On October 28, 2024, the Minnesota Public Utilities Commission (MN PUC) approved a new framework that requires the state’s three largest gas utilities to conduct long-term planning with public participation and commission approval. The approved framework adds to Minnesota’s status as a state that is leading the effort in in making gas utility system planning more robust and transparent.
How we plan and regulate gas distribution infrastructure used for heating buildings and powering many industrial processes in the US is gaining greater attention. Two primary drivers of this focus are decarbonization efforts to address climate change and consumer protection from the financial and reliability impacts of short-term planning.
Minnesota is of particular interest due to its widespread use of natural gas for space and water heating and its cold climate, which creates a high demand for heating fuel. The risks of short-term planning became clear when Winter Storm Uri caused unprecedented natural gas price spikes throughout the US. In the aftermath, the MN PUC investigated the impacts of severe weather events on gas utilities and their customers, finding gas resource planning to be in the public interest and initiating a process to establish a new long-term planning framework for gas distribution.
Since May 2023, GPI has convened a monthly meeting of the state’s gas utilities, consumer advocates, environmental advocates, organized labor, government agencies, and others to learn about gas planning frameworks from other states and to develop comments to the commission on what Minnesota’s framework should be.
Key things to know
- Natural gas is a critical energy source to address when it comes to climate change and energy affordability: Public utility commissions have jurisdiction over utilities that deliver the natural gas we use to heat our homes and buildings. The benefits of natural gas include its relatively low cost and abundance as a domestic energy source. However, its combustion and leakage both contribute to greenhouse gas (GHG) emissions, and its combustion indoors (e.g., via gas stoves) releases pollutants that can be harmful to human health. It is also subject to price volatility during extreme weather and geopolitical events.
- Minnesota has established a new framework for long-term gas planning: For the first time, the MN PUC has established a long-term planning framework that requires the state’s three largest gas utilities to involve stakeholders in modeling their system under various scenarios ten years out.
- Minnesota’s new framework is nation-leading: Minnesota’s new framework is both rigorous and transparent to help reach the state’s GHG emissions reduction goals, protect affordable rates for customers, and maintain safe and reliable service.
- The framework helps ensure gas utilities are making prudent investments: Electrification incentives, climate goals, and extreme weather events are challenging the traditional gas utility business model. The requirements, stakeholder scrutiny, and commission approval within Minnesota’s new framework will help utilities, regulators, and stakeholders navigate those challenges.
Digging deeper: Gas utility planning framework scope
The new framework requires gas utilities to file integrated resource plans (IRPs) every three years, with a ten-year planning horizon and a five-year action plan. Other states’ gas planning horizons range from five to twenty years.
Xcel Energy must file its first IRP by July 1, 2026, followed by CenterPoint Energy in 2027 and Minnesota Energy Resources in 2028. The framework objectives are to determine the energy resources that protect ratepayers, maintain “safe, reliable, and affordable service,” and advance state policy, specifically directing utilities to consider state GHG reduction goals.
The commission may “approve” the IRPs, which enables the acquisition of short-term action plan resources but does not constitute a finding of prudency (that must be determined separately when utilities petition the commission to increase their rates).
The commission will evaluate IRPs based on their availability to maintain safe and reliable service, keep customers’ bills low, minimize adverse socioeconomic and environmental impacts, prioritize energy savings, and enhance utilities’ abilities to limit risks from changes in financial, social, and technological factors affecting their operations.
Planning requirements for gas utilities in Minnesota
To develop their IRPs, gas utilities will forecast high, medium, and low demand for gas over the next 10 years and then identify resources to meet that demand. Those resources must include a wide variety of options, such as fossil gas, renewable natural gas, hydrogen, energy efficiency, heat pumps, and thermal energy networks. The utilities must evaluate the resources and associated infrastructure options on a comparable and consistent basis.
Gas utilities will include a section in the IRPs that discusses risks and uncertainties around economic conditions, new technologies, and relevant environmental policies. That context will inform an assessment of risk and uncertainties of demand, availability, and price for resources, including costs to comply with GHG emissions regulations. They must also report GHG emissions from their distribution system operations, including methane leakage rates, a description of leak abatement practices, and any upstream emissions information that gas suppliers have available.
Under the new framework, utilities must also conduct an Expansion Alternatives Analysis (EAA), which will assess alternatives to planned expansions of the gas system (for example, extending gas lines to a newly developed neighborhood). The EAA will consider non-pipeline or non-natural-gas alternatives, costs and benefits (including the social cost of carbon), air quality impacts, and equity.
The EAA analysis will first identify up to 10 expansion projects above $1 million that would be suitable for the EAA and then work with stakeholders to select two to three projects from that list for the full analysis. Utilities must prioritize projects that have learning potential and are in low-income areas, environmental justice areas (as defined in Minn. Stat. § 116.065, subd. 1(e) (2023)), and/or Indigenous communities. Investments related to routine maintenance, public works accommodation, integrity, reliability, and safety are not part of the IRP or EAA.
The framework also requires gas utilities to work with electric utilities in their respective service territories to understand how electrification may reduce the demand for gas. The commission explained that it understands this may be difficult as a gas utility may overlap with multiple electric service territories, but this information will be helpful to maintain affordability and equity as customers increasingly adopt electric space and water heating appliances.
New IRP part of a broader gas utility innovation effort in Minnesota
Minnesota’s 2021 Natural Gas Innovation Act (NGIA) directed the commission to initiate two additional proceedings focused on gas system innovation and decarbonization. The NGIA required the development of a framework to evaluate voluntary gas utility “innovation plans” that reduce or avoid emissions. GPI had the pleasure of convening parties to jointly develop that framework, which the commission approved in September 2022.
The NGIA also directed the commission to evaluate changes to gas utility regulatory and policy structures needed to meet Minnesota’s GHG emissions reduction goals, inciting the commission to open a Future of Gas proceeding. GPI’s Minnesota Gas Utility Innovation Roundtable, which meets monthly, will convene parties to support that proceeding. We anticipate that stakeholder discussions will initially focus on strategies to maintain affordable and equitable service for gas customers, including potential impacts from electrification.
Together, the gas IRPs, innovation plans, and Future of Gas investigation provide a foundation to ensure Minnesota’s energy system can decarbonize while maintaining affordable rates and safe, reliable service.
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