Utility Dive met with Minnesota Public Utilities Commission Vice Chair Joseph Sullivan on Monday at the National Association of Regulatory Utility Commissioners’ annual meeting in San Juan, Puerto Rico.

We wanted to hear his perspective on the top challenges facing regulators in Minnesota, home to utilities like Minnesota Power, Otter Tail Power and Xcel Energy’s Northern States Power-Minnesota.

Sullivan joined the PUC in April 2020, and was reappointed by Gov. Tim Walz in January to a second six-year term.

This interview has been edited for length and clarity.

UTILITY DIVE: What are the top challenges you’re facing at the commission?

Joseph Sullivan: Certainly affordability. In recent rate cases, it’s abundantly clear that many people are struggling to pay their bills, and they’re going to struggle to pay a new higher bill.

On top of that, you have the compounding impact of the system that’s changing. We have a system that is getting older. We have older power plants that need to be replaced. We have clean energy targets and requirements in our state.

And then you put on top of that new large loads that are coming, so we have transmission lines that are coming in. Many people are looking at these transmission lines, and they say, “Why is this transmission line going in? Is it going to increase the bills that I pay?” 

In addition, people don’t trust the institutions. That’s becoming more and more evident and more difficult. You can see that in our hearings, which are becoming more contentious. What we receive in the dockets and the record is becoming more and more contentious, and in some cases, very worrisome.

How important is transparency in terms of rate cases, large loads?

Transparency has certainly been an issue with some of the data centers that have been proposed. People are concerned about what is happening within their community.

I would say, though, it’s not just transparency that’s an issue. It’s context. People oftentimes just don’t understand how the system works, and why would they? 

But when you add that lack of transparency, plus the lack of contextual knowledge about the system, plus a degradation of faith in the institutions — it ends up being a really foul mix.

On the affordability issue, what can the commission do?

The biggest affordability program that our state has are our demand side management programs. They are taking millions of megawatt hours out of the system every year, and they’re making us more productive. If you put those megawatt hours back in the system, our system would be about 20% larger. So that is a very real savings to people. All ratepayers benefit because we have to build fewer power plants and transmission lines. So, that’s one of our main go-tos.

We have put a lot of work into setting up programs that our gas utilities run and our electric utilities run to help people avoid being disconnected, to help them with the arrearages.

When our legislature passed data center legislation last year, they put in a component that the data centers would have to pay into the state’s weatherization fund.

What about things within a rate case: return on equity, debt to equity ratios?

Why that didn’t spring immediately to mind is because that’s what we do. Every rate case is about prudency. Is this expenditure just and reasonable, and therefore prudent? We focus like a laser beam on that.

Under our state statutes and under my thinking of how our law is, you don’t include affordability in that ROE determination.

Is there anything that the utilities could be doing better to meet some of these challenges?

This is going to be really hard for them, but filing rate cases right now is really painful. I recognize that they have capital needs. But taking a breather from rate cases could be very helpful. We’ve had a lot of rate cases in the last year. They come at a — politically — really not great time.

Things that they could do also would be to be supportive of affordability programs that are going to be helpful to keeping people connected or paying down arrearages. I want the utilities to be creative in how they are addressing affordability.

The utilities also have to really clearly articulate that they are primarily investing in resources without fuel clauses, that don’t have a fuel impact. Like, “We’re investing in resources that are less expensive in other parts of your bill.” 

And keeping rate increases to below the rate of inflation.

What effect do you think the midterms may have on state energy policy (In Minnesota, Democrats maintained control of the governor’s seat and Senate and took full control of the House in the midterm elections)?

For six of the last eight years, we’ve basically been on Democratic control. We already have a 100% carbon-free statute. We have our new energy efficiency framework. A lot of these big pieces are already set in stone, and we’re in implementation mode on them.

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The discussion in Minnesota will certainly be on data centers. Data center moratorium legislation was offered last year, and I think it’ll be offered again this year. The politics has definitely changed, and some of those initiatives may have more momentum.

For me, the interesting question will be do the advocates who are more interested in small solar, are they on the ascendancy? Or are the people who are supportive of the vertically integrated model, are they on the ascendancy? Restructuring versus continuing the regulated approach — where does that land?

How are things going with the Midcontinent Independent System Operator?

In general, MISO is doing a good job with juggling between a lot of stakeholders.

We’ve continued on the pathway with the [Long-Range Transmission Planning] Tranche One [transmission projects]. Minnesota is done with our permitting for Tranche One. We’re deep into our permitting for Tranche 2.1. So MISO has been moving forward — not as fast as I’d like — approving new transmission.

What I am worried about with MISO right now is the cost allocation for large loads, and in particular, I’m concerned that MISO has developed, along with the transmission owners, a very complicated cost allocation framework. We don’t understand how it is consistent with not just Minnesota state law, but with what the Trump administration has said [on ratepayer protection], with where it appears that Congress is going, with making sure that data centers are paying both their incremental and their embedded costs.