In the Matter of the Application of Otter Tail Power Company for Authority to Increase Rates for Electric Service in Minnesota.

1
STATE OF MINNESOTA

IN SUPREME COURT

A17-1300

Court of Appeals Thissen, J.
Took no part, Anderson, J.

In the Matter of the Application of Otter Tail
Power Company for Authority to Increase
Rates for Electric Service in Minnesota.

Filed: April 22, 2020
Office of Appellate Courts

________________________

Keith Ellison, Attorney General, Jeffrey K. Boman , Assistant Attorneys General, Saint
Paul, Minnesota, for appellant Minnesota Public Utilities Commission.

Bruce Gerhardson, Otter Tail Power Company, Fergus Falls, Minnesota; and

Richard J. Johnson, Patrick T. Zomer, Moss & Barnett, P.A., Minneapolis, Minnesota, for
respondent Otter Tail Power Company.
________________________

S Y L L A B U S
The Minnesota Public Utilities Commission does not have the authority in this
general rate case to require Otter Tail Power Company to file a n amended transmission
cost-recovery rider under Minn. Stat. § 216B.16, subd. 7b(b) (2018) , which includes the
costs and revenues associated with the Big Stone Access Transmission Lines.
Affirmed.

2
O P I N I O N
THISSEN, Justice.
In this appeal, we must determine whether appellant Minnesota Public Utilities
Commission (MPUC) can require respondent Otter Tail Power Company (Otter Tail) to
amend an existing transmission cost-recovery rider approved under Minn. Stat. § 216B.16,
subd. 7b(b) (2018), to include the costs and revenues associated with the two high-voltage
interstate transmission lines known as the Big Stone Access Transmission Lines (Big Stone
Lines). We conclude that the MPUC lacks such authority in this case . Further, because
the MPUC considered but explicitly declined to include the costs and revenues of the Big
Stone Lines in setting base rates in this general rate case, we need not consider, and we
express no opinion on, whether federal law and a Federal Energy Regulatory Commission
(FERC) tariff preempt the MPUC from considering the costs and revenues associated with
the Big Stone Lines.
FACTS
Otter Tail is an electric utility company headquartered in Fergus Falls, Minnesota.
It provides retail electric services to approximately 161,000 customers across Minnesota,
North Dakota, and South Dakota. About 61,000 of those customers reside in Minnesota.
The Big Stone Lines are two large high-voltage transmission lines located in North
Dakota and South Dakota. The Big Stone -Brookings segment runs south through South
Dakota from the Big Stone South Substation to the Brookings County Substation. The Big
Stone-Ellendale segment runs west and n orth from the Big Stone South Substation to the
Ellendale Substation in Dickey County, North Dakota. The Big Stone Lines provide direct
3
access from the resource -rich areas of North Dakota and South Dakota —particularly
significant wind power —to the rest of the electric grid covering the middle of the North
American continent and beyond. Although the two Big Stone Lines do not run through
Otter Tail’s Minnesota region, they connect into the regional grid and therefore benefit
Otter Tail’s Minnesota retail customers (and all retail customers in the region).
Otter Tail owns an approximate 50-percent interest in each of the Big Stone Lines.
Otter Tail invested approximately $134.5 million in the Big Stone -Brookings line and
approximately $182.5 million in the Big Stone -Ellendale line , for a total investment of
approximately $317 million.
Operational control of the Big Stone Lines was turned over to the Midcontinent
Independent System Operator ( MISO).1 Accordingly, the Big Stone Lines are subject to
MISO’s FERC-approved Open Access Transmission Tariff, which governs how Otter Tail
and its co-owners are paid for construction and operation of the Big Stone Lines. At the
time of these proceedings, MISO’s tariff included a 10.32-percent base return on equity for
owners of interstate transmission projects. See Ass’n of Bus. Advocating Tariff Equity

1 FERC authorized the formation of regional transmission organizations , which are
“voluntary associations of utilities that own electrical transmission lines interconnected to
form a regional grid and that agree to delegate operational control of the grid to the
association.” Ill. Commerce Comm’n v. FERC, 721 F.3d 764, 769 (7th Cir. 2013). FERC
has encouraged the members of the regional transmission organization s to permit their
regional power grids to be operated by “Independent System Operators,” which are “not -
for-profit entities that operate transmission facilities in a nondiscriminatory manner.” Id.
at 770 (citation omitted) (inter nal quotation marks omitted). MISO is one such regional
transmission organization. MISO manages high-voltage electric transmission grids in 15
states, including Minnesota , and the Canadian province of Manitoba. Otter Tail is a
member of MISO.
4
Coal. v. Midcontinent Indep. Sys. Operator, Inc., 156 FERC P 61,234, at ¶ 275, 2016 WL
5799957, at *75 (Sept. 28, 2016) (adopting 10.32 percent as an authorized rate of return on
equity). In addition, Otter Tail is entitled to an additional 0.5-percent “adder” because of
its membership in MISO. See Midcontinent Indep. Sys. Operator, Inc. , 150 FERC P
61,004, at ¶ 39, 2015 WL 77424, at *10 (Jan. 5, 2015) (“We grant the MISO Transmission
Owners’ request for a 50 -basis point adder to their base [return on equity ] for their
participation in MISO . . . .”); see generally 16 U.S.C. § 824s(c) (2018) (encouraging the
Commission to “provide for incentives to each transmitting or electric utility that joins a
Transmission Organization”). Consequently, the FERC-authorized rate of return on equity
for the Big Stone Lines was at the time of these proceedings 10.82 percent.2 Based on that
rate of return on equity, Otter Tail expected to recover $67.8 million for the two Big Stone
Lines between 2016 and 2020. The Big Stone-Brookings segment was completed in 2017
and the Big Stone-Ellendale segment was energized in 2019.
In 2012, Otter Tail filed a request with the MPUC for a transmission-cost recovery
rider (TCRR) pursuant to Minn. Stat. § 216B.16, subd. 7b(b) . A TCRR is a statutory
mechanism through which a utility may petition the MPUC for recovery of transmission

2 The actual rate of return on equity under the MISO tariff is subject to revision by
FERC. In October 2018, FERC adopted a revised methodology for calculating return on
equity. Coakley v. Bangor Hydro-Elec. Co., 165 FERC P 61,030, 2018 WL 5075142 (Oct.
16, 2018) (proposing new methodologies for calculating return on equity for the New
England Transmission Owners). On November 21, 2019, FERC issued an Order on Briefs,
Rehearing and Initial Decisio n in Association of Businesses Advocating Tariff Equity v.
Midcontinent Independent System Operator, Inc., 169 FERC P 61,129, at PP 20–21, 2019
WL 6243026, at *8 (Nov. 21, 2019), which reduced the base return on equity for MISO
transmission projects to 9.88 percent.
5
construction costs as they are incurred through a customer bill rider. Minn. Stat. § 216B.16,
subd. 7b (2018). The costs and revenues of a new transmission line project typically are
not included in a utility’s general rate base until the transmission line has been put into
service. See Minn. Stat. § 216B.16, subd. 6 (2018). A TCRR allows a utility to recover
transmission construction costs before filing a new general retail rate case following the
completion of construction and placement of the transmission line into service. Id. Otter
Tail’s 2012 petition for a TCRR listed 12 transmission projects, includi ng the Big Stone
Lines. Otter Tail subsequently amended the petition and removed nine of the transmission
projects from consideration, including the Big Stone Lines. In 2013, the MPUC approved
Otter Tail’s request for a TCRR for the three remaining transmission projects.
In 2016, Otter Tail filed this general rate case with the MPUC, seeking an
annual-rate increase on its retail electricity rates of 9.8 percent per year to help offset
company-wide investment costs. Otter Tail asserted that the costs and revenues associated
with the Big Stone Lines should not be considered when setting the retail rates.
During the course of the administrative proceedings, the MPUC took a position that
differed from Ottertail’s position with regard to the Big Stone Lines. Because the lines had
not yet become used and useful during the test year of the current rate case (2016), the
MPUC declined to incorporate the costs and revenues of the Big Stone Lines into Otter
Tail’s retail base rates. See generally Minn. Stat. § 216B.16, subd. 6 (providing that “the
commission shall give due consideration to evidence of the cost of the property when first
devoted to public use ” and that until a new transmission line is put into service, it is not
considered “utili ty property used and useful in rendering service to the public” and so
6
cannot be put into the retail base rate to earn a “fair and reasonable return on investment”).
The MPUC, however, claimed that it could require Otter Tail to amend the TCRR approved
in 2013 to include the costs and revenues of the Big Stone Lines.
The MPUC referred the rate case to the Offi ce of Administrative Hearings. On
January 5, 2017, an administrative law judge concluded that Minnesota’s TCRR statute
does not authorize the MPUC to direct Otter Tail to include the Big Stone Lines in the
existing TCRR.3 The administrative law judge determined that “the statutory text [of the
TCRR statute] makes clear that development of [transmission] cost adjustments is a
voluntary process, initiated by formal request from the utility. The statute cannot be fairly
read to authorize TCRR coverage of projects over a utility’s objection.”
On review, t he MPUC disagreed with the administrative law judge’s
recommendation and concluded that it had statutory authority to compel Otter Tail to
account for the costs and revenues of the Big Stone Lines under Minn. Stat. § 216B.16,
subd. 7b(b)(2) –(3). The MPUC reasoned that , by filing a general rate case, Otter Tail
“invite[d]” the MPUC to evaluate all the utility’s costs and revenues and that it could use

3 The administrative law judge also concluded that the Federal Power Act preempted
the MPUC from including costs and revenues of the Big Stone Lines in the base rate and
recommended that the MPUC exclude those costs and revenues from Otter Tail ’s retail
ratemaking case. But t he MPUC disagreed with the administrative law judge’s
recommendation, asserting that it retains the express and exclusive authority to set retail
rates for the intrastate sale of electricity. On certiorari review, the court of appeals reversed
the MPUC’s order and held that section 219 of the Federal Power Act preempts the MPUC
from conside ring the B ig Stone Lines’ costs and revenues in the retail ratemaking
proceeding. See In re Otter Tail Power Co. , No. A17 -1300, 2018 WL 2770388 , at *5
(Minn. App. June 11, 2018). We do not express an opinion on preemption for the reasons
stated in this opinion.
7
all rate setting mechanisms—retail base rate authority and riders including the TCRR —to
accomplish that purpose. Accordingly, the MPUC directed Otter Tail “to amend its petition
in the currently pending TCRR docket to incorporate into its filing the costs and reve nues
related to the [Big Stone] Lines.”
The court of appeals reversed the MPUC and held that Minnesota’s TCRR statute
limits the MPUC’s authority to regulating “Minnesota jurisdictional costs net of associated
revenues,” a category to which the Big Stone Lines do not belong. See In re Otter Tail
Power Co., No. A17-1300, 2018 WL 2770388, at *6 (Minn. App. June 11, 2018) (citation
omitted) (internal quotation marks omitted). We granted the MPUC’s petition for review.
ANALYSIS
A.
The question before us is whether the MPUC has authority to order Otter Tail to
include the costs and revenues of the Big Stone Lines in its existing TCRR in this
proceeding. “Whether an administrative agency has acted within its statutory authority is
a question of law that we review de novo.” In re Hubbard, 778 N.W.2d 313, 318 (Minn.
2010).
“The MPUC, as a creature of statute, only has the authority given it by the
legislature. ‘The legislature states what the agency is to do and how it is to do it. ’ ”
Minnegasco v. M inn. Pub. Utils. Comm’n , 549 N.W.2d 904, 90 7 (Minn. 1996) (quoting
Peoples Nat. Gas Co. v. Minn. Pub. Utils. Comm’n, 369 N.W.2d 530, 534 (Minn. 1985)).
An agency’s authority may be stated either expressly in statute or implied from the express
powers given to the MPUC by the Legislature. See Hubbard, 778 N.W.2d at 318. Express
8
authority exists only where a statute unambiguously grants the MPUC such authority. See
id. at 320. “ ‘While express statutory authority need not be given a cramped reading, any
enlargement of express powers by implication must be fairly drawn and fairly evident from
the agency objectives and powers expressly given by the legislature. ’ ” Minnegasco, 549
N.W.2d at 906–07 (quoting Peoples Nat. Gas Co., 369 N.W.2d at 534).
The MPUC claims authority under Minn. Stat. § 216B.16, subd. 7b(b), to force Otter
Tail to amend its 2013 TCRR to include the Big Stone Lines. But the plain language of
section 216B.16, sub division 7b(b), does not expressly grant such power . Instead, the
statute provides that, “[u]pon filing by a public utility or utilities providing transmission
service, the commission may approve, reject, or modify . . . a tariff.” Minn. Stat. § 216B.16,
subd. 7b(b) (emphasis added). Further, Minn. Stat. § 216B.16, subd. 7b(c), states that “[a]
public utility may file annual rate adjustments to be applied to customer bills paid under
the tariff approved in [section 216B.16, subdivision 7b(b)].” See also Minn. Stat. § 645.44,
subd. 15 (2018) (“ ‘May’ is permissive.”). Based on the plain language of the statute, we
conclude that the Minnesota Legislature created the TCRR as an optional financial tool
available to a utility upon request. Certainly, nothing in Minn. Stat. § 216B.16, subd. 7b,
expressly authorizes the MPUC to compel or require a utility to use or modify a TCRR.
The MPUC also claims broad authority under Minn. Stat. § 216A.05, subd. 5 (2018),
to require Otter Tail as part of the current general rate case to amend its existing TCRR to
include the Big Stone Lines. Section 216A.05, subd. 5, provides:
With respect to those matters within its jurisdiction the commission shall
receive, hear, and determine all petitions filed with it in accordance with the
rules of practice and procedure promulgated by the commission, and may
9
investigate, hold hearings, and make determinations upon its own motion to
the same extent, and in every instance, in which it may do so upon petition.

Otter Tail responds that the specific and later -adopted TCRR provision in Minn. Stat.
§ 216B.16, subd. 7b, which expressly leaves modification of the TCRR to the discretion of
the utility , controls over the general language of section 216A.05, subd ivision 5. See
Connexus Energy v. Comm’r of Revenue, 868 N.W.2d 234, 242–43 (Minn. 2015) (applying
the canon that , when a conflict exists between two stat utory provisions, the specific
provisions in a statute control the general provisions to hold that the statutory limitations
period s pecific to erroneous refunds applied rather than the more general statutory
limitations period).
We agree with Otter Tail. Once again, the TCRR statute, first enacted in 2005, is a
voluntary mechanism designed by the Legislature to allow a utility to request the recovery
of construction costs before a transmission asset is placed into service. The express
language of the statute gives the utility the discretion to seek early recovery of the costs for
a particular transmission line. Section 216A.05, subd ivision 5, was enacted in 1967, long
before the TCRR statute was enacted, and on its face does not address TCRRs. We
conclude that the MPUC’s generic powers in section 216A.05, subdivision 5, do not control
over the specific legislative directive in the TCRR statute. Connexus Energy, 868 N.W.2d
at 242–43; see also Minn. Stat. § 645.26, subd. 4 (2018) (“When the provisions of two or
10
more laws passed at different sessions of the legislature are irreconcilable, the law latest in
date of final enactment shall prevail.”).4
We find further support in our precedent on implied statutory authority , where we
state that we are “reluctant to find implied statutory authority.” In re N. States Power Co.,
414 N.W.2d 383, 387 (Minn. 1987). As we explained in In re Qwest’s Wholesale Service
Quality Standards, “if nothing more than a broad grant of authority were needed to show
that implied authority could be fairly drawn from the statutory scheme, the implied
authority would be present in all cases in which the agency had a broad grant of authority,”
and we declined to adopt such a “sweeping rule.” 702 N.W.2d 246, 261 (Minn. 2005). We
also stated that “any doubt about the existence of an agency’s authority [is resolved] against
the exercise of such authority.” Id. at 259. For the reasons stated above, b road general
authority under Minn. Stat. § 216A.05, subd. 5, to “make determinations upon its own
motion” does not grant the MPUC implied authority to compel the use of a TCRR over a
utility’s objection.
Accordingly, the MPUC’s order requiring Otter Tail to include its costs and
revenues from the Big Stone Lines in the existing TCRR must be reversed.
B.
Otter Tail also argue s that the MPUC is preempted by federal statute and FERC
tariffs from considering the costs and revenues of the Big Stone Lines when setting Otter

4 It seems an odd result procedurally to use in the proceeding before us the TCRR
statute to achieve through the backdoor the capture of the costs and revenues of the Big
Stone Lines for retail rate calculations when the agency itself disavowed an y such power
under its general ratemaking authority in this very proceeding
11
Tail’s Minnesota retail rates. We have just held that the MPUC does not have authority in
this proceeding to compel Otter Tail to include the Big Stone Lines in the TCRR. Further,
the MPUC expressly declined to incorporate the Big Stone Lines’ costs and revenues in
setting base rates in this proceeding, noting that the Big Stone Lines had not yet become
used and useful during the test year of the current rate case. Accordingly, the MPUC lacks
statutory authority to include the costs and revenues of the Big Stone Lines in the current
general retail rate case. We need not consider whether federal law preempts state authority
that does not exist under the circumstances presented in this case. Accordingly, we express
no opinion on whether the MPUC is preempted by federal statute and FERC tariffs from
considering the costs and revenues of the Big Stone Lines when setting Otter Tail’s
Minnesota retail rates.5

5 Otter Tail moved to strike portions of the MPUC’s reply brief under Minn. R. Civ.
App. P. 127 and 128.02, subd. 4. Specifically, Otter Tail takes issue with the MPUC’s
reference and argument regarding a jurisdictional cost of service study (JCOSS); it argues
that because neither Otter Tail nor the MPUC relied on the JCOSS in its opening briefs,
and because the MPUC had not referenced the JCOSS before, it should be stricken from
its reply brief. The MPUC, in response, contends that the arguments in its reply brief are
in its opening brief (albeit indirectly) and that the JCOSS is record evidence rebutting Otter
Tail’s claims.
We have held that when a party fails to raise an argument in its opening brief, and
the responding party does not do so in its own brief, the initial party is precluded under
Minn. R. Civ. App. P. 128.02, subd. 4, from raising that issue in its reply brief . See State
v. Yang, 774 N.W.2d 539, 558 (Minn. 2009). Here, the JCOSS is referenced by testimony
in the record, and the MPUC cites to that testimony indirectly and in a footnote in its
opening brief (although it does not identify it as JCOSS testimony ). Moreover, none of
our conclusions relies on the materials that Otter Tail seeks to strike. Therefore, we deny
Otter Tail’s motion to strike.
12
CONCLUSION
For the foregoing reasons, we affirm the decision of the court of appeals.

ANDERSON, J., took no part in the consideration or decision of this case.