Minnesota Republicans are missing a critical opportunity to practice what they preach.
Competition and consumer choice are good for the Gopher State. The phone you use, car you drive, coffee you drink and clothes you wear all are better because businesses compete for your patronage. Unfortunately, when it comes to electricity, Republicans in Minnesota are about to head in the opposite direction.
Xcel Energy is a regulated utility. That’s jargon for a government-granted monopoly. Xcel doesn’t compete for customers or give them options. If you live in Xcel’s district, you’re forced to buy Xcel’s power. It also has a guaranteed rate of return that’s set by the Public Utilities Commission. In exchange for protection from competition and guaranteed returns, Xcel submits to stringent oversight.
So why has the Minnesota Legislature rolled back that oversight?
Republicans in St. Paul sent legislation to the governor that will allow Xcel to build an $800 million power plant in Sherburne County and make its customers foot the bill. Xcel is pushing the legislation specifically to get out from under the PUC process, allowing the company to continue its monopoly with far less oversight.
Sponsors say the legislation is necessary because the PUC has been playing politics and moving too slowly in approving the proposed plant. But preventing the PUC from playing politics certainly shouldn’t mean rewarding a corporate monopolist at its customers’ expense.
Let’s take it a step further.
What if, instead, lawmakers took away Xcel’s monopoly on electricity generation and opened up the electricity-generation market? Xcel’s legions of lobbyists (they currently report an eye-popping 51 to the State of Minnesota) probably wouldn’t like that idea, but maybe they should. Xcel would already start off with a serious competitive edge in the state, even if they do face increased competition.
This isn’t some kind of future fantasy. Texas forces all utilities to compete for customers. Current electric rates in Texas are nearly 20 percent lower than in Minnesota. Increased competition also appears to be better for the environment. Texas ranks No. 5 on the recently revised “Corporate Clean Energy Procurement Index,” a report that studies and compares states on their relative economic freedom from utility monopolies. Incidentally, Texas has more wind-energy generation than any other state and boasts a top 10 ranking in terms of average energy costs.
The idea of competition should be familiar to Minnesota Republicans, who just last week insisted on the very same principles of competition to fix the Affordable Care Act’s health insurance marketplace. They want to give Minnesotans more competition, more transparency about rates and a broader array of choices. If it’s a priority in the health-care sector, why would the Legislature insist on the opposite approach for energy?
Monopolies like Xcel make most of their money from building things. The monopoly doesn’t really care what it builds; they just need to build something and pass the bill (plus interest) on to ratepayers. That undermines the incentive to innovate and reduce costs, which is bad for your wallet and for the environment.
Rather than freeing up the electricity marketplace, Republicans approved legislation that will lock in the status quo for a generation, so that Xcel can recover costs from customers. To make matters worse, they’ve approved an end-run around the only system that can hold the company accountable. It’s antithetical to the current monopoly system and even moreso to a system that would incentivize innovation, choice and competition.
Competition works for consumers. Electricity bills shouldn’t be an Xception.
Image by Jon T. Powers