Senate Tax Reform Division Hears Refundable Sales Tax Bill

On Tuesday, the Senate Tax Reform Division heard SF 532, the bill which would make the sales tax on construction materials for local governments refundable. The bill is authored by Division chair, Sen. Ann Rest (DFL-New Hope). Sen. Rest described the bill as an attempt to break through the red tape. The League of MN Cities explained the cumbersome Department of Revenue process that cities must currently go through to receive the sales tax exemption and said this bill will allow cities to receive the exemption without having to change their contracting processes. The bill was laid over for possible inclusion in the Division’s omnibus bill.

Now that the bill has cleared the committee process in both the House and Senate, MMUA Government Relations staff will monitor the assembly of each body’s omnibus tax bill and encourage the inclusion of the refundable sales tax provisions.

House Environment Committee Continues Discussing Costs of Clean Water

On Tuesday, the House Environment and Natural Resources Committee continued to hear testimony Rep. Fabian’s bills to address the costs of clean water (HF 616 and HF 617).

Staff from the Minnesota Public Facilities Authority (PFA) outlined the various funding programs it has available to help local governments fund water and wastewater improvements. Several DFL members asked lines of questions related to funding levels, saying that local governments were sending back funds. The PFA said that program funding levels have ramped up more quickly than construction, as these projects often take a number of years. Though there is a cancellation of funds this year, the PFA is requesting additional dollars for these programs in the next budget, as there are a lot of cities affected by water standards that will need funding.

Additional groups providing testimony included the MN Chamber of Commerce (support) and Minnesota Center for Environmental Advocacy (oppose). The MPCA spent a significant amount of time expressing their opposition to the bill, saying that it was duplicative, as the agency already does peer review, and the bills would add costs and time to the agency’s work. The agency also asserted that the bills would require peer review of permits, which is false, as the regulatory and permitting processes are separate.

The bills were laid over for possible inclusion in the committee’s omnibus bill. The Chair, Rep. Denny McNamara (R-Hastings) verbalized his intentions to include these bills in his omnibus package.

Senate Energy Committee Discusses Nuclear Energy

On Tuesday, the Senate Environment and Energy Committee discussed two bills pertaining to the future of nuclear energy in Minnesota. SF 306 (Sen. Mary Kiffmeyer, R-Big Lake) would lift Minnesota’s nuclear moratorium and SF 536 (Sen. Bruce Anderson, R-Buffalo) would allow for construction of another unit at the Monticello nuclear plant.

Sen. Kiffmeyer noted that the decommissioning dates for Minnesota’s current nuclear facilities is not far away (2030-32), and that is not a long way off to lose significant baseload power. Lifting the moratorium would not mean that a nuclear facility would be built, but allow the discussion to take place as the state considers how to replace the power. She suggested that “we owe it to ratepayers” to look at all the options, and there are plenty of hurdles and agencies that any new nuclear facility would have to go through.

The MN Chamber of Commerce, MN Building Trades, IBEW, MN Utility Investors, and Xcel Energy testified in support of the bills. The organizations conveyed that our state needs to explore all forms of baseload power as Minnesota works towards its energy future and the PUC can protect ratepayer concerns. Xcel also answered technical questions on safety measures at nuclear facilities and timelines for citing a new plant.

Bill Grant expressed the Division of Energy Resource’s opposition to the bills, saying storage solutions are needed for nuclear energy. He said Minnesota doesn’t need additional baseload power for at least 15 years, so there is no reason to explore uneconomical nuclear power. Other state anti-nuclear organizations and citizens testified against the bills, as well.

The bills were laid over for possible inclusion in the committee’s omnibus bill, but it would seem unlikely that they will be given the committee’s makeup.

House Committee Considers Bill to Improve Rulemaking Process

On Wednesday, the House Government Operations Committee heard HF 1261, a bill that would reform the state agency rulemaking process. The bill author, Rep. Ron Kresha (R-Little Falls), said he gets a lot of pressure from communities and constituents to address the implications of state agency rules. The bill sets a threshold for a rule to have a perceived “substantial economic impact,” and if so, it triggers review from the Office of the Legislative Auditor (OLA). In its report, the OLA will determine if the proposed rule has a substantial economic impact, and if so, it cannot go into effect until approved by the Legislature.

Rep. Kresha said rulemaking reform is not a new issue at the Legislature, and this bill is just a first stab at addressing some of the concerns. He pledged an open door policy to work with stakeholders on any concerns they bring to him.

Representatives from the MN Chamber of Commerce and LMC testified in support of the bill, citing the costs that rules can have on businesses and municipalities.

The MN Center for Environmental Advocacy opposed the bill, stating repeatedly that the Legislature directs what the rules should say, and the agency should maintain the power to execute it. The Sierra Club said this bill would cut down the public involvement in the rulemaking process.

On behalf of all state agencies, the MPCA expressed opposition to the bill. They were concerned that the rule review would only look at costs, not the benefits of the rule. They felt there is duplication of effort in the bill and that it would add cost and time. There was also concern that politics would take a larger role in approving rules, and there may not be time in a Legislative Session for both bodies to approve.

Several DFL committee members brought up concern about the impact of this bill on the state budget and the potential need for special sessions to approve bills. They support the current process, which allows the Legislature to pass laws after the fact to change rules if they don’t like what an agency did.

Rep. Kresha said he doesn’t believe every rule should be subject to legislative approval, so throughout the legislative process, they need to work on finding the right economic threshold.

After the discussion, the bill was re-referred to the House Civil Law Committee. This legislation will have several committee stops, so it is likely it will be modified with amendments along the way. MMUA Government Relations staff will continue to monitor the deliberations on this bill, as rulemaking reform would be welcome by our members.

House Energy Committee Overviews Clean Power Plan

On Wednesday, the House Job Growth and Energy Affordability Committee received an informational overview of the EPA’s proposed Clean Power Plan. David Thornton of the MPCA provided the technical overview of the proposed rule, as well as outlining the concerns of state regulators that were included in their comments to the EPA. These include the treatment of early action, the fact that Sherco 3 was offline in the baseline year of 2012, the more aggressive goal Minnesota received than neighboring states, that renewable energy credits should belong to those who paid for them (not the state in which they are located), and others.

MMUA’s Bill Black, along with representatives from Xcel Energy and MREA, reiterated these concerns with the prosed CPP. The American Coalition for Clean Coal announced it was their “singular goal to defeat the Clean Power Plan,” and questioned how the state plans will be enforceable when it gives authority to state agencies that currently don’t have regulatory authority. The MN Chamber of Commerce said that on behalf of ratepayers, they are concerned about the significant renewable energy investments made that will not be credited. Fresh Energy expressed its support for the plan, saying it puts states in the driver’s seat and builds off efforts Minnesota has already made to reduce fossil fuel consumption and create jobs.

At the end of the hearing, Chair Garofalo told the committee that the Clean Power Plan will come up in several more hearing discussions this year and members should understand how impactful it will be.

Senate Energy Committee Holds Hearing on “40 by 30”

On Thursday, the Senate Environment and Energy Policy Committee held an informational hearing on SF 1077, which would increase the renewable energy standard to 40% by 2030. Bill author Sen. Kevin Dahle (DFL-Northfield) said increasing the standard is a good idea

because we already have the infrastructure in place, we just need to ramp up our efforts. He said he believed 40 by 30 would be attainable and affordable.

In a committee room packed with wind industry workers and developers, Wind on the Wires testified in support of the bill, noting the jobs and income taxes that have resulted from the current RES. They cited the November 2014-released MN Renewable Integration and Transmission Study (MRITS) as reason to increase the RES, as well as the cost of carbon going up on under the Clean Power Plan. Several of these wind developers and employees also expressed their support. The Union of Concerned Scientists also supported the bill, saying they estimated it would only cost the typical Minnesota ratepayer 12 cents/month to meet a 40% by 2030 RES.

The MN Chamber of Commerce expressed its opposition, noting that we need to be talking about net jobs. Certainly wind industry jobs have been created by the RES, but higher energy costs also displace other industrial/mining jobs.

Great River Energy pointed out that additional energy resources are not needed and utilities need to match supply with forecasted consumption. Minnesota Power noted their plan to achieve 1/3 renewable, 1/3 coal, and 1/3 natural gas in their energy portfolio, but said that adding too many renewables can lead to price volatility to consumers. They said the Clean Power Plan will be very impactful to utilities and pointed out that MRITS was a reliability, not economic study.

The municipal position was well represented. Bill Black highlighted the timeline for the Clean Power Plan finalization and Minnesota’s state implementation plan, stating that changes to the RES made now may have to be undone in just a few years. He also pointed out that the MRITS study did not take the effects of the Clean Power Plan into consideration, so should not be used as a basis to justify the RES increase. Chris Schoenherr of SMMPA reiterated that the uncertainty with the Clean Power Plan makes this the wrong time to increasing the RES. Deb Birgen of MRES emphasized that the Clean Power Plan’s treatment of cross-state renewables will have huge implication to MRES member cities, since they own coal and renewable generation in different states. She also pointed out that Iowa has no RES and exceeds Minnesota in wind production and lower energy costs.

MREA pointed out that the RES provides a one-size fits all mandate for utilities and the current RES is already very expensive for co-ops to meet. Xcel Energy noted that renewable energy standards are policies of the past. Standards were needed when renewables were new and expensive, but not now they can compete on the market. A RES essentially allows the Energy Committee to do utilities’ resource planning. The Clean Power Plan will already put heavy constraints on utilities’ resource planning, there is no reason to create additional hurdles with increasing the RES.

The Division of Energy Resources expressed support for the bill, stating that 40% by 2030 is included in their policy bill (HF 1431), which they hope will be heard next week. Bill Grant said the rate impacts of meeting the current RES have been “nominal and cost-effective.”

Several GOP senators questioned bill proponents about the need for an increased RES if Iowa is outperforming Minnesota without it. They also questioned the exclusion of large hydro and nuclear power, noting that the RES singles out development in wind and solar energy, which is counterintuitive to diversifying the state’s energy portfolio.

Being as this was an informational hearing, no action on the bill was taken. MMUA Government Relations staff will continue to monitor all hearings and provide our members position in regard to increasing the RES.