HF 4574

as introduced - 93rd Legislature (2023 - 2024) Posted on 04/02/2024 01:10pm

A bill for an act
relating to energy; allowing public utilities providing electric service to propose
goals for efficient fuel-switching improvement achievements to the commissioner
of commerce; authorizing the commission to approve a financial incentive for
public utilities providing electric service to implement efficient fuel-switching
improvements; allowing recovery of certain advertising expenses of public utilities;
increasing utility research allowance to account for efficient fuel-switching and
load management investments; repealing a requirement that natural gas utilities
meet a certain threshold of energy efficiency savings to be eligible for a financial
incentive for efficient fuel-switching improvements; amending Minnesota Statutes
2022, sections 216B.16, subdivisions 6c, 8; 216B.2402, subdivisions 4, 10, by
adding a subdivision; 216B.2403, subdivisions 2, 3, 5, 8; 216B.241, subdivisions
1c, 2, 11, 12; 216B.2411, subdivision 1.

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

Section 1.

Minnesota Statutes 2022, section 216B.16, subdivision 6c, is amended to read:

Subd. 6c.

Incentive plan for energy conservation new text begin and efficient fuel-switching
new text end improvement.

(a) The commission may order public utilities to develop and submit for
commission approval incentive plans that describe the method of recovery and accounting
for utility conservation new text begin and efficient fuel-switching new text end expenditures and savings. In developing
the incentive plans the commission shall ensure the effective involvement of interested
parties.

(b) In approving incentive plans, the commission shall consider:

(1) whether the plan is likely to increase utility investment in cost-effective energy
conservation new text begin or efficient fuel switching new text end ;

(2) whether the plan is compatible with the interest of utility ratepayers and other
interested parties;

(3) whether the plan links the incentive to the utility's performance in achieving
cost-effective conservation new text begin or efficient fuel switching new text end ; and

(4) whether the plan is in conflict with other provisions of this chapter.

(c) The commission may set rates to encourage the vigorous and effective implementation
of utility conservation new text begin and efficient fuel-switching new text end programs. The commission may:

(1) increase or decrease any otherwise allowed rate of return on net investment based
upon the utility's skill, efforts, and success in deleted text begin conserving deleted text end new text begin improving the efficient use of new text end
energy new text begin through energy conservation or efficient fuel switching new text end ;

(2) share between ratepayers and utilities the net savings resulting from energy
conservation new text begin and efficient fuel-switching new text end programs to the extent justified by the utility's
skill, efforts, and success in deleted text begin conserving deleted text end new text begin improving the efficient use of new text end energy; and

(3) adopt any mechanism that satisfies the criteria of this subdivision, such that
implementation of cost-effective conservation new text begin or efficient fuel switching new text end is a preferred
resource choice for the public utility considering the impact of conservation new text begin or efficient fuel
switching new text end on earnings of the public utility.

Sec. 2.

Minnesota Statutes 2022, section 216B.16, subdivision 8, is amended to read:

Subd. 8.

Advertising expense.

(a) The commission shall disapprove the portion of any
rate which makes an allowance directly or indirectly for expenses incurred by a public utility
to provide a public advertisement which:

(1) is designed to influence or has the effect of influencing public attitudes toward
legislation or proposed legislation, or toward a rule, proposed rule, authorization or proposed
authorization of the Public Utilities Commission or other agency of government responsible
for regulating a public utility;

(2) is designed to justify or otherwise support or defend a rate, proposed rate, practice
or proposed practice of a public utility;

(3) is designed primarily to promote consumption of the services of the utility new text begin , excluding
efficient fuel-switching programs approved under section 216B.241, subdivision 11, and a
public utility's transportation electrification plan approved by the commission under section
216B.1615, subdivision 3 new text end ;

(4) is designed primarily to promote good will for the public utility or improve the
utility's public image; or

(5) is designed to promote the use of nuclear power or to promote a nuclear waste storage
facility.

(b) The commission may approve a rate which makes an allowance for expenses incurred
by a public utility to disseminate information which:

(1) is designed to encourage deleted text begin conservation deleted text end new text begin efficient use new text end of energy supplies;

(2) is designed to promote safety; or

(3) is designed to inform and educate customers as to financial services made available
to them by the public utility.

(c) The commission shall not withhold approval of a rate because it makes an allowance
for expenses incurred by the utility to disseminate information about corporate affairs to its
owners.

Sec. 3.

Minnesota Statutes 2022, section 216B.2402, is amended by adding a subdivision
to read:

new text begin Subd. 3a. new text end

new text begin Data mining facility. new text end

new text begin "Data mining facility" means all buildings, structures,
equipment, and installations at a single site where electricity is used primarily by computers
to process transactions involving digital currency not issued by a central authority.
new text end

Sec. 4.

Minnesota Statutes 2022, section 216B.2402, subdivision 4, is amended to read:

Subd. 4.

Efficient fuel-switching improvement.

"Efficient fuel-switching improvement"
means a project that:

(1) replaces a fuel used by a customer with electricity or natural gas delivered at retail
by a utility subject to section 216B.2403 or 216B.241;

(2) results in a net increase in the use of electricity or natural gas and a net decrease in
source energy consumption on a fuel-neutral basis;

(3) otherwise meets the criteria established for consumer-owned utilities in section
216B.2403, subdivision 8, and for public utilities under section 216B.241, subdivisions 11
and 12; and

(4) requires the installation of equipment that utilizes electricity or natural gas, resulting
in a reduction or elimination of the previous fuel used.

An efficient fuel-switching improvement is not an energy conservation improvement or
energy efficiency even if the efficient fuel-switching improvement results in a net reduction
in electricity or natural gas use. deleted text begin An efficient fuel-switching improvement does not include,
and must not count toward any energy savings goal from, energy conservation improvements
when fuel switching would result in an increase of greenhouse gas emissions into the
atmosphere on an annual basis.
deleted text end

Sec. 5.

Minnesota Statutes 2022, section 216B.2402, subdivision 10, is amended to read:

Subd. 10.

Gross annual retail energy sales.

"Gross annual retail energy sales" means
a utility's annual electric sales to all Minnesota retail customers, or natural gas throughput
to all retail customers, including natural gas transportation customers, on a utility's
distribution system in Minnesota. Gross annual retail energy sales does not include:

(1) gas sales to:

(i) a large energy facility;

(ii) a large customer facility whose natural gas utility has been exempted by the
commissioner under section 216B.241, subdivision 1a, paragraph (a), with respect to natural
gas sales made to the large customer facility; and

(iii) a commercial gas customer facility whose natural gas utility has been exempted by
the commissioner under section 216B.241, subdivision 1a, paragraph (b), with respect to
natural gas sales made to the commercial gas customer facility;

(2) electric sales to new text begin :
new text end

new text begin (i) new text end a large customer facility whose electric utility has been exempted by the commissioner
under section 216B.241, subdivision 1a, paragraph (a), with respect to electric sales made
to the large customer facility; deleted text begin or deleted text end new text begin and
new text end

new text begin (ii) a data mining facility, if the facility:
new text end

new text begin (A) has provided a signed letter to the utility verifying the facility meets the definition
of a data mining facility, as defined in subdivision 3a; and
new text end

new text begin (B) imposes a peak electrical demand on a consumer-owned utility's system equal to or
greater than 40 percent of the peak electrical demand of the system, measured in the same
manner as the utility that serves the customer facility measures electric demand for billing
purposes; or
new text end

(3) the amount of electric sales prior to December 31, 2032, that are associated with a
utility's program, rate, or tariff for electric vehicle charging based on a methodology and
assumptions developed by the department in consultation with interested stakeholders no
later than December 31, 2021. After December 31, 2032, incremental sales to electric
vehicles must be included in calculating a new text begin public new text end utility's gross annual retail sales.

Sec. 6.

Minnesota Statutes 2022, section 216B.2403, subdivision 2, is amended to read:

Subd. 2.

Consumer-owned utility; energy-savings goal.

(a) Each individual
consumer-owned new text begin electric new text end utility subject to this section has an annual energy-savings goal
equivalent to 1.5 percent of gross annual retail energy sales new text begin and each individual
consumer-owned natural gas utility subject to this section has an annual energy-savings
goal equivalent to one percent of gross annual retail energy sales new text end , to be met with a minimum
of energy savings from energy conservation improvements equivalent to at least deleted text begin 0.95 deleted text end new text begin 0.90 new text end
percent of the consumer-owned utility's gross annual retail energy sales. The balance of
energy savings toward the annual energy-savings goal may be achieved only by the following
consumer-owned utility activities:

(1) energy savings from additional energy conservation improvements;

(2) electric utility infrastructure projects, as defined in section 216B.1636, subdivision
1, that result in increased efficiency greater than would have occurred through normal
maintenance activity;

(3) net energy savings from efficient fuel-switching improvements that meet the criteria
under subdivision 8, which may contribute up to deleted text begin 0.55 deleted text end new text begin 0.60 new text end percent of the goal; or

(4) subject to department approval, demand-side natural gas or electric energy displaced
by use of waste heat recovered and used as thermal energy, including the recovered thermal
energy from a cogeneration or combined heat and power facility.

(b) The energy-savings goals specified in this section must be calculated based on
weather-normalized sales averaged over the most recent three years. A consumer-owned
utility may elect to carry forward energy savings in excess of 1.5 percent for a year to the
next three years, except that energy savings from electric utility infrastructure projects may
be carried forward for five years. A particular energy savings can only be used to meet one
year's goal.

(c) A consumer-owned utility subject to this section is not required to make energy
conservation improvements that are not cost-effective, even if the improvement is necessary
to attain the energy-savings goal. A consumer-owned utility subject to this section must
make reasonable efforts to implement energy conservation improvements that exceed the
minimum level established under this subdivision if cost-effective opportunities and funding
are available, considering other potential investments the consumer-owned utility intends
to make to benefit customers during the term of the plan filed under subdivision 3.

deleted text begin (d) Notwithstanding any provision to the contrary, until July 1, 2026, spending by a
consumer-owned utility subject to this section on efficient fuel-switching improvements
implemented to meet the annual energy savings goal under this section must not exceed
0.55 percent per year, averaged over a three-year period, of the consumer-owned utility's
gross annual retail energy sales.
deleted text end

Sec. 7.

Minnesota Statutes 2022, section 216B.2403, subdivision 3, is amended to read:

Subd. 3.

Consumer-owned utility; energy conservation and optimization plans.

(a)
By June 1, 2022, and at least every three years thereafter, each consumer-owned utility must
file with the commissioner an energy conservation and optimization plan that describes the
programs for energy conservation, efficient fuel-switching, load management, and other
measures the consumer-owned utility intends to offer to achieve the utility's energy savings
goal.

(b) A plan's term may extend up to three years. A multiyear plan must identify the total
energy savings and energy savings resulting from energy conservation improvements that
are projected to be achieved in each year of the plan. A multiyear plan that does not, in each
year of the plan, meet both the minimum energy savings goal from energy conservation
improvements and the total energy savings goal of 1.5 percent, or lower goals adjusted by
the commissioner under paragraph (k), must:

(1) state why each goal is projected to be unmet; and

(2) demonstrate how the consumer-owned utility proposes to meet both goals on an
average basis over the duration of the plan.

(c) A plan filed under this subdivision must provide:

(1) for existing programs, an analysis of the cost-effectiveness of the consumer-owned
utility's programs offered under the plan, using a list of baseline energy- and capacity-savings
assumptions developed in consultation with the department; and

(2) for new programs, a preliminary analysis upon which the program will proceed, in
parallel with further development of assumptions and standards.

(d) The commissioner must evaluate a plan filed under this subdivision based on the
plan's likelihood to achieve the energy-savings goals established in subdivision 2. The
commissioner may make recommendations to a consumer-owned utility regarding ways to
increase the effectiveness of the consumer-owned utility's energy conservation activities
and programs under this subdivision. The commissioner may recommend that a
consumer-owned utility implement a cost-effective energy conservation new text begin or efficient
fuel-switching new text end program deleted text begin , including an energy conservation program deleted text end suggested by deleted text begin an outside
source such as deleted text end a political subdivision, nonprofit corporation, or community organization.

(e) Beginning June 1, 2023, and every June 1 thereafter, each consumer-owned utility
must file: (1) an annual update identifying the status of the plan filed under this subdivision,
including: (i) total expenditures and investments made to date under the plan; and (ii) any
intended changes to the plan; and (2) a summary of the annual energy-savings achievements
under a plan. An annual filing made in the last year of a plan must contain a new plan that
complies with this section.

(f) When evaluating the cost-effectiveness of a consumer-owned utility's energy
conservation programs, the consumer-owned utility and the commissioner must consider
the costs and benefits to ratepayers, the utility, participants, and society. The commissioner
must also consider the rate at which the consumer-owned utility is increasing energy savings
and expenditures on energy conservation, and lifetime energy savings and cumulative energy
savings.

(g) A consumer-owned utility may annually spend and invest up to ten percent of the
total amount spent and invested on energy conservation new text begin , efficient fuel-switching, or load
management new text end improvements on research and development projects that meet the new text begin applicable
new text end definition of energy conservation new text begin , efficient fuel-switching, or load management new text end improvement.

(h) A generation and transmission cooperative electric association or municipal power
agency that provides energy services to consumer-owned utilities may file a plan under this
subdivision on behalf of the consumer-owned utilities to which the association or agency
provides energy services and may make investments, offer conservation programs, and
otherwise fulfill the energy-savings goals and reporting requirements of this subdivision
for those consumer-owned utilities on an aggregate basis.

(i) A consumer-owned utility is prohibited from spending for or investing in energy
conservation improvements that directly benefit a large energy facility or a large electric
customer facility the commissioner has exempted under section 216B.241, subdivision 1a.

(j) The energy conservation and optimization plan of a consumer-owned utility may
include activities to improve energy efficiency in the public schools served by the utility.
These activities may include programs to:

(1) increase the efficiency of the school's lighting and heating and cooling systems;

(2) recommission buildings;

(3) train building operators; and

(4) provide opportunities to educate students, teachers, and staff regarding energy
efficiency measures implemented at the school.

(k) A consumer-owned utility may request that the commissioner adjust the
consumer-owned utility's minimum goal for energy savings from energy conservation
improvements under subdivision 2, paragraph (a), for the duration of the plan filed under
this subdivision. The request must be made by January 1 of the year when the
consumer-owned utility must file a plan under this subdivision. The request must be based
on:

(1) historical energy conservation improvement program achievements;

(2) customer class makeup;

(3) projected load growth;

(4) an energy conservation potential study that estimates the amount of cost-effective
energy conservation potential that exists in the consumer-owned utility's service territory;

(5) the cost-effectiveness and quality of the energy conservation programs offered by
the consumer-owned utility; and

(6) other factors the commissioner and consumer-owned utility determine warrant an
adjustment.

The commissioner must adjust the energy savings goal to a level the commissioner determines
is supported by the record, but must not approve a minimum energy savings goal from
energy conservation improvements that is less than an average of 0.95 percent per year over
the consecutive years of the plan's duration, including the year the minimum energy savings
goal is adjusted.

(l) A consumer-owned utility filing a conservation and optimization plan that includes
an efficient fuel-switching program deleted text begin to achieve the utility's energy savings goal deleted text end must, as part
of the filing, demonstrate deleted text begin by a comparison of greenhouse gas emissions between the fuels deleted text end
that the requirements of subdivision 8 are met deleted text begin , using a full fuel-cycle energy analysis deleted text end .

Sec. 8.

Minnesota Statutes 2022, section 216B.2403, subdivision 5, is amended to read:

Subd. 5.

Energy conservation programs for low-income households.

(a) A
consumer-owned utility subject to this section must provide energy conservation programs
to low-income households. The commissioner must evaluate a consumer-owned utility's
plans under this section by considering the consumer-owned utility's historic spending on
energy conservation programs directed to low-income households, the rate of customer
participation in and the energy savings resulting from those programs, and the number of
low-income persons residing in the consumer-owned utility's service territory. A municipal
utility that furnishes natural gas service must spend at least 0.2 percent of the municipal
utility's most recent three-year average gross operating revenue from residential customers
in Minnesota on energy conservation programs for low-income households. A
consumer-owned utility that furnishes electric service must spend at least 0.2 percent of the
consumer-owned utility's gross operating revenue from residential customers in Minnesota
on energy conservation programs for low-income households. The requirement under this
paragraph applies to each generation and transmission cooperative association's aggregate
gross operating revenue from the sale of electricity to residential customers in Minnesota
by all of the association's member distribution cooperatives.

(b) To meet all or part of the spending requirements of paragraph (a), a consumer-owned
utility may contribute money to the energy and conservation account established in section
216B.241, subdivision 2a. An energy conservation optimization plan must state the amount
of contributions the consumer-owned utility plans to make to the energy and conservation
account. Contributions to the account must be used for energy conservation programs serving
low-income households, including renters, located in the service area of the consumer-owned
utility making the contribution. Contributions must be remitted to the commissioner by
February 1 each year.

(c) The commissioner must establish energy conservation programs for low-income
households funded through contributions to the energy and conservation account under
paragraph (b). When establishing energy conservation programs for low-income households,
the commissioner must consult political subdivisions, utilities, and nonprofit and community
organizations, including organizations providing energy and weatherization assistance to
low-income households. The commissioner must record and report expenditures and energy
savings achieved as a result of energy conservation programs for low-income households
funded through the energy and conservation account in the report required under section
216B.241, subdivision 1c, paragraph (f). The commissioner may contract with a political
subdivision, nonprofit or community organization, public utility, municipality, or
consumer-owned utility to implement low-income programs funded through the energy and
conservation account.

(d) A consumer-owned utility may petition the commissioner to modify the required
spending under this subdivision if the consumer-owned utility and the commissioner were
unable to expend the amount required for three consecutive years.

(e) The commissioner must develop and establish guidelines for determining the eligibility
of multifamily buildings to participate in energy conservation programs provided to
low-income households. Notwithstanding the definition of low-income household in section
216B.2402, a consumer-owned utility or association may apply the most recent guidelines
published by the department for purposes of determining the eligibility of multifamily
buildings to participate in low-income programs. The commissioner must convene a
stakeholder group to review and update these guidelines by August 1, 2021, and at least
once every five years thereafter. The stakeholder group must include but is not limited to
representatives of public utilities; municipal electric or gas utilities; electric cooperative
associations; multifamily housing owners and developers; and low-income advocates.

(f) Up to 15 percent of a consumer-owned utility's spending on low-income energy
conservation programs may be spent on preweatherization measures. A consumer-owned
utility is prohibited from claiming energy savings from preweatherization measures toward
the consumer-owned utility's energy savings goal.

(g) The commissioner must, by order, establish a list of preweatherization measures
eligible for inclusion in low-income energy conservation programs no later than March 15,
2022.

(h) A Healthy AIR (Asbestos Insulation Removal) account is established as a separate
account in the special revenue fund in the state treasury. A consumer-owned utility may
elect to contribute money to the Healthy AIR account to provide preweatherization measures
for households eligible for weatherization assistance from the state weatherization assistance
program in section 216C.264. Remediation activities must be executed in conjunction with
federal weatherization assistance program services. Money contributed to the account by a
consumer-owned utility counts toward: (1) the minimum low-income spending requirement
under paragraph (a); and (2) the cap on preweatherization measures under paragraph (f).
Money in the account is annually appropriated to the commissioner of commerce to pay for
Healthy AIR-related activities.

new text begin (i) Where a low-income household receives the household's primary heating fuel from
an entity other than a utility subject to section 216B.241, the consumer-owned utility
providing electric service to the household may meet all or part of the consumer-owned
utility's obligation under paragraph (a) through space and water heating energy conservation
improvements and efficient fuel switching.
new text end

Sec. 9.

Minnesota Statutes 2022, section 216B.2403, subdivision 8, is amended to read:

Subd. 8.

Criteria for efficient fuel-switching improvements.

(a) A fuel-switching
improvement is deemed efficient if, applying the technical criteria established under section
216B.241, subdivision 1d, paragraph (e), the improvement, relative to the fuel being
displaced:

(1) results in a net reduction in the amount of source energy consumed for a particular
use, measured on a fuel-neutral basis new text begin , using (i) the consumer-owned utility's or the utility's
electricity supplier's annual system average efficiency, or (ii) if the utility elects, a seasonal,
monthly, or more granular level of analysis for the electric utility system over the measure's
life new text end ;

(2) results in a net reduction of statewide greenhouse gas emissions, as defined in section
216H.01, subdivision 2, over the lifetime of the improvement. For an efficient fuel-switching
improvement installed by an electric consumer-owned utility, the reduction in emissions
must be measured deleted text begin based on the hourly emissions profile of the consumer-owned utility or
the utility's electricity supplier, as reported in the most recent resource plan approved by
the commission under section 216B.2422. If the hourly emissions profile is not available,
the commissioner must develop a method consumer-owned utilities must use to estimate
that value deleted text end new text begin using (i) the consumer-owned utility's or the utility's electricity supplier's annual
average emissions factor, or (ii) if the utility elects, the seasonal, monthly, or more granular
level of analysis for the electric utility system over the measure's life new text end ; new text begin and
new text end

(3) is cost-effective, considering the costs and benefits from the perspective of the
consumer-owned utility, participants, and society deleted text begin ; and deleted text end new text begin .
new text end

deleted text begin (4) is installed and operated in a manner that improves the consumer-owned utility's
system load factor.
deleted text end

(b) For purposes of this subdivision, "source energy" means the total amount of primary
energy required to deliver energy services, adjusted for losses in generation, transmission,
and distribution, and expressed on a fuel-neutral basis.

Sec. 10.

Minnesota Statutes 2022, section 216B.241, subdivision 1c, is amended to read:

Subd. 1c.

Public utility; energy-saving goals.

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

(b) A public utility providing electric service has an annual energy-savings goal equivalent
to 1.75 percent of gross annual retail energy sales unless modified by the commissioner
under paragraph (c). A public utility providing natural gas service has an annual
energy-savings goal equivalent to one percent of gross annual retail energy sales, which
cannot be lowered by the commissioner. The savings goals must be calculated based on the
most recent three-year weather-normalized average. A public utility providing electric
service may elect to carry forward energy savings in excess of 1.75 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 public utility
providing natural gas service may elect to carry forward energy savings in excess of one
percent for a year to the succeeding three calendar years. A particular energy savings can
only be used to meet one year's goal.

(c) In its energy conservation and optimization plan filing, a public utility 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.

(d) The commissioner may not approve a plan of a public utility that provides for an
annual energy-savings goal of less than one percent of gross annual retail energy sales from
energy conservation improvements.

The balance of the 1.75 percent annual energy savings goal may be achieved through
energy savings from:

(1) additional energy conservation improvements;

(2) electric utility infrastructure projects approved by the commission under section
216B.1636 that result in increased efficiency greater than would have occurred through
normal maintenance activity; or

(3) subject to department approval, demand-side natural gas or electric energy displaced
by use of waste heat recovered and used as thermal energy, including the recovered thermal
energy from a cogeneration or combined heat and power facility.

(e) A public 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: (1) the costs and benefits
to ratepayers, the utility, participants, and society; (2) the rate at which a public utility is
increasing both its energy savings and its expenditures on energy conservation; and (3) the
public utility's lifetime energy savings and cumulative energy savings.

(f) On an annual basis, the commissioner shall produce and make publicly available a
report on the annual energy and capacity savings and estimated carbon dioxide reductions
achieved by the programs under this section and section 216B.2403 for the two most recent
years for which data is available. The report must also include information regarding any
annual energy sales or generation capacity increases resulting from efficient fuel-switching
improvements. 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, and must estimate progress made toward the statewide energy-savings
goal under section 216B.2401.

deleted text begin (g) Notwithstanding any provision to the contrary, until July 1, 2026, spending by a
public utility subject to this section on efficient fuel-switching improvements to meet energy
savings goals under this section must not exceed 0.35 percent per year, averaged over three
years, of the public utility's gross annual retail energy sales.
deleted text end

Sec. 11.

Minnesota Statutes 2022, section 216B.241, subdivision 2, is amended to read:

Subd. 2.

Public utility; energy conservation and optimization plans.

(a) The
commissioner may require a public utility 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.

(b) A public utility shall file an energy conservation and optimization plan by June 1,
on a schedule determined by order of the commissioner, but at least every three years. As
provided in subdivisions 11 to 13, plans may include programs for efficient fuel-switching
improvements and load management. An individual utility program may combine elements
of energy conservation, load management, or efficient fuel-switching. The plan must estimate
the lifetime energy savings and cumulative lifetime energy savings projected to be achieved
under the plan. A plan filed by a public utility by June 1 must be approved or approved as
modified by the commissioner by December 1 of that same year.

(c) The commissioner shall evaluate the plan 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 an energy conservation 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.

(d) The commissioner may require a utility subject to subdivision 1c 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.

(e) Each public utility subject to this subdivision may spend and invest annually up to
ten percent of the total amount deleted text begin spent and invested deleted text end new text begin that the public utility spends and invests new text end
on energy conservation new text begin , efficient fuel-switching, or load management new text end improvements under
this section deleted text begin by the public utility deleted text end on research and development projects that meet the new text begin applicable
new text end definition of energy conservation new text begin , efficient fuel-switching, or load management new text end improvement.

(f) The commissioner shall consider and may require a public utility to undertake an
energy conservation new text begin or efficient fuel-switching, subject to the requirements of subdivisions
11 and 12, new text end program suggested by deleted text begin an outside source, including deleted text end a political subdivision, a
nonprofit corporation, or community organization. new text begin When approving a proposal under this
paragraph, the commissioner must consider the qualifications and experience of the entity
proposing the program and any other criteria the commissioner deems relevant.
new text end

(g) A public utility, a political subdivision, or a nonprofit or community organization
that has suggested an energy conservation program, the attorney general acting on behalf
of consumers and small business interests, or a public utility customer that has suggested
an energy conservation 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 energy conservation 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 an energy conservation program
is not in the public interest.

(h) The commissioner may order a public utility to include, with the filing of the public
utility's annual status report, the results of an independent audit of the public 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 public utility. The audit must
specify the energy savings or increased efficiency in the use of energy within the service
territory of the public utility that is the result of the public utility's spending and investments.
The audit must evaluate the cost-effectiveness of the public utility's conservation programs.

(i) The energy conservation and optimization plan of each public utility subject to this
section must include activities to improve energy efficiency in public schools served by the
utility. As applicable to each public utility, at a minimum the activities must include programs
to increase the efficiency of the school's lighting and heating and cooling systems, and to
provide for building recommissioning, building operator training, and opportunities to
educate students, teachers, and staff regarding energy efficiency measures implemented at
the school.

(j) The commissioner may require investments or spending greater than the amounts
proposed in a plan filed under this subdivision or section 216C.17 for a public utility whose
most recent advanced forecast required under section 216B.2422 projects a peak demand
deficit of 100 megawatts or more within five years under midrange forecast assumptions.

(k) A public utility filing a conservation and optimization plan that includes an efficient
fuel-switching program deleted text begin to achieve the utility's energy savings goal deleted text end must, as part of the filing,
demonstrate deleted text begin by a comparison of greenhouse gas emissions between the fuels deleted text end that the
requirements of subdivisions 11 or 12 are met, as applicable deleted text begin , using a full fuel-cycle energy
analysis deleted text end .

Sec. 12.

Minnesota Statutes 2022, section 216B.241, subdivision 11, is amended to read:

Subd. 11.

Programs for efficient fuel-switching improvements; electric utilities.

(a)
A public utility providing electric service at retail may include in the plan required under
subdivision 2 new text begin a proposed goal for efficient fuel-switching improvements that the utility
expects to achieve under the plan and the new text end programs to implement efficient fuel-switching
improvements or combinations of energy conservation improvements, fuel-switching
improvements, and load management. For each program, the public utility must provide a
proposed budget, an analysis of the program's cost-effectiveness, and estimated net energy
and demand savings.

(b) The department may approve proposed programs for efficient fuel-switching
improvements if the department determines the improvements meet the requirements of
paragraph (d). deleted text begin For fuel-switching improvements that require the deployment of electric
technologies, the department must also consider whether the fuel-switching improvement
can be operated in a manner that facilitates the integration of variable renewable energy
into the electric system. The net benefits from an efficient fuel-switching improvement that
is integrated with an energy efficiency program approved under this section may be counted
toward the net benefits of the energy efficiency program, if the department determines the
primary purpose and effect of the program is energy efficiency.
deleted text end

(c) A public utility may file a rate schedule with the commission that provides for annual
cost recovery of reasonable and prudent costs to implement and promote efficient
fuel-switching programs. The new text begin utility, department, or other entity may propose, and the
new text end commission may deleted text begin not deleted text end approve new text begin , modify, or reject, new text end a new text begin proposal for a new text end financial incentive to
encourage efficient fuel-switching programs operated by a public utility providing electric
service new text begin approved under this subdivision. When making a decision on the financial incentive
proposal, the commission must apply the considerations established in section 216B.16,
subdivision 6c, paragraphs (b) and (c) new text end .

(d) A fuel-switching improvement is deemed efficient if, applying the technical criteria
established under section 216B.241, subdivision 1d, paragraph (e), the improvement meets
the following criteria, relative to the fuel that is being displaced:

(1) results in a net reduction in the amount of source energy consumed for a particular
use, measured on a fuel-neutral basis new text begin , using (i) the utility's annual system average efficiency,
or (ii) if the utility elects, a seasonal, monthly, or more granular level of analysis for the
electric utility system over the measure's life new text end ;

(2) results in a net reduction of statewide greenhouse gas emissions as defined in section
216H.01, subdivision 2, over the lifetime of the improvement. For an efficient fuel-switching
improvement installed by an electric utility, the reduction in emissions must be measured
deleted text begin based on the hourly emission profile of the electric utility, using the hourly emissions profile
in the most recent resource plan approved by the commission under section 216B.2422 deleted text end new text begin
using (i) the utility's annual average emissions factor, or (ii) if the utility elects, the seasonal,
monthly or more granular level of analysis, for the electric utility system over the measure's
life new text end ; new text begin and
new text end

(3) is cost-effective, considering the costs and benefits from the perspective of the utility,
participants, and society deleted text begin ; and deleted text end new text begin .
new text end

deleted text begin (4) is installed and operated in a manner that improves the utility's system load factor.
deleted text end

(e) For purposes of this subdivision, "source energy" means the total amount of primary
energy required to deliver energy services, adjusted for losses in generation, transmission,
and distribution, and expressed on a fuel-neutral basis.

Sec. 13.

Minnesota Statutes 2022, section 216B.241, subdivision 12, is amended to read:

Subd. 12.

Programs for efficient fuel-switching improvements; natural gas
utilities.

(a) As part of a public utility's plan filed under subdivision 2, a public utility that
provides natural gas service to Minnesota retail customers may propose one or more programs
to install electric technologies that reduce the consumption of natural gas by the utility's
retail customers as an energy conservation improvement. The commissioner may approve
a proposed program if the commissioner, applying the technical criteria developed under
section 216B.241, subdivision 1d, paragraph (e), determines that:

(1) the electric technology to be installed meets the criteria established under section
216B.241, subdivision 11, paragraph (d), clauses (1) and (2); and

(2) the program is cost-effective, considering the costs and benefits to ratepayers, the
utility, participants, and society.

(b) If a program is approved by the commission under this subdivision, the public utility
may count the program's energy savings toward its energy savings goal under section
216B.241, subdivision 1c. Notwithstanding section 216B.2402, subdivision 4, efficient
fuel-switching achieved through programs approved under this subdivision is energy
conservation.

(c) A public utility may file rate schedules with the commission that provide annual
cost-recovery for programs approved by the department under this subdivision, including
reasonable and prudent costs to implement and promote the programs.

(d) The commission may approve, modify, or reject a proposal made by the department
or a utility for an incentive plan to encourage efficient fuel-switching programs approved
under this subdivision, applying the considerations established under section 216B.16,
subdivision 6c, paragraphs (b) and (c). The commission may approve a financial incentive
mechanism that is calculated based on the combined energy savings and net benefits that
the commission has determined have been achieved by a program approved under this
subdivision, provided the commission determines that the financial incentive mechanism
is in the ratepayers' interest.

deleted text begin (e) A public utility is not eligible for a financial incentive for an efficient fuel-switching
program under this subdivision in any year in which the utility achieves energy savings
below one percent of gross annual retail energy sales, excluding savings achieved through
fuel-switching programs.
deleted text end

Sec. 14.

Minnesota Statutes 2022, section 216B.2411, subdivision 1, is amended to read:

Subdivision 1.

Generation projects.

(a) Any deleted text begin municipality or rural electric association
providing electric service and subject to section 216B.241 may, and each deleted text end public utility may deleted text begin , deleted text end
use five percent of the total amount to be spent on energy conservation improvements under
section 216B.241, on:

(1) projects in Minnesota to construct an electric generating facility that utilizes eligible
renewable energy sources as defined in subdivision 2, such as methane or other combustible
gases derived from the processing of plant or animal wastes, biomass fuels such as
short-rotation woody or fibrous agricultural crops, or other renewable fuel, as its primary
fuel source;

(2) projects in Minnesota to install a distributed generation facility of ten megawatts or
less of interconnected capacity that is fueled by natural gas, renewable fuels, or another
similarly clean fuel; or

(3) projects in Minnesota to install a qualifying solar energy project as defined in
subdivision 2.

(b) A deleted text begin municipality, rural electric association, or deleted text end public utility that offers a program to
customers to promote installing qualifying solar energy projects may request authority from
the commissioner to exceed the five percent limit in paragraph (a), but not to exceed ten
percent, to meet customer demand for installation of qualifying solar energy projects. In
considering this request, the commissioner shall consider customer interest in qualifying
solar energy and the impact on other customers. deleted text begin A municipality, rural electric association,
or public utility may not participate in a qualifying solar energy project on a property unless
it is provided evidence that all reasonable cost-effective conservation investments have
previously been made to the property.
deleted text end

new text begin (c) A consumer-owned utility that offers projects under this section is not subject to the
five percent limit in paragraph (a).
new text end

new text begin (d) A consumer-owned utility or a public utility is prohibited from participating in a
qualifying solar energy project on a property unless the public utility is provided evidence
that all reasonable cost-effective conservation investments have previously been made to
the property.
new text end

deleted text begin (c) deleted text end new text begin (e) new text end For a deleted text begin municipality, rural electric association, deleted text end new text begin consumer-owned new text end or public utility,
projects under this section must be considered energy conservation improvements as defined
in section 216B.241.