Electric Bills in Minnesota Reach Record Highs in 2018
According to new information provided by the Energy Information Administration (EIA), monthly residential electric bills in Minnesota reached record highs in 2018, exceeding $103 per month for the first time.
This is an increase of more than 26 percent, in inflation-adjusted dollars, since 2004, before the first utility in the state (Xcel Energy) was mandated to include renewable energy into its portfolio in 2005.
Residential electricity rates in 2018 were also the highest ever recorded in Minnesota, increasing by 28 percent since 2004 after adjusting for inflation and growing to 13.38 cents per kilowatt-hour (kwh) as electric utility companies continue making substantial investments to incorporate renewable energy sources onto the electrical grid.
The cost of electricity in Minnesota has increased so dramatically that ratepayers in the state now pay over 25 percent more for electricity than they did in prior years when they used the same amount of electricity.
For example, the average monthly household consumption in Minnesota was 774 kwh in 2018. This is about the same as the years 2001 and 2004, when Minnesotan’s used 778 and 775 kwh per month, respectively.
Yet, despite electricity usage in these years being almost identical, electric bills in 2018 were 24 percent and 26 percent higher than they were in 2001 and 2004, respectively, in inflation-adjusted dollars.
None of this comes as a surprise to those of us paying attention to the energy sector in Minnesota, which has been experiencing a flattening of electricity sales since roughly 2005.
Most private companies – if they wish to remain in business – attempt to cut spending when sales are down. If they don’t, the cost of their product will soar, and more and more people will likely stop buying from them.
Government-regulated monopoly utility companies in Minnesota are a different story.
Even though electricity sales have been essentially flat since 2005 in Minnesota, renewable energy mandates have been requiring utility companies to continue spending, forcing the cost of electricity to skyrocket, as you can see below.
From 1990 leading up to 2004, electricity rates decreased every year, in real terms, because the electrical grid was utilizing existing resources that were built to meet electricity demand, and not to satisfy renewable energy mandates. Utilizing existing resources allows power facilities to depreciate over time, providing significant benefit to ratepayers as they are no longer required to pay off capital expenses for those power facilities.
Since 2004, however, instead of utilizing these extremely valuable and economical power plants, like coal plants, utilities and policymakers have been facilitating their early retirement in favor of building expensive renewable energy sources.
Rather than cutting expenses in an effort to keep electricity rates low for Minnesotan’s while electricity sales were lacking, as a normal business would do, electric utility companies in Minnesota increased the amount of money they needed to recover through ratepayers through reckless spending on renewable energy sources, as the graph below shows.
Total revenue received through electricity rates continues to increase annually even as total electricity sales level off, meaning that revenues are not rising due to growing sales but in order to recover growing costs associated with enormous renewable energy investments.
This has resulted in electricity rates skyrocketing back up to historically high levels.
By looking at the graph below, it isn’t difficult to see why this is occurring. Minnesota has had sufficient energy sources to reliably meet electricity demand since 2004 when electricity sales started to level-off, yet total generating capacity available to produce electricity has increased by nearly 50 percent since then. Most of these capacity additions have been for new wind or solar farms, as well as natural gas facilities designed to fill in the gaps for the intermittent and unreliable electricity that renewables generate.
These new capacity additions are incredibly expensive to maintain.
In previous posts, I have shown how investments for new renewable energy sources are directly tied to increasing electricity costs in Minnesota. They are being made solely to satisfy government-sanctioned renewable energy mandates, ones that were passed into law without a clear understanding of how they would help reduce climate change and completely in disregard for the bottom line of Minnesota households.
Minnesota electricity consumers have yet to be told the truth by utility companies and government officials about the “transition” to renewable energy and how much it has and will continue to cost them.
The only way to bring electricity costs back down is by putting an end to investments for any energy source that isn’t required to meet growing electricity demand. Any other use of the funds provided by ratepayers is and should be considered an irresponsible act on part of the utility company and any government policy encouraging it.
Minnesota currently has enough generating capacity online to power nearly three Minnesota’s – if policymakers were truly concerned with the cost of electricity in the state, it would be a long time before ratepayers were forced to foot the bill for additional energy sources, which would raise electricity rates even further.
Unfortunately, considering that Xcel has more than 7,000 MWs of capacity additions scheduled in their new resource plan to replace more than 2,500 MWs of coal capacity – the costs of which they fully intend on passing onto ratepayers – it’s clear that keeping costs low is the least concern for those in control of Minnesota’s electrical grid.