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Legislative Audit Commission Meeting


October 22, 2010

Members Present:

Representative Michael Beard Senator Don Betzold
Representative Rick Hansen Senator David Hann
Representative Bill Hilty Senator Ann H. Rest
Representative Ron Shimanski Senator Claire Robling

Members Absent:

Representative Mary Liz Holberg Senator Joe Gimse
Representative Steve Simon Senator James Metzen

Other Members Present:

Senator Sandy Rummel


Senator Ann Rest, Chair, called the Legislative Audit Commission (LAC) meeting to order at 10:03 a.m. Senator Rest said the purpose of the meeting was to release the evaluation, Renewable Energy Development Fund. Senator Rest noted that the commission would begin the meeting without a quorum present.

Senator Rest introduced Jim Nobles, Legislative Auditor. Mr. Nobles said that the evaluation is timely and important because people consume enormous amounts of energy, mostly from nonrenewable sources. Mr. Nobles explained that in 1994 the Legislature established a fund to help foster the creation of electricity from renewable sources. The LAC asked the OLA to examine the impact of the fund on renewable energy. Mr. Nobles introduced Joel Alter, evaluation manager for the Renewable Energy Development Fund evaluation. Mr. Alter said the overall conclusions of the report were that the Renewable Development Fund (RDF) was established with an unusual structure and funding source; RDF allocations have increasingly become legislatively designated and administratively fragmented; and the RDF has had limited impact so far and needs a clearer purpose and stronger accountability to ratepayers.

Senator Rest noted at 10:20 a.m. that a quorum had been attained. 

Mr. Alter went on to explain several recommendations for the Legislature, including: 1) clarification of the RDF’s purpose and structure; 2) adoption of RDF reporting requirements; and 3) authorization and limits on the use of RDF revenues to pay for administrative costs.

Senator Rest asked representatives from the Public Utilities Commission (PUC) to come forward for comments and questions. Mr. David Boyd, Chair, introduced himself and Mr. Burl Haar, Executive Secretary. Mr. Boyd said that the portion of the RDF under the PUC’s oversight is functional, responsive to the missions of the PUC and RDF, and accountable to Xcel Energy ratepayers. He said it would be appropriate for the Legislature to provide additional direction on the purpose of the RDF. He believes the PUC should continue to have a role in RDF oversight if Xcel ratepayers continue to pay for RDF projects. In response to questions, Mr. Boyd said it would be reasonable for the Legislature to consider making the RDF a statewide program, rather than a program linked entirely to Xcel’s operation of nuclear power plants. If the Legislature did this, he said, it could consider revising the RDF’s purposes and funding sources, perhaps with funding from all electrical ratepayers in the state.

Senator Rest asked representatives from the Department of Commerce to come forward. Mr. Bill Glahn, Deputy Commissioner, offered no general statements on the report, but in response to questions he said the department has played a role in selecting some of the RDF projects and grantees.

Senator Rest welcomed representatives from Xcel Energy: Ms. Grania McKiernan, Manager of Minnesota Governmental Affairs, and Mr. Tim Edman, Regulatory Administration. Ms. McKiernan said, in light of the RDF’s current funding sources, Xcel would be concerned if the RDF were declared a state fund and used to benefit persons other than Xcel customers. In response to a question from Senator Hann, Ms. McKiernan said the RDF’s benefits are difficult to quantify, but the fund’s creation was one condition that has allowed Xcel to continue operating its nuclear power plants. In response to a question from Representative Hansen, Mr. Edman said some entire RDF grants or portions of grants have been returned to the RDF account in cases in which a project did not proceed or had costs below the initial grant award.

Senator Rest next welcomed Mr. Richard Hemmingsen, Director of the University of Minnesota’s Initiative for Renewable Energy and the Environment (IREE). Mr. Hemmingsen said the University is in the process of implementing several of the OLA recommendations, such as improving access to reports on the IREE Web site and ensuring that research findings are presented in an understandable way. He said state law has provided clear direction regarding the purposes for which IREE may use RDF funds. When asked by Senator Hann about the benefits of RDF expenditures, Mr. Hemmingsen said the RDF has supported graduate students at the University, leveraged additional research dollars, and advanced scientific knowledge.

Finally, Senator Rest invited comments from Mr. Bill Grant of the Izaak Walton League. Mr. Grant is a member of the RDF Board, but he clarified that his comments were not intended to represent the board as a whole. Mr. Grant expressed concern about the policy option raised in the report of giving the Legislature a more formal role in oversight of the RDF. He said the RDF Board’s process for recommending RDF projects has considered a wide range of competing projects, in contrast to the Legislature’s process for selecting projects. In response to a question from Senator Hann, Mr. Grant explained the composition of the RDF Board, noted that the appointment process for board members is ad hoc, and said the board is accountable to the PUC.

Senator Rest asked Mr. Nobles for any concluding comments. Mr. Nobles reiterated the need for legislative clarification of the purpose and structure of the Renewable Development Fund and RDF Board. Regarding the reluctance expressed by some people to bring the RDF more formally into the legislative process, Mr. Nobles said the Legislature is already playing an important role in RDF allocations. He said that any future legislative actions regarding RDF allocations should be made using a transparent process with a clear basis in law.

Senator Rest thanked Mr. Nobles and the staff from the OLA for their work on the report. She also said she was hopeful that the new legislative session would bring about new policies for this program. With no further business, the meeting was adjourned at 11:58 a.m.

Senator Ann H. Rest, Chair

Shelly Watterud, Recording Secretary


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