SF 1197

1st Engrossment - 87th Legislature (2011 - 2012) Posted on 05/02/2011 02:22pm

A bill for an act
relating to energy; modifying provisions related to utility report filings,
weatherization programs, and public utility commission assessments; removing
obsolete and redundant language; providing for certain reporting requirements;
requiring utility rates be based primarily on cost of service between and among
consumer classes; making clarifying and technical changes; authorizing the
Public Utilities Commission to approve a multiyear rate plan for certain utilities;
providing for cost recovery for certain pollution control products; requiring
certain rate impact information related to compliance with renewable energy
standard; modifying conservation improvement program; modifying provision
relating to transmission projects reports; regulating charitable contributions and
securities issuance by utilities; relieving Energy Conservation Information Center
from certain data-gathering responsibilities; amending Minnesota Statutes 2010,
sections 16E.15, subdivision 2; 216B.03; 216B.07; 216B.16, subdivisions 7, 9,
15, by adding subdivisions; 216B.1691, by adding a subdivision; 216B.2401;
216B.241, subdivisions 1c, 2; 216B.2425, subdivision 2; 216B.49, subdivision
3; 216C.11; 216C.264; 216E.18, subdivision 3; repealing Minnesota Statutes
2010, section 216B.242.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2010, section 16E.15, subdivision 2, is amended to read:

Subd. 2.

Software sale fund.

(a) Except as provided in deleted text begin paragraphs deleted text end new text begin paragraph new text end (b)
deleted text begin and (c) deleted text end , proceeds of the sale or licensing of software products or services by the chief
information officer must be credited to the enterprise technology revolving fund. If a state
agency other than the Office of Enterprise Technology has contributed to the development
of software sold or licensed under this section, the chief information officer may reimburse
the agency by discounting computer services provided to that agency.

(b) Proceeds of the sale or licensing of software products or services developed by
the Pollution Control Agency, or custom developed by a vendor for the agency, must be
credited to the environmental fund.

deleted text begin (c) Proceeds of the sale or licensing of software products or services developed by
the Department of Education, or custom developed by a vendor for the agency, to support
the achieved savings assessment program, must be appropriated to the commissioner of
education and credited to the weatherization program to support weatherization activities.
deleted text end

Sec. 2.

Minnesota Statutes 2010, section 216B.03, is amended to read:

216B.03 REASONABLE RATE.

Every rate made, demanded, or received by any public utility, or by any two or
more public utilities jointly, shall be just and reasonable. Rates shall not be unreasonably
preferential, unreasonably prejudicial, or discriminatory, but shall be sufficient, equitable,
and consistent in application to a class of consumers new text begin and among classes of consumers new text end .
To the maximum reasonable extent, the commission shall set rates to encourage energy
conservation and renewable energy use and to further the goals of sections 216B.164,
216B.241, and 216C.05. Any doubt as to reasonableness should be resolved in favor of the
consumer. For rate-making purposes a public utility may treat two or more municipalities
served by it as a single class wherever the populations are comparable in size or the
conditions of service are similar.

Sec. 3.

Minnesota Statutes 2010, section 216B.07, is amended to read:

216B.07 RATE PREFERENCE PROHIBITED.

No public utility shall, as to rates or service, make or grant any unreasonable
preference or advantage to any person new text begin or class of consumers new text end or subject any person new text begin or class
of consumers new text end to any unreasonable prejudice or disadvantage.

Sec. 4.

Minnesota Statutes 2010, section 216B.16, is amended by adding a subdivision
to read:

new text begin Subd. 6e. new text end

new text begin Revenue allocation among consumer classes. new text end

new text begin Cost of service shall
be the primary consideration in the commission's determination of revenue allocation
among consumer classes. Factors other than cost of service, including impact on business
development and job growth, may also be considered and evaluated by the commission in
determining revenue allocations. Factors used in determining revenue allocation must
be supported by record evidence.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
and applies to filings for rate changes filed on and after that date.
new text end

Sec. 5.

Minnesota Statutes 2010, section 216B.16, subdivision 7, is amended to read:

Subd. 7.

Energy new text begin and emission control products new text end cost adjustment.

Notwithstanding
any other provision of this chapter, the commission may permit a public utility to file
rate schedules containing provisions for the automatic adjustment of charges for public
utility service in direct relation to changes in:

(1) federally regulated wholesale rates for energy delivered through interstate
facilities;

(2) direct costs for natural gas delivered; deleted text begin or
deleted text end

(3) costs for fuel used in generation of electricity or the manufacture of gas new text begin ; or
new text end

new text begin (4) prudent costs incurred by a public utility for sorbents, reagents, or chemicals
used to control emissions from an electric generation facility, provided that these costs are
not recovered elsewhere in rates. The utility must track and report annually the volumes
and costs of sorbents, reagents, or chemicals using separate accounts by generating plant new text end .

Sec. 6.

Minnesota Statutes 2010, section 216B.16, subdivision 9, is amended to read:

Subd. 9.

Charitable contribution.

The commission shall allow as operating
expenses only those charitable contributions deleted text begin which deleted text end new text begin that new text end the commission deems prudent and
deleted text begin which deleted text end new text begin that new text end qualify under section deleted text begin 290.21, subdivision 3, clause (b) deleted text end new text begin 300.66, subdivision 3 new text end .
Only 50 percent of the qualified contributions deleted text begin shall be deleted text end new text begin are new text end allowed as operating expenses.

Sec. 7.

Minnesota Statutes 2010, section 216B.16, subdivision 15, is amended to read:

Subd. 15.

Low-income affordability programs.

(a) The commission must
consider ability to pay as a factor in setting utility rates and may establish affordability
programs for low-income residential ratepayers in order to ensure affordable, reliable,
and continuous service to low-income utility customers. deleted text begin Affordability programs may
include inverted block rates in which lower energy prices are made available to lower
usage customers. By September 1, 2007, deleted text end A public utility serving low-income residential
ratepayers who use natural gas for heating must file an affordability program with the
commission. For purposes of this subdivision, "low-income residential ratepayers" means
ratepayers who receive energy assistance from the low-income home energy assistance
program (LIHEAP).

(b) Any affordability program the commission orders a utility to implement must:

(1) lower the percentage of income that participating low-income households devote
to energy bills;

(2) increase participating customer payments over time by increasing the frequency
of payments;

(3) decrease or eliminate participating customer arrears;

(4) lower the utility costs associated with customer account collection activities; and

(5) coordinate the program with other available low-income bill payment assistance
and conservation resources.

(c) In ordering affordability programs, the commission may require public utilities to
file program evaluations that measure the effect of the affordability program on:

(1) the percentage of income that participating households devote to energy bills;

(2) service disconnections; and

(3) frequency of customer payments, utility collection costs, arrearages, and bad
debt.

(d) The commission must issue orders necessary to implement, administer, and
evaluate affordability programs, and to allow a utility to recover program costs, including
administrative costs, on a timely basis. The commission may not allow a utility to recover
administrative costs, excluding start-up costs, in excess of five percent of total program
costs, or program evaluation costs in excess of two percent of total program costs. The
commission must permit deferred accounting, with carrying costs, for recovery of program
costs incurred during the period between general rate cases.

(e) Public utilities may use information collected or created for the purpose of
administering energy assistance to administer affordability programs.

Sec. 8.

Minnesota Statutes 2010, section 216B.16, is amended by adding a subdivision
to read:

new text begin Subd. 19. new text end

new text begin Multiyear rate plan. new text end

new text begin (a) A public utility may propose, and the
commission may approve, approve as modified, or reject, a multiyear rate plan as provided
in this subdivision. The term "multiyear rate plan" refers to a plan establishing the rates the
utility may charge for each year of the specified period of years to be covered by the plan.
The commission may approve a multiyear rate plan only if it finds that the plan establishes
just and reasonable rates for the utility, applying the factors described in subdivision 6.
new text end

new text begin (b) Rates charged under a multiyear rate plan must be based only upon the utility's
reasonable and prudent costs of service over the term of the plan, as determined by the
commission, provided that the costs are not being recovered elsewhere in rates. Rate
adjustments authorized under subdivisions 6b and 7 may continue outside of a plan
authorized under this subdivision.
new text end

new text begin (c) The commission may, by order, establish terms, conditions, and procedures
necessary to implement this subdivision, including a mechanism to periodically examine
a multiyear rate plan to ensure rates charged under the plan remain just and reasonable.
In reviewing a multiyear rate plan proposed in a general rate case under this section,
the commission may extend the time requirements for issuance of a final determination
prescribed in this section by an additional 90 days beyond its existing authority under
subdivision 2, paragraph (f).
new text end

Sec. 9.

Minnesota Statutes 2010, section 216B.1691, is amended by adding a
subdivision to read:

new text begin Subd. 2e. new text end

new text begin Rate impact of standard compliance; report. new text end

new text begin Each electric utility must
submit to the commission and the legislative committees with primary jurisdiction over
energy policy a report containing an estimation of the rate impact of activities of the
electric utility necessary to comply with section 216B.1691. The rate impact estimate
must be for wholesale rates and, if the electric utility makes retail sales, the estimate
shall also be for the impact on the electric utility's retail rates. Those activities include,
without limitation, energy purchases, generation facility acquisition and construction,
and transmission improvements. An initial report must be submitted within 150 days of
the effective date of this section. After the initial report, a report must be updated and
submitted as part of each integrated resource plan or plan modification filed by the electric
utility under section 216B.2422. The reporting obligation of an electric utility under
this subdivision expires December 31, 2025, for an electric utility subject to subdivision
2a, paragraph (a), and December 31, 2020, for an electric utility subject to subdivision
2a, paragraph (b).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 10.

Minnesota Statutes 2010, section 216B.2401, is amended to read:

216B.2401 ENERGY CONSERVATION POLICY GOAL.

It is the energy policy of the state of Minnesota to achieve annual energy savings
equal to 1.5 percent of annual retail energy sales of electricity and natural gas directly
through energy conservation improvement programs and rate design, deleted text begin such as inverted
block rates in which lower energy prices are made available to lower-usage residential
customers, deleted text end and indirectly through energy codes and appliance standards, programs
designed to transform the market or change consumer behavior, energy savings resulting
from efficiency improvements to the utility infrastructure and system, and other efforts to
promote energy efficiency and energy conservation.

Sec. 11.

Minnesota Statutes 2010, section 216B.241, subdivision 1c, is amended to
read:

Subd. 1c.

Energy-saving goals.

(a) The commissioner shall establish energy-saving
goals for energy conservation improvement expenditures and shall evaluate an energy
conservation improvement program on how well it meets the goals set.

(b) Each individual utility and association shall have an annual energy-savings
goal equivalent to 1.5 percent of gross annual retail energy sales unless modified by the
commissioner under paragraph (d). The savings goals must be calculated based on the
most recent three-year weather normalized average. A utility or association may elect to
carry forward energy savings in excess of 1.5 percent for a year to the succeeding three
calendar years, except that savings from electric utility infrastructure projects allowed
under paragraph (d) may be carried forward for five years. A particular energy savings can
be used only for one year's goal.

(c) The commissioner must adopt a filing schedule that is designed to have all
utilities and associations operating under an energy-savings plan by calendar year 2010.

(d) In its energy conservation improvement plan filing, a utility or association may
request the commissioner to adjust its annual energy-savings percentage goal based on
its historical conservation investment experience, customer class makeup, load growth, a
conservation potential study, or other factors the commissioner determines warrants an
adjustment. The commissioner may not approve a plan new text begin of a public utility new text end that provides for
an annual energy-savings goal of less than one percent of gross annual retail energy sales
from energy conservation improvements.

A utility or association may include in its energy conservation plan energy savings
from electric utility infrastructure projects approved by the commission under section
216B.1636 or waste heat recovery converted into electricity projects that may count as
energy savings in addition to deleted text begin the deleted text end new text begin a new text end minimum energy-savings goal of at least one percent
for energy conservation improvements. Electric utility infrastructure projects must result
in increased energy efficiency greater than that which would have occurred through
normal maintenance activity.

(e) An energy-savings goal is not satisfied by attaining the revenue expenditure
requirements of subdivisions 1a and 1b, but can only be satisfied by meeting the
energy-savings goal established in this subdivision.

(f) An association or utility is not required to make energy conservation investments
to attain the energy-savings goals of this subdivision that are not cost-effective even
if the investment is necessary to attain the energy-savings goals. For the purpose of
this paragraph, in determining cost-effectiveness, the commissioner shall consider the
costs and benefits to ratepayers, the utility, participants, and society. In addition, the
commissioner shall consider the rate at which an association or municipal utility is
increasing its energy savings and its expenditures on energy conservation.

(g) On an annual basis, the commissioner shall produce and make publicly available
a report on the annual energy savings and estimated carbon dioxide reductions achieved
by the energy conservation improvement programs for the two most recent years for
which data is available. The commissioner shall report on program performance both in
the aggregate and for each entity filing an energy conservation improvement plan for
approval or review by the commissioner.

(h) By January 15, 2010, the commissioner shall report to the legislature whether
the spending requirements under subdivisions 1a and 1b are necessary to achieve the
energy-savings goals established in this subdivision.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
and applies to energy savings plans for calendar year 2012 and thereafter.
new text end

Sec. 12.

Minnesota Statutes 2010, section 216B.241, subdivision 2, is amended to read:

Subd. 2.

Programs.

(a) The commissioner may require public utilities to make
investments and expenditures in energy conservation improvements, explicitly setting
forth the interest rates, prices, and terms under which the improvements must be offered to
the customers. The required programs must cover no more than a three-year period. Public
utilities shall file conservation improvement plans by June 1, on a schedule determined by
order of the commissioner, but at least every three years. Plans received by a public utility
by June 1 must be approved or approved as modified by the commissioner by December
1 of that same year. The commissioner shall evaluate the program on the basis of
cost-effectiveness and the reliability of technologies employed. The commissioner's order
must provide to the extent practicable for a free choice, by consumers participating in the
program, of the device, method, material, or project constituting the energy conservation
improvement and for a free choice of the seller, installer, or contractor of the energy
conservation improvement, provided that the device, method, material, or project seller,
installer, or contractor is duly licensed, certified, approved, or qualified, including under
the residential conservation services program, where applicable.

(b) The commissioner may require a utility to make an energy conservation
improvement investment or expenditure whenever the commissioner finds that the
improvement will result in energy savings at a total cost to the utility less than the cost
to the utility to produce or purchase an equivalent amount of new supply of energy. The
commissioner shall nevertheless ensure that every public utility operate one or more
programs under periodic review by the department.

(c) Each public utility subject to subdivision 1a may spend and invest annually up to
ten percent of the total amount required to be spent and invested on energy conservation
improvements under this section by the utility on research and development projects
that meet the definition of energy conservation improvement in subdivision 1 and that
are funded directly by the public utility.

(d) A public utility may not spend for or invest in energy conservation improvements
that directly benefit a large energy facility or a large electric customer facility for which
the commissioner has issued an exemption pursuant to subdivision 1a, paragraph (b).
The commissioner shall consider and may require a utility to undertake a program
suggested by an outside source, including a political subdivision, a nonprofit corporation,
or community organization.

(e) A utility, a political subdivision, or a nonprofit or community organization
that has suggested a program, the attorney general acting on behalf of consumers and
small business interests, or a utility customer that has suggested a program and is not
represented by the attorney general under section 8.33 may petition the commission to
modify or revoke a department decision under this section, and the commission may do
so if it determines that the program is not cost-effective, does not adequately address the
residential conservation improvement needs of low-income persons, has a long-range
negative effect on one or more classes of customers, or is otherwise not in the public
interest. The commission shall reject a petition that, on its face, fails to make a reasonable
argument that a program is not in the public interest.

(f) The commissioner may order a public utility to include, with the filing of the
utility's deleted text begin proposed conservation improvement plan under paragraph (a) deleted text end new text begin annual status
report new text end , the results of an independent audit of new text begin all or a selection of new text end the utility's conservation
improvement programs and expenditures performed by the department or an auditor
with experience in the provision of energy conservation and energy efficiency services
approved by the commissioner and chosen by the utility. The audit must specify the
energy savings or increased efficiency in the use of energy within the service territory of
the utility that is the result of the spending and investments. The audit must evaluate the
cost-effectiveness of the utility's conservation programs.

Sec. 13.

Minnesota Statutes 2010, section 216B.2425, subdivision 2, is amended to
read:

Subd. 2.

List development; transmission projects report.

(a) By November
1 of each odd-numbered year, a transmission projects report must be submitted to the
commission by each utility, organization, or company that:

(1) is a public utility, a municipal utility, a cooperative electric association, the
generation and transmission organization that serves each utility or association, or a
transmission company; and

(2) owns or operates electric transmission lines in Minnesota new text begin , except a company or
organization that owns a transmission line that serves a single customer or interconnects a
single generating facility new text end .

(b) The report may be submitted jointly or individually to the commission.

(c) The report must:

(1) list specific present and reasonably foreseeable future inadequacies in the
transmission system in Minnesota;

(2) identify alternative means of addressing each inadequacy listed;

(3) identify general economic, environmental, and social issues associated with
each alternative; and

(4) provide a summary of public input related to the list of inadequacies and the role
of local government officials and other interested persons in assisting to develop the list
and analyze alternatives.

(d) To meet the requirements of this subdivision, reporting parties may rely on
available information and analysis developed by a regional transmission organization
or any subgroup of a regional transmission organization and may develop and include
additional information as necessary.

Sec. 14.

Minnesota Statutes 2010, section 216B.49, subdivision 3, is amended to read:

Subd. 3.

Commission approval required.

It deleted text begin shall be deleted text end new text begin is new text end unlawful for any public
utility organized under the laws of this state to offer or sell any security or, if organized
under the laws of any other state or foreign country, to subject property in this state to
an encumbrance for the purpose of securing the payment of any indebtedness unless the
security issuance of the public utility deleted text begin shall deleted text end new text begin is new text end first deleted text begin be deleted text end approved by the commission new text begin , either
as an individual issuance or as one of multiple possible issuances approved in the course
of a periodic proceeding reviewing the utility's proposed sources and uses of capital funds new text end .
Approval by the commission deleted text begin shall deleted text end new text begin must new text end be by formal written order.

Sec. 15.

Minnesota Statutes 2010, section 216C.11, is amended to read:

216C.11 ENERGY CONSERVATION INFORMATION CENTER.

The commissioner shall establish an Energy Information Center in the department's
offices in St. Paul. The information center shall maintain a toll-free telephone information
service and disseminate printed materials on energy conservation topics, including but
not limited to, availability of loans and other public and private financing methods
for energy conservation physical improvements, the techniques and materials used to
conserve energy in buildings, including retrofitting or upgrading insulation and installing
weatherstripping, the projected prices and availability of different sources of energy,
and alternative sources of energy.

The Energy Information Center shall serve as the official Minnesota Alcohol Fuels
Information Center and shall disseminate information, printed, by the toll-free telephone
information service, or otherwise on the applicability and technology of alcohol fuels.

The information center shall include information on the potential hazards of energy
conservation techniques and improvements in the printed materials disseminated. The
commissioner shall not be liable for damages arising from the installation or operation of
equipment or materials recommended by the information center.

The information center shall use the information collected under section 216C.02,
subdivision 1, to maintain a central source of information on conservation and other
energy-related programs, including both programs required by law or rule and programs
developed and carried on voluntarily. deleted text begin In particular, the information center shall compile
and maintain information on policies covering disconnections or denials of fuel during
cold weather adopted by public utilities and other fuel suppliers not governed by section
216B.096 or 216B.097, including the number of households disconnected or denied fuel
and the duration of the disconnections or denials.
deleted text end

Sec. 16.

Minnesota Statutes 2010, section 216C.264, is amended to read:

216C.264 COORDINATING RESIDENTIAL WEATHERIZATION
PROGRAMS.

Subdivision 1.

Agency designation.

The department is the state agency to apply
for, receive, and disburse money made available to the state by federal law for the purpose
of weatherizing the residences of low-income persons. The commissioner must coordinate
available federal money with state money appropriated for this purpose.

Subd. 2.

Grants.

The commissioner must make grants of federal and state money
to community action agencies and other public or private nonprofit agencies for the
purpose of weatherizing the residences of low-income persons. deleted text begin Grant applications must
be submitted in accordance with rules promulgated by the commissioner.
deleted text end

Subd. 3.

Benefits of weatherization.

In the case of any grant made to an owner of a
rental dwelling unit for weatherization, the commissioner must require that (1) the benefits
of weatherization assistance in connection with the dwelling unit accrue primarily to the
low-income family that resides in the unit; (2) the rents on the dwelling unit will not be
raised because of any increase in value due solely to the weatherization assistance; and (3)
no undue or excessive enhancement will occur to the value of the dwelling unit.

deleted text begin Subd. 4. deleted text end

deleted text begin Rules. deleted text end

deleted text begin The commissioner must promulgate rules that describe procedures
for the administration of grants, data to be reported by grant recipients, and compliance
with relevant federal regulations. The commissioner must require that a rental unit
weatherized under this section be rented to a household meeting the income limits of
the program for 24 of the 36 months after weatherization is complete. In applying this
restriction to multiunit buildings weatherized under this section, the commissioner must
require that occupancy continue to reflect the proportion of eligible households in the
building at the time of weatherization.
deleted text end

Subd. 5.

Grant allocation.

The commissioner must distribute supplementary
state grants in a manner consistent with the goal of producing the maximum number of
weatherized units. Supplementary state grants are provided primarily for the payment of
additional labor costs for the federal weatherization program, and as an incentive for the
increased production of weatherized units.

Criteria for the allocation of state grants to local agencies include existing local
agency production levels, emergency needs, and the potential for maintaining or increasing
acceptable levels of production in the area.

An eligible local agency may receive advance funding for 90 days' production, but
thereafter must receive grants solely on the basis of program criteria.

Subd. 6.

Eligibility criteria.

To the extent allowed by federal regulations, the
commissioner must ensure that the same income eligibility criteria apply to both the
weatherization program and the energy assistance program.

Sec. 17.

Minnesota Statutes 2010, section 216E.18, subdivision 3, is amended to read:

Subd. 3.

Funding; assessment.

The commission shall finance its baseline studies,
general environmental studies, development of criteria, inventory preparation, monitoring
of conditions placed on site and route permits, and all other work, other than specific site
and route designation, from an assessment made quarterly, at least 30 days before the start
of each quarter, by the commission against all utilities with annual retail kilowatt-hour
sales greater than 4,000,000 kilowatt-hours in the previous calendar year.

Each share shall be determined as follows: (1) the ratio that the annual retail
kilowatt-hour sales in the state of each utility bears to the annual total retail kilowatt-hour
sales in the state of all these utilities, multiplied by 0.667, plus (2) the ratio that the annual
gross revenue from retail kilowatt-hour sales in the state of each utility bears to the annual
total gross revenues from retail kilowatt-hour sales in the state of all these utilities,
multiplied by 0.333, as determined by the commission. The assessment shall be credited
to the special revenue fund and shall be paid to the state treasury within 30 days after
receipt of the bill, which shall constitute notice of said assessment and demand of payment
thereof. The total amount which may be assessed to the several utilities under authority
of this subdivision shall not exceed the sum of the annual budget of the commission
for carrying out the purposes of this subdivision. The assessment for the deleted text begin second deleted text end new text begin third new text end
quarter of each fiscal year shall be adjusted to compensate for the amount by which actual
expenditures by the commission for the preceding fiscal year were more or less than the
estimated expenditures previously assessed.

Sec. 18. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2010, section 216B.242, new text end new text begin is repealed.
new text end