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Efficiency, Transmission, Base Load Supply and Renewable Energy

Issue

How can the Legislature and regulatory agencies most effectively maximize investments in efficiency, base load electricity and renewable energy technologies to ensure that Minnesota customers can continue to depend on reliable, cost-effective electricity?

Policy

Summary:

  • Efficiency – Reward successful investments by businesses and utilities
  • Transmission – Expedite development of a robust system
  • Generation – Leave all technology options on the table
  • Renewables – Support objectives, not mandates

Energy Efficiency: Incentives for All Customers:

  • As an efficiency measure, require the Public Utilities Commission to set rates based primarily on the cost of service to the customer class, so all classes are subject to roughly similar price signals relative to their energy usage.
  • Conservation initiatives should be designed, or redesigned, to focus on energy savings rather than spending.
  • Customers should be given incentives to use their electricity more efficiently. Technology needed to support voluntary initiatives (i.e., “smart meters”) could be financed by the Conservation Improvement Program (CIP).
  • Eliminate any financial bias with respect to rate of return for electricity sold versus electricity conserved.
  • Give all businesses with proven efficiency practices the opportunity to be exempt from CIP charges.
  • Customers should expect minimal standards on CIP administration, regardless of their utility, so customers have a minimal set of expectations on which they can rely, and utilities still can plan for their distinctive customer base. Specifically, customers should:
    • Be aware that they are paying into CIP and have access to a rebate. This could be accomplished by a specific CIP line item on the customers’ electric bill,
    • Have a list of examples of efficiency improvements that qualify for CIP rebates, customized by customer class to the extent possible; and,
    • Receive an estimate of the expected rebate if efficiency improvements are made.

Transmission

  • Allow greater access to highway and other existing rights-of-way (including interstate highways) for transmission lines.
  • Impose a strict timeline on the process for obtaining approvals for transmission improvements. Requests should be deemed approved as proposed if established deadlines are not met.
  • Require the Public Utilities Commission to consider only transmission-related topics when considering a new line. The discussion should focus on the impact on reliability to the system and the route of the line, not the technology used to generate the electricity.

Increasing Base Load Supply

  • Maximize the existing generation base by supporting policies that encourage cost-effective, environmentally sound improvements necessary to improve the efficiency of existing base load resources (i.e., Xcel Energy’s King plant.) The Minnesota Chamber opposes policies that would close facilities prematurely or reduce their ability to continue operating cost effectively.
  • Ensure that the PUC is able to consider all base load generating technologies. For example, the Legislature should remove the ban on issuing a Certificate of Need for a new nuclear power facility.
  • Impose a strict timeline on the process for obtaining approvals for new generation facilities. Requests should be deemed approved as proposed if established deadlines are not met.
  • The retail price of electricity must be a key factor in determining whether power plant improvements and/or new facilities are cost effective. To this end, no state or local policies should be adopted which limit the ability of utilities or regulators to make the most cost-effective electricity supply decisions. We recognize that the definition of “cost-effective” may change with each specific facility. Options that might be the most cost effective in one location or circumstance may not be practical in another.

Renewable Energy

  • Define “renewable” energy consistently in state law. Define “renewable” energy by excluding from the definition that which is not renewable, such as energy generated from fossil fuels or from nuclear sources. This policy would support increased renewable energy by counting all renewable energy currently in operation, and encouraging technological innovations that are not defined under current law as “renewable.” Some improvements in renewable energy we could expect from such a clarification are:
    • Counting renewable energy used by Minnesota customers, regardless of where it is produced.
    • Counting (for example), all hydroelectric, biomass, solar, landfill gas, refuse-derived fuels, geothermal and wind generation.
    • Counting all power not generated due to demand-side management (conservation), as measured by Minnesota utilities.
    • Ensuring that renewable energy credits are counted in the same manner as renewable energy.
  • Customers’ reliability and retail cost should be the primary factors considered in any adjustments to the Renewable Energy Objective (REO). Use the results of the 2006 wind integration study to evaluate and potentially change the REO. This could mean adjusting the overall REO and/or making adjustments for each utility so the utility’s goal takes precedence over the statewide objective.
  • Allow customers that own and generate their own renewable electricity to transport the power to where it will be used. Transmission-owning utilities should allow this activity, assuming the power can be transported without reducing reliability to other customers. This will encourage additional development in renewable electricity generation for customers who do not own property in areas of the state with insufficient wind resources.
  • Count electric customers’ and utilities’ demand side management (DSM) savings toward renewable energy objective goals.
  • Oppose renewable energy mandates, unless in the context of allowing customers to shop for electricity. Outside a competitive market, a renewable mandate is the most expensive and least reliable way to build Minnesota’s renewable industry.
  • Report to customers on the economic and environmental benefits Minnesota customers have experienced as a result of their investment in renewable technologies. The Department of Commerce should write an annual report on the breakdown of the resources used to generate Minnesota’s electricity, the relative cost of each generation technology, their reliability relative to one another, and how these factors affect ratepayers. The report should include the number of renewable energy-related jobs created in Minnesota, as well as their nature (i.e., full-time manufacturing, full-time technical, part-time construction).

Business Impact

Minnesota’s electricity system needs a fresh look by policy-makers and stakeholders. Customers are in jeopardy of losing a traditional advantage of doing business in Minnesota, that being reliable, competitively priced electricity. This policy is part of a broad strategy to reduce our demand, increase our efficiency and add cost-effective supply to Minnesota’s system.

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