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Minnesota's investor-owned utilities and publicly owned utilities offer a broad portfolio of customer energy efficiency programs. The programs have benefited from long records of consistent, strong support, allowing the programs to evolve and improve over many years. In 2007, Minnesota's utility energy efficiency programs saved 463,543 MWh and 1.9 million Mcf.
Until new legislation was passed in 2007 that established energy efficiency resource standards (see below), Minnesota statutes had required a specified spending by regulated natural gas and electric utilities on energy efficiency programs (according to filed and approved “Conservation Improvement Programs” or “CIPs”). Xcel Energy (the state's largest investor-owned utility) was required to spend 2% of gross operating revenues (GOR) on programs; all other electric utilities (including publicly owned utilities) were required to spend 1.5% of GOR. Natural gas utilities were required to spend 0.5% of GOR. In 2007, Minnesota utilities spent $91.2 million on electric efficiency and $15.6 million on natural gas efficiency. Cost recovery for regulated utility energy efficiency programs is through rate cases, which include consideration of program costs and incentives. Program plans are made and approved on a 2-year cycle. Approved CIP expenses are trued up annually.
In May 2007, the Minnesota legislature passed the New Generation Energy Act of 2007 (Minnesota Statutes 2008 § 216B.241). Among its provisions, the Act sets energy-saving goals for utilities in the state of 1.5% of retail sales each year. Included under this goal are savings from energy conservation programs, rate design, energy codes, appliance standards, market transformation programs, programs to change human behavior, improvements to utility infrastructure (e.g., transmission and distribution improvements), and waste heat recovery. The law allows a utility to request a lower target (based on historical experience, an energy conservation potential study, and other factors), but in no case lower than 1% per year.
In 2007, the Minnesota legislature enacted Section 216B.2412, directing the Public Utilities Commission to allow one or more rate-regulated utilities to participate in a pilot program (of up to 3 years) to assess the merits of a rate-decoupling strategy. In June 2009, the PUC issued an Order adopting Criteria and Standards to be utilized in pilot proposals for revenue decoupling (Docket No. E,G-999/CI-08-132, Issue date June 19, 2009). All utilities are to file non-binding notices of intent as to their plans for filing a decoupling pilot by June 1, 2010 with all pilot proposals filed by December 30, 2011. One utility, CenterPoint Energy, has already included a pilot proposal for natural gas customers, filed within its ongoing rate case in November, 2008 (Docket No. G-008/GR-08-1075). The Commission is requiring CenterPoint to file additional information explaining how its pilot decoupling proposal meets the criteria and standards for decoupling.
In 1999 the Minnesota Public Utility Commission agreed to a performance-based incentive for utility energy efficiency programs. Utilities are rewarded with a specific percentage of net benefits (as measured by the utility cost-effectiveness test) created by their actual investments in energy conservation. The percentage of net benefits awarded increases as the percentage of energy-savings goal achieved increases. The incentive is calibrated such that at 150% of the energy-savings goal, the utility would receive about 30% of the utility’s conservation expenditure budget as required by statute. Under the incentive design, utilities are also rewarded for delivering their programs more cost-effectively because more net benefits are created when actual costs are lowered. Ratepayers fund the incentive during the following year when the PUC adjusts rates. Recently these charges have been on the order of 1.45%.
Through the Conservation Improvement Program, electric and natural gas utilities operating in Minnesota are required to invest a portion of their state revenues in projects designed to reduce their customers' consumption of electricity and natural gas, and to generally improve resource efficiency. Minnesota’s regulated utilities are required to file integrated resource plans with the Public Utilities Commission. The plans identify the potential resources the utilities intend to use to meet consumer needs in future years, including significant energy efficiency and conservation savings.
Last Updated 09/25/2009
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For more information contact: Dan York, Utilities Program Senior Research Associate |
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