Minnesota utility regulators Thursday dismissed a complaint filed by solar developers against Xcel Energy, deciding not to investigate a controversial grid management policy that has restricted small rooftop arrays and larger community solar gardens.

The state Public Utilities Commission voted 4 to 0, in this instance, to stick with Xcel's judgment of when grid congestion would threaten system safety.

"I do believe that it is a high bar and should be a high bar ... for this commission to make a ruling on the company's reliability actions over their objections," said Commissioner Matthew Schuerger.

In September, the Minnesota Solar Energy Industries Association — along with a coalition of developers, customers and advocacy nonprofits — filed the complaint accusing Xcel of breaking the law when it set the restrictions in 2022. The group argued Xcel is exacerbating longstanding capacity problems on the company's power distribution network, claiming the utility cuts off 20% of space unnecessarily.

Xcel, however, says community solar is a major source of that congestion, prompting its "technical planning standard" meant to reserve some space on its power lines as a buffer.

When more energy flows onto Xcel's system than customers can use, it can lead to an excess power balance that risks equipment damage and failure. The company maintains it can use its engineering judgment to take action to head off that possibility.

Utilities traditionally transmit power by way of generating plants that are connected to transmission lines. But energy from rooftop and community solar flows back to Xcel for use elsewhere on the grid. This sends power both ways on the feeders and substations that handle power distribution.

Once an area reaches capacity, it's up to the solar developer — or customer hoping to build a rooftop array — to pay for infrastructure upgrades to the overall grid system because of state law and policy. Some have reported potentially $1 million estimates from Xcel, which will not hook up those projects until it is paid.

The dispute is another chapter in an often bitter debate over Minnesota's community solar garden system. The program allows people to subscribe to a small solar farm typically run by a for-profit developer. Xcel then pays a bill credit to those subscribers for their share of energy from the garden that goes back onto the company's grid.

It was meant as an alternative to individual rooftop solar projects, and its supporters say the program has been crucial to growing the industry in Minnesota while helping people participate in the energy transition and providing other economic benefits.

Xcel, on the other hand, has long argued the energy from community solar is more expensive than other options for its customers — which broadly foot the bill for the program. Xcel also has financial incentive to build its own energy generation rather than take it from community solar.

Before the hearing Thursday, the Minnesota Attorney General's Office told the PUC it should investigate Xcel's actions. The state Department of Commerce said Xcel appeared to have violated an earlier order from the PUC.

Schuerger said he had concerns about whether the planning standard was necessary. However, he said the commission had previously examined the regulation, even if based on limited information, and ultimately didn't stop Xcel.

"We didn't forbid it," he said.

Schuerger, who was participating in his last meeting as a commissioner, said the PUC will be diving into the grid capacity issue in more detail. The PUC could always revisit the Xcel community solar policy as it learns more, he said. The commission voted to require Xcel host meetings with interested parties about the justification for the grid policy.

Curtis Zaun, director of policy and regulatory affairs for the solar trade group, said it is considering challenging the PUC decision in court.

Lawmakers this year approved changes that aim to speed up the time it takes for residential customers to hook up small arrays to the grid, including $10 million for distribution system upgrades.

The Legislature also overhauled the community solar program, aimed in part at addressing criticisms and steering the arrays to serve more residential and low-income customers. But the existing community solar on Xcel's grid, which totals more than 860 megawatts, is far more than solar owned by the utility.