Energy deal with bipartisan support is a no go with Minnesota Legislature unable to pass a budget

Minnesota lawmakers had plenty of disagreements this year, failing to resolve differences over spending a massive and historic budget surplus on education, public safety, child care, nursing homes and more.

But the lack of a final deal also tanked legislation on topics where the Legislature actually did negotiate successfully. That includes, of course, the $3.88 billion tax bill made up of new cuts and credits. But there were other smaller bills dragged down too.

One was the state’s energy budget.

Committee leaders in the Republican-led Senate and the DFL-Majority House struck a deal to greatly expand a weatherization program that helps make homes more energy efficient, which supporters say helps reduce greenhouse gas emissions, saves residents money — particularly in Greater Minnesota — and creates blue-collar jobs. The broader disagreements meant the energy budget never got full approval from the Legislature, however.

The deal also included more money to build solar panels for public schools and, notably, provide state matching funds needed to get federal cash for energy infrastructure projects. 

Weatherization expansion

In total, the deal struck over the energy budget would have spent about $46.5 million from the state’s general fund over the next three years and another $36 million from the Renewable Development Account — which is paid for by fees on Xcel Energy for nuclear waste storage.

That cash would represent a small fraction of the state’s remaining one-year $7.05 billion surplus. It’s also much less than the $1 billion House Democrats wanted to use on a variety of climate change priorities throughout the state budget.

It would have been, however, still a considerable amount, especially in a supplemental budget year that usually might involve only tweaks to a full two-year budget approved in 2021.

One of the biggest spending items agreed to in the deal would have been $16.3 million for weatherization. It’s not a new idea. The state currently has a weatherization assistance program that is paid for largely by the federal government.

It helps eligible homeowners and renters with upgrades such as attic insulation, repair or replacement of a furnace, boiler or water heater or a programmable thermostat. And it’s targeted towards low-income people, the elderly, families with children, people with disabilities and those whose energy costs make up a greater share of their income.

Since 2005, the program has served about 60,000 people, said Kevin Lee, a deputy commissioner for the Minnesota Department of Commerce heading the agency’s energy resources division.

Federal funding for weatherization has waxed and waned over the years, hovering around $20 million a year on average but jumping up after the 2009 federal stimulus bill during the Great Recession and more recently because of the 2021 American Rescue Plan and the federal infrastructure bill.

Still, some lawmakers, state officials and environmental advocates have argued an expansion of the program with Minnesota cash would bring great benefits.

Lee said legislators had agreed that state money could be used more flexibly, allowing Minnesota to pay for what’s known as pre-weatherization work that fixes problems in homes that make the houses ineligible for federal weatherization help. That might be a plumbing or roof problem or issues with asbestos or mold.

The ups and downs in federal funding have also made finding a consistent weatherization workforce difficult, Lee said. The cash can help lure people into the industry and also would have included money to train about 100 workers in the sector, Lee said.

Minnesota also simply doesn’t spend as much on weatherization compared to many other states and even neighboring states. Rep. Jamie Long, a Minneapolis Democrat who chairs the House’s Climate and Energy Finance and Policy Committee, noted that in 2019, the state estimated it would take 291 years to serve all eligible households.

The University of Minnesota recently compared the state’s weatherization efforts to 20 others. Massachusetts spent the most — $129.7 million — in 2019, while Minnesota spent about $22 million. South Dakota spent the least at $2.1 million. Per capita, Minnesota ranked 12th out of the 21 states the U looked at, trailing neighboring states Iowa, North Dakota and Wisconsin. Many of those states use more money for weatherization that doesn’t come from the federal government.

Lee said the weatherization program saves people between 20 to 40 percent on their energy bill — and roughly reduces energy use by the same amount. The extra $16 million would have helped weatherize about 1,600 homes, about two-thirds of which would be in Greater Minnesota, Lee said.

Democrats and Republicans disagree plenty over energy and climate change policy. But the expansion of weatherization had bipartisan support at the Capitol.

Sen. Dave Senjem, a Rochester Republican who chairs the Senate’s Energy and Utilities Finance and Policy Committee, said houses in many parts of the state were built when energy was far cheaper and not built with weather resistance in mind. And Senjem said conservation of energy has to be a big part of the ongoing energy transition, saying the country can’t just rely on windmills and solar panels at this point.

“Any BTU that we can save within the home and not have it leak out is a BTU you don’t have to put through a gas pipeline or something like that,” Senjem said. “As we move away from certainly coal and natural gas at some point, nuclear probably at some point, we have to … conserve, it has to be part of the menu.”

Long said the program will create jobs and reduce energy use. “We know at a time of rising costs, helping people save money on their electricity bills is really important,” he said.

Matching funds at risk

Another part of the deal, which never passed, was money required by the federal government to access parts of the $1.2 trillion infrastructure deal known as the Infrastructure Investment and Jobs Act (IIJA).

Some of the money in the IIJA is doled out for energy projects in a broad array of competitive grant programs that require varying amounts of matching funds to cover part of any given initiative. Lee said the state is eyeing a program focused on “grid hardening,” which would fund projects to ensure the electricity grid can stand up to extreme weather. The energy budget deal had about $26 million for a “state competitiveness fund” aimed at matching federal grant money.

Without state match money, Minnesota’s allocation for that program will get redistributed elsewhere, though Lee said they’re still figuring out exact deadlines for matching funds on all the wide spectrum of grant programs.

Separately, Long said top legislative leadership separately approved $30 million to use for state matching funds needed for infrastructure programs.

Minnesota would also need to approve matching funds to use $68 million from the feds dedicated to expanding the state’s electric vehicle charging network.

Jake Loesch, a spokesman for the state Department of Transportation, said if the Legislature waited to approve state matching funds in the 2023 regular legislative session for the EV charging program, they expect “minimal risk of losing the money,” though it could delay development of the program and installation of chargers.

Long and Senjem said they hope the Legislature strikes a broad final deal they could pass in a special session that includes the energy money. Lee, from the Commerce Department, said there are consequences to not approving matching funds, or even more money for weatherization.

“It does get a little frustrating to just say ‘well we’re going to continue to let energy be a burden for our most vulnerable families for another year,’ ” Lee said.