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A rare bipartisan bill aims to help Minnesota lower emissions while offering significant savings for low-income families, including many people of color.
Governor Tim Walz signed the Energy Conservation and Optimization (ECO) Act into law May 25. The bill modernizes the state’s Conservation Improvement Program, a long-term energy- efficiency policy that experts say has saved Minnesotans billions of dollars while avoiding millions of tons in carbon emissions since it began in the 1980s.
The bill increases the amount investor-owned utilities, like Xcel Energy and Minnesota Power, and municipal providers are required to spend on programs benefiting low-income customers. It increases annual energy savings goals for utilities across the state. And it implements a pathway for residents to switch fuel sources from natural gas to electricity, which increasingly comes from renewable energy like wind and solar.
“It’s better for the environment but it’s also better for their bank accounts,” Minnesota Commerce Department Commissioner Grace Arnold told Sahan Journal.
Easing energy burdens
Environmental and consumer advocacy groups agree, saying the bill will give the biggest benefits to low-income households while cutting greenhouse gas emissions.
“I’m mostly excited about the spending for under-resourced households,” said Ben Passer, director of energy access and equity for Fresh Energy, a Minnesota nonprofit that promotes a carbon-neutral economy.
Fresh Energy has lobbied for the ECO Act since 2016, when the Legislature began to discuss an update to the Conservation Improvement Program, which was last modified in 2007. The legislation has mostly stayed the same, but the updated version just signed into law contains more spending for low-income households than prior iterations did.
The bill passed the DFL-led House of Representatives in 2020, but the Republican-held Senate didn’t put it up for a vote. It enjoyed broader bipartisan support this year, with Representative Zack Stephenson (DFL–Coon Rapids) and Senator Jason Rarick (R–Pine City) sponsoring the bill in their chambers.
The more energy efficient households are, the less energy it takes to power them, which decreases the amount of greenhouse gas emissions needed to create that power. Less affluent people and many new Americans may live in older, less energy-efficient housing with older, less efficient appliances. Providing power for these homes can prove more expensive, and result in higher levels of pollution.
“A significant amount of our energy production goes to lost energy,” Arnold said.
Historically, Conservation Improvement Program initiatives have helped households become more energy efficient by updating to technologies such as LED light bulbs, and offering low-cost or free energy audits. The ECO Act offers larger rebates that can help with more significant purchases, such as a new, more efficient furnace.
“We’re hitting the limits on small things you can do so we’re moving into bigger investments,” Arnold said.
Low-income residents “stand to benefit the most,” from the ECO Act, according to Annie Levenson-Falk, executive director of the nonprofit Citizens Utility Board, a consumer advocacy group in Minnesota.
Low-income Minnesotans are disproportionately people of color. About 10 percent of Minnesotans live in poverty, according to the Minnesota Department of Health. But those figures are higher for communities of color: 28 percent of Black and Native American residents live in poverty, as do 19 percent of Minnesotans identifying as Hispanic and nearly 12 percent of Asians.
People of color are more likely to pay a higher share of their income on energy bills, according to a 2020 study from University of California–Berkeley’s Energy Institute at Haas.
Minnesota ratepayers are eligible for Conservation Improvement Program benefits regardless of immigration status, unlike some federal energy assistance programs that require a social security number to register.
The legislation allows Conservation Improvement Program spending on health and safety issues for low-income households that will lead to overall savings. That means dollars can be spent resolving electric wiring issues and removing vermiculite insulation, which is known to be contaminated with asbestos, a potential air-borne carcinogen.
Reaching low-income customers to offer energy savings
The bill requires increased spending for programs benefiting low-income households. But it is up to the utilities to decide how that spending will occur. Utilities will need to find ways to reach customers, who often are unaware about programs they could benefit from, experts say.
“What I’m hopeful for is that ECO will also prompt innovation in customer outreach,” Passer, from Fresh Energy, said.
The ECO Act went into effect immediately. Utility providers will begin developing and rolling out expanding Conservation Improvement Programming in the next year. There is no set time frame for when providers will begin offering expanded benefits to customers. Minnesota residents can also contact their providers about energy efficiency programs.
The ECO Act recognizes that when energy is used is as important as what source of energy is used, Levenson-Falk said. It creates incentives for utility providers to offer special rates to power large appliances, such as water heaters, during off-peak hours, when electricity demand is low, saving customers money.
Utilities typically have programs that customers can opt into that will automatically turn off an appliance during the brief periods when rates peak. (Another option involves switching fuel sources during these events.) The ECO Act will encourage expanding those offerings.
Fuel switching to lower emissions
A key update in the ECO Act is a provision allowing Conservation Improvement Program money to go toward fuel switching.
Today in Minnesota, natural gas heats most homes and buildings, especially in the metro area. Many rural communities rely on propane as a heat source.
The new bill incentives households and businesses that want to switch from a fossil fuel heat source (natural gas, propane, or heating oil) to an electric system, such as an air pump heat source (more on that technology in a moment). Now, investing in that change can count toward a utility’s Conservation Improvement Program spending. Customers will be able to get rebates or incentives from utility companies to go all-electric.
Air-source heat pumps use electricity to compress cold air from the outdoors to hot air inside buildings. The technology works increasingly well in cold climates and is catching on in Minnesota.
“We really see the Conservation Improvement Program as a great tool in creating a decarbonized building sector,” said Margaret Cherne-Hendrick, director of energy transition with Fresh Energy.
Minnesota is not on track to meet the greenhouse gas emission reduction targets set by the Next Generation Energy Act. This 2007 state law seeks to reduce emissions 80 percent by 2050. Residential emissions have risen 32 percent since 2005 and constitute the state’s fifth-leading source of greenhouse gases, according to a 2021 report by the Minnesota Pollution Control Agency. Commercial building emissions are also up 15 percent since 2005.
Emissions from electricity generation have fallen by 29 percent since 2005, a trend expected to continue as renewable sources grow and coal plants shut down. Overall emissions in Minnesota are down just 8 percent since 2005, leaving the state far from meeting its stated goal of a 30 percent reduction in greenhouse gas emissions by 2025.