1.1                          A bill for an act 
  1.2             relating to energy and economic development; enacting 
  1.3             the Minnesota Economic, Environmental, and Energy 
  1.4             Security Act of 2002; making a legislative finding on 
  1.5             the need for additional electric generation capacity 
  1.6             in the state and encouraging construction of certain 
  1.7             energy facilities; amending Minnesota Statutes 2001 
  1.8             Supplement, section 116C.575, subdivision 2; proposing 
  1.9             coding for new law in Minnesota Statutes, chapter 216B.
  1.10  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.11     Section 1.  [SHORT TITLE.] 
  1.12     This act may be referred to as the "Minnesota Economic, 
  1.13  Environmental, and Energy Security Act of 2002." 
  1.14     Sec. 2.  [LEGISLATIVE FINDINGS AND STATEMENT OF NEED.] 
  1.15     (a) The legislature finds that: 
  1.16     (1) the state has a near-term need for 1,000 megawatts of 
  1.17  new electric base-load generation capacity; 
  1.18     (2) there is a developing need for at least an additional 
  1.19  1,000 megawatts of electric base-load generation capacity to 
  1.20  meet projected demand for electricity in the state during the 
  1.21  current resource planning period; 
  1.22     (3) due to energy security, public health, economic 
  1.23  development, and other considerations, Minnesota needs to reduce 
  1.24  reliance on electric generation and transmission facilities 
  1.25  constructed outside the borders of the state; 
  1.26     (4) there is a need to reduce reliance on aging coal-fired 
  1.27  power plants, particularly in the Twin Cities metropolitan area, 
  2.1   due to the low efficiency of these facilities and their 
  2.2   emissions profile; 
  2.3      (5) there is uncertainty as to the continued reliance upon 
  2.4   nuclear-generated electric power in the state; 
  2.5      (6) the state will benefit from the local development of 
  2.6   innovative base-load electric generation technologies that 
  2.7   utilize this country's most abundant energy resource while 
  2.8   providing low-emission alternatives to traditional coal-fired 
  2.9   generation; 
  2.10     (7) the state will benefit from new generation capacity 
  2.11  that diversifies the state's electric generation portfolio and 
  2.12  reduces reliance on natural gas use for nonpeaking power 
  2.13  generation needs; 
  2.14     (8) construction of new base-load electric generation 
  2.15  facilities within the state will bring critically needed jobs 
  2.16  and other economic benefits to the state and will permit greater 
  2.17  policy control over pollutants emitted regionally that affect 
  2.18  Minnesota's natural environment and the health and welfare of 
  2.19  its citizens; 
  2.20     (9) adding to the state's renewable generation resources 
  2.21  furthers the state's emission reduction goals and helps position 
  2.22  the state to meet future requirements for emissions reductions, 
  2.23  including greenhouse gas emissions; and 
  2.24     (10) existing electric transmission facilities are at or 
  2.25  near capacity and new electric transmission facilities will be 
  2.26  needed to support new base-load electric generation and 
  2.27  renewable generation capacity in the state and improve electric 
  2.28  reliability in the region.  
  2.29     Therefore, the legislature finds that the state must act 
  2.30  swiftly to encourage and expedite the construction of new 
  2.31  base-load and renewable generation in the state, along with 
  2.32  transmission capacity and associated facilities, to address the 
  2.33  energy, economic, and environmental needs of the state and 
  2.34  ensure the reliability of Minnesota's electric energy system, 
  2.35  increase the competitiveness of its businesses, promote economic 
  2.36  growth in all regions of the state, and protect the 
  3.1   environmental health and welfare of the state.  
  3.2      Sec. 3.  Minnesota Statutes 2001 Supplement, section 
  3.3   116C.575, subdivision 2, is amended to read: 
  3.4      Subd. 2.  [APPLICABLE PROJECTS.] The requirements and 
  3.5   procedures in this section apply to the following projects:  
  3.6      (1) large electric power generating plants with a capacity 
  3.7   of less than 80 megawatts; 
  3.8      (2) large electric power generating plants that are fueled 
  3.9   by natural or synthetic gas; 
  3.10     (3) high voltage transmission lines of between 100 and 200 
  3.11  kilovolts; 
  3.12     (4) high voltage transmission lines in excess of 200 
  3.13  kilovolts and less than five miles in length in Minnesota; 
  3.14     (5) high voltage transmission lines in excess of 200 
  3.15  kilovolts if at least 80 percent of the distance of the line in 
  3.16  Minnesota will be located along existing high voltage 
  3.17  transmission line right-of-way or transportation corridors; 
  3.18     (6) a high voltage transmission line service extension to a 
  3.19  single customer between 200 and 300 kilovolts and less than ten 
  3.20  miles in length; and 
  3.21     (7) a high voltage transmission line rerouting to serve the 
  3.22  demand of a single customer when the rerouted line will be 
  3.23  located at least 80 percent on property owned or controlled by 
  3.24  the customer or the owner of the transmission line. 
  3.25     Sec. 4.  [216B.680] [QUALIFYING ENERGY PROJECT; 
  3.26  DEFINITIONS.] 
  3.27     Subdivision 1.  [SCOPE.] The terms used in sections 
  3.28  216B.680 to 216B.685 have the meanings given them in this 
  3.29  section. 
  3.30     Subd. 2.  [COMPETITIVE BIDDING PROCESS.] "Competitive 
  3.31  bidding process" means the process by which a request for 
  3.32  proposals is administered and evaluated. 
  3.33     Subd. 3.  [QUALIFYING ENERGY PROJECT.] "Qualifying energy 
  3.34  project" is defined as a new power generation project that: 
  3.35     (1) utilizes innovative generation technology capable of 
  3.36  using a variety of fuel stocks, including at least one solid 
  4.1   fuel source, in a manner that reduces environmental impacts 
  4.2   including, without limitations, integrated gasification combined 
  4.3   cycle technology; 
  4.4      (2) deploys wind or other renewable generation in a ratio 
  4.5   of at least 25 percent of the total installed capacity upon 
  4.6   completion of the overall project; and 
  4.7      (3) provides economic development within a tax relief area 
  4.8   as defined in section 273.134. 
  4.9      Subd. 4.  [REQUESTING UTILITY] "Requesting utility" is any 
  4.10  public utility that, as of January 1, 2002, had an outstanding 
  4.11  request for proposals. 
  4.12     Subd. 5.  [REQUEST FOR PROPOSALS] "Request for proposals" 
  4.13  means an all-source supply proposal that had been approved or 
  4.14  established by the commission pursuant to section 216B.2422, 
  4.15  subdivision 5, paragraph (a). 
  4.16     Sec. 5.  [216B.681] [COMPETITIVE BIDDING.] 
  4.17     Subdivision 1.  [BIDDING PROCESS.] (a) Within 30 days of 
  4.18  the effective date of this section, the commission shall order a 
  4.19  requesting utility to amend its selection criteria for any 
  4.20  pending competitive bidding process to incorporate those 
  4.21  criteria listed in subdivision 2.  A requesting utility shall 
  4.22  then continue and complete any pending competitive bidding 
  4.23  process in accordance with the terms of this section, and shall 
  4.24  select a proposal, from a third party that filed a notice of 
  4.25  intent to bid, in accordance with the terms of the amended 
  4.26  competitive bid process.  
  4.27     (b) The deadline under the amended process for a sponsor of 
  4.28  any qualifying energy project to submit a proposal, which must 
  4.29  include all material commercial terms relating to the proposed 
  4.30  qualifying energy project, is the later of 90 days after the 
  4.31  effective date of this section or September 10, 2002, or a later 
  4.32  date as the commission shall approve. 
  4.33     Subd. 2.  [COMPETITIVE BIDDING CRITERIA.] In order to 
  4.34  advance the state's energy, environmental, and economic policy 
  4.35  goals identified in section 2, the criteria for evaluating and 
  4.36  selecting qualified energy projects and other proposals received 
  5.1   in the competitive bidding process are: 
  5.2      (1) the competitiveness and stability of the proposed price 
  5.3   of the capacity and energy for the proposed project; 
  5.4      (2) the ability of the project to provide for a portion of 
  5.5   the state's current and future base-load capacity needs; 
  5.6      (3) the use of new electric generation that utilizes an 
  5.7   innovative technology to reduce air emissions, greenhouse gas 
  5.8   emissions, and other environmental impacts; 
  5.9      (4) the jurisdiction of state policymakers over the 
  5.10  emissions and other environmental impacts of the project; 
  5.11     (5) the project's contribution to research and development 
  5.12  in reducing mercury emissions and actual mercury emission 
  5.13  reductions achievable by the project; 
  5.14     (6) the long-term stability of the price of the primary 
  5.15  fuel or fuels to be used for the project; 
  5.16     (7) the project's contribution to reducing long-term 
  5.17  reliance on natural gas for nonpeaking power generation; 
  5.18     (8) the project's contribution to environmental reclamation 
  5.19  and redevelopment of existing industrial sites within the state 
  5.20  and its potential for providing competitive advantages to 
  5.21  industrial entities within the state; 
  5.22     (9) the project's ratio of installed renewable energy 
  5.23  capacity to installed base-load capacity; 
  5.24     (10) the project's utilization of technology that would be 
  5.25  eligible for federal energy tax credits that have historically 
  5.26  been available or are, at the time of bid evaluation, being 
  5.27  considered by Congress; 
  5.28     (11) the project's utilization of technology that can be 
  5.29  configured to produce hydrogen for fuel cells and other gases 
  5.30  and products having the potential to attract further industry, 
  5.31  investment, and jobs to the state; 
  5.32     (12) local support for the project as evidenced by a 
  5.33  resolution or other recorded vote of a local governmental unit 
  5.34  nearest to the generation facility or in whose jurisdiction it 
  5.35  will be sited; and 
  5.36     (13) the opportunities for job creation and other economic 
  6.1   development benefits within the state associated with the 
  6.2   proposed project.  
  6.3      Sec. 6.  [216B.682] [REVIEWS OF QUALIFYING ENERGY PROJECT 
  6.4   PROPOSAL.] 
  6.5      Subdivision 1.  [REQUESTING UTILITY REVIEW AND SUBMISSION.] 
  6.6   Within 30 days following the deadline for submitting proposals 
  6.7   for a qualifying energy project pursuant to section 216B.681, 
  6.8   the requesting utility shall review and summarize each proposal 
  6.9   for a qualifying energy project and shall submit to the 
  6.10  commission: 
  6.11     (1) the proposals; 
  6.12     (2) written summaries of the proposals, including summaries 
  6.13  of the proposals' compliance and satisfaction with the criteria 
  6.14  set forth in section 216B.681, subdivision 2; and 
  6.15     (3) the requesting utility's recommendation of the 
  6.16  qualifying energy project that best meets those criteria. 
  6.17     Subd. 2.  [COMMISSION REVIEW AND DETERMINATION.] Within 30 
  6.18  days of receipt of a submission under subdivision 1, the 
  6.19  commission shall independently review the proposals to determine 
  6.20  and confirm that the qualified energy project proposal 
  6.21  recommended by the requesting utility best meets the criteria in 
  6.22  section 216B.681, subdivision 2.  If the commission determines 
  6.23  that the proposal recommended by the requesting utility best 
  6.24  meets those criteria, the commission shall notify the requesting 
  6.25  utility that it concurs with the requesting utility's 
  6.26  recommendation.  If the commission finds that another proposal 
  6.27  for a qualified energy project best meets those criteria, the 
  6.28  commission shall notify the requesting utility that it rejects 
  6.29  the requesting utility's recommendation and has substituted the 
  6.30  proposal selected by the commission.  
  6.31     Sec. 7.  [216B.683] [POWER PURCHASE AGREEMENT.] 
  6.32     Subdivision 1.  [GOOD FAITH NEGOTIATION.] (a) Upon receipt 
  6.33  of notification by the commission pursuant to section 216B.682, 
  6.34  the requesting utility shall negotiate in good faith for a 
  6.35  long-term power purchase agreement with the sponsor of the 
  6.36  qualified energy project that has been selected by the 
  7.1   commission.  
  7.2      (b) In addition to negotiating with the sponsor of the 
  7.3   qualified energy project selected by the commission, the 
  7.4   requesting utility may negotiate with any other sponsor of any 
  7.5   project which the requesting utility has selected as a finalist 
  7.6   in its competitive bidding process under sections 216B.681 and 
  7.7   216B.682.  
  7.8      Subd. 2.  [AGREEMENT RECOMMENDATION AND APPROVAL.] Within 
  7.9   90 days following commission notification under subdivision 1, 
  7.10  the requesting utility shall present a signed power purchase 
  7.11  agreement with a term of at least 25 years to the commission for 
  7.12  the commission's approval for the selected qualifying energy 
  7.13  project and for each finalist selected by the requesting 
  7.14  utility.  The requesting utility shall recommend to the 
  7.15  commission which power purchase agreement best meets the 
  7.16  criteria in section 216B.681, subdivision 2.  Upon receipt of 
  7.17  the signed power purchase agreements, the commission shall 
  7.18  review the agreements and shall approve an agreement in 
  7.19  accordance with subdivision 5. 
  7.20     Subd. 3.  [INTERVENING PROPOSAL.] (a) Notwithstanding 
  7.21  subdivisions 1 and 2 and section 216B.681, if prior to the 
  7.22  requesting utility's selection of a finalist, a sponsor of a 
  7.23  qualifying energy project submits to the commission an eligible 
  7.24  proposal, the commission may require the requesting utility to 
  7.25  select the proposal and negotiate in good faith a power purchase 
  7.26  agreement consistent with the requirements of subdivision 4 
  7.27  exclusively with the sponsor of that qualifying energy project.  
  7.28     (b) For purposes of this subdivision, an "eligible 
  7.29  proposal" is a proposal that the commission determines: 
  7.30     (1) contains all material commercial terms; 
  7.31     (2) commits to a price for the generation output of the 
  7.32  qualifying energy project that is within ten percent of the 
  7.33  requesting utility's average cost of generation; 
  7.34     (3) shows a compelling need to act expeditiously; and 
  7.35     (4) is consistent with subdivision 5, paragraph (a). 
  7.36     Subd. 4.  [AGREEMENT TERMS.] The power purchase agreement 
  8.1   between a requesting utility and a sponsor of a qualifying 
  8.2   energy project must provide for: 
  8.3      (1) the purchase of at least 1,000 megawatts of nonpeaking 
  8.4   generation that will be operational no later than December 31, 
  8.5   2007; 
  8.6      (2) an option in favor of the sponsor to provide the 
  8.7   requesting utility with at least an additional 1,000 megawatts 
  8.8   of nonpeaking generation, subject to the conditions of section 
  8.9   216B.685, subdivision 2, that will be brought on line in a 
  8.10  manner that serves the requesting utility's next subsequent 
  8.11  forecasted nonpeaking needs; and 
  8.12     (3) the purchase of at least 1,000 megawatts of renewable 
  8.13  installed capacity to be deployed over a ten-year period 
  8.14  commencing in the second year of the power purchase agreement, 
  8.15  provided that the parties may, by mutual agreement subject to 
  8.16  commission approval, change the dates any of the facilities will 
  8.17  be brought on line.  
  8.18     Subd. 5.  [COMMISSION OVERSIGHT AND APPROVAL.] (a) The 
  8.19  commission shall approve a power purchase agreement submitted 
  8.20  under this section and section 216B.682, if it finds that: 
  8.21     (1) the terms and conditions of the agreement and the 
  8.22  project selected best meet the criteria established in section 
  8.23  216B.681, subdivision 2; 
  8.24     (2) the agreement benefits the utility's ratepayers and 
  8.25  shareholders; and 
  8.26     (3) in the case of a qualifying energy project, the terms 
  8.27  of the power purchase agreement are consistent with subdivision 
  8.28  4.  
  8.29     (b) The commission shall issue an order approving, 
  8.30  approving as modified, or disapproving the power purchase 
  8.31  agreement within 90 days of its submission to the commission. 
  8.32     Subd. 6.  [COST RECOVERY.] Subject to the commission's 
  8.33  approval of the power purchase agreement, and a finding by the 
  8.34  commission that the utility negotiated in good faith, the 
  8.35  utility may recover the costs of the power purchase agreement, 
  8.36  and any associated costs, including associated transmission 
  9.1   facilities, without filing a general rate proceeding under 
  9.2   section 216B.16. 
  9.3      Sec. 8.  [216B.684] [DISPUTE RESOLUTION.] 
  9.4      In the event of a dispute between a utility and a 
  9.5   qualifying energy project sponsor over any aspect of the 
  9.6   competitive bidding process, the commission shall, within 45 
  9.7   days after the filing of a notice of dispute, make a finding 
  9.8   resolving the dispute.  All actions of the commission under this 
  9.9   section must give maximum consideration to advancing public 
  9.10  interest criteria without placing unreasonable burdens on 
  9.11  utility ratepayers. 
  9.12     Sec. 9.  [216B.685] [AGENCY PROCESS.] 
  9.13     Subdivision 1.  [NEW OR UPGRADED TRANSMISSION 
  9.14  FACILITIES.] (a) For any new or upgraded transmission facilities 
  9.15  located in the state that are reasonably necessary to connect a 
  9.16  qualified energy project to the transmission system so that the 
  9.17  output of the project can be transmitted to the areas of the 
  9.18  state where the power is needed, and for other facilities 
  9.19  related to or associated with those electric generation and 
  9.20  transmission facilities: 
  9.21     (1) the commission need not make any additional findings of 
  9.22  need under section 216B.243, but rather shall rely upon the 
  9.23  competitive bidding exemption found in section 216B.2422, 
  9.24  subdivision 5, and on the legislative determinations in section 
  9.25  2 that the generation, transmission, and other associated 
  9.26  facilities are needed; and 
  9.27     (2) all state and local agencies and all local units of 
  9.28  government shall process any required approval, permit, or 
  9.29  review of generation, transmission, and other associated 
  9.30  facilities with the highest priority. 
  9.31     (b) The commission and all other state and local agencies 
  9.32  shall treat the determinations made in section 2 as equivalent 
  9.33  in all respects to a commission finding of need for those 
  9.34  generation, transmission, and related or associated facilities 
  9.35  pursuant to section 216B.243. 
  9.36     Subd. 2.  [ADDITIONAL GENERATION CAPACITY.] (a) The 
 10.1   construction of nonpeaking generation capacity, beyond the 
 10.2   initial 1,000 megawatts, by a qualified energy project for which 
 10.3   the commission has approved a power purchase agreement under 
 10.4   subdivision 5, is subject to the commission's determination: 
 10.5      (1) that there exists the need for the additional capacity, 
 10.6   following nomination for the capacity by the requesting utility; 
 10.7   and 
 10.8      (2) that no alternative nonpeaking energy source is 
 10.9   technologically viable, provides superior environmental 
 10.10  performance at a comparable cost, and better satisfies the 
 10.11  criteria set forth in section 216B.681, subdivision 2.  
 10.12     (b) The commission shall make these determinations in a 
 10.13  manner that permits timely nomination and construction under the 
 10.14  power purchase agreement of each additional capacity increment.  
 10.15     (c) If the commission determines that an alternative 
 10.16  base-load energy source exists, the requesting utility is not 
 10.17  obligated to nominate subsequent capacity additions from the 
 10.18  qualified energy project to the extent the utility is ordered by 
 10.19  the commission to take capacity from a project employing the 
 10.20  alternative energy technology.  
 10.21     Sec. 10.  [EFFECTIVE DATE.] 
 10.22     Sections 1 to 9 are effective the day following final 
 10.23  enactment.