Legislative Updates February 2017: Where We Stand
As outlined in our Policy Framework, CEE advances policies to maximize overall benefits and reduce adverse consequences associated with energy production, delivery, and consumption. Below are key legislative initiatives we're working on in the 2017 Minnesota legislative session.
1. Natural gas combined cycle electric generation plant construction and operation
This legislation would allow Xcel Energy to replace a portion of capacity from retiring coal units at its Sherco plant in Becker, Minnesota, with gas-fired generation.
Throughout 2014 and 2015, CEE staff negotiated with colleagues at Xcel Energy regarding the early retirement of over 1,300 megawatts of coal generation from Sherco Units 1 and 2. As a result, Xcel Energy's proposed resource plan in October of 2015 included (1) the voluntary early retirement of Sherco 1 and 2 in 2023 and 2026; (2) the addition of 1,800 MWs of wind generation and 1,400 MWs of solar generation; (3) the continuation of Xcel's exceptional achievements in energy efficiency for another 15 years; and (4) the construction of a 783 MW combined cycle natural gas generation facility in Becker, Minnesota.
This package puts Xcel Energy on a nation-leading path for a 60% reduction in CO2 by 2030 (over 2005 levels). The gas plant was critical to making the overall package come together; Xcel Energy would not have proposed early retirement of the coal units without it. And, despite excellent advocacy by the Minnesota Department of Commerce and Minnesota's clean energy community, it would have been exceedingly difficult for our Public Utilities Commission (PUC) to order early retirement of those massive coal units over Xcel Energy's objections. Thus, the Becker gas plant was the linchpin to the biggest clean energy win since the passage of Governor Pawlenty's Next Generation Energy Act in 2007. Last fall, the PUC approved all but the Becker plant, setting that aside for a future proceeding. The legislators representing the Becker area objected and brought legislation forward to provide the community with certainty about the construction of the gas plant, and the associated jobs and tax base.
We worked with Xcel Energy, the Minnesota Consumer Utilities Board, the Minnesota Chamber of Commerce, and the Minnesota Department of Commerce on changes to the bill to ensure appropriate PUC oversight of the gas plant costs and adequate PUC review of the size of the gas plant. These consumer protections allowed Governor Dayton to sign the bill, finalizing this historic clean energy victory for Minnesota.
Related: CEE Statement: Legislation clears way to cut Xcel Energy emissions 60% by 2030
2. Public Utilities Commission regulation of municipal electric utilities and rural electric cooperatives
This legislation calls for local control to resolve disputes between electric cooperative utilities and their members, rather than deferring to the Minnesota Public Utilities Commission.
In 2014, the Minnesota Rural Electric Association successfully lobbied for the authority to impose grid access fees under certain circumstances on their net metered members/customers. However, they unknowingly placed the authority in a section of statute that subjects them to Public Utilities Commission (PUC) oversight over the fees. In 2016, members/customers who were subject to the fees complained to the PUC that the co-ops were not following the law for which they had lobbied, and the co-ops were assessed significant costs to process these complaints. To correct their error, and get out from under these PUC costs, the co-ops brought forward legislation to allow individual co-ops to take over dispute resolution of these complaints.
CEE worked with legislators to amend the proposed language to ensure that the PUC has oversight over whether the formula the co-ops use to set their grid access fees complies with the law and that members/customers of co-ops that take over dispute resolution have access to third-party mediation of their concerns. We support the co-op's bill, not because we support high grid access fees — we don't support the use of defensive rate-making to keep any utility customer from taking greater control over their energy use — but because it's in keeping with the Minnesota regulatory framework under which co-ops set their own rates and are accountable to their members for those rates. And in part because of that regulatory flexibility, Minnesota co-ops have been doing some pretty innovative things for their customers. Read more about co-op innovation in the white paper linked below.
Related: MN's Electric Cooperatives: Laboratories of Utility Innovation
3. Suspension of PACE financing to identify consumer risks and protections
This legislation would establish a stakeholder group to assess and develop recommendations for appropriate consumer protections to implement PACE financing in Minnesota.
In 2015, a private company began expressing interest in offering residential PACE loans in Minnesota. CEE's financing team has been involved in many successful commercial PACE deals in Minnesota — but given several federal agencies' disinclination toward residential PACE-encumbered homes, we were interested to learn of the desire to offer residential PACE here in Minnesota.
Despite the concerns of federal agencies, a number of companies provide residential PACE financing in California (home to the majority of U.S. residential PACE projects) and elsewhere. As CEE looked into residential PACE, we found residential PACE in California is offered at much higher costs in rates and fees than Minnesota homeowners are accustomed to for similar financing. To delve deeper, we partnered with local consumer advocate colleagues at the Legal Services Advocacy Project (LSAP) and discovered that consumer advocates nationally (such as the National Consumer Law Center) have serious concerns about residential PACE — concerns about the adequate and timely disclosure of all costs and fees under a residential PACE loan; adequate underwriting criteria to make sure a homeowner has the ability to pay back the loan; unique protections necessary for elderly, low-income, and other financially vulnerable homeowners; ability to cancel a loan if a homeowner changes their mind; and protections against contractor kickbacks.
CEE joined with LSAP, the Minnesota Consumer Utility Board, the Minnesota Bankers Association, and the Minnesota Realtors to push for legislation to suspend authorization for residential PACE in Minnesota, and the creation of a stakeholder group to develop legislative recommendations for the 2018 session that will adequately protect consumers.
Since no one is yet offering a residential PACE program in Minnesota, we believe the timing is right get an adequate statutory framework for consumer protections in place before residential PACE is implemented. It would be a black eye on Minnesota if residential PACE ran into the same sort of trouble here as in California. We need to avoid that difficult outcome.
Related: CEE testimony to MN Senate Energy and Utilities Finance and Policy Committee
Image credit: Timitrius via CC