directors authorized a $1.1 million general retirement of Cooperative Capital Credits…