1.1                          A bill for an act 
  1.2             relating to utilities; authorizing performance-based 
  1.3             electricity purchasing plans and regulation plans; 
  1.4             authorizing rulemaking; removing sunset provisions 
  1.5             that repeal performance-based utility service plans; 
  1.6             amending Minnesota Statutes 1998, sections 216B.16, 
  1.7             subdivision 7a and 16; 216B.167; and 216B.1675; 
  1.8             repealing Laws 1997, chapter 25, section 3. 
  1.9   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.10     Section 1.  Minnesota Statutes 1998, section 216B.16, 
  1.11  subdivision 7a, is amended to read: 
  1.12     Subd. 7a.  [PERFORMANCE-BASED GAS PURCHASING PLAN 
  1.13  ADJUSTMENT.] The commission may permit a public utility to file 
  1.14  rate schedules providing for annual adjustments reflecting 
  1.15  rewards or penalties provided for in performance-based gas or 
  1.16  electric power purchasing plans approved by the commission under 
  1.17  section 216B.167. 
  1.18     Sec. 2.  Minnesota Statutes 1998, section 216B.16, 
  1.19  subdivision 16, is amended to read: 
  1.20     Subd. 16.  [PERFORMANCE REGULATION PLAN TARIFFS.] A public 
  1.21  utility providing natural gas or electrical services that has a 
  1.22  performance regulation plan approved pursuant to section 
  1.23  216B.1675 shall file tariff provisions incorporating the 
  1.24  provisions of that plan.  Changes in the cost recovery of 
  1.25  natural gas supplies must not be included within the plan. 
  1.26     Sec. 3.  Minnesota Statutes 1998, section 216B.167, is 
  1.27  amended to read: 
  2.1      216B.167 [PERFORMANCE-BASED GAS PURCHASING PLAN.] 
  2.2      Subdivision 1.  [PLAN APPROVAL; COMMISSION FINDINGS.] A 
  2.3   public utility that furnishes natural gas or electricity may 
  2.4   petition the commission for approval of a performance-based 
  2.5   gas or electric power purchasing plan under this section.  The 
  2.6   commission may approve a plan if it finds that: 
  2.7      (1) the plan provides incentives for the utility to achieve 
  2.8   lower natural gas or electricity costs than would have been 
  2.9   achieved in the absence of the plan, as measured by the 
  2.10  benchmarks established in clause (3), by linking financial 
  2.11  rewards and penalties to natural gas or electricity costs; 
  2.12     (2) the potential benefits of the plan apply, at a minimum, 
  2.13  to each customer class purchasing firm natural gas service or 
  2.14  firm electrical service from the utility; 
  2.15     (3) the plan establishes one or more benchmarks against 
  2.16  which actual natural gas or electricity costs will be measured 
  2.17  and the benchmarks reflect relevant market conditions and 
  2.18  represent reasonable and achievable natural gas or electricity 
  2.19  costs in Minnesota for the term of the plan; and 
  2.20     (4) the plan provides that the utility cannot curtail or 
  2.21  interrupt service to any customer class purchasing firm natural 
  2.22  gas service or firm electrical service during the term of the 
  2.23  plan except for causes outside the reasonable control of the 
  2.24  utility or causes not directly related to the gas or electric 
  2.25  power purchasing practices of the utility. 
  2.26     Subd. 2.  [SHARING MECHANISM.] A plan must include a 
  2.27  mechanism through which the utility shares with its customers 
  2.28  the difference between actual natural gas costs and the plan's 
  2.29  benchmark costs during the term of the plan.  A plan must 
  2.30  provide details of the sharing mechanism and may include an 
  2.31  allowed level of costs above and below the benchmark before any 
  2.32  sharing is to take place.  The commission must determine an 
  2.33  appropriate percentage of the difference between the benchmark 
  2.34  and actual natural gas costs to be shared between customers and 
  2.35  the utility.  The sharing mechanism shall be implemented 
  2.36  annually under section 216B.16, subdivision 7a.  Financial 
  3.1   rewards or penalties under the plan shall not be considered in 
  3.2   the determination of the utility's revenue requirements in a 
  3.3   general rate case pursuant to section 216B.16. 
  3.4      Subd. 3.  [RELIABILITY OF SERVICE.] A plan must allow for 
  3.5   the imposition of penalties if the standard for reliability of 
  3.6   service established in subdivision 1, clause (4), is not met. 
  3.7      Subd. 4.  [PLAN EVALUATION.] A plan must include an 
  3.8   evaluation process and mechanism that is reasonable and capable 
  3.9   of supporting a full review of the utility's performance under 
  3.10  the plan.  The commission shall evaluate the various customer 
  3.11  and utility impacts of a plan based on this evaluation process 
  3.12  and mechanism, including the impact on customer bills over time, 
  3.13  the impact on utility revenues, and the effectiveness of the 
  3.14  plan in meeting the purposes contained in subdivision 1.  The 
  3.15  evaluation must occur within a reasonable time following the end 
  3.16  of the plan. 
  3.17     Subd. 5.  [ANNUAL REPORT.] The utility shall provide an 
  3.18  annual report to the commission documenting its performance in 
  3.19  meeting the requirements of the plan.  Upon review of this 
  3.20  report, the commission shall determine and approve rewards or 
  3.21  penalties as provided in the plan. 
  3.22     Subd. 6.  [ADOPTION.] A plan may be filed and approved 
  3.23  within a miscellaneous tariff filing pursuant to section 
  3.24  216B.16.  The commission may approve, reject, or modify the plan 
  3.25  in a manner which meets the requirements of this section.  An 
  3.26  approved plan is effective for a period of not less than two 
  3.27  years unless: 
  3.28     (1) the plan is withdrawn by the utility within 30 days of 
  3.29  a final appealable order approving the plan; or 
  3.30     (2) the commission, after notice and hearing, rescinds or 
  3.31  amends its order approving the plan. 
  3.32     Subd. 7.  [GENERAL EVALUATION.] The commission must 
  3.33  evaluate the effectiveness of all plans approved under this 
  3.34  section and submit its findings to the legislature by January 1, 
  3.35  1999. 
  3.36     Subd. 8.  [EXPIRATION.] This section expires January 1, 
  4.1   2000.  All plans must expire no later than December 31, 1999. 
  4.2      Subd. 9.  [RULES.] The commission may adopt rules to 
  4.3   implement and administer this section. 
  4.4      Sec. 4.  Minnesota Statutes 1998, section 216B.1675, is 
  4.5   amended to read: 
  4.6      216B.1675 [PERFORMANCE REGULATION PLAN FOR GAS UTILITY 
  4.7   SERVICE PLANS.] 
  4.8      Subdivision 1.  [PURPOSE.] Performance-based regulation 
  4.9   plans for public utilities offering natural gas or electrical 
  4.10  services are authorized in order to provide quality service at 
  4.11  rates that can reasonably and reliably be expected to be lower 
  4.12  than rates would be under current regulation and to reduce the 
  4.13  cost of regulation.  Performance-based regulation plans are 
  4.14  intended to provide the utility with increased earnings for 
  4.15  efficient performance and decreased earnings for inefficient 
  4.16  performance. 
  4.17     Subd. 2.  [PETITION.] A public utility that furnishes 
  4.18  electrical or natural gas service may petition and file with the 
  4.19  commission for its approval a performance regulation plan 
  4.20  pursuant to this section.  The plan applies to the utility's 
  4.21  rates for providing electrical or natural gas distribution 
  4.22  service, excluding the portion of the rates recovering the cost 
  4.23  of natural gas supplies.  If adopted, the plan must apply to all 
  4.24  of the utility's customers, except that nothing in this section 
  4.25  requires the utility to adjust the rates collected from 
  4.26  customers receiving service under tariffs authorized by sections 
  4.27  216B.16, subdivision 15, and 216B.163.  A petition may be filed: 
  4.28     (1) as part of a general rate filing pursuant to section 
  4.29  216B.16, in which case the time provided for the commission to 
  4.30  suspend rates and make a final determination shall be extended 
  4.31  by two months; or 
  4.32     (2) as a miscellaneous tariff filing pursuant to section 
  4.33  216B.16, in which case the commission shall, within 120 days of 
  4.34  the date of the filing, determine whether the utility's current 
  4.35  rates are reasonable based on financial information for the most 
  4.36  recent calendar year, amended to reflect appropriate regulatory 
  5.1   adjustments.  If the commission cannot resolve all material 
  5.2   issues concerning the reasonableness of the utility's current 
  5.3   rates to its satisfaction, it shall dismiss the filing.  If the 
  5.4   filing is not dismissed, the commission shall issue its decision 
  5.5   on the plan within ten months from the date of the filing.  The 
  5.6   rates at the beginning of the plan shall be the same as the 
  5.7   rates on file with the commission prior to the filing. 
  5.8      Subd. 3.  [PLAN CONTENTS.] The commission may approve a 
  5.9   performance regulation plan for electric or natural gas 
  5.10  distribution services upon finding that the plan: 
  5.11     (1) contains a benchmark or measure of gas distribution 
  5.12  costs that is a reasonable and reliable predictor of the 
  5.13  utility's rates for gas distribution service under 
  5.14  cost-of-service regulation; 
  5.15     (2) ensures that rates for gas distribution services to 
  5.16  customers under the plan will be materially lower than the rates 
  5.17  would be under cost-of-service regulation as predicted by the 
  5.18  benchmark in clause (1); 
  5.19     (3) links the utility's earnings to its performance by 
  5.20  permitting higher utility earnings than under cost-of-service 
  5.21  regulation only when the utility's performance is more efficient 
  5.22  than the benchmark; 
  5.23     (4) can be reasonably and reliably expected to offer lower 
  5.24  administrative costs than would otherwise be experienced under 
  5.25  cost-of-service regulation; 
  5.26     (5) contains a reasonable limit on utility earnings; 
  5.27     (6) is compatible with the development of increased 
  5.28  competition in the natural gas industry or electric power 
  5.29  industries; 
  5.30     (7) has adequate provisions to prevent the degradation of 
  5.31  service quality; and 
  5.32     (8) provides for gathering of relevant data and evaluation 
  5.33  of the plan's effect on rates, service quality, utility 
  5.34  earnings, competition in providing electricity or natural gas, 
  5.35  and regulatory costs. 
  5.36     Subd. 4.  [RATE CHANGE.] The initial rate adjustment under 
  6.1   the plan may not be implemented for a minimum of 18 months 
  6.2   following the final determination by the commission on the 
  6.3   plan.  The plan shall provide a methodology and procedures for 
  6.4   changing rates thereafter not more frequently than on an annual 
  6.5   basis.  The commission may allow the utility to change rates to 
  6.6   reflect material changes in cost due to compliance with 
  6.7   government mandates provided that the cost is one that the 
  6.8   commission would otherwise allow to be recovered in rates.  
  6.9   Increases or decreases in revenues under the plan shall be 
  6.10  applied on an equal percentage basis to each customer class, 
  6.11  excluding the portion of the rate recovering the cost of natural 
  6.12  gas supplies.  Miscellaneous rate changes may be approved 
  6.13  outside the operation of the plan. 
  6.14     Subd. 5.  [ACCEPTANCE OF PETITION FOR FULL REVIEW.] 
  6.15  Interested parties have, unless the commission otherwise orders, 
  6.16  45 days from the date a petition containing a proposed plan is 
  6.17  filed to submit comments on whether the plan, as proposed, 
  6.18  addresses each of the requirements of this section sufficiently 
  6.19  to merit further consideration.  If the commission does not 
  6.20  dismiss the petition proposing a plan as insufficient within 120 
  6.21  days from the date of the filing, the petition shall be deemed 
  6.22  accepted for filing.  A petition accepted for filing shall not 
  6.23  be presumed accepted for final adoption. 
  6.24     Subd. 6.  [PLAN ADMINISTRATION.] A plan must require the 
  6.25  filing of information needed to administer the plan. 
  6.26     Subd. 7.  [NOTICE TO CUSTOMER.] The petitioning utility 
  6.27  must provide notice of the proposed plan to its customers and to 
  6.28  the governing body of each municipality and county in the area 
  6.29  affected, along with a summary description of the plan 
  6.30  provisions and a notice of the dates, times, and locations of 
  6.31  any public meetings scheduled by the commission. 
  6.32     Subd. 8.  [PLAN REVIEW; HEARING; DISCOVERY.] In reviewing a 
  6.33  proposed plan, the commission shall: 
  6.34     (1) conduct public meetings that it considers appropriate; 
  6.35  and 
  6.36     (2) grant discovery, as appropriate. 
  7.1      Subd. 9.  [COMMISSION FINDINGS.] The commission shall issue 
  7.2   findings concerning the appropriateness of the proposed plan.  
  7.3   The commission may approve, reject, or modify the plan in a 
  7.4   manner which meets the requirements of this section.  An 
  7.5   approved or modified plan becomes effective unless the plan is 
  7.6   withdrawn by the utility within 30 days of a final appealable 
  7.7   order.  If the utility withdraws an approved or modified plan, 
  7.8   all of the administrative costs related to the plan that are 
  7.9   charged by the commission or the department of public service to 
  7.10  the utility may not be recovered from ratepayers in current or 
  7.11  subsequent rates.  A utility that withdraws an approved or 
  7.12  modified plan may not file another plan under this section for a 
  7.13  period of one year following the withdrawal of the plan. 
  7.14     Subd. 10.  [PLAN TERM; RENEWAL.] The plan shall specify its 
  7.15  term, which shall not be less than three years.  Not less than 
  7.16  six months before the completion of the term of an approved 
  7.17  plan, the commission shall, at the request of the utility, 
  7.18  commence a review of the plan to determine whether to renew the 
  7.19  plan for an additional term.  The commission may approve, 
  7.20  reject, or modify the renewal plan in a manner that meets the 
  7.21  requirements of this section.  A plan approved or modified under 
  7.22  this subdivision becomes effective unless the plan is withdrawn 
  7.23  by the utility within 30 days of a final appealable order. 
  7.24     Subd. 11.  [PLAN TERMINATION.] On its own motion or upon 
  7.25  the petition of any party other than the utility, the commission 
  7.26  may initiate an investigation to determine whether to terminate 
  7.27  the plan.  The commission shall issue findings on the 
  7.28  investigation within 120 days.  If the commission finds that the 
  7.29  plan has failed to meet the requirements of this section and is 
  7.30  inconsistent with the public interest, it shall terminate the 
  7.31  plan and may order the utility to initiate any proceedings 
  7.32  necessary to correct the failure of the plan, including but not 
  7.33  limited to, filing a general rate proceeding under section 
  7.34  216B.16.  The utility must be allowed at least 120 days after 
  7.35  the date of the commission's order to initiate the general rate 
  7.36  proceeding. 
  8.1      Subd. 12.  [PLAN EVALUATION.] A plan must include an 
  8.2   evaluation process and mechanism that is reasonable and capable 
  8.3   of supporting a full review of the utility's performance under 
  8.4   the plan.  The commission shall evaluate the various customer 
  8.5   and utility impacts of a plan based on this evaluation process 
  8.6   and mechanism, including the impact on customer bills and 
  8.7   service quality, over time, the impact on utility revenues, and 
  8.8   the effectiveness of the plan in meeting the purposes of this 
  8.9   section.  The evaluation must occur within a reasonable time 
  8.10  following the end of the plan. 
  8.11     Subd. 13.  [GENERAL EVALUATION.] The commission shall 
  8.12  evaluate the effectiveness of all plans approved under this 
  8.13  section and submit its findings to the legislature by January 1, 
  8.14  2005, for natural gas utilities, and by January 1, 2007, for 
  8.15  electric utilities. 
  8.16     Subd. 14.  [RULES.] The commission may adopt rules to 
  8.17  implement and administer this section. 
  8.18     Sec. 5.  [REPEALER.] 
  8.19     Laws 1997, chapter 25, section 3, is repealed.