Nuclear Blank Check bill gets House Hearing

There was no roll call vote taken at the April 16th House Committee Hearing on HF 3708, the fate of HF 3708 will be part of an insider process, perhaps being included as part of a larger legislative package.

       Some of the most important takeaways from the hearing:

BILL AMENDED ON SHORT NOTICE

One of the first announcements was that the bill author Marion O’Neill had deleted a portion of the bill’s original language but this change was not reflected on the state website. So lot of us speaking against the bill to notice and had prepared testimony without noticing this small change. So O’Neill presented us with a moving target and then used the fact that she made the amendment as a tactic to dismiss a lot of the common thread concerns we made about the bill. Overall between the House and Senate version, the bill is gradually getting less bad.

ADVANCE DETERMINATION OF PRUDENCY WAS THE CENTRAL CRUX

Rick Evans of Xcel suggested that this bill was entirely about moving determination prudency to the front end of the PUC process rather than during the rate case portion of the PUC process toward the end. Rick Evans also repeatedly said that this bill changes nothing about the remainder of the process.

 In contrast Bill Grant of the Dept. of Commerce repeated that doing prudence after the fact is the standard rulemaking procedure and is simply how we do things.

Usually, the PUC decision about how much money was prudent to spend is made AFTER work on a project is
finished. That way regulators at the PUC will have the benefit of hindsight to review things that have
already happened. Determining is prudent on the front end before the project is done is much more difficult and poses
unnecessary risks with unknown unknowns. 

Advance determination of prudency was the crux of the discussion at the hearing as opposed to whether the bill would wipe away the cost-comparison studies part of the process. I also heard during the hearing that there is some subjectivity involved with prudency making prudency difficult to define.

Another interesting perspective I heard during the hearing was that for a great number of years, Xcel did not ask lawmakers for advance predetermination of prudency and that Xcel only seemed to get the idea of putting it into law when the PUC told them no on getting a rate of return on the Monticello cost overruns.

SIGNS OF GOP BEING SPLIT ON THE BILL

I heard some Republican discontent with the bill -

Rep Bahr I recall said that he wanted to see a more free market approach for our energy system, and that this bill involves an Investor owned utility asking government for some certainty.

Rep. Bob Vogel I recall suggested that shareholders should have to face some natural market discipline (that gives the company reason to keep costs down). “If we can be more creative then this has a lot more legs”. To that end, I heard a response saying that “The sliding scale rate of return introduces a competitive element”.

Meanwhile Rep Rarick justified support of the bill by saying “We could not know everything at the beginning of the capitol renovation project and therefore flexibility for unexpected costs (cost overruns) is justified. So therefore, he concluded, we are supposed to declare a project as prudent in order to do the work in the first place then do the arbitrate about the costs at a later time.

Rep Munson said he will support the bill now because of the late Amendment O’Neill added in. He spoke toward the feeling of being fed up with wishy washy “unelected bureaucrats” making huge decisions that affect a lot and that this bill is all about “business mitigating risk”.

When the Committee held a roll-call vote on Friday April 20th, there were 5 Republicans who voted against the bill and it would have been tabled had 2 DFL members of the Committee not been absent.  

A CAP OR A BLANK CHECK?

Rick Evans said that this bill provides Xcel with a cap (on nuclear project spending) where everything above that set cap is a risk to the company. But that is a different outcome than the company wanted at Monticello when they wanted to get profits off of the cost overruns. When someone brought up a question as to where in the bill this referred to cap was located, the response we heard was “the Cap is located in the “not in excess” language included in section D.” It is unclear how effective that cap would be if Xcel gets to define what that cap is.

The MN Chamber of Commerce opposed the overall bill but disagreed with our characterization of the bill as “a blank check.”

HOW THE BILL EFFECTS THE LIFETIME OF THE NUCLEAR PLANTS

There was a question brought up as to whether the bill effects the licensing end date of the plant.

Rick Evans (or possibly the other person from Xcel) stated that they “want to avoid a situation where we have to shutter nuclear plants because they can’t handle the regulatory uncertainty as opposed to the cost.” Xcel’s honest admitted motive is more regulatory certainty, as opposed to worries about how costly the nuclear projects could become.  

Something else notable that I heard from the hearing was that Passing this bill into law makes it more likely but not a guarantee that the nuclear plants will remain open longer. The current lifetime of the nuclear plants could remain perfectly intact without this bill. However, the bill would put the thumb on the scale in the direction that the nuclear plants remaining open for longer. Interestingly, they (I think Xcel) admitted that stories around the country of nuclear plants closing (due to lack of competitiveness) was largely happening in states with deregulated electricity markets which was different from what we have here in Minnesota. While some of the speakers at the hearing wanted the nuclear plants to close the plants early, the MN Chamber of Commerce not among them.

NO SPEAKERS FROM PRAIRIE ISLAND BUT PLENTY FROM MONTICELLO

At the March 27th Senate committee public hearing, Xcel and the IBEW were the only organizations speaking in favor. At the April 16th House committee public hearing, all of the speakers in support of the bill (besides Xcel and the IBEW) were officials representing the host community for the Monticello nuclear plant. They argued that the nuclear facility has become essential to their tax revenue and as a source of jobs for workers. Bill Author Marion O’neil said this was about fighting for jobs in her district which includes Monticello.

But interestingly enough, there was no one from the host community of the Prairie Island nuclear plant who came to the hearing to speak about of the bill. Representative Karen Clark pointed out that it would be unfair for the bill to pass without the host community for Prairie Island getting a chance to weigh in (which happens to be an indigenous community where nuclear waste is stored on site).

HF 3708 SUPPORTS APPEALS TO JOBS AND COMMUNITY NOT GENUINE

Despite legislators and other speakers in support of the bill making token appeals to jobs and community, the bill does not actually do anything to assure the power plant workers or the host community will be taken care of if the plants close. The speakers from the Monticello area in support of HF 3708 spoke about the bill as if it was some sort of guarantee the nuclear plants will stay open, which was later revealed in the hearing to not be the case. HF 3708 only "puts the thumb on the scale" in that direction of the nuclear plants staying open longer.
HF 3708 does not offer any measures like pension support, transition aid, worker retraining programs or anything that will benefit workers or the community if and when the nuclear plants close. We could very well see a lose-lose scenario where Xcel sinks over $1.4 billion investment dollars into the plants and yet the plants still close earlier than the host community wants. Granting Xcel advance determination of prudency makes that scenario more likely where the workers will be left without their jobs and the host community will be without their tax payments even after Xcel ratepayers pay the entire tab for the expensive projects.