Senate Energy Omnibus Emerges

This week, the Senate Environment and Energy Committee assembled its omnibus energy bill (SF 1431) onto the body of the DER policy bill.  Hearings on individual bills were held on Tuesday and Thursday, some of which were then amended onto the omnibus Thursday night.  The bill now includes the following provisions:

  • Increasing the Renewable Energy Standard to 40% by 2030
  • Increasing the CIP goal from 1.5% to 2% for electric utilities and from 1% to 1.5% for natural gas utilities
  • Adding propane to the state’s energy assurance plan (for emergency situations)
  • Implementing changes to siting solar farms, allowing counties or cities to site solar farms up to 25 MW in size and PUC siting authority for larger projects.  (Currently, large electric generation projects over 50 MW trigger PUC siting authority)
  • Allowing natural gas investor owned utilities to file for rate recovery for natural gas extension projects.  (Currently, the PUC requires that only new customers can be assessed for these project costs)
  • Exempting the repowering of large wind energy conversion systems from the certificate of need process.  (This would allow upgrades on existing footprints)
  • A series of small initiatives to help move customers off of propane to natural gas.
  • Allowing municipal utilities and co-ops to appeal CIP cost-effectiveness decisions to the PUC, as IOU’s currently can.  (This was not a provision advocated by munis or co-ops)
  • A version of regulatory changes sought under the E-21 initiative.  (Sen. Marty noted that this language was preliminary and would receive further discussion next week)
    • A concerning segment of the current E-21 language would require municipal utilities that own and operate transmission lines to file reports that identify investments needed to modernize the grid.  These utilities would also have to conduct a study to identify distribution upgrades needed for continued development of distributed generation.

Several other amendments were unsuccessfully attempted by GOP members, including:  lifting the nuclear moratorium, allowing big hydro to be counted as renewable energy, and requiring legislative approval of the state’s 111(d) implementation plan.  Sen. Michelle Benson (R-Ham Lake) also offered an amendment directing DER to study the implications of the clean power plan on the use of natural gas in Minnesota.  She said that adding wind under a “40 by 30” RES will require additional natural gas, so we need to look how state energy policy will fit into 111(d) requirements.  Sen. Marty agreed that we need to take a big picture look at Minnesota’s energy portfolio, but did not support the amendment because it would have required an appropriation (and thus a re-referral to the Environment, Economic Development and Agriculture Budget Division, where the omnibus bill would stand a good chance of being defeated).

After a vote late Thursday night, the energy omnibus bill is headed to the Senate floor.  The House has not yet assembled its energy omnibus bill, and when it does, it is unlikely to be similar.  MMUA Government Relations staff will meet with Senators to express our opposition to the bill, and especially encourage rural Democrats to vote against it on the floor.

Senate Discusses Utility Property Tax Reform

On Thursday, the Senate Tax Committee heard SF 1636, which would reform utility property taxation.  Authored by Tax Committee Chair Rod Skoe (DFL-Clearbrook), this bill removes electric generating machinery from the personal property tax and uses a generation and capacity formula to determine the tax base of the electric generation facility, which would then be subject to local jurisdiction property taxes.  The bill also repeals the property tax exemptions (Pollution Control Exemption, Sliding Scale Exclusion, and individual facility exemptions) which many utilities currently enjoy, as well as the current wind and solar production taxes.  The bill also sets up state transition aid for host jurisdictions that lose property tax revenue under the new system.  Sen. Skoe said that the current utility taxation system is a mess and hard to understand; this bill will bring consistency to all forms of generation.

All testifiers agreed that this system would bring stability to property tax revenues from electric generation facilities and that this system was simpler to understand. The Coalition of Utility Cities said this reform was “paradigm shifting” since they’ve so long been dependent on personal property tax revenues.  Wind on the Wires, Geronimo Energy, and Iberdola all expressed support for the current wind production tax (which is collected by the state and then distributed locally by formula), saying this reform could make long-term power purchasing agreements more difficult to administer.  They suggested being subject to local tax rates and referenda could reduce predictability.

Xcel Energy noted that because taxation would be based on generation, rather than investments, the taxation levels would even out over time, but projected a near term 9% tax liability increase.  Xcel also noted that the treatment of transmission and distribution property is not changed under this proposal, so could present difficulty in calculations.

Sen. Skoe acknowledged several of these issues need to be worked out and asked any interested stakeholders to sign up to engage in ongoing dialogue on these reforms. Indications are that this tax reform will be a multi-year effort, rather than something that will be pushed to passage in the 2015 Session.  On behalf of the municipal power agencies that own generation in Minnesota and recognition that changes in tax liability will trickle down to municipal utility ratepayers, MMUA Government Relations staff will take active part in these discussions.

Bill Reconsidering MN’s Clean Energy Future Framework Heard in House

On Tuesday, the House Government Operations Committee heard legislation (HF 1133) that would repeal the statute providing for the framework to make Minnesota the first state to use 100% renewable energy.  The author, Rep. Jim Newberger (R-Becker) said 100% renewables is not sustainable due to costs and noted Minnesota needed baseload sources of power.  With minimal discussion and a party line vote, the bill was re-referred to the House Job Growth and Energy Affordability Committee.

House Discusses Lifting Nuclear Moratorium

On Wednesday, the House Job Growth and Energy Affordability Committee considered HF 1400, which would lift Minnesota’s nuclear moratorium.  Bill author Rep. Eric Lucero (R-Dayton) stated that this discussion is timely, as the state’s nuclear plants are reaching the end of their useful lives in the early 2030’s and it takes 15 years to site a new nuclear plant.

As in the Senate a few weeks ago, the IBEW, Building Trades, MN Chamber, and Xcel Energy testified in support of the bill, saying all energy options should be on the table as Minnesota’s energy future is discussed.  DER’s Bill Grant again testified in opposition, saying Minnesota won’t need any baseload generation for 15 years and ratepayers shouldn’t be subject to the cost and risks of nuclear energy.

Chair Garofalo pressed Grant on how Minnesota would replace the baseload power of the two plants, noting the anti-coal regulatory environment, and expressed his concern with an all-natural gas and renewable portfolio.  Other GOP members pointed out that ratepayers are bearing the costs of clean energy upgrades and new renewables.  Several DFL members stressed the safety risks, high security costs, and unclear future of spent fuel, though Rep. Tim Mahoney (DFL-St. Paul) did express his support for lifting the moratorium.

The committee ran to the edge of its allotted time, so Chair Garofalo said that if this bill was included in a later omnibus, the discussion could continue (which suggests it will indeed be included).