The document discusses the future of energy regulation in Minnesota. It frames the discussion around three questions: 1) What don't we want? It notes low customer satisfaction ratings for cable TV and internet providers. 2) What do we have today? It describes the current investor-owned electric utility industry as reliable with responsive customer service and more renewable energy. 3) Why change and what change do we want? It lists trends like declining utility revenue growth and the need for grid upgrades to accommodate new technologies. Possible regulatory changes discussed include separating generation from distribution, modifying revenue recovery mechanisms, and adding more retail pricing options.

1. The Future of Energy Regulation
in Minnesota |Policy
Opportunities and Innovations
January 27, 2015
How Do We Approach the Question?
Presented by
Dan Lipschultz, Commissioner
Minnesota Public Utilities Commission

2. Framing the Analysis
• Question:
▫ How should we regulate electric utilities going
forward?
• Approach:
▫ Three Questions

3. Question 1: What Don’t We Want?
2014 Rating
American Customer Satisfaction
Index (ACSI)
(100 Point Scale)
Industry Average 65
Comcast 60
Time Warner 56
Cable TV Industry
2014 ACSI Rating
Industry Average 63
Comcast 57
Time Warner 54
Internet/Broadband Industry

4. Industry 2014 Rating
Wireless Service 72
Computer Software 76
Hospitals 76
Banks 76
Department Stores 77
Cell Phones 78
FF Restaurants 80
FS Restaurants 82
Other Industries - Comparative

5. 2014 ACSI Rating
Industry Average 75
High Score 83
Low Score
(Consolidated Edison)
69
Xcel Energy 75
Question 2: What Do We Have Today?
Investor-Owned Electric Utility Industry
• Reliable service
• Responsive customer service
• Diversified generation
• More renewables/declining costs
• Reduced environmental impact
o Xcel 2014 ACSI rating 2nd highest customer in the past 10 years.
o According to JD Power & Associates, electric utility business
customer satisfaction in 2014, “hit its highest mark since 2009 . . ..”

6. Question 3: Why Change and What
Change Do We Want?
• Why Change? Trends: Public Policy and
Customer Desires
▫ Declining utility revenue growth from slowing volumetric sales
 Energy Efficiency/Demand Response
 Distributed Generation
 Fossil fuel emissions and more renewables
▫ Increasing need for distribution system upgrades to
accommodate further energy efficiency and distributed
generation
▫ Nutshell: Modernize grid to further public policy goals and
facilitate more customer control of energy use – how much,
when, what price, from what source?

7. • What Change Do We Want?
▫ Structurally separate retail generation from
distribution?
 Does this really drive down retail prices?
 Lose economies of scope/impose transactional costs?
 Lose generation diversity?
 Risk shortages and volatility in long run
 Does it really benefit residential customers?
▫ Retain vertically integrated structure, but modify some
regulatory mechanisms?

8. Possible Regulatory Changes
▫ Separate utility revenue recovery from volume sales
(decoupling)?
▫ Require /encourage more retail pricing options for customers?
▫ Make it easier for vertically integrated utility to compete for
energy efficiency and distributed generation revenues?
 Unfair to 3rd-part competitors? Stifle innovation? OR
 Essential to incent utility upgrades & meet customer needs?
▫ Transition to more formulaic ratemaking w/incentive
mechanisms?
 What does that really mean?
 How will consumers benefit?
 What will the formula be and how will it protect ratepayers?
 How do we develop meaningful incentives?
 How will those incentives be enforced?

9. Thank you!
Dan Lipschultz, Commissioner
Minnesota Public Utilities Commission
121 7th Place East, Suite 350
Saint Paul, MN 55101
mn.gov/puc