Minnesota House, Senate support storm-related relief, but far apart on other energy-funding issues

The Minnesota House and Senate are in rare agreement on a significant energy issue: cushioning the financial blow to Minnesota natural gas customers from sky-high bills due to natural disasters.

But as the Legislature reconvenes Monday after a weeklong break, the DFL-controlled House and Republican-controlled Senate are still far apart on energy-spending proposals.

The House wants to spend $120 million next fiscal year alone. About $30 million would be for weatherization efforts aimed at low-income residents, while another $20 million would go to a new state energy fund.

The Senate's energy bill calls for spending $13.6 million in the next fiscal year, and is silent on the House's big-ticket items.

Funds to cover storm costs

Separate bills introduced in both chambers would provide $35 million to shore up Minnesota municipal utilities battered by a February 2021 winter storm that caused a huge spike in natural gas prices.

The storm froze unweatherized equipment in U.S. gas-producing regions — particularly Texas — causing Midwest gas prices to rise 4,500 % at one point. Minnesota municipal gas utilities were saddled with up to $35 million in extra costs.

"We spent a year's budget in three days," said Kent Sulem, government relations director 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 the extra costs. Without replenishment, "at the end of the day [the burden] would come back to ratepayers," Sulem said.

Legislation that has passed both the Senate and House energy committees would plug the reserve gap. It would also allow tax credits for municipal utility customers whose bills were bloated by the superstorm.

Legislation also calls for a tax credit for customers of investor-owned utilities. However, there's no details on funding such a tax credit, and the tab could cost taxpayers at least $300 million.

Storm-related gas costs for investor-owned utilities — who serve far more Minnesotans — are exponentially higher than those for municipalities: $660 million. By state law, investor-owned utilities' gas costs are passed down directly to consumers.

The Minnesota Public Utilities Commission (PUC) is still investigating whether the state's investor-owned utilities will be able to recover that full amount.

In the meantime, the PUC allowed the state's two largest gas utilities — CenterPoint Energy and Xcel Energy — to collect extraordinary storm costs over 63 months. Two other gas utilities are recovering those costs from ratepayers over 27 months, as is Xcel for non-residential customers.

Bills that passed the House and Senate energy committees would allow investor-owned utilities to collect such disaster-related surcharges over even longer periods of time, thus cushioning the blow to consumers.

The legislation also would allow gas utilities to create special-purpose subsidiaries that could issue "extraordinary event" bonds of up to 30 years.

Such low-interest bonds would be backed by streams of cash from customer payments. Bonds could be issued for big 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 also is supported by the Citizens Utility Board of Minnesota, a ratepayer watchdog.

Weatherization, competitiveness funds

Allowing utilities to cushion extraordinary gas costs is one of the few commonalities between the House and Senate energy bills.

With a record $9.25 billion state budget surplus, two-thirds of funding for the $120 million in spending proposed in the House bill would come from the taxpayer-fueled general fund.

The rest would flow from the state's Renewable Development Account, which is financed by annual payments from Xcel for allowing the utility to store nuclear waste at its Prairie Island nuclear power plant.

The Senate's general energy bill calls for spending $4.3 million from the general fund and $9.3 million from the renewable account.

The biggest-ticket 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 conserves energy and lowers heating bills.

The second-largest item in the House bill is $20 million — half from the general fund, half from the renewable account — for a "state competitiveness account." It would invest in a range of energy projects, particularly efforts to make the electric grid more resilient to extreme weather.

The account would fund both research — say at Minnesota universities — and utility efforts to boost grid reliability. The fund would be particularly advantageous to small Minnesota electric utilities.

Crucially, it would allow the state to get matching money from the federal infrastructure bill passed earlier this year by Congress.

"It will help us draw federal infrastructure funds, and there are a lot of those funds available," said Grace Arnold, the Minnesota Department of Commerce's commissioner.

The head of the Senate's Energy and Utilities Finance and Policy Committee, Sen. David Senjem, R-Rochester, said he will still take a look at the state competitiveness fund and increased weatherization funding.

"We want to compete and not leave federal money sitting in Washington," he said. However, he added: "There is a lot we don't understand about how this federal money is rolling out to us."

Senjem said he has a "weatherization bill" and plans to hold a hearing. "It is still very early in the process, and we are not even in conference yet."

Still, he said he's skeptical the Senate would appropriate the amount of weatherization money proposed by the House; its spending priorities are different.

"The Senate is obviously focused on public safety and tax relief," Senjem said.