Advancing Energy Justice at the PUC

Through deep regulatory and organizing work, the Just Solar Coalition is advancing energy justice at the Minnesota Public Utilities Commission.

In 2021, Xcel Energy uncorked a shocking proposal: asking the Public Utilities Commission (PUC), the state agency that regulates corporate utilities, to raise their rates for electricity by 21% for three years, the largest proposed rate hike in Minnesota history. With a household seeing an $18-$20 increase in their monthly electric bill, such an action would have undoubtedly left Minnesotans, already struggling from inflation, reeling.

The proposal to raise rates was part of Xcel’s multiyear rate case filing, a regulatory proceeding that determines how much a utility can spend, where they can spend it, and how they can recover their investments. In addition to determining electricity prices, the proceeding would direct Xcel’s investments in modernizing the distribution grid—influencing the ability of underserved communities to build wealth by accessing “distributed energy resources” like rooftop solar and community solar gardens.

In addition to directing Xcel’s grid investments, the rate case would also determine Xcel’s “return on equity,” the guaranteed profit margin that utility companies are allowed to reap from their investments, and an increase in compensation to Xcel’s executives. As Xcel’s proposed return on equity would drive a significant amount of the rate increase, many groups, including the JSC, critiqued the billion-dollar company for attempting to enrich itself at the expense of Minnesotan families across the state already struggling with skyrocketing costs of living. Xcel made $1.74 billion in profits in 2022, an 8.7% increase from the previous year, and its profits have nearly doubled since 2012 when it reported profits of $905 million.

Rate cases are complex and onerous processes, and are traditionally something only large organizations have the resources to participate in. However, four Just Solar Coalition members—Cooperative Energy Futures, Minnesota Interfaith Power & Light, Community Power, and Vote Solar and their legal representation by the Environmental Law & Policy Center—decided to throw their weight behind this case to ensure energy justice was embodied in these consequential decisions shaping our energy system and to thwart Xcel’s rate hike. Through both this intervention, the “inside game,” and a “ground game” to organize ratepayers, the JSC scored several key energy justice wins from the rate case:

Firstly, the PUC denied the 21% rate increase. The PUC’s final decision allowed Xcel to increase rates by about 9%, less than half of what the company originally proposed, and limited Xcel’s return on equity and executive compensation.

Secondly, the JSC got the PUC to explicitly acknowledge one key point in the final decision: energy justice is relevant in utility regulatory proceedings, including when the rates were set in this same rate case. This acknowledgement is a significant advancement towards a vision of utility regulation and energy decision-making that centers justice and equity.

How did the JSC achieve these wins? First, let’s explore how decisions are made at the PUC. Due to the structure of our energy system, investor-owned utilities like Xcel are allowed by law to have monopolies over their respective service territories. For millions of people living across Minnesota, including the Twin Cities metro region, Xcel is the only option for electricity.

As the sole regulator of these monopoly utility companies, the PUC is the locus for many critical decisions about energy that affect people’s lives in very real ways: How much do people pay for electricity? Does it come from sources that pollute our communities, or does it come from clean energy? Should utilities invest in grid renovations that open the door for communities to access distributed energy generation like rooftop solar and community solar gardens, or should it preserve the status quo structure that relies on centralized, utility-scale generation?

The process by which these decisions are made is known as “docket intervention,” in which the utility company and other “intervenors” advocate for their position before the PUC’s five Commissioners with evidence-based arguments, often hiring technical experts to help build their testimonies. “Intervenors” are stakeholders deemed to have an interest in the proceeding, and usually consist of government agencies, corporations, larger environmental organizations, and some public interest groups. Individual civilians and groups who are not official intervenors have an opportunity to weigh in as well by submitting written comments and testifying before Commissioners at public hearings. At the end, the Commissioners have the final say on the case, supposedly balancing the competing interests of the utility and the intervenors to set rates that are “just and reasonable.”

Given the time and financial demands of intervening in a rate case, well-resourced organizations are typically the only groups who become full intervenors. In fact, the JSC’s intervention in this rate case was historic—-only the second grassroots energy coalition in the nation to be involved in a rate case proceeding in such a way.

As an intervenor, the JSC built a robust argument against Xcel’s proposed rate hike. “The JSC’s innovative approach was to critique the hike through an Energy Justice lens, looking at how Xcel’s request ignored persistent, structural injustices in the energy system,” wrote the Environmental Law & Policy Center.

For example, the JSC argued the rate hike violated energy justice because ratepayers who were Black, Indigenous, and people of color would be most harmed by major increases in utility bills. “Customers that have been subjected to structural injustices derived from inside and outside of the energy system are treated equivalently to those that have benefitted from structural advantages,” explained Dr. Gabriel Chan in his expert testimony on behalf of the JSC. In Minnesota, racial disparities in energy insecurity are higher than national averages, with 61% of Black households in Minnesota reporting experiencing energy insecurity while only 14% of white households reporting so. A major rate increase would only exacerbate these disparities.

Dr. Chan is a professor of public policy at the Humphrey School of Public Affairs at the University of Minnesota. He accompanied four other expert witnesses for the JSC to help develop the Coalition’s evidence-based arguments.

Kristel Porter, executive director of MN Renewable Now and community organizer working in North Minneapolis, was another expert witness for the JSC. To complement the other witnesses’ technical analyses, Porter centered the lived experience of residents in her community facing energy insecurity in her testimony. “The rate increase Xcel is seeking would make electricity bills even less affordable than they already are for my community,” she wrote. “People are very anxious about this proposal and about how they will pay their higher bills for this essential service. They are worried about having their power shut off.”

In addition to addressing the substance of Xcel’s proposed rate hike and investments, the JSC critiqued the lack of “procedural justice”—which witnesses described as “meaningful and equitable participation and representation in energy decision making”—in the docket intervention process, both in this particular rate case and beyond. Despite the significant impact of the outcome on the lives of millions of Minnesotan households, docket intervention is chock full of hurdles, roadblocks, and power imbalances that often prevent the most impacted from participating.

To start, an official intervenor must have counsel, which means they must hire a lawyer to represent them. They must also develop their testimonies, read through thousands of pages of legal filings, and attend day-long settlement hearings to negotiate with the other intervenors—tasks which take hundreds of hours. These costs are usually an insurmountable barrier for most smaller organizations to participate. For the JSC, intervening jointly as a coalition allowed the four organizations to pool resources and share the time burden, allowing the coalition to do together what wouldn’t have been possible for just one member intervening alone.

On the other hand, a utility is allowed to recover everything it spends working on a docket from its customers. “The utility can pay as many witnesses as they want, because they have the money,” explained Jenna Warmuth, Midwest Regional Director at Vote Solar, one of the four JSC intervenors. “They can have as many lawyers, as many witnesses–they can spend as much time as they want on it, they can hire more people just to work on it.”

In effect, grassroots organizations are expected to dig up their own funds to even get a seat at the table, but ratepayers are footing the bill for Xcel, a billion-dollar corporation, to lobby for even higher guaranteed profits: “I have a powerful visual of maybe ten big fat binders sitting on a table at the back of the conference room that we met in, and that was the contract,” recounted Joshua Lewis of MNIPL, another of the four intervenors. “I just know, there’s no way anybody from the state read through all of that, and there’s no way that we as intervenors can read through all of it either. The capacity is not there, but yet the capacity is there for Xcel to write that out and lobby for it as well.”

Among the simplest but most prevalent barriers to participation is lack of awareness. Joshua Lewis, who helped represent the JSC at hearings with the other official intervenors, spoke of his experience working on the docket for the first time: “It was eye opening. Illuminating,” he said. “I had no idea—most people have no idea—how those decisions are made.”

One significant reason for this lack of awareness is lack of accessibility. Spanning topics from electrical engineering to finance to law, utility regulation is extremely technical, mired in jargon and bureaucratic formalities that result in gatekeeping of newer participants who don’t speak the language of the PUC. “You can tell when there’s a person who’s new to the process, and they aren’t being taken seriously. They don’t know how to translate what they want into regulatory speak,” Warmuth recounted.

The lack of awareness and lack of accessibility are symptomatic of broad historical failings of the PUC to implement procedural justice and democratize the decisions that shape our energy system. In 2020, the Office of the Legislative Auditor, a non-partisan watchdog group in the state legislature, found that the “PUC has done a poor job educating the public about PUC’s unique role and processes, and has not provided adequate resources to help the public participate.”

Motivated by these failings, Lewis led the JSC’s “ground game” to bring the rate case to the public. Through door-to-door contacts, the JSC both informed people about the rate hike and encouraged them to take action against it by signing onto a public letter and testifying at public hearings. Led by Joshua Lewis and Kristel Porter, the coalition and its volunteers knocked on over 2,500 doors in Frogtown in St. Paul and the Northside of Minneapolis.

In doorknocking, the JSC aimed to educate people about rate hike and what it would mean for their bills first and foremost.

“Knocking on doors, 99% of the people we were encountering were not familiar with the rate hike,” recounted Joshua. “They don’t really understand the mechanisms of the PUC & how decisions are made, how the money was being spent or how the rates were being designed. Money we thought might actually be reinvested back into our communities and power grid is actually being siphoned off into the profits of the ownership class.”

However, once that bubble was broken, Joshua said many people’s positions became clear. “For 99 out of 100 people, as soon as I talked about the rate hike, they were against it,” he said. “Most people knew what was up. They knew something was fishy right away, and they knew that wasn’t acceptable.”

Through organizing, the JSC helped turn out over 500 people to submit written comments and testify at public hearings. For rate requests, Xcel is required to hold hearings where the public can come to learn about the issue, ask questions, and voice their opinion by testifying before PUC’s five Commissioners.

At first, Xcel chose not to hold any hearings in Minneapolis or St. Paul, and only held hearings in the middle of the workday. Both of these decisions had the effect of excluding lower-income and working-class people living in the Cities who couldn’t drive to outlying areas or take extra time off, Joshua explained. “It was like Xcel was playing this game where they want to take advantage of folks who have more difficulty showing up,” he said. After the JSC spoke up about this issue, Xcel agreed to hold hearings in the Twin Cities and online.

In their work on this rate case, the JSC significantly advanced energy justice in utility regulation in Minnesota. “Energy justice as a concept is hard to get incorporated into these very traditional processes that were made before we started the energy transition and before we started questioning the utility and its investments,” Warmuth said.

Now that the PUC has acknowledged the relevance of energy justice, future intervenors can remind regulators of this precedent and point out what energy justice means in a particular docket. This further advances the conversation around equity in energy regulatory and policy-making spaces. “I’ve been working in energy policy for 15 years, and the traditional utility system has been upended from even 15 years ago,” Warmuth said. “Truly seeing equity and reparations actively talked about in places where decisions are being made—I’d never have thought we’d be in this place now.”

Through their historic intervention, Lewis hopes the JSC can be a leader for other groups across the country pursuing energy justice in utility regulation. “There’s a level of responsibility that comes with that—setting a standard for groups across the country, for them to follow the template,” he said. “A large part of the role there is to expand the vision and imagination of other groups in the process.”

For Lewis, the most rewarding part of working on this rate case was seeing the power and influence JSC built, which he believes was instrumental in the case’s wins. “I do not believe for a second that the result of the rate case would have happened if the JSC was not an intervenor.”

One of the JSC’s guiding principles is to bring impacted communities into the conversations about energy decisions that will impact their and their children’s futures, and the coalition aims to continue fighting at the PUC and at the legislature to democratize these conversations. By building power and influence both within the PUC and outside of it, the JSC is working towards a vision where communities, rather than corporations, are the architects of our energy future.

Just Solar Coalition members Cooperative Energy Futures, Vote Solar, Community Power, and Minnesota Interfaith Power & Light work towards energy justice by building equitable solar projects, engaging in legislative and regulatory advocacy, and educating and organizing communities. Learn more about their work below.

This blog post was authored by Nicholai Jost-Epp, summer 2023 intern with the Just Solar Coalition.