Minnesota

Energy Efficiency Standards

The Next Generation Energy Act of 2007 amended existing energy conservation law to create an energy efficiency resource standard in Minnesota. The statutory requirements for energy efficiency savings (referred to as "conservation improvements") are found in Minn. Stat. 216B.241. The Energy Conservation and Optimization (ECO) Act, passed and signed into law in 202`1, expanded and modernized the state's EE framework.

Under ECO, Minnesota has an annual savings goal of 1.5% of annual retail sales for municipal and cooperative utilities (called consumer-owned utilities in the statute). Natural gas investor-owned utilities must reach a minimum of 1% savings, and electric IOUs must reach 1.75% savings, up from 1.5%. The ECO Act expanded what can be included as energy savings. In addition to traditional energy efficiency programs, utilities can also count energy savings from load management and efficient fuel-switching measures. The statute allows utilities to fuel-switch when the measure results in a net-reduction of source energy on a fuel-neutral basis, results in a net-reduction of greenhouse gas emissions, is cost-effective and improves the utility's system load factor.

The ECO Act also raised the minimum spending levels that utilities must spend on low-income programming. Consumer-owned utilities must spend at least .2% annually of residential gross operating revenues (GOR). Gas IOUs must spend 1% GOR (up from .4%) and electric IOUs must spend .6% GOR starting in 2024 (up from .2%). 15% of a utility's low-income spending requirement can be met through pre-weatherization measures.

Currently, investor-owned utilities file triennial Conservation Improvement Program(CIP) plans and annual status reports on their CIP performance and compliance from the past year. Cooperatives and municipal utilities submit annual plan updates and status reports, though ECO now allows consumer-owned utilities to submit plans on a three-year basis if they choose to. 

Resource Planning

Minnesota Public Utility Commission (PUC) rules require utilities to file integrated resource plans (IRPs) that consider all resources to meet future energy needs including demand-side resources from controlling customer loads and implementing customer energy conservation. Plans are filed biennially and must include a 15-year forecast of future energy needs.

Utilities filing a Certificate of Need application seeking to expand generation or transmission capacity must also include a load forecast and information about their energy efficiency activities.

Rate Structures & Incentives

Cost Recovery

Utilities can file rate schedules to recover the cost of conservation improvement programs. In its determination of just and reasonable rates, the commission is required to consider investment and expenses incurred in conservation improvement program implementation.

Lost Revenue Recovery

The PUC reviewed criteria and standards for decoupling in Docket Number 08-132, and filed an Order Establishing Criteria and Standards to be used in Pilot Proposals for Revenue Decoupling (Document ID: 20096-38723-01). (Note Minnesota PUC docket system does not allow permanent hotlinks, please search by docket number or document ID at their edockets search page)

Utility Incentives

The Commission is authorized to adjust utility incentives to reward progress toward meeting conservation improvement targets. Currently, all investor-owned utilities in Minnesota are operating under a shared savings model that awards utilities with an increasing percentage of net benefits as higher savings are achieved. The current form of the incentive was approved in early 2010, with an update in 2012 to slightly reduce incentives for electric utilities and increase the incentives for natural gas utilities. The Department of Commerce has been studying how to update this shared savings model in a long running PUC docket (08-133) and has proposed that utilities would receive 10% of net benefits for each .1% of achieved savings above their statutory requirements.

Utilities can file proposed methods for incentivizing conservation improvement performance. Incentives can include an increased rate of return, a shared savings model or other methodology approved by the commission that is consistent with implementing energy efficiency as a preferred, cost-effective energy resource.

Noncompliance Penalties

There are no direct monetary penalties for noncompliance with Conservation Improvement Plans, though a loss of performance incentives associated with achieving CIP targets would apply some economic pressure toward compliance. Additionally, a utility could be denied a Certificate of Need for the construction of a new facility if they do not demonstrate that they are meeting their CIP requirements.

Stakeholder Collaboration

The Department of Commerce initiates stakeholder collaboratives on such topics as calculating avoided costs of energy and improving the technical reference manual on both an as-needed and on-going basis. 

Program Evaluation

Cost-effectiveness Testing

Utility conservation improvement plans must be cost-effective at the program level "from the utility, ratepayer, participant and societal perspectives." Accordingly, the following cost-effectiveness tests are required: the Program Administrator Cost Test (PACT), the Ratepayer Impact Measure (RIM), the Participant Cost Test (PCT) and the Societal Cost Test (SCT).

The ECO Act of 2021 now allows the Department of Commerce to consider lifetime savings when calculating cost effectiveness of utility programs.

Net vs. Gross

Minnesota requires only gross energy savings to be reported. Annual reports must include actual energy savings, but there is no requirement for adjusting for free-ridership or spillover.

Technical Reference Manual

The Department of Commerce, Division of Energy Resources maintains the Technical Resource Manual for the Minnesota Conservation Improvement Programs. The TRM includes the deemed savings database of approved specifications for energy efficiency measures that utilities would include in their CIP plans. The deemed savings are reviewed and updated annually to include new technologies or revised savings levels. The current TRM (v.4.0) and past versions are hosted on the MN DOC website. 

State Energy Plan or Vision

The ECO Act of 2021 increased the state's annual energy savings goal from 1.5% to 2.5%. This statewide goal includes energy savings from utility energy efficiency programs, but also includes savings from rate design, efficient improvements to utility infrastructure, advancements in the state's energy codes and more.

Every four years, Minnesota releases its Energy Policy and Conservation Quadrennial Report. Its most recent version was released in 2024. This document serves to provide status updates on the state's energy supply, consumption, conservation and costs. The report is technical in nature and demonstrates the latest trends and provides data on whether or not the state will meet its energy-related goals and statutes. 

The state's Climate Action Framework is the document that seeks to shape state goals around climate policy. While the Quad Report demonstrates regional and state trends, the Framework serves to provide the state with tangible goals and policy suggestions to reduce greenhouse gas emissions. A new version of the Framework is set to be released in 2026.

Key Policymaker Contacts