Minnesota needs to make “just and reasonable” electric bills a reality for state’s poorest residents.
Many low-income Minnesotans live paycheck to paycheck; utility bills can push them over the financial cliff. Utility bills are cited as the leading cause for low-income households resorting to payday loans, a notorious debt trap.
These households face both the current financial strain from COVID-19 as well as chronic problems with utility bills.
State law says electric rates need to be both “just and reasonable. … Any doubt as to reasonableness should be resolved in favor of the consumer.” According to the lived experiences of low-income Minnesotans, the current rate structure isn’t “just and reasonable.”
Utility rate setting offers one path forward to make our system more equitable. Larger changes are needed, too.
In 2019 – before COVID-19 – Xcel Energy disconnected 16,693 residential customers due to their inability to pay. COVID-19 has put cash-strapped families in an even more precarious situation. Some have lost jobs. Many have service jobs they can’t do from home. For those with compromised health, going to work is a life-threatening decision. Some have to scramble for child care in order to work.
COVID-19 magnified and revealed the problems of an already flawed system.
In 2018, more than a half-million Minnesotans, including 150,000 children under age 18, had family incomes below the official poverty threshold. (In 2018, it was $20,780 a year for a family of three, ridiculously low.) For households living between 50 and 100 percent of poverty in 2018, electric bills took 17 percent of their income on average.
Utility decisions impact low-income Minnesotans in more ways than just their pocketbooks. Low-income communities also are often located in less desirable areas – near freeways, coal plants, incinerators, and industrial factories. The air pollution harms the communities’ health.
For a state that sees itself as a decent and just place to live, this paints a deeply disturbing picture.
In Minnesota, the Public Utilities Commission (PUC) regulates electric rates. For a century, Minnesota and most other states have had what is called a “regulatory compact” with utilities.
Under the compact, the state gives for-profit companies such as Xcel a monopoly to provide electricity in a specified service area. The utility benefits from economies of scale and predictable revenue. In return, utilities commit to serve all customers in their service area with “adequate and reliable services” and agree to charge rates that are “sufficient, equitable, and consistent in application to a class of consumers.”
That language seems to leave Xcel and the PUC plenty of leeway to allow low-income households to have “equitable” bills based on their ability to pay.
Minnesota has a program to help people pay utility bills, the Low Income Home Energy Assistance Program. Yet only 27 percent of eligible families make it through the application process. Energy utilities have additional low-income assistance programs, but almost all of them first require that the household has qualified for Low Income Home Energy Assistance. Many low-income Minnesotans live in homes or apartments that aren’t energy efficient, adding to utility bills.
What low-income Minnesotans need are programs without so much red tape and barriers. Options include providing the first 300kWh/month free or at an inexpensive rate, applying to all users, or creating “Lifeline rates” that provide discounts based on income.
Still, it’s important to acknowledge larger, structural problems. We all are forced into a system where if we want electricity, we have to pay for large corporate profits and polluting infrastructure.
We need to rethink and transform our relationship with utilities. The current system is outdated and doesn’t serve the public interest as well as it could. As energy becomes more democratized – with more and smaller renewable energy producers in the field – we can build a different system, one that protects our health and spreads the wealth.
The Just Solar Coalition has written a letter to Xcel inviting it to voluntarily address the immediate COVID-19 crisis as well as other long-term changes.
These requests are not about charity but justice – restoring people’s self-sufficiency and dignity, and meeting the law’s requirement for “just and reasonable” rates.
You can read our letter to Xcel here. Here’s a summary:
In 2019, Xcel Energy reported an annual shareholder return exceeding 32 percent, outpacing its peers. Xcel had $11.5 billion in revenue and record shareholder profits of $2.1 billion. Credit at least 25 percent of those profits back to ratepayers to alleviate the immediate stresses created by the COVID-19 pandemic.
Forgive rather than simply delay utility bill debt during the COVID-19 pandemic.
Place a moratorium on utility disconnections for the length of COVID-19’s economic disruption.
Adopt “Lifeline rates” that tie low-income families’ electric bills to their ability to pay.
Dramatically increase weatherization programs in impacted communities.
Expand low-barrier residential weatherization opportunities by adopting Inclusive Financing throughout your service territory.
Reduce pollution, future price volatility, and the harm done to low-income communities resilience by immediately shuttering remaining coal plants, ending contracts with trash incinerators, and abandoning regulatory and legislative pursuit of all new gas plants.
CEO pay in general has increased 940 percent since 1978, whereas the typical worker has seen only a 12 percent bump, according to the Economic Policy Institute. Xcel should cap upper management compensation to a multiplier of Xcel worker compensation to its lowest-paid workers, such as no more than 100 or 150 times.
Be transparent about stimulus funds you receive from the federal, state, or local governments, money that could offset rate increases.
Utilities are an essential service, not a take-it-or-leave it extra. Utility bills are one of several budget items that can push a low-income family into financial crisis, resulting in anything from worsening credit problems to homelessness. It not only harms the family but the community, which now needs to step up with more social services.
We have a regulatory compact with utilities. We also have a social contract with residents to make sure they can meet their basic needs. We need to find solutions that work for everyone.