The Minnesota Legislature is poised to change the workings of a state renewable energy fund that critics say has been misused in recent years.

The House is expected to vote this week on a bill that more explicitly spells out the purpose of the Renewable Development Fund (RDF), that Xcel Energy began contributing to in 1994 in exchange for permission to store spent fuel at its Prairie Island nuclear plant.

The bill, authored by Republican Sen. Julie Rosen, aims to make the RDF more efficient, more transparent, and more beneficial for Xcel ratepayers, who pay into the fund. The plan was unanimously approved by the state Senate last week.

Policy associates for Fresh Energy, which also publishes Midwest Energy News, have been among those making recommendations for changes to the program.

Moratorium about to expire

Between 1999 and 2010, Xcel contributed $165 million to the RDF, funding more than 200 renewable energy projects. But in 2011, the legislature placed a moratorium on RDF funds until July 1 of this year. A 2010 state auditor’s report said “the fund’s administration has grown more fragmented over time, and its impact on the generation of electricity from renewable sources has often been indirect and limited.”

Over the years, money had been set aside annually from the fund for the University of Minnesota, the Department of Commerce, and individual projects like the Mesaba Energy Project, which received $10 million in funding in 2005. Those appropriations bypassed the established approval process, by which Xcel administered the fund and evaluated potential projects, then submitted them for approval to the fund’s Advisory Board and ultimately the Public Utilities Commission (the advisory board includes a representative from Fresh Energy).

“We wanted to make sure that we got the legislature out of appropriating any more dollars from the fund,” Rosen said.

Clarifying fund’s purpose

Rosen’s bill specifies that RDF funds can only be used for renewable electricity, or transmission projects that benefit renewable electricity sources. While critics say this is too limiting – the original law used the words “renewable energy” – the fund’s architects say that was the program’s original intent.

The bill also requires that all projects seeking funding go through the same approval process. That’s a sticking point for the University of Minnesota, which says the approach may prevent funding recipients from landing federal matching funds.

“For opportunities to get matching funds, faculty often have a month or less to respond, and the process for approval would be too cumbersome for that kind of funding,” said Dick Hemmingsen, managing director of the University of Minnesota’s Initiative for Renewable Energy and the Environment, which has campaigned against the bill.

Some still worry that Xcel will have a stronger hand to use the money in ways it wasn’t intended for, and that the composition of the advisory board should be spelled out more clearly in the legislation. But board members say that the PUC has final say over which projects receive funding, and that Xcel has never overridden the board before and is unlikely to now.

Rick Evans, director of government affairs for Xcel, said that the proposed changes will ultimately be good for the fund and for Minnesota’s ratepayers. “It helps to establish a system where there’s a lot of public accountability for how the money is spent,” he said.

Holly Dolezalek is a Minneapolis-based freelance writer whose work has appeared in the Minneapolis-St. Paul Business Journal, Finance and Commerce, and other publications.