Purpose

This bill changes how small natural gas utilities can be exempt from regulation by the Minnesota Public Utilities Commission (MPUC). It lets municipalities work with the MPUC to exempt a small gas utility that operates under a municipal franchise from certain parts of state utility regulation, while still establishing protections and transparency for customers and outside-service areas.

Main provisions

• Exemption eligibility for small gas utilities:
  • A municipality may file with the MPUC a resolution requesting exemption for a public utility under a franchise to supply natural gas, serving 650 2500 or fewer customers in the municipality, as long as the utility serves no more than a total of 5000 customers from the system serving the municipality and located outside the municipality’s corporate limits (as stated in the bill text).
• Scope of exemption:
  • The MPUC must grant an exemption for that portion of the utility’s business covered by the exemption.
  • The MPUC must also grant an exemption for any service outside the municipality that the commission considers incidental.
• Rates, tariffs, and contracts for outside-service:
  • The utility must file all initial and subsequent changes in rates, tariffs, and contracts for outside-service with the MPUC and the state Department of Commerce at least 30 days before implementation.
  • The same applicable tariff rates must apply to customers outside the municipality as inside.
• Customer protections and oversight:
  • The MPUC may require the utility to adopt the commission’s policies and procedures governing disconnection during cold weather.
  • The utility must annually submit municipally approved rates to the MPUC.
• Procedures and oversight:
  • In cases where an exemption for service outside the municipality is granted, the MPUC may initiate an investigation on its own motion or upon customer complaint.
  • If a municipality rescinds its exemption resolution, the MPUC shall regulate the public utility’s business in that municipality under this section.
• Definition of key term:
  • The bill defines “system” as physically connected infrastructure owned and operated by a public utility that receives wholesale natural, manufactured, or mixed gas and delivers it to customers, and is not physically connected to another system owned by the same utility.

Changes to existing law

• Amends Minnesota Statutes 2024 section 216B.16 subdivision 12 to establish a new framework for municipal exemptions from regulation for small gas utilities, including scope, outside-service allowances, filing requirements, and oversight mechanisms.

How this would work in practice

• A city with a small gas utility would determine if the utility meets the threshold criteria and file a resolution with the MPUC requesting an exemption for the relevant portion of the utility’s business.
• If granted, the exemption would cover the specified service area, including limited customers outside the municipality if incidental, with rates outside the municipality aligned to inside rates.
• The utility would follow disconnection policies during cold weather and provide annual rate updates to the MPUC.
• The MPUC could still investigate complaints or act on its own if issues arise, and a rescission of the exemption by the municipality would return regulation to the MPUC for the affected area.
• The term “system” clarifies what portion of the utility’s operations are eligible for exemption (the physically connected infrastructure serving customers and not connected to another of the utility’s systems).

Potential implications

• For small gas utilities and participating municipalities, this creates a pathway to reduced state regulatory oversight in exchange for certain transparency, reporting, and consumer protections.
• Outside-service areas deemed incidental must still follow reporting and rate parity requirements.
• Regulators retain authority to address consumer complaints and cold-weather disconnection practices.

Relevant Terms exemption, Minnesota Public Utilities Commission, MPUC, small gas utility, municipal franchise, municipality, rates, tariffs, contracts, outside-service, incidental, disconnection during cold weather, cold-weather policies, system, wholesale gas, regulatory relief, municipal resolution, investigation, rescind, regulated, unregulated.