Purpose

• Designates thermal energy networks as a type of public improvement that municipalities can plan, fund, build, operate, and maintain. The bill also expands the general list of projects municipalities may pursue and updates related definitions to formalize how these energy networks fit into local government authority.

Main Provisions

• Improvements municipalities can undertake (expanded list)
  • Adds permission to construct and maintain thermal energy networks (also called district heating systems) as public improvements.
  • Keeps and expands other typical improvements municipalities may do, such as streets, sidewalks, storm and sanitary sewers, water works, flood control, parks, pedestrian skyways and underground concourses, public plazas, and district heating systems.
  • Allows energy-related projects in existing buildings, including heating, ventilation, air conditioning (HVAC), building envelopes, and renewable energy installations, under specific conditions (see energy financing and notice requirements below).
  • Enables municipalities to fund and administer energy improvement projects, with funds used only for specified energy-related work.
  • Creates rules for financing improvements and notifying mortgage lenders before financing occurs (for properties being improved).
  • Allows assessment of affected property owners to cover some costs for burying or upgrading utility distribution lines if the project is petitioned under existing procedures.
• Internet and communications rights-of-way
  • Allows municipalities to install and maintain facilities for Internet access and other communications.
  • Requires non-discriminatory treatment of nonmunicipal service providers and keeps a clear separation between the municipality’s role as a regulator and as a service provider.
  • Sets terms for access to public rights-of-way (such as conduits, towers, and poles) and for fees charged to access municipal facilities.
  • Requires separation of regulatory activities from competitive service provision activities and prohibits sharing certain internal information between these roles.
• Energy improvements and notices
  • Provides for energy improvement projects in buildings, including the need for a petition by a property owner and municipality funding/administration.
  • Requires project funds to be used for specific purposes (heating, ventilation, air conditioning, building envelope, and renewable energy systems).
  • Requires property owners to be informed about free or low-cost energy improvements available through federal, state, or utility programs.
  • For residential properties, energy improvement financing can be offered for buildings with five or more units, with lender notice requirements before financing.
• Specific authorization for thermal energy networks
  • Section 23 grants explicit authority to construct, reconstruct, extend, operate, maintain, and promote thermal energy networks as defined in statute.

Definitions and Changes to Law

• Update to waterworks and related terms
  • Adds thermal energy networks to the definitions of waterworks (as part of “waterworks systems”).
  • Broadens the definition of “facilities” to include waterworks, sanitary sewers, and storm sewers (potentially alongside thermal energy networks).
• Municipal terminology
  • Clarifies that “municipality” includes cities (home rule or statutory) and towns, and defines the governing body for towns as the town board.

Significant Changes to Existing Law

• Broadening of municipal powers
  • Thermal energy networks are now explicitly authorized as public improvements, expanding what municipalities can build and own.
  • Thermal energy networks are incorporated into the waterworks framework, affecting how they are financed, regulated, and integrated with other utilities.
• Regulatory and market separation
  • Creates explicit rules to keep the municipality’s role as a regulator separate from its role as a competitive service provider in communications.
  • Requires protection of sensitive information, preventing cross-use of internal data between regulator and provider functions.
• Financing and property impacts
  • Introduces processes for property-owner assessments and financing for energy projects, with specific notice and petition requirements.
  • Establishes mechanisms for funding energy improvements and for ensuring property owners are aware of broader energy programs that could reduce costs.

Potential Implications

• Municipal energy autonomy
  • Cities and towns could own and operate thermal energy networks and district heating, potentially changing how energy is delivered at the local level.
• Cost and financing dynamics
  • Property owners may face assessments for specific improvements, and residential buildings with multiple units could access financing for energy projects under certain conditions.
• Market effects
  • The rules aim to balance municipal energy services with private providers, particularly in communications, potentially influencing local competition and rights-of-way access.

Relevant Terms - thermal energy networks - district heating - public improvements - waterworks - facilities - sanitary sewer - storm sewer - Internet access facilities - rights-of-way - conduits, towers, utility poles - non-discrimination - regulator vs competitive provider separation - petition under section 429.031 subdivision 3 - bury or alter distribution system - energy improvement project - energy improvement financing (216C.436 subdivision 7; 216C.437 subdivision 28) - energy improvements in existing buildings - mortgage lender notice - 216B.2427 subdivision 1 paragraph s - Minnesota Statutes 2024 sections 429.021 and 444.075 - definitions: Municipality, Governing body, Waterworks, Sanitary sewer, Storm sewer, Facilities