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Minnesota utilities are not disclosing avoided costs, arguing instead that the information constitutes a trade secret.
Clean energy organizations say Minnesota’s investor-owned utilities are improperly withholding information from the public and independent generators about what it costs the companies to produce power.
The Public Utility Regulatory Policies Act of 1978, or PURPA, was meant to help create a more level playing field for non-utility power producers. The federal law requires utilities to buy power from independent companies if they can produce it for less than what it would cost the utility to generate itself.
The problem in Minnesota, according to the Environmental Law & Policy Center and the Institute for Local Self-Reliance, is that utilities are using “trade secret” exemptions to avoid disclosing those rates to the public.
The trade secret practice became a point of contention in a case involving developer Juhl Energy, Inc. and utility Otter Tail Power over a wind-solar hybrid project in Red Lake Falls that began in 2016. Juhl Energy subsequently turned it over to one of its project partners.
Minnesota utilities have used trade secret exemptions for at least the past decade to hide their avoided costs of energy production in required annual reports, said Jeff Hammons, staff attorney with the Environmental Law & Policy Center. Without the pricing data, wind and solar developers struggle to propose projects that can qualify under PURPA, he said.
Xcel Energy, Minnesota Power and Otter Tail Power argue in PURPA reports that revealing trade secrets would undermine competitive bidding and affect the cost they pay for energy. Xcel and Otter Tail did not respond to requests for comments, while Minnesota Power offered a statement:
“Minnesota Power follows the commissions’ trade secret practices, rules and procedures and protects confidential business information in order to protect customers and save customers costs as appropriate. And we recognize there is a balance that needs to be struck here and [Minnesota Power] consistently works with regulators to achieve that balance,” the company said.
Public Utilities Commission rules and the Minnesota Data Protection Act allow companies to protect trade secrets but require them to define why they must maintain secrecy, Hammons said. Utilities have rarely provided any reasoning behind their decision to extensively use trade secrets in PURPA reports, he said.
Although he has not done an exhaustive study of trade secrets in PURPA documents, Hammons found utilities in Iowa, South Dakota, Florida and Colorado reveal avoided cost data in PURPA filings.
The price utilities pay third-party providers may be less than the cost of generating the energy themselves, Hammons said, allowing them to reduce operations of aging and expensive power plants. Armed with accurate pricing data, developers can decide whether to make proposals to build solar, wind or bioenergy projects.
Revealing trade secrets might also allow the public to compare whether a proposal to build a new fossil fuel plant is a financially sound decision. The disclosure of pricing information might show a plant looks uneconomical based on avoided cost data.
“There could be an explanation, but you can’t ask the questions if you don’t have the necessary information,” Hammons said.
The secrecy has not stopped Minnesota from being a national leader in renewable energy, he conceded, but more could be done. “Not all utilities are doing as good a job as they could be and this route through PURPA is one way could to interject another avenue toward developing these projects and protect ratepayers,” he said.
Minnesota Solar Energy Industries Association Executive Director David Shaffer said he thinks any utility data hidden as “trade secret” in PURPA filings do not deserve the designation. The only instances where utilities are justified in using trade secrets is when they do not own the data and information, he said.
“The bar for making something trade secret in Minnesota is generally too low,” Shaffer said. “I struggle to know why a utility needs a trade-secret designation when it’s a monopoly and has no real competition in its service territory.”
The Institute for Local Self-Reliance’s John Farrell said state regulators traditionally have done little to enforce PURPA.
“Minnesota is a great example of that because it’s where you have utilities that are out of compliance with federal law and out of compliance with state law and regulators who have never held [utilities’] feet to the fire,” said Farrell, director of the institute’s Energy Democracy Initiative.
No additional legislation is required, Farrell said. Instead, utilities should simply follow the state and federal laws. Revealing avoided costs would help create more wind and solar projects, especially in rural areas such as Red Lake Falls where the benefits include the taxes developers pay and the jobs they create.
Retired Juhl Energy founder Dan Juhl said even when utilities release their avoided costs to developers they are often inaccurate because they may not include transmission costs and associated data. The information he eventually received from Otter Tail could not have represented the true cost of energy production and transmission, he said.
The Red Lake Falls project combining 4.6 megawatts of wind and 1 megawatt of solar remains unbuilt. Con Edison Development, once a Juhl partner in Red Lake Falls, now owns it. He believes secrecy over avoided costs has hindered progress on developments such as Red Lake Falls.
“Wind and solar technology costs have just plummeted over the past few years,” Juhl said. “We consumers are bearing the brunt of the fact [that utilities are] playing hide the peanut with avoided costs to our detriment.”