Minnesota Legislative Session Review – Energy
A relatively quiet session on energy issues at the Minnesota Legislature does not indicate a lack of discussion. Although only a narrowly tailored energy bill passed, several topics were front and center.
1) Reforming Net Energy Metering (NEM) and Community Solar Gardens. Although the 2024 session addressed a significant overhaul of these programs, several special interest groups continue to push for change on this topic. Notably, Minnesota rural electric cooperatives and municipal utilities seek to reduce compensation for NEM projects operating in their territories. These groups claim that NEM customers do not pay their fair share for electricity infrastructure—a common refrain from utilities around the country. Solar advocates dispute that characterization. For example, it is not unusual for rural customers to have multiple meters on their property that are billed at different rates. While the house is billed at a residential rate, other locations (e.g., farm equipment, barn) are billed on commercial, industrial, or other rates. So while solar may be located on their premises and billed at one meter, the excess electricity would offset usage for separately metered places on their property. Effectively, the farmers’ solar helps run other operations on their property—to the customer’s benefit.
Efforts on community solar gardens exposed a key split between Democratic-Farmer-Labor (DFL) party members in the Minnesota House versus the Minnesota Senate: Senate DFL members have sought to overhaul, if not eliminate, the entire community solar garden program, while House DFL members have successfully kept the program alive.
2) Data Centers. A significant amount of time was taken at the end of session, extending into a special session, to deal with data center growth. One of the main differences in Minnesota’s discussion as compared to other states was a focus on water issues. The final bill directed the creation of a special tariff that would apply to data centers and other large users, allow the utilities to offer a clean energy tariff, and ensure that costs to serve large customers are not borne by the overall electric rate base. Work on this comes after Amazon pulled out of building a data center in Minnesota due to a decision of the Minnesota Public Utilities Commission (PUC) to deny a waiver related to the construction of over 200 distributed generators located on the site.
3) Virtual Power Plants. The Minnesota House Energy Finance and Policy Committee held a hearing on a bill to create requirements for a virtual power plant (VPP) tariff to be implemented by the PUC. While the legislature took no action on the bill, it does set up the topic for a more detailed discussion in next year’s session. Important points for this conversation revolve around the role of the utility in owning VPPs and crowding out non-utility-owned VPPs. Additionally, Minnesota’s largest electric utility, Xcel Energy, is set to file its own version of a VPP plan in early October.
4) Repeal of Right of First Refusal (ROFR) for New Transmission Projects. For the third session in a row, bills were introduced to repeal Minnesota’s ROFR law protecting electric monopolies from needing to compete to build new transmission lines. ROFR laws have been subject to intense debate across the Midwest, particularly in Minnesota neighbor states Iowa and Wisconsin, where utilities and their allies sought to pass these laws. The Iowa Supreme Court overturned Iowa’s initial ROFR law last year, but the utilities tried again. Significant opposition to ROFR has come from pro-market voices as well as from the Trump administration and the Department of Justice.
What’s Next for Minnesota
Looking to the next legislative session, it is increasingly important that Minnesota enact policy solutions that promote competition. For example, repealing its ROFR law would enable lower costs and more competition in the construction of transmission lines throughout the state. In the data center discussion, an option should be to allow those large customers to shop and directly procure electricity from competitive suppliers. This would further reduce risk to Minnesota’s ratepayers, as the costs to build that generation would be borne entirely by the data centers or other large customers. Allowing direct procurement of generation by large customers would also provide them with the opportunity to choose the source of their generation, such as 100 percent renewable power purchase contracts to the extent a company has such carbon commitments. While this choice should be available to more Minnesota customers, it is clear that large customers like data centers have a unique place in the electricity grid.
In R Street’s recently released “State-by-State Scorecard on Electricity Competition,” we looked at alternatives within the traditionally regulated utility system and access to usage information. Minnesota received a D-. Amongst the recommendations for Minnesota are to lower barriers to entry for distributed energy resource (DER) providers and interested customers and create a viable marketplace for non-utility offerings. Introducing options for more competitive solutions, whether through generation or from third-party DERs, would move Minnesota in a more positive direction. This also includes repealing the state’s prohibition on demand response aggregators.
In Remembrance: Minnesota Mourns
On the morning of June 14, 2025, Minnesotans awoke to the horrific news that Speaker Emerita Melissa Hortman, her husband, and their dog were assassinated. State Sen. John Hoffman and his wife, also shot that day, were wounded and have recovered. The loss of Speaker Emerita Hortman is not only a loss to Minnesota and the legislature, but she was an important voice on energy matters. Before becoming speaker, Rep. Hortman was chair of the House Energy Policy Committee and chief author of Minnesota’s solar energy standard and community solar laws passed in 2013. Her leadership on energy matters was invaluable in ensuring customers did not lose the opportunity to choose alternative providers of electricity through the community solar program. I was lucky enough to know her and to have several meetings with her to discuss energy matters for Minnesota. She leaves a long legacy of achievement and an even longer list of people, including myself, who will miss her.