Gov. Dayton Signs 2015 Jobs and Energy Bill into Law

On Saturday, June 13, Governor Dayton signed the 2015 Jobs and Energy Bill into Law.  Our prior coverage of this bill can be found here and here.  The following amendments were made after the Governor’s veto:

  • New definitions for “propane,” “propane storage facility,” and “synthetic gas.”
  • New net metering provision that applies to cooperative electric associations and municipal utilities.  The vetoed version of the bill included a reference to a subdivision 3(f), which was omitted.  The final version of the legislation includes the referenced subdivision 3(f), which provides a customer with a net metered facility having a capacity of less than 40 kW to be compensated for the customer’s net input into the utility’s system via a kWh bill credit.
  • Continuation to the year 2017 of the Minnesota Department of Commerce’s ability to assess up to $1,000,000/year for regional and national duties under section 216A.07 subd. 3a.
  • New obligation of the Minnesota Department of Commerce and Minnesota Pollution Control Agency to formally submit the draft state implementation plan for Clean Power Plan compliance to the legislature for review and comment.
  • New authorization to the Minnesota Department of Commerce to assess up to $854,000 per biennium for reasonable costs it incurs in services it provides to implement the new energy-intensive, trade-exposed rate provision.

Funding for the Minnesota Department of Commerce appears to have been the big concern, which was set out in Governor Dayton’s veto letter.  Moving forward, the three regulatory developments “to watch” in Minnesota are concepts that were first considered and discussed in the Minnesota e21 Initiative.  Although not fully endorsed by all members to that effort, the statutory language authorized by the 2015 Jobs and Energy Bill on those issues can be summarized as follows:

  • Regulatory Reform: The existing multi-year rate plan provision was revised to permit multi-year rate plan proposals up to five years in duration, during which the utility may be subject to reasonable performance measures and incentives, and as part of which the utility may propose: (1) recovery of its forecasted rate base; (2) recovery of O&M expenses; (3) tariffs that expand the products and services available to customers, including an affordability rate for low-income customers; and (4) MN PUC-approved adjustments for changes the MN PUC determines are just and reasonable, including changes in the utility’s cost of operating its nuclear facilities.
  • Distribution Grid Planning: Utilities operating under a multi-year rate plan must engage in distribution system planning to (i) identify in a report those investments that are necessary to modernize the grid, enhance reliability, improve security against cyber and physical threats, and increase energy conservation; and (ii) identify in a study the interconnection points on its distribution system that are available for small-scale distributed generation resources and identify any necessary upgrades. The utility may recover the costs associated with this planning and any investments incident thereto.
  • Competitive Rate Options for Energy-Intensive Trade-Exposed Customers: To achieve the policy objective of ensuring competitive electric rates for energy-intensive trade-exposed customers, certain utilities have the flexibility to offer those customers various rate options, including fixed rates, market-based rates, and rates to encourage utilization of new clean energy technology.

MN Special Session Jobs and Energy Bill Posted

As a follow up to our prior coverage, Governor Dayton vetoed the jobs and energy bill that passed in the final few minutes of the 2015 regular legislative session.  Governor Dayton’s veto letter can be found here.

After significant negotiations, the legislature finally posted a revised version of the legislation in its 2015 1st Special Session Jobs and Energy Bill

There will be an informational hearing this afternoon to walk through the bill.  We will provide additional coverage once the bill passes.

USFWS to Evaluate New Incidental Take Permitting Program Under the Migratory Bird Treaty Act

Today, the U.S. Fish and Wildlife Service (“Service”) published notice in the Federal Register announcing that it intends to prepare a programmatic environmental impact statement to evaluate the effects of a program that would authorize incidental take under the Migratory Bird Treaty Act (“MBTA”). Although the Service has MBTA regulations that authorize the issuance of permits to take migratory birds for specific purposes (e.g. scientific collection, bird banding and marking, raptor propagation), there is presently no permit to authorize take that occurs incidental to, and which is not the purpose of, an otherwise lawful activity. Companies potentially impacted include those involved in the oil and gas sector, telecommunications, energy transmission infrastructure, and solar and wind energy generation.

Through this rulemaking, the Service will evaluate various approaches to regulating incidental take of migratory birds, including: Continue Reading

Sprint to the Finish! Fast Work at the Conclusion of the 2015 Minnesota Legislative Session Results in Few but Significant Energy Policy Changes

In a literal sprint to the finish, the Minnesota legislature passed a bill, which included energy policy provisions as part of a Senate Floor Amendment, just seconds before the State constitutional deadline. Pertinent energy policy provisions were included in Article 3 of that amendment and are briefly summarized below:

  • If the MN PUC orders a generating facility to terminate its operations prior to the end of that facility’s physical life, the MN PUC may assess whether to allow a utility to recover any positive net book value of that facility.
  • The existing multi-year rate plan provision was revised to permit multi-year rate plan proposals up to five years in duration, during which the utility may be subject to reasonable performance measures and incentives, and as part of which the utility may propose: (1) recovery of its forecasted rate base; (2) recovery of O&M expenses; (3) tariffs that expand the products and services available to customers, including an affordability rate for low-income customers; and (4) MN PUC-approved adjustments for changes the MN PUC determines are just and reasonable, including changes in the utility’s cost of operating its nuclear facilities.
  • Utilities operating under a multi-year rate plan must engage in distribution system planning to (i) identify in a report those investments that are necessary to modernize the grid, enhance reliability, improve security against cyber and physical threats, and increase energy conservation; and (ii) identify in a study the interconnection points on its distribution system that are available for small-scale distributed generation resources and identify any necessary upgrades. The utility may recover the costs associated with this planning and any investments incident thereto.
  • Utilities may petition the MN PUC for recovery of natural gas extension projects outside of a general rate case.
  • Net metered customers of a cooperative electric association or a municipal utility may be subject to additional fixed charges.
  • To achieve the policy objective of ensuring competitive electric rates for energy-intensive trade-exposed customers, certain utilities have the flexibility to offer those customers various rate options, including fixed rates, market-based rates, and rates to encourage utilization of new clean energy technology.

Although not endorsed by all members of the Minnesota e21 Initiative, the concepts in the provisions related to the multi-year rate plan, distribution planning, and energy-intensive trade-exposed rate options were raised in the e21 Report.

Governor Brown Announces New 2030 Greenhouse Gas Reduction Target for California

This morning, California Governor Jerry Brown announced Executive Order B-30-15, setting a target to reduce greenhouse gas (GHG) emissions in the state to 40% below 1990 levels by 2030. The 2030 target acts as an interim goal on the way to achieving reductions of 80% below 1990 levels by 2050, a goal set by former Governor Schwarzenegger in 2005 with Executive Order S-3-05. In starting his fourth term in 2015, Governor Brown has not been shy in laying out ambitious carbon reduction goals. In his inaugural address, the Governor called for increasing the state renewable portfolio standard (RPS) to 50%, reducing petroleum use in cars and trucks in California by 50%, and doubling building energy efficiency, all by 2030.

State legislators have also introduced bills this session to increase the RPS to 50% and amend AB 32 to reach 80% below 1990 GHG levels by 2050. AB 32, the California Global Warming Solutions Act of 2006, established the current statutory target of reducing GHG emissions to 1990 levels by 2020. The fate of the legislative proposals will be decided later this year, but in the meantime, Governor Brown has directed state agencies to implement measures to achieve the 2030 and 2050 goals under existing statutory authority. The Executive Order also specifically directed the California Air Resources Board to update its Climate Change Scoping Plan to incorporate the 2030 target. Continue Reading

SEPA Selects “Grid Market Structures” Paper Concept as a Focus of 51st State Summit

I’m pleased to announce that the Solar Electric Power Association has selected a paper authored by James Tong of Clean Power Finance, Jenny Hu and myself as one of three concepts that will focus discussion at SEPA’s 51st State Summit on Monday, April 27 in San Diego. Titled “The 51st State: Market Structures for a Smarter, More Efficient Grid,” the paper was selected from a dozen submitted by individuals and organizations from across the country.

You can view our paper concept at this SEPA link (PDF). A screenshot of the abstract of our paper is available at the end of this post.

As Gavin Bade of Utility Dive described in a review of our paper concept last week, James, Jenny and myself are calling for an Independent Distribution System Operator (IDSO) model under which the grid  would operate like a network “not unlike the Internet, stock market, or our capitalistic economy,” with millions of actors each day making value-based energy decisions on a “plug-and-play” grid with multi-directional electricity flows. Continue Reading

Jon Wellinghoff Joins Blogger Team at Renewable + Law Blog

Hi there, this is Jon Wellinghoff, former FERC chair and current Stoel Rives partner. I’m pleased to announce that effective today I have joined the Stoel Rives Renewable + Law blogger team. We thought it would be useful to share with you blog readers some of my thinking and writing on the topic of energy policy and energy transformation.

We’re going to kick things off today with a review of my recent press commentary, op-eds and announcements. In the future, I also expect to review some individual cases that have particular importance for U.S. and global energy policy as well as for energy industry participants.

What’s Happening?

On March 31, 2015, I appeared in a Q&A with Robert Fares of the Scientific American Blog titled “Wellinghoff: Extend Electricity Market Visibility to the Distribution Grid.”

On March 30, 2015, the Center for Resource Solutions announced that I will be joining their board of directors. Joining me on the board is Karin Corfee of Navigant Consulting. Read the release: http://www.resource-solutions.org/pressreleases/2015/033015.html

On March 28, 2015, The Texas Tribune published a Q&A I had with Jim Malewitz titled “Wellinghoff: Texas Needn’t Fret Over Climate Rules.”

On March 25, 2015, James Tong of Clean Power Finance and myself published an op-ed in Utility Dive titled “Tong and Wellinghoff: Are fixed charges a curse in disguise for investor-owned utilities?”

On March 25, 2015 I was featured in a front cover USA Today story titled “Power Grid Left Open to Attacks.”

On March 6, 2015 I published an op-ed in the Washington Post titled “Clean power is right for Virginia.”

Where’s Jon?

I am scheduled to attend the following events and conferences in April:

Beginning on April 27, I will be the keynote speaker at Infocast’s Grid Transformation Summit in New York, NY. I will also present at the event in a presentation titled “Moving Beyond Smart – Making the Distribution Grid More Open, Resilient and Efficient.”

Beginning on April 30, Lisa Polk Edgar of NARUC and I will be keynote speakers at NEM’s 18th Annual National Energy Restructuring Conference, in Washington D.C.

USFWS Publishes Northern Long-Eared Bat Listing Decision, Opts for Interim 4(d) Rule

In a long-anticipated move, the U.S. Fish and Wildlife Service (“Service”)has published a final listing decision and interim rule on the northern long-eared bat. The Service listed the northern long-eared bat as threatened under the Endangered Species Act (“ESA”), and, rather than publishing a final 4(d) rule, opted to publish an interim 4(d) rule and open a 90-day comment period to gather additional information and potentially refine the interim rule.

The effect of the interim 4(d) rule depends on the location of a particular activity. For areas of the country not affected by white-nose syndrome, the interim 4(d) rule exempts incidental take from all activities. For areas of the country affected by white-nose syndrome, the interim 4(d) rule exempts from ESA take prohibitions the following activities: (1) forest management practices, (2) maintenance and limited expansion of transportation and utility rights-of-way, (3) prairie habitat management, and (4 )limited tree removal projects, provided these activities protect known maternity roosts and hibernacula. These activities are exempted provided: (1) the activity occurs more than 0.25 mile (0.4 km) from a known, occupied hibernacula, (2) the activity avoids cutting or destroying known, occupied roost trees during the pup season (June 1–July 31), and (3) the activity avoids clearcuts (and similar harvest methods, e.g. seed tree, shelterwood and coppice) within 0.25 mile (0.4 km) of known, occupied roost trees during the pup season (June 1–July 31).

Importantly, due to the significant number of comments received in response to the 4(d) rule proposed on January 15, 2015, the Service has opened a 90-day comment and will accept further input on the interim rule through July 1, 2015. The Service has specifically asked for comments on “whether it may be appropriate to except incidental take as a result of other categories of activities beyond those covered in the proposed rule and, if so, under what conditions and with what conservation measures.” More information on the interim rule and opportunity to comment is available here.

Rep. Garofalo Posts Bold Minnesota Energy Omnibus Bill

Late this afternoon, Rep. Pat Garofalo posted a bold and significant omnibus bill on the web page for the Job Growth and Energy Affordability Policy and Finance Committee of the Minnesota House of Representatives.  This author has not gone through the bill in detail, but calls out the following provisions as noteworthy based on a quick review this afternoon:

  • Article 2: Changes related to energy conservation, including a December 31, 2016, sunset to the conservation improvement program, and corresponding creation of an energy conservation advisory taskforce with appropriation of funds for an energy technology business accelerator.
  • Article 3: Modifications related to renewable energy, including creation of an “advanced energy standard” that counts all hydroelectric generation as an eligible renewable technology in meeting an RPS increased by 2%; allowance for the solar energy standard to be met “through the use of solar energy or any other more affordable elligible energy technology;” creation of new siting and approval requirements for solar energy generating systems; modifications to the Made in Minnesota incentives; and a repeal of the Value of Solar subdivision in section 216B.164.
  • Article 4: Elimination of the 80% by 2050 greenhouse gas emissions goal and replacement of it with a continued goal of a general reduction in an affordable manner.
  • Article 5: Changes to general rate provisions, including an affirmative statement “to position Minnesota at the median among states with respect to energy rates;” establishment of a new performanced-based multiyear plan for utilities and competitive rate for energy-intensive trade-exposed customers (similar to e21 recommendations, coverage here); creation of a compressed natural gas vehicle rebate program; and direction to study the functions of the Department of Commerce – Division of Energy Resources, the low-income heating assistance programs, and the feasibility and potential costs and benefits of creating a state public power authority.

The Minnesota legislature will be on break next week, which will allow the bill some time to simmer before the legislature returns and takes these proposals up for discussion.  On March 19, the Senate Energy Committee voted out its omnibus bill.  Although there are similarities between the two bills, there are significant differences.  How these two pieces of proposed legislation proceed will be interesting to watch!

MN PUC Approves First Minnesota Multiyear Plan, But Work Remains on Implementation

Yesterday, the Minnesota Public Utilities Commission (the “Commission”) met to address the first general rate case filed under section 216B.16 subd. 19 of the Minnesota Statutes. Northern States Power Company, a Minnesota Corporation, d/b/a Xcel Energy submitted the multiyear rate petition on November 4, 2013. In that petition, Xcel Energy asked for an increase in retail electric rates in Minnesota of $192.7 million, or 6.9%, effective January 1, 2014, based on a forecasted 2014 test year, and a proposed return on equity capital of 10.25%. As part of its multiyear proposal, Xcel also asked for a calendar year 2015 step increase of $98.5 million, or 3.5%, effective January 1, 2015.  Over the last 500+ days, parties to the proceeding worked through the contested case process, addressing such issues as the revenue requirement, class cost of service study, and rate design.

On December 26, 2014, the Administrative Law Judge issued her Findings of Fact, Conclusions of Law, and Recommendations (“ALJ Report”). On January 16, 2015, Xcel Energy submitted a compliance filing noting that, if the ALJ Report were adopted in its entirety, Xcel Energy’s two-year rate increase would be reduced from $291.1 million to $191.3 million, based on a return on common equity of 9.77%.

The Commission did not adopt the findings and recommendation in the ALJ Report in their entirety. And given the complexity of the issues and their respective interrelationships, the impacts of all of the Commission’s decision yesterday on revenue requirement issues are not yet known. For example, the recent decisions regarding Monticello need to be folded in to the revenue requirement for 2014 and 2015 (coverage here). Another significant portion of yesterday’s decision relates to capital structure and return on equity. The Commission approved Xcel’s proposed capital structure comprised of 52.50% common equity, 45.60% long-term debt, and 1.90% short-term debt for 2014 and 52.50% common equity, 45.61% long-term debt, and 1.89% short-term debt for 2015. But the Commission adopted a hybrid ROE calculation that resulted in an return on common equity of 9.72%. The impact of the Commission’s resolution of other issues, such as pension, corporate aviation costs, will also need to be assessed.

With respect to class cost of service study issues, the Commission appeared to ignore concerns raised by the business community regarding Minnesota’s increasingly uncompetitive rates, rejecting proposed changes related to classification and allocation. Given that some of the changes were built into Xcel Energy’s filed class cost of service study, the Commission ordered that Xcel re-file its class cost of service study to incorporate the Commission’s resolution of various issues.

With respect to rate design, the Commission approved Xcel Energy’s proposed revenue decoupling mechanism (“RDM”), as a three-year pilot program. The Commission modified Xcel Energy’s proposal from a partial RDM to a full RDM and put a soft-cap limitation on the RDM billing rate increases. Xcel Energy is the first electric utility in Minnesota to receive approval of an RDM. A number of other rate design proposals were before the Commission, some of which were accepted and some of which were rejected. Notably, the Commission approved a proposal from a group of industrial consumers for a renewable energy purchase option – Xcel Energy was directed to work with customers to develop a tariff and bring it before the Commission for approval.

The Commission’s written decision will probably be issued in 3-5 weeks. Once received, Xcel Energy will have compliance filing work to complete, including revised schedules of rates and charges to reflect the Commission’s decision, a revised class cost of service study, and a proposal for addressing the interim rates that have been in effect since early 2014. Parties will have the opportunity to comment on these filings and submit petitions for reconsideration or clarification of the Commission’s decision.

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