Minnesota PUC fines Xcel Energy $1M for DER interconnection failures –
Minnesota PUC fines Xcel Energy $1M for DER interconnection failures –
Minnesota utility Xcel Energy was fined one million dollars on Thursday for exceeding a maximum number of customer service complaints as a result of significant delays in its processing of interconnection requests for solar projects. A ruling from the Minnesota Public Utilities Commission affirms the right of consumers to reasonable customer service in the interconnection process. We provide the inside scoop based on IREC’s participation in the regulatory proceeding.
Interconnection, the process of connecting a solar installation or other distributed energy resource (DER) to the electric grid, is a critical step in the project development process. But around the country, interconnection is also a frequent pain point for clean energy developers and their customers.
Cumbersome paperwork and slow approval times from the utility companies that must review and approve customers’ solar interconnection requests are one reason for this. Strikingly, there is almost no history of regulatory commissions holding utilities accountable for failures to meet their obligations under the interconnection procedures.
A recent case in Minnesota exemplifies both the types of challenges to interconnection that clean energy projects can face and why these delays and other frustrations can be so damaging for consumers and businesses. The resolution, reached yesterday in a hearing of the Minnesota Public Utilities Commission, provides a win for Minnesota consumers and solar companies.
The Commission fined Xcel Energy $1 million for exceeding the threshold of complaints filed, many of which were about significant problems with Xcel’s interconnection process. It also provides a helpful precedent for how utility regulators can hold utilities accountable for providing an efficient interconnection process and good customer service to their ratepayers who are investing in solar and other clean energy technologies.
In this blog post, we provide an update on the regulatory case and its outcomes, and the significance of this decision in the context of clean energy interconnection challenges across the country.
The Background: Xcel Faces Fine for Solar Interconnection Delays
In June of 2019, the Minnesota Public Utilities Commission, which regulates the state’s electric utilities, established new rules for solar interconnection. The rules were supposed to make the interconnection process easier and faster, but after the new rules were implemented, solar developers reported frequent delays and other problems with Xcel Energy’s process. (These issues were specific to Xcel; customers of other Minnesota utilities have not reported similar issues under the new rules.)
After many failed efforts to resolve issues related to approval delays and missed deadlines through direct communication with Xcel, two solar companies saw no other option than to begin to submit complaints to the PUC. In total, the companies submitted 129 separate complaints to the Commission’s Consumer Affairs Office on behalf of their customers in December 2019, explaining that Xcel was not complying with the process and was unnecessarily delaying their projects.
Xcel Energy is subject to a Quality of Service Plan (“QSP”) that requires it to provide a certain level of service to its customers. Under the QSP, the Minnesota Public Utilities Commission (PUC) is to fine Xcel if it exceeds a certain number of customer complaints in a year. Because of these complaints on behalf of solar customers, Xcel exceeded its maximum number of complaints in 2019—in theory triggering a one million dollar fine.
However, Xcel petitioned the Commission asking it not to count the 129 complaints regarding problems with Xcel’s interconnection process, arguing that these should not count as “customer” complaints.
Our Regulatory Team filed comments on behalf of IREC and our partners Fresh Energy, the Environmental Law and Policy Center (ELPC), and Vote Solar asking the Commission to ensure that the solar installer complaints be counted. We argued that the delays have real impacts—including financial impacts—on Xcel’s customers who seek to install solar, and that Xcel must be held accountable for providing adequate customer service to all customers, including solar customers. Other groups submitted comments in support of counting the complaints including the Minnesota Solar Energy Industry Association, the Citizens Utility Board of Minnesota, and the cities of Minneapolis and St. Paul.
We argued that the delays have real impacts—including financial impacts—on Xcel’s customers who seek to install solar, and that Xcel must be held accountable for providing adequate customer service to all customers, including solar customers.
Following the public comment period, the Commission voted 3-2 on January 21, 2021 that the complaints should be counted under the QSP. In their comments, each of the Commissioners emphasized that it should be absolutely clear that solar customers are indeed customers of Xcel and deserve adequate customer service. They all agreed that the complaint threshold in the QSP had been crossed. When it came to the question of whether to therefore issue the one million dollar fine, a majority of the Commissioners voted in favor of issuing the fine. Two of the five Commissioners did not vote to issue the fine, preferring instead to delay that decision to a later date.
The Commission also recognized that just issuing a fine was insufficient and decided to take additional actions that would ensure greater accountability for Xcel. All five Commissioners voted to adopt a new set of reporting requirements for Xcel Energy that will require the company to regularly report on its adherence to the timelines in the interconnection procedures, on the number of disputes or complaints submitted, and on any work it is doing to improve the interconnection process. They also adopted a process that will require Xcel Energy to work with stakeholders to develop an additional process for resolving disputes when they arise. These additional measures should provide further incentive for Xcel Energy to fix the problems with their interconnection process.
IREC commends the Commission for tackling the issue head on and strongly affirming that solar customers should be treated like all other Xcel Energy customers and be provided with quality customer service. While stakeholders should always be encouraged to work together to try to resolve challenges in the interconnection process, there comes a point where it is necessary for the Commission to exercise its regulatory authority and demand more from the utility. Here the QSP tariff was very clear that if the complaint threshold was crossed that a fine should be issued. We also appreciate the Commission taking steps to help ensure that this situation is not necessary again and we look forward to seeing concrete improvements for solar interconnection customers in the coming months.
Why Does It Matter?
In most aspects of our daily lives, when confronted with poor service, we can choose to take our business elsewhere. If I order a product and it arrives late or is of poor quality, next time, I can choose to buy from another company. Not so in the case of utilities.
As regulated monopolies, electric utilities like Xcel have a captive market. Customers of Xcel cannot simply choose another electric utility. The role of the regulator is to ensure that, despite the monopoly, a utility’s customers still receive adequate service.
As regulated monopolies, electric utilities like Xcel have a captive market. Customers of Xcel cannot simply choose another electric utility. The role of the regulator is to ensure that, despite the monopoly, a utility’s customers still receive adequate service.
Other than submitting complaints through the Commission’s Consumer Affairs Office or filing a very expensive and time consuming formal complaint with the Commission, there is currently no other avenue for customers to ensure that Xcel Energy is providing adequate customer service.
If the Commission were to have agreed with Xcel’s argument that their solar customers do not count as “customers” in terms of their right to seek redress for service issues, people who install solar on their homes and businesses would be deemed in effect “non-customers”—whose rights to reasonable customer service are valued differently than other people that receive electricity from Xcel.
Fortunately, the Commission fulfilled its role protecting the rights of Xcel’s customers and affirmed the QSP is an appropriate mechanism for ensuring that customers receive quality service during the interconnection process. They also took steps to ensure that the specific obligations under the interconnection procedures are complied with as well.
While there are other concerns that remain about how the solar interconnection process is working in Minnesota (particularly for community solar garden projects), today’s resolution is an important win for Minnesota’s solar customers and companies.
It may also provide a valuable model for regulators in other states. Lack of accountability to interconnection timelines remains an issue in many other states, and a similar accountability mechanism could be a solution to consider.
Lack of accountability to interconnection timelines remains an issue in many other states, and a similar accountability mechanism could be a solution to consider.
A Question of Customer Service and the Role of Consumer Advocates
As discussed, this case explored the issue of interconnection delays, and the accountability of utilities to meet interconnection timelines and have functioning interconnection portals, as issues of customer service and consumer rights. But another interesting facet of the case was the role played by the state’s official consumer advocate—the Minnesota Department of Commerce.
The mission of the Minnesota Department of Commerce is to advocate for the state’s consumers and to ensure a “competitive and fair marketplace.” Yet in this instance, Commerce submitted comments that put the interests of Xcel Energy over the rights of Xcel’s solar customers (Minnesota consumers).
Their comments suggested that the complaints not be counted as customer complaints because they were filed by solar installers (rather than directly by the customers who hired the installers to manage the process on their behalf). They further argued, inaccurately, that the comments should not be counted because it did not appear anyone was financially harmed by Xcel’s delays.
As a basis for evaluating whether there had been financial harm (something which is not a requirement for determining whether a fine is assessed under the quality of service tariff), the Department of Commerce asked only Xcel whether customers were impacted. Xcel responded that, to its knowledge, no customers or solar installers were harmed by delays.
Remarkably, the Department of Commerce did not actually ask any customers whose solar installations were delayed whether they suffered any harm, and in reality, Xcel’s delays resulted in hundreds of thousands of dollars in harm.
Importantly, both Xcel and the Department of Commerce were wrong about the legal standard for what constitutes a customer complaint under Xcel’s quality of service tariff. Customers seeking to install solar are customers to whom Xcel provides service, and the tariff contains no requirement that the customer show actual harm. The metric measures satisfaction through evidence of the complaint—not actual harm (though in this case, there was actual harm, as we discuss below).
Fortunately, the Commission firmly rejected the idea that customers should be required to show financial harm under the QSP. As noted above, they also strongly affirmed that solar customers are indeed customers deserving of quality customer service. IREC is disappointed that the Department of Commerce chose to protect the monopoly utility instead of the state’s residential customers in this fight. Utility solar customers are at a significant disadvantage when faced with the power of a large utility and they need the state’s designated advocate to have their back. We were pleased however that the Citizens Utility Board of Minnesota and the Cities of St. Paul and Minneapolis spoke up on the behalf of solar customers.
Interconnection Delays Have Real Consequences
“Not only do customers experience delays in their projects, but also increased costs or reduced incentives,” explained Michael R. Allen, President of All Energy Solar, one of the solar companies that submitted complaints, in a public comment letter asking the Minnesota PUC not to accept Xcel’s petition to throw out the complaints.
“Not only do customers experience delays in their projects, but also increased costs or reduced incentives,” explained Michael R. Allen, President of All Energy Solar, one of the solar companies that submitted complaints, in a public comment letter asking the Minnesota PUC not to accept Xcel’s petition to throw out the complaints.
“The Federal Tax Credit reduced from 30% in 2019 to 26% in 2020,” Allen went on to explain. “Xcel failed to meet many deadlines in 2019 causing projects to get pushed to 2020, thereby causing customers to lose out on 4% of their tax credit incentive. Had the deadlines been met on many of those projects, they would have qualified for the larger tax credit. Instead our company alone experienced over $150,000 in penalties from our customers and the commitments that we made to them. Not all of the delays we experienced were due to Xcel delays but a significant percentage were. We made commitments to our customers based on rules that Xcel Energy agreed to follow… Ultimately, Xcel customers were delayed in their projects and we were penalized financially because of it.”
As the race to confront climate change grows increasingly urgent, these kinds of interconnection delays slow down the critical process of getting more solar and other distributed energy resources (DERs) on the grid. They also drive up the cost of developing solar projects, undermining the extensive work being done in states around the country to make solar development faster and more affordable.
As the race to confront climate change grows increasingly urgent, these kinds of interconnection delays slow down the critical process of getting more solar and other distributed energy resources (DERs) on the grid.
It is going to be important in the coming years for regulators across the country to adopt similar accountability metrics for utility performance in the interconnection process if we want to rapidly deploy DERs. The decision yesterday in Minnesota provides an important example of how best to do this. The Commission affirmed that there should be two types of accountability metrics. The first evaluates whether the utilities are meeting their specific obligations under the interconnection procedures with respect to timelines or other steps. The second evaluates the utility’s overall provision of “customer service” which does not look just at whether the specific timelines are met, but also at the overall quality of the customer experience during the interconnection process. IREC believes both metrics should be deployed by Commissions to protect customers and to ensure DER deployment is fast and cost effective.
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