North Dakota Challenges Minnesota Power Restrictions

Published December 29, 2011

North Dakota is suing Minnesota over a state law that impedes utilities from entering into new contracts to import coal-fired power from other states. North Dakota officials say the Minnesota law violates the U.S. Constitution’s Interstate Commerce Clause, while Minnesota officials claim it does not improperly discriminate against out-of-state power providers.

Law Targets Fossil Fuels
The Next Generation Energy Act (NGEA), passed by the legislature and signed into law in 2007, includes provisions prohibiting the construction of new fossil-fuel power plants in the state and the purchase of electricity from newly constructed out-of-state fossil-fuel power plants. The Act also forbids Minnesota utilities from entering into long-term contracts to purchase more than 50 megawatts of electricity from an out-of-state provider.

North Dakota has abundant deposits of lignite coal that allow utilities in the state to produce and sell power less expensively than almost all other states. Electricity prices in Minnesota, for example, are 23 percent higher than in North Dakota, according to the U.S. Energy Information Administration. Minnesota electricity consumers would save approximately $1 billion per year if electricity in the state sold at North Dakota prices. That averages out to nearly $500 per household per year.

“It was a sad day in 2007 when the Minnesota legislature passed the NGEA,” said Annette Meeks, CEO of the Freedom Foundation of Minnesota. “This job-killing legislation isn’t enhancing or protecting our air quality—it’s protecting environmental organizations that developed this questionable scheme. Many of us said at the time that this legislation would increase the cost of energy for Minnesota businesses and consumers, and it has, dramatically.”

Governor Vetoed Repeal
The Minnesota legislature voted in the 2011 legislative session to repeal the prohibition against the importation of fossil-fuel electricity, but Gov. Mark Dayton (D) vetoed it.

Costly Decisions
“It’s silly to put policies in place that drive up the cost of utilities for Minnesotans,” said Brett Narloch, executive director of the North Dakota Policy Council. “The economy is rough out there, so anything they can do to alleviate burdens on people is good.”

“While I’m pleased that the state of North Dakota filed suit, the fact that a suit took over four years to be filed is distressing,” said Peter J Nelson, director of public policy at the Minneapolis-based Center of the American Experiment. “It reflects the fact that Minnesota ratepayers have very little protection against legislative, regulatory, and special interest efforts to raise electricity rates at the expense of Minnesota consumers and Minnesota jobs.

D. Brady Nelson ([email protected]) is a Milwaukee-based economist.