Safeguards suggested for renewable development fund

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More than $165 million has been collected from Xcel Energy ratepayers and deposited into the utility’s Renewable Energy Development account since the fund was mandated by the Legislature in 1994. Its intent was to help generate renewable sources of electricity through solar, wind, hydro and biomass methods.

At the time, the fund’s creation was a condition that allowed Xcel Energy (then Northern States Power) to store spent nuclear fuel at its Prairie Island facility near Red Wing. The Legislature designated how much was collected per storage cask and the Public Utilities Commission would decide what projects would be funded with the help of an advisory board.

But an October 2010 report by the Office of the Legislative Auditor shows just how far astray the funds have gone.

For example, $10 million paid for preconstruction work on the proposed Excelsior Mesaba Energy Project, a state-of-the-art coal facility using Integrated Gasification Combined Cycle technology to generate electricity in northern Minnesota. The project is still in the permitting stages and there is a state moratorium on coal-generated power plants.

“The largest project funded by the RDF was something that the Legislature authorized – a coal-based power plant for clean coal energy that did not involve a form of renewable energy,” said Joel Alter, an auditor who worked on the report.

Lawmakers are pausing to consider what the return on investment has been and if legislative changes are needed in the process and policies associated with the fund.

The report was discussed Feb. 8 by the House Environment, Energy and Natural Resources Policy and Finance Committee. No action was taken.

In 2002, the Department of Commerce and the University of Minnesota Initiative for Renewable Energy & the Environment also began allocating part of the funds, especially to research and development projects. Legislative Auditor James Nobles said the fund migrated over the years because legislators saw a pot of money and diverted funds when other sources of funding were not available.

The report raises questions for lawmakers to consider for possible action this session, among them:

  • Who should administer the funds?
  • Can administrative costs be recouped through the RDF?
  • Should the private fund held by Excel Energy be brought under state coffers?
  • How can administrators provide better fund accountability and transparency?

Committee Chairman Denny McNamara (R-Hastings) said the policies have “serious shortcomings in a rather large fund” and he anticipates a bill being introduced this session as a result.