Updates to Minnesota's energy conservation policy advance at the legislature

Published April 24, 2020

A bill to update the state's Conservation Improvement Program (CIP) law was passed by the energy committees in both the Minnesota House and Senate yesterday.

The product of more than a year of work, the Energy Conservation and Optimization (ECO) Act is advancing with bipartisan support, carried by Representative Zack Stephenson (HF 4502) and Senator Jason Rarick (SF 4409). It has been championed by the Center for Energy and Environment (CEE) and has the backing of investor-owned, municipal, and cooperative utilities; environmental and clean energy advocates; and labor groups. Compromises are necessary, of course, for a bill to work for such diverse stakeholders, but this bill would improve Minnesota's energy conservation policy in a number of ways, and CUB is happy to support it, as well.

At CUB, we regularly refer Minnesotans to their utilities' energy conservation programs in order to reduce their energy bills on a permanent basis. Conservation incentives that are available because of CIP -- like rebates to help people purchase energy efficient light bulbs and appliances, discounted energy audits, low-flow shower heads, and much more -- have saved consumers billions of dollars. The ECO Act will help to ensure that utilities and their customers can continue to take advantage of such savings opportunities as the energy world modernizes.

The bill will allow efficient fuel switching to be a part of utilities' conservation programs for the first time. That means that utilities can provide conservation incentives to help a customer save energy even if they do so by using a different fuel -- say, installing an air source heat pump to cut down on the amount of propane or fuel oil they need to use -- as long as the new measure saves money, and reduces emissions, and uses less energy overall.

The bill allows load management to be a part of these programs, too. This could include opt-in programs for consumers to allow a utility to cycle their air conditioner during peak hours or to heat up an electric water heater overnight. These programs can cut costly, high-emission usage peaks.

Under current law, investor-owned electric utilities, like Xcel Energy and Minnesota Power, have a goal of saving at least 1.5% of sales each year through their conservation programs. This bill would increase the annual goal to 1.75%, a threshold that utilities are already meeting.

The low-income conservation programs required of investor-owned utilities would see their budgets increase under this bill. The bill would also allow a portion of those funds to be spend on so-called pre-weatherization measures: things like remediating vermiculite (asbestos) insulation and knob-and-tube wiring that prevent efficiency improvements from being made in a large number of Minnesota homes today.

Apart from utilities' conservation programs, the ECO Act would also allow the utilities regulated by the PUC to invest in "innovative clean technologies." Prior drafts allowed for spending of up to $5 million per year, which we were concerned could be a significant cost for customers of smaller utilities, and contained very few parameters on how those funds would be spent. However, CUB worked with utilities and with CEE to put more guardrails on the program and to reduce the budget to an average of $2 million per year for utilities over 200,000 customers, and $1 million for smaller utilities such as Otter Tail and Minnesota Power.

Yesterday's hearings were the first held by either the House or Senate energy committee since the coronavirus emergency began in Minnesota, which is a good sign for the bill's prospects in both bodies.