The Minnesota House and Senate rarely agree on an important energy issue: cushioning the financial blow to Minnesota natural gas customers from sky-high bills due to natural disasters.
But as the Legislature reconvenes on Monday after a week-long hiatus, the DFL-controlled House and the Republican-controlled Senate are still far apart on energy spending proposals.
The House wants to spend $120 million in the next fiscal year alone. About $30 million would go to weatherization efforts for low-income residents, while another $20 million would go to a new state energy fund.
The Senate energy bill calls for spending $13.6 million over the next fiscal year and says nothing about big House items.
Funds to cover storm costs
Separate bills presented in both chambers would provide $35 million to shore up municipal utilities in Minnesota battered by a February 2021 winter storm that caused a huge spike in natural gas prices.
The storm froze equipment not exposed to the weather in gas-producing regions of the United States – particularly Texas – driving Midwest gas prices up 4,500% at one point. Minnesota municipal gas utilities had to bear up to $35 million in additional costs.
“We spent a year’s budget in three days,” said Kent Sulem, director of government relations for the Minnesota Municipal Utilities Association, which represents 33 gas utilities with about 90,000 customers.
Several municipal utilities dug deep into their reserves to pay for the additional costs. Without replenishment, “in the end [the burden] would go to taxpayers,” Sulem said.
Legislation that has been passed by the Senate and House Energy Committees would close the reserve gap. It would also allow tax credits for municipal utility customers whose bills were inflated by the superstorm.
The legislation also provides a tax credit for customers of investor-owned utilities. However, there are no details on the funding of such a tax credit, and the tab could cost taxpayers at least $300 million.
Storm-related gas costs for investor-owned utilities — which serve many more Minnesotans — are exponentially higher than those for municipalities: $660 million. Under state law, gas costs from investor-owned utilities are passed directly to consumers.
The Minnesota Public Utilities Commission (PUC) is still investigating whether utilities owned by state investors will be able to recoup that full amount.
In the meantime, the PUC has allowed the state’s two largest gas utilities — CenterPoint Energy and Xcel Energy — to collect extraordinary 63-month storm costs. Two other gas utilities recoup those costs from ratepayers over 27 months, as does Xcel for non-residential customers.
Bills passed by the House and Senate Energy Committees would allow investor-owned utilities to collect these disaster-related surcharges over even longer periods of time, cushioning the blow to consumers.
The legislation would also allow gas utilities to create special purpose subsidiaries that could issue “extraordinary event” bonds for up to 30 years.
These low-interest bonds would be backed by cash flows from customer payments. Bonds could be issued for large gas price spikes caused by weather and other natural disasters, as well as sabotage and terrorism, including cybersecurity breaches.
CenterPoint, the state’s largest gas utility, is pushing for the legislation, which is also backed by the Citizens Utility Board of Minnesota, a ratepayer watchdog.
Weatherization, competitiveness fund
Allowing utilities to write off extraordinary gas costs is one of the few commonalities between House and Senate energy bills.
With a record budget surplus of $9.25 billion, two-thirds of funding for the $120 million spending proposed in the House bill would come from the taxpayer-funded general fund.
The rest would come from the state’s Renewable Energy Development Account, which is funded by annual payments from Xcel to allow the utility to store nuclear waste at its Prairie Island nuclear plant.
The Senate’s general energy bill plans to spend $4.3 million from the general fund and $9.3 million from the renewable energy account.
The biggest item in the House bill is $30 million to expand the state’s home weatherization program for low-income residents, currently funded with federal dollars.
“At our current rate, it would take about 300 years to weatherize all eligible homes,” said Rep. Jamie Long, DFL-Minneapolis, head of the House Energy and Climate Committee. “We have a need and we are not meeting it.
Weatherization both saves energy and reduces heating bills.
The second-largest item in the House bill is $20 million — half general fund, half revolving account — for a “state competitiveness account.” It would invest in a range of energy projects, in particular efforts to make the power grid more resilient to extreme weather conditions.
The account would fund both research — say at Minnesota universities — and utility efforts to improve grid reliability. The fund would be of particular benefit to small electric utilities in Minnesota.
Importantly, it would allow the state to obtain matching funds from the federal infrastructure bill passed by Congress earlier this year.
“It will help us attract federal infrastructure funds, and there are plenty of those funds available,” said Grace Arnold, commissioner of the Minnesota Department of Commerce.
The head of the Senate Finance and Energy and Utilities Policy Committee, Sen. David Senjem, R-Rochester, said he would still review the state’s competitiveness fund and the increase weathering funding.
“We want to be competitive and not let federal money sit in Washington,” he said. However, he added, “There’s a lot we don’t understand about how this federal money is flowing to us.”
Senjem said he has a “bad weather bill” and plans to hold a hearing. “It’s still very early in the process, and we’re not even in conference yet.”
Still, he said he was skeptical that the Senate would appropriate the amount of weatherization money proposed by the House; its spending priorities are different.
“The Senate obviously focuses on public safety and tax relief,” Senjem said.