From CIP to ECO

Jan 5, 2023
man adjusting smart thermostat

Minnesota's 2022 regular legislative session ended with lawmakers passing legislation to strengthen and modernize our state’s longstanding and successful energy efficiency program, long called the Conservation Improvement Program (CIP). After six years of bipartisan planning, the Energy Conservation and Optimization Act (known as "ECO") was approved in both houses and signed into law by Governor Walz.

As designed, ECO will maintain all the core energy efficiency work of CIP, which has already saved Minnesotans more than $8.2 billion. Building on CIP's successes, ECO will open new doors to a wider range of fuel choices and more opportunities to benefit from using energy when energy costs are lower.

Minnesota’s conservation history

Strategies evolve and improve, but Minnesota has been an energy efficiency pioneer for decades.

Way back in 1980, the State of Minnesota directed the Public Utilities Commission to initiate a pilot to demonstrate the feasibility of investing in energy efficiency at a system-wide level. Just three years later, the State determined that each Minnesota utility with a revenue greater than $50 million would be required to operate at least one conservation program requiring a “significant” investment. With that, Minnesota’s Conservation Improvement Program was born.

As needs and technologies shift, Minnesota has consistently revisited and refined our flagship efficiency program. In 1989, the State required all public utilities to participate and added provisions requiring efficiency services for low-income customers. In 1991, Minnesota set specific levels of conservation investments for gas and electric utilities. In 2007, Republican governor Tim Pawlenty signed Minnesota’s groundbreaking, bipartisan Next Generation Energy Act, establishing cost-effective energy efficiency as the state’s preferred energy resource. And in 2010, utilities’ annual spending goals were reframed as savings goals — aiming for electric utilities to save 1.5% of annual sales per year and gas utilities to save 1% of annual sales per year, through targeted energy efficiency incentives, rebates, and programs for their customers.

In 2021, ECO passed to further update the CIP statute.

ECO paves our way forward

While CIP focused exclusively on energy efficiency, ECO broadens Minnesota’s approach to add efficient fuel switching and load optimization (also known as demand response). ECO also increases annual energy savings requirements for electric investor-owned utilities to 1.75% of sales, raises spending on low-income energy efficiency programs for both electric and natural gas utilities, and allows utilities to put funding toward pre-weatherization measures (i.e., health and safety improvements) for low-income households as well.

It's a big leap forward for clean energy strategies and for Minnesotans. Preserving and building on the best of CIP’s structure and successes, starting in 2024 ECO will:

  1. Increase the annual energy savings requirement for electric investor-owned utilities.
  2. Allow for efficient fuel switching, like switching from a natural gas furnace to an air source heat pump.
  3. Increase utility spending on low-income programs.
  4. Allow utilities to fund pre-weatherization improvements, addressing health and safety concerns for Minnesotans with lower incomes.
  5. Allow utilities to include load management, or demand response, programming.

As designed by a broad bipartisan range of lawmakers and advocates, ECO offers wins for everyone. Utilities will benefit from a streamlined regulatory process with a focus on energy savings goals, rather than spending goals, and a fuel-neutral savings framework. Households statewide will now have new ways to save money, thanks to more choices in fuel sources and efficiency approaches.

And in the broadest sense, our entire state of Minnesota will reap the benefits of more local efficiency and clean energy jobs that cannot be outsourced, lower utility system costs, reduced greenhouse gas emissions and other pollutants, as well as greater energy independence with less reliance on fuel imports.

As we ring in 2023, it’s important to note that CIP is still in effect, although this will be the final year that Minnesota utility programs operate under CIP guidelines.

Even as CEE and our partners continue our CIP-related efforts throughout 2023, this is also the year that Minnesota’s utilities and other stakeholders will provide input and the Department of Commerce will nail down more detailed guidance for working within the updated ECO framework starting in 2024. By June 2023, Minnesota’s energy utilities will file their 2024–2026 ECO triennial plans, further clarifying the role ECO will play in future conservation goals and strategies.

Given the transition, don’t be surprised in 2023 to hear plenty of talk about both policies, as one statute serves its final year (CIP) while the other preps for launch (ECO). Rest assured, when the dust settles by the end of the year, ECO will shine as our state’s newest clean energy north star — building on our best successes, forged through bipartisan collaboration, and built to serve Minnesotans statewide with more choices to save money, energy, and emissions.

Related Links

CEE's Policy Framework

Minnesota's Efficient Technology Accelerator

Equitable Decarbonization