The Minnesota Legislature passed the Next Generation Energy Act in 2007, which established energy savings goals and conservation spending requirements for all of the state’s utilities. Great River Energy and our member cooperatives have worked to achieve the goals and requirements each year since the law took effect. Since 2010, Great River Energy’s members have realized nearly 1 billion kilowatt-hours in energy savings. In addition, we have realized significant savings as a result of efficiency improvements at our generation and transmission facilities. The annual savings associated with these programs exceed the total annual sales of several of our smaller member cooperatives. Great River Energy’s members met or exceeded their efficiency goals by engaging consumers to identify cost-effective energy efficiency investments. Excess energy savings are applied to the energy savings goals for subsequent years, as the legislation allows.
Great River Energy’s position
Although Great River Energy and our members have been successful in meeting the Minnesota energy conservation goals, we oppose any expansion to the state’s energy savings goals or increase in the Conservation Improvement Program (CIP). Minnesota’s Energy Savings Policy Goal states that “…cost-effective energy savings should be procured systematically and aggressively in order to reduce utility costs for businesses and residents.” For electric cooperatives, which are owned by their end-use members, any CIP goal increase would result in excessive financial hardship for both parties and does not reflect current resource needs.
We expect meeting future energy savings goals will be challenging due to a number of issues unique to electric cooperatives. They are:
- Co-ops predominantly serve residential customers: More than 80 percent of Great River Energy member-consumers are rural, residential customers which account for approximately 65 percent of our total energy sales. Today, there are fewer residential energy savings opportunities due to continued improvements to building codes, federal appliance and lighting standards, and limited new home construction.
- Co-ops serve residential members that are largely below the state average per capita income: Nearly 80 percent of Minnesota residential cooperative members have income levels below the state average. This limits consumer investment in energy conservation measures.
- Co-ops serve very few commercial or industrial customers: Energy savings from commercial or industrial customers is generally more cost-effective than achieving similar energy savings from residential customers.
- Costs associated with goal increases: In performing an internal analysis evaluating costs of increasing Great River Energy’s retail energy efficiency achievements from the 2015 level of about 1 percent, it is important to note that along with increased spending on incentives, utilities must also expand the amount that is spent on administration of the programs that help identify energy efficiency opportunities available to residents. Doubling our energy efficiency achievements would result in more than tripling our costs. This does not reflect a good investment on behalf of Great River Energy, our member-owners or their consumers.
Potential changes in the future
Great River Energy and our member cooperatives continue to educate members on both the importance of saving energy and how to take steps to participate in cooperative-sponsored programs that help to offset the upfront costs of energy efficiency. After complying with the legislation for nearly a decade, Great River Energy and our member cooperatives may reach the point where it is time to review portions of the law that are no longer valid or adversely affect our member-consumers. Some of the changes to the 2007 Next Generation Energy Act to consider in the future include:
- Allowing cooperative educational activities to count toward the energy savings goal: Many residential members are undertaking energy efficiency measures and changing their behavior as a result of the educational activities offered by their cooperative. The state should recognize these educational efforts by allowing full credit for energy savings from these activities to count toward meeting the energy savings goal.
- Recognizing the value of electrifying energy efficient technologies that reduce carbon dioxide (CO2) emissions: Minnesota’s energy puts significant emphasis on mitigating CO2 emissions, including a state goal of realizing an 80 percent reduction of CO2 emissions compared to 2005 levels by 2050. Electric utilities in the state have been the biggest contributor to these emissions reductions to date. Technology developments associated with electric end uses would suggest that further CO2 emissions reductions can result from the encouragement and promotion of energy efficient electric technologies that promote consumers switching from fossil fuel-based resources to ones that use electricity, primarily from renewables.
- Provide credit to load management activities and other grid-modernization efforts: As state policies drive utilities to procure larger percentages of renewable energy, utilities need to look for ways to better manage the variability of these resources and their impacts on the electric grid. Current policy treatments for load management, advanced metering, energy storage and time-of-use rate designs do not reflect the value that such programs can provide to the electric grid. Policies that better recognize the value associated with when energy is consumed will be important to furthering the overall efficiency of the electric grid and the integration of renewable energy.
- Shift focus from quantity of savings to system-wide efficiency improvements: Energy-efficient market transformation is occurring much more rapidly than when utility energy efficiency programs were originally conceived. Technological progress is being driven by federal legislation, new codes and standards, as well as manufacturer’s promotional efforts and numerous educational campaigns. Continuing to require utilities to meet efficiency requirements in the face of limited generation needs adds costs and limits the ability to make other system investments without further increasing consumers’ costs. Utility conservation efforts should shift the focus of these programs to demand- and-supply-side technologies that deliver system-wide benefits, not simply working to meet arbitrary goals.
Great River Energy and our member cooperatives will continue making a good faith effort to meet future energy savings goals by educating consumers about the importance of saving energy and encouraging participation in energy efficiency programs. We will also continue to advocate for changes to the 2007 Next Generation Energy Act that better reflect the cooperative business model and the unique challenges Minnesota electric cooperatives face to meet the goals that have been established.
Great River Energy and our member cooperatives are widely respected for our combined energy conservation efforts and for helping consumers use energy wisely. We have more than 30 years of experience doing so, and plan to continue to encourage demand side management efforts that are in the best interest of our members. Future revisions to the 2007 Next Generation Energy Act that acknowledge the unique challenges of the state’s electric cooperatives would help cooperatives meet future goals and protect them and their member-consumers from undue harm.
February 12, 2018