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State Energy Efficiency Policy Database

Minnesota

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Summary

Minnesota has a long record of customer energy efficiency programs offered by both investor-owned and publicly owned utilities. Minnesota has achieved significant savings from these programs, which have been in place in various forms for well over two decades. These programs and efforts have remained steadfast in Minnesota without any of the interruption or upheavals that occurred in other states that restructured their electric utility industries.

In 2007, the Minnesota Legislature passed the Next Generation Energy Act of 2007 (Minnesota Statutes 2008 § 216B.241). Among its provisions, the Act sets energy-saving goals for utilities of 1.5% of retail sales each year, thereby establishing an EERS. This act also directed 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. The Commission continues to examine decoupling and has established criteria and standards to be used when considering proposals from utilities. Minnesota allows utilities to earn performance incentives for energy efficiency programs.  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.

The most recent budgets for energy efficiency programs and electricity and natural gas savings can be found in the State Spending and Savings Tables on the left.

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November 8, 2013


Customer Energy Efficiency Programs

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 them to evolve and improve over many years.

In 2007, the Minnesota Legislature passed the Next Generation Energy Act of 2007 (Minnesota Statutes 2008 § 216B.241). Among its provisions, the Act sets energy-saving goals for utilities of 1.5% of retail sales each year. Regulated utilities recover the cost of energy efficiency programs through rate cases which include consideration of program costs and incentives. Program plans are made and approved on a 3-year cycle for investor-owned utilities and a 1-year cycle for electric cooperatives and municipal utilities. Approved CIP expenses are trued up annually.

Minnesota offers a self-direct option, with a full exemption from assigned CRM fees, to customers with 20 MW average electric demand or 500,000 MCF of gas consumption.  Customers must also show that they are making "reasonable" efforts to identify or implement energy efficiency and that they are subject to competitive pressures that make it helpful for them to be exempted from the CRM fees.  Participating customers must submit new reports every five years to maintain exempt status.  The utility is not involved in self-direct program administration; the state Department of Commerce functions as the manager of self-direct accounts and is the arbiter of whether a company qualifies for self-direct and is satisfying its obligations. 

The most recent budgets for energy efficiency programs and electricity and natural gas savings can be found in the State Spending and Savings Tables on the left.

Links:

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November 8, 2013


Energy Efficiency Resource Standards

Summary: Electric and Natural Gas: 1.5% annual savings beginning in 2010, adjustable to a minimum of 1% savings.

Minnesota investor-owned electric and gas utilities are subject to the energy savings requirements of the Next Generation Energy Act (NGEA), passed by the Minnesota Legislature in 2007 (Minnesota Statutes 2008 § 216B.241). Among its provisions, the Act set energy-saving goals for utilities of 1.5% of retail sales annually, commencing with the first triennial plan period that began January 1, 2010. Of the 1.5%, the first 1% must be met with direct energy efficiency energy savings, or conservation improvements.  This may include savings from efficiency measures installed at a utility’s own facilities. The NGEA also allows savings to be achieved indirectly through energy codes and appliance standards. Up to 0.5% may be met by efficiency enhancements to each utility’s generation, transmission, and distribution infrastructure.

All electric and natural gas utilities, including municipal utilities and co-operatives, must set energy efficiency spending goals based on a percentage of revenue. Prior to the Next Generation Energy Act going into effect fully in 2010, Minnesota utilities were required to spend a percentage of gross operating revenue (0.5% gas, 1.5% electric, 2% for Xcel Energy's electric utility) on energy efficiency programs rather than to achieve a set amount of energy savings.  In practice, however, these minimum spending requirements are often irrelevant, as utilities must spend more than these minimum percentages to achieve the 1.5% EERS.

The NGEA allows a utility to request a lower target (based on historical experience, an energy conservation potential study, and other factors), but for investor-owned utilities that target can be no lower than 1% per year. Lower savings can also be justified if the Commissioner of Commerce determines that additional savings are not cost-effective to ratepayers, the utility, participants, and society. In 2009, the state legislature passed interim legislation to reduce the mandated level of savings during the first three years for natural gas utilities, establishing an interim average annual savings goal of 0.75 percent over 2010-2012 for utilities that submit a “ramp up” plan that averages annual savings of 1% in subsequent years (Minnesota Session Laws 2009, Ch. 110, Sec. 32).

In the most recent triennial planning period (2013-2015), Xcel Energy electric savings goals were set at 1.38% annually (see Docket No. E,G002/CIP-12-447). 


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September 5, 2013


Alternative Business Models

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. Two utilities, CenterPoint Energy and Minnesota Energy Resources Corp, have decoupling for natural gas customers (Docket No. G-008/GR-08-1075, G007,G011/GR-10-977).  In June 2009, the PUC issued an Order adopting criteria and standards for pilot proposals for revenue decoupling (Docket No. E,G-999/CI-08-132, Issue date June 19, 2009). 


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September 5, 2013


Reward Structures for Successful Energy Efficiency Programs

Minnesota has had a shared benefit incentive in place since 1999. The incentive increases as the percentage of savings of retail sales increases. There is a cap of 20% of net benefits on the amount of incentive that may be earned. The incentive is set such that at savings of 1.5% of retail sales, electric utilities will earn an incentive of $0.07 per kWh saved and gas utilities will earn and incentive of $9.00 per thousand cubic feet saved. The percentage of net benefits to be awarded to each utility at different energy savings levels will be set at the beginning of each year. (See Minn. Stat.§ 216B.241, subd. l(c) and Docket No. E,G-999/CI-08-133).

  • Report to the Legislature on Decoupling and Decoupling Pilot Programs under Minnesota Statutes §216B.2412 
  • Minnesota Public Utilities Commission docket search

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September 5, 2013


Energy Efficiency as a Resource

Through Minnesota’s long-running “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 improve 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. The plans include significant energy efficiency and conservation savings.

Minnesota continues to take actions to support energy efficiency as a resource. On May 19, 2010, the Minnesota 2009 Energy Policy Act was signed into law as Chapter 110. This was the outcome of the Omnibus Energy Policy Bill from the 2009 legislative session.  The PUC summarized the energy efficiency section of the statute:

Modifies the criteria the PUC can consider in setting incentives for energy conservation. Adds language that makes implementation of cost-effective conservation “a preferred choice” while taking into account the impact of conservation on earnings.

In addition, Article 12, Sec. 2 and 3 of H.F. 729, passed in 2013, explicitly declared energy efficiency a resource and clarified that the state energy policy goal of saving 1.5% of retail energy sales annually is a floor, not a ceiling. 


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September 5, 2013


Evaluation, Measurement & Verification
  • Cost-effectiveness test(s) used: SCT, UCT, PCT, RIM
  • Uses a deemed savings database: yes (Deemed Savings Database)

In addition to the TRM, Minnesota has developed the Energy Savings Platform (ESP) to track and report the energy savings for all 187 utilities that participate in CIP. The evaluation of ratepayer-funded energy efficiency programs in Minnesota relies on legislative mandates (MN Statutes 261B.241). Evaluations are mainly administered by the utilities. However, the Division of Energy Resources and staff from Minnesota Department of Commerce also assists in the evaluation administration. Evaluations for each of the utilities are conducted. Minnesota has formal requirements for evaluation articulated in MN Statutes 261B.241 and Rule 7690.0550. Minnesota uses four of the five classic benefit-cost tests identified in the California Standard Practice Manual. These are the Utility/Programs Administrator (UCT), Participant (PCT), Social Cost (SCT), and Ratepayer Impact Measure (RIM). Minnesota specifies the SCT to be its primary test for decision making. The benefit-cost tests are required for portfolio, total program, and customer project level screening, with exceptions for low-income programs, pilots, and new technologies. The rules for benefit-cost tests are stated in MN Statutes 261B.241 and Rule 7690.0550.


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August 21, 2013