Senate Environment, Economic Development, and Agriculture Budget Assembled

Taking a vastly different approach than the House in both process and content, the Senate Environment, Economic Development, and Agriculture Budget Division quickly assembled its omnibus budget bill (SF 2101)  last week.  Unlike the House, where Chair Garofalo’s omnibus included significant energy policy in addition to state budget appropriations, Senate Chair Tomassoni’s bill includes minimal policy.  However, the jurisdiction of the Senate’s bill is wide—funding state agencies such as Agriculture, DNR, DEED, DOLI, Commerce, the PUC, and more.

None of the concerning energy policy included in Sen. Marty’s energy policy bill passed earlier this session (40% by 2030, 2% CIP) were included in Sen. Tomassoni’s bill.  The only notable energy policy in the bill is allowing IOU’s to establish competitive rate schedules for energy-intensive, trade-exposed customers, such as mines and mills.

The bill includes several provisions that are beneficial to utilities:

  • Appropriating $17 million to the Border-to-Border Broadband Fund.
  • Exempting utilities from application fees for licenses to cross public land, provided the line/cable/conduit is under 100 kilovolts.
  • Requiring a cost analysis of recently-adopted or proposed water quality standards to determine the impact on a sampling of communities.
  • Limitations on the application of wild rice sulfate standards until the MPCA finishes rulemaking and identifies affected waters.

Although utilities were pleased to see that the budget omnibus does not include the Governor’s budget recommendations regarding DER assessments, it does add $1.5 million/year in increased utility assessments for additional staff for the PUC and allows the MPCA to begin the process of restructuring its Water Program fees (potentially opening the door to increased costs for municipal wastewater facilities).

This budget omnibus will receive a hearing in the Senate Finance Committee on Tuesday.


House Environment Budget Good for Water Utilities

The House Environment and Natural Resources Committee assembled its omnibus policy and finance bill last week.  HF 846 includes many policy positions that are beneficial to municipal water utilities, including:

  • Requiring the peer review of proposed water quality standards if compliance costs were estimated to meet certain thresholds.
  • Requiring a cost analysis of recently-adopted and proposed water quality standards to determine the impact on a sampling of communities.
  • Suspending the total suspended solids (TSS) and eutrophication standards adopted in 2014 until the MPCA performs this cost analysis.
  • Suspending the enforcement of the wild rice sulfate standard until the MPCA completes rulemaking for identifying wild rice waters.

The bill also includes language exempting utilities from the application fee for licenses to cross public land, provided the line/cable/conduit is under 100 kilovolts.  Also of note, the bill does not include the Governor’s recommendation to allow the MPCA to restructure their water program fees.


Senate Tax Committee Again Discusses Utility Property Tax Reform

Last week, the Senate Tax Committee again discussed SF 1636, which would reform utility property taxes.  Currently, electric generation machinery is subject to the personal property tax.  The bill removes the machinery from the personal property tax and establishes a new property tax formula based on production and capacity.  Since the last time this bill was discussed in March, author/Tax Chair Rod Skoe is recommending changes to his proposal.  Most notably, he added an annual inflator to the formula based on Minnesota’s residential electric rate increase (as reported to the EIA).  Sen Skoe said this was an effort to ensure that property tax compensation to host jurisdictions would not remain static if a facility did not increase production.

Several utilities (Xcel, Minnesota Power, Otter Tail, and Great River Energy, and SMMPA) spoke in support of an effort to make utility property taxes more stable and predictable, but expressed concern with the annual inflator.  They noted that an increase in electric rates does not necessary correspond to an increased value of a facility.  Though Sen. Skoe suggested that the inflator could be included in PUC rate cases, GRE and SMMPA noted that as member-owned utilities, these tax increases would have to be passed along to customers by the local board/commission. SMMPA estimated a “modest to moderate” increase in their property tax liability under the proposed legislation.

Utilities also suggested that keeping transmission and distribution on the personal property tax would add complexity, and they would prefer to work towards a more-encompassing reform.  Sen. Skoe agreed this a direction that is worth going, but there isn’t time this session.

Wind energy advocates continued to express preference for the existing production tax to the proposed bill.  The Coalition of Utility Cities spoke in strong support of the inflator.  The Department of Revenue noted that there were several technical issues that need to be worked out and that switching to this system would be a staff-intensive process.

Sen. Skoe said he looks forward to continuing to work with the stakeholders on the concerns.  The bill was then laid over for possible inclusion in the omnibus tax bill.  It remains to be seen whether the Chair will include this bill in it despite the enumerated concerns or keep working towards consensus.


House Energy Omnibus Set for Floor Debate

The House Job Growth and Energy Affordability policy and finance omnibus bill (described in detail in the previous edition of The Capitol Letter) continued its legislative journey last week with stops in the Tax Committee and Ways and Means Committee.  The House increased its budget targets, so in the Ways and Means Committee, the bill was amended to provide $8 million in funding for the Border-to-Border Broadband Grant Program and restore funding of the DEED Office of Broadband Development.

Chair Garofalo has indicated that a floor vote on HF 843 is likely for the week of April 20.