The Minnesota House and Senate agreed this week on expanding the state's energy conservation program, the most significant energy legislation in recent years.

The Energy Conservation and Optimization Act should increase spending by utilities on conservation programs, particularly to low-income households. Gov. Tim Walz is expected to sign the legislation.

"It's possibly the biggest piece of energy legislation we have passed in several years," said Rep. Jamie Long, DFL head of the House Committee on Climate and Energy Finance and Policy. "This will be really meaningful."

The House and Senate also agreed on "natural gas innovation" legislation, which would make it easier for gas utilities to use "renewable" natural gas and carbon-free hydrogen. The agreement, made in a conference committee, will be taken up when the Legislature reconvenes for a special session in June.

Despite much debate over energy in the last several sessions, the Republican Senate and DFL House haven't agreed to any broad new policies. And again this year, some major DFL clean-energy initiatives failed or have been left hanging.

For example, the DFL's push for 100% carbon-free electricity in Minnesota by 2040 went nowhere in the Senate, as similar attempts have in recent years. The chambers also are far apart on electric vehicle legislation.

Still, Long and clean energy advocates hope some sort of compromise can be worked out in June.

"Obviously there are bigger changes needed, but this looks to be the most impactful session for energy in several years," said Justin Fay, director of public affairs at FreshEnergy, a St. Paul-based research and advocacy group.

The new energy conservation act, which had been knocking around the Legislature for a few years, ended up with bipartisan support despite opposition from the Minnesota Chamber of Commerce.

The legislation updates the state's decade old Conservation Improvement Program (CIP), which helps households and businesses use electricity and natural gas more efficiently. At the same time, it lessens the need for new utility infrastructure while cutting greenhouse gas emissions.

Under the legislation, the average energy savings goal for investor-owned electric utilities will be increased somewhat. Also, the amount that electric and gas utilities must specifically spend on conservation for low-income households will increase significantly.

Plus, utility conservation programs can now be "fuel neutral," meaning a customer, for instance, can switch from a gas appliance to an electric one as long as the move is cost efficient and cuts carbon emissions.

The costs of CIP programs is paid for by utility ratepayers. However, the energy savings from conservation makes up for that cost many times over, ratepayer and clean-energyadvocates say.

"Energy efficiency is by far the cheapest way to meet customers' needs," said Annie Levenson-Falk, executive director of the Citizens Utility Board of Minnesota, a ratepayer watchdog group.

The natural gas legislation, which was heavily backed by CenterPoint Energy, creates a regulatory framework for gas utilities to do cleaner-energy projects.

CenterPoint, the state's largest gas utility, has been pursuing renewable gas — for example, nonfossil-fuel methane from livestock manure, landfills and water treatment refuse.

The company also has plans for a pilot project in Minneapolis that would turn electricity from renewable sources into hydrogen through electrolysis (which splits water into its oxygen and hydrogen components).

These technologies could be years away from affordable, large-scale deployment. But the new law would allow CenterPoint and other utilities to recover investments in such projects from ratepayers — even though they won't be low-cost projects, at least at first.

The legislation would cap what utilities could recover from ratepayers; CenterPoint said that assuming regulators approve any of their plans, the average residential customer would pay no more than $1 per month in 2023 at the earliest.

In the conference bill to be taken up again in June, the House and Senate have already agreed to a $5 million grant this year to the Mountain Iron Economic Development Authority to expand a city-owned building used by Heliene, a solar panel manufacturer.

Heliene, which started in Mountain Iron, Minn., in 2018, has been growing fast. The $5 million would come from the state's renewable development account, which is funded by Xcel Energy as a condition of nuclear waste storage near its Prairie Island nuclear plant.

The renewable development account also would pay for a roughly $8 million measure that would help fund solar power deployment at Minnesota public schools. The House and Senate conference committee on energy is close to agreement on that program, Long said.

The House and Senate have already agreed on creating a revolving loan fund for energy conservation improvements at state-owned buildings, Long said. It, too, would be funded through the renewable development account.