Yesterday afternoon, the Minnesota Public Utilities Commission approved the methodology for calculating value of solar (VOS) tariffs in Minnesota as developed by the Department of Commerce. In doing so, Minnesota became the first in the nation to adopt a VOS tariff methodology.

The Commission was required by statute to take action on the VOS calculation methodology by the end of the month. It had three options: to approve it as proposed, reject it, or approve it with modifications and with the consent of the Department. For background on the Department’s January 31st recommendation, see our blog posts here and here. The Department subsequently included several modifications affecting the fuel price escalation factor, the avoided distribution capacity cost, and the environmental cost categories.

In its ruling, the Commission approved the Department’s methodology, as amended, by a 3-2 vote.

The motion to approve carried after extensive discussion on the appropriate cost or placeholder value for the avoided carbon dioxide emissions associated with solar generation. The Department selected a federal social cost of carbon value because it felt this calculation more appropriately captured the marginal damage value of incremental additional units of energy. Others had argued a different value should be used, including an existing externality value set in the state two decades ago or a more recent planning value. Further complicating the discussion was the fact that Minnesota is separately about to review these externality values in a separate docket.

Ultimately the Department’s use of a federal social cost of carbon value was adopted, but the Commission also separately voted to clarify that the Commission’s adoption of the Department’s methodology values was not intended to have any precedential effect.

The Commission declined to incorporate various additional value components including a separate value for the transferred renewable energy certificate or for solar energy standard compliance that would be over and above the environmental benefit value already included in the Department’s methodology. In addition several issues were raised and discussed that the Commission ultimately determined were outside the scope of this decision but worth further consideration. In order to follow up on these issues the Commission directed staff to solicit comments on the effect of the decision on existing net metered-customers, conformity with PURPA, REC ownership disclosure and other issues. In certain cases, it also determined the Commission would have another chance to more directly consider the issues when a specific utility tariff that applies the methodology is before the Commission for approval.

Next Steps
The next step in the process is for utilities to determine whether to elect to create an alternative tariff based on the methodology for customer projects 1MW and under and then file the proposed tariff with the Commission. Xcel Energy will file a VOS tariff, at a minimum, for the utility’s developing Community Solar Garden Program (CSG). Within 30 days of the Commission’s Order approving the VOS methodology, Xcel must file a VOS tariff for the purposes of its CSG program, or file a VOS calculation for the CSG program and show cause why the rate should not be implemented.