1.1                          A bill for an act 
  1.2             relating to energy; authorizing additional dry cask 
  1.3             storage at Prairie Island; increasing funding for 
  1.4             renewable energy development; encouraging 
  1.5             conservation; modifying duties of the legislative 
  1.6             energy task force; authorizing creation of an energy 
  1.7             enterprise zone; amending Minnesota Statutes 2002, 
  1.8             sections 116C.779; 216A.03, subdivision 1; 216B.02, by 
  1.9             adding a subdivision; 216B.095; 216B.097, by adding a 
  1.10            subdivision; 216B.1645, subdivision 2; 216B.1691, 
  1.11            subdivisions 1, 2, by adding subdivisions; 216B.241, 
  1.12            subdivisions 1a, 1b, 2; 216B.2424, subdivision 5; 
  1.13            216B.243, subdivision 3b; 216C.051, subdivisions 1, 2, 
  1.14            3, 9, by adding a subdivision; 216C.052, subdivision 
  1.15            2; 216C.41, subdivisions 1, 2, 3, 4, 5, by adding a 
  1.16            subdivision; 297A.67, by adding a subdivision; 
  1.17            297B.03; 471.345, subdivision 13; proposing coding for 
  1.18            new law in Minnesota Statutes, chapters 16C; 116C; 
  1.19            216B; repealing Minnesota Statutes 2002, section 
  1.20            216C.051, subdivisions 4, 5. 
  1.21  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.22                             ARTICLE 1
  1.23                          DRY CASK STORAGE
  1.24     Section 1.  [116C.83] [AUTHORIZATION FOR ADDITIONAL DRY 
  1.25  CASK STORAGE.] 
  1.26     Subdivision 1.  [AUTHORIZATION.] Subject to the cask 
  1.27  storage limits of the federal license for the independent spent 
  1.28  fuel storage installation at Prairie Island, the public utility 
  1.29  that owns the Prairie Island nuclear generation plant has 
  1.30  authorization without additional administrative review to place 
  1.31  an additional 12 TN-40 casks at that installation to allow:  
  1.32     (1) the unit 1 reactor at Prairie Island to operate until 
  1.33  the end of its current license in 2013; and 
  2.1      (2) the unit 2 reactor at Prairie Island to operate until 
  2.2   the end of its current license in 2014. 
  2.3      Subd. 2.  [SETTLEMENT WITH TRIBE.] The authorization 
  2.4   contained in subdivision 1 is not effective until the public 
  2.5   utility enters into a settlement agreement with the Mdewakanton 
  2.6   Dakota Tribal Council at Prairie Island, a federally recognized 
  2.7   Indian Tribe, to resolve outstanding disputes with respect to 
  2.8   the provisions of Laws 1994, chapter 641, article 1, section 4.  
  2.9   The settlement agreement shall provide for payments to the tribe 
  2.10  of at least $2,250,000 annually for a period of at least ten 
  2.11  years to be used for, among other purposes, acquiring land in 
  2.12  the state of Minnesota for placement in trust.  
  2.13     Sec. 2.  Minnesota Statutes 2002, section 216B.1645, 
  2.14  subdivision 2, is amended to read: 
  2.15     Subd. 2.  [COST RECOVERY.] The expenses incurred by the 
  2.16  utility over the duration of the approved contract or useful 
  2.17  life of the investment and expenditures made pursuant to section 
  2.18  116C.779 and an agreement with the Mdewakanton Dakota Tribal 
  2.19  Council at Prairie Island regarding the provisions of Laws 1994, 
  2.20  chapter 641, article 1, section 4, shall be recoverable from the 
  2.21  ratepayers of the utility, to the extent they are not offset by 
  2.22  utility revenues attributable to the contracts, investments, or 
  2.23  expenditures.  Upon petition by a public utility, the commission 
  2.24  shall approve or approve as modified a rate schedule providing 
  2.25  for the automatic adjustment of charges to recover the expenses 
  2.26  or costs approved by the commission, which, in the case of 
  2.27  transmission expenditures, are limited to the portion of actual 
  2.28  transmission costs that are directly allocable to the need to 
  2.29  transmit power from the renewable sources of energy.  The 
  2.30  commission may not approve recovery of the costs for that 
  2.31  portion of the power generated from sources governed by this 
  2.32  section that the utility sells into the wholesale market.  
  2.33     Sec. 3.  Minnesota Statutes 2002, section 216B.243, 
  2.34  subdivision 3b, is amended to read: 
  2.35     Subd. 3b.  [NUCLEAR POWER PLANT; NEW CONSTRUCTION 
  2.36  PROHIBITED; RELICENSING.] (a) The commission may not issue a 
  3.1   certificate of need for the construction of a new 
  3.2   nuclear-powered electric generating plant. 
  3.3      (b) A public utility that operates a nuclear generating 
  3.4   facility in the state must seek and obtain approval by the 
  3.5   commission of a proposal to renew a federal license to operate 
  3.6   that nuclear generation facility beyond the initial license 
  3.7   period.  The commission shall treat the proposal to seek such a 
  3.8   renewal as a proposal for construction of a new large energy 
  3.9   facility for the purpose of this section and section 216B.2422. 
  3.10     (c) Within 30 days of issuing a decision to authorize 
  3.11  continued operation of a nuclear generation facility, the 
  3.12  commission must issue a report to the chairs of the house of 
  3.13  representatives and senate committees with jurisdiction over 
  3.14  energy regulation and environmental protections, detailing the 
  3.15  grounds for its decision.  A decision by the commission to 
  3.16  authorize continued operation of a nuclear generation facility 
  3.17  under paragraph (b) is not effective until ratified by law. 
  3.18                             ARTICLE 2
  3.19                    RENEWABLE ENERGY DEVELOPMENT
  3.20     Section 1.  Minnesota Statutes 2002, section 116C.779, is 
  3.21  amended to read: 
  3.22     116C.779 [FUNDING FOR RENEWABLE DEVELOPMENT.] 
  3.23     Subdivision 1.  [RENEWABLE DEVELOPMENT ACCOUNT.] (a) The 
  3.24  public utility that operates owns the Prairie Island nuclear 
  3.25  generating plant must transfer to a renewable development 
  3.26  account $500,000 each year for each dry cask containing spent 
  3.27  fuel that is located at the independent spent fuel storage 
  3.28  installation at Prairie Island after January 1, 1999 $26,500,000 
  3.29  annually.  The fund transfer must be made if waste is stored in 
  3.30  a cask for any part of a year in which the plant is in 
  3.31  operation.  Funds in the account may be expended only for 
  3.32  development of renewable energy sources and energy storage 
  3.33  technologies that facilitate the development of intermittent 
  3.34  renewable energy sources.  Preference must be given to 
  3.35  development of renewable energy source projects located within 
  3.36  the state.  
  4.1      (b) Expenditures from the account may only be made after 
  4.2   approval by order of the public utilities commission upon a 
  4.3   petition by the public utility. 
  4.4      Subd. 2.  [HYDROGEN ECONOMY RESEARCH.] (a) $5,000,000 
  4.5   annually from the renewable development account must be 
  4.6   allocated to support basic and applied research at the Minnesota 
  4.7   hydrogen and renewables research center at the University of 
  4.8   Minnesota.  
  4.9      (b) Research funded under this subdivision must focus on: 
  4.10     (1) conversion of state wind resources to hydrogen for 
  4.11  energy storage and transportation to areas of energy demand; 
  4.12     (2) improvement of scalable hydrogen fuel cells for 
  4.13  stationary combined electricity generation and heating/cooling 
  4.14  function for residential and commercial use; and 
  4.15     (3) processing of agricultural and forestry plant products 
  4.16  for production of hydrogen and other fuels and sequestration of 
  4.17  carbon using a variety of means, including biocatalysis and 
  4.18  fermentation. 
  4.19     Subd. 3.  [WIND ENERGY PRODUCTION INCENTIVE.] (a) Until 
  4.20  January 1, 2018, up to $7,000,000 annually must be allocated 
  4.21  from the account to fund the renewable energy production 
  4.22  incentive for up to 150 megawatts of electricity generated by 
  4.23  wind energy conversion systems larger than 40 kilowatts in size 
  4.24  that are eligible for the incentive under section 216C.41.  Any 
  4.25  portion of the $7,000,000 not expended in any calendar year for 
  4.26  the incentive is available for other spending purposes under 
  4.27  this section.  
  4.28     (b) The state energy office shall determine eligibility of 
  4.29  projects under section 216C.41 for the purposes of this 
  4.30  subdivision.  At least quarterly, the state energy office shall 
  4.31  notify the public utility of the name and address of each 
  4.32  eligible project owner and the amount due to each project under 
  4.33  section 216C.41.  The public utility shall make payments within 
  4.34  15 working days after receipt of notification of payments due.  
  4.35  Payments made more than 15 working days following receipt of 
  4.36  notification of payments due must include late fees of: 
  5.1      (1) five percent for payments made up to 20 working days of 
  5.2   notification; 
  5.3      (2) ten percent for payments made up to 25 working days of 
  5.4   notification; and 
  5.5      (3) 25 percent for payments made after 25 working days of 
  5.6   notification.  
  5.7      Late fees required under this section may not be charged to 
  5.8   the renewable development account and may not be recovered from 
  5.9   ratepayers.  
  5.10     Sec. 2.  [216B.013] [HYDROGEN ENERGY ECONOMY GOAL.] 
  5.11     It is a goal of this state that Minnesota move to hydrogen 
  5.12  as an increasing source of energy for its electrical power, 
  5.13  heating, and transportation needs. 
  5.14     Sec. 3.  Minnesota Statutes 2002, section 216B.1691, 
  5.15  subdivision 1, is amended to read: 
  5.16     Subdivision 1.  [DEFINITIONS.] (a) "Eligible energy 
  5.17  technology" means an energy technology that: 
  5.18     (1) generates electricity from the following renewable 
  5.19  energy sources:  solar, wind, hydroelectric with a capacity of 
  5.20  less than 60 megawatts, or biomass, or an energy recovery 
  5.21  facility used to capture the heat value of mixed municipal solid 
  5.22  waste or refuse-derived fuel; and 
  5.23     (2) was not mandated by state energy law or commission 
  5.24  order enacted or issued prior to August 1, 2001. 
  5.25     (b) "Electric utility" means a public utility providing 
  5.26  electric service, a generation and transmission cooperative 
  5.27  electric association, or a municipal power agency. 
  5.28     Sec. 4.  Minnesota Statutes 2002, section 216B.1691, 
  5.29  subdivision 2, is amended to read: 
  5.30     Subd. 2.  [ELIGIBLE ENERGY OBJECTIVES.] (a) Each electric 
  5.31  utility shall make a good faith effort to generate or procure 
  5.32  sufficient electricity generated by an eligible energy 
  5.33  technology to provide its retail consumers, or the retail 
  5.34  members of a distribution utility to which the electric utility 
  5.35  provides wholesale electric service, so that: 
  5.36     (1) commencing in 2005, at least one percent of the 
  6.1   electric energy provided to those retail customers is generated 
  6.2   by eligible energy technologies; 
  6.3      (2) the amount provided under clause (1) is increased by 
  6.4   one percent each year until 2015; 
  6.5      (3) ten percent of the electric energy provided to retail 
  6.6   customers in Minnesota is generated by eligible energy 
  6.7   technologies; and 
  6.8      (4) of the eligible energy technology generation required 
  6.9   under clauses (1) and (2), at least but not more than 0.5 
  6.10  percent of the energy must be generated by biomass energy 
  6.11  technologies or an energy recovery facility used to capture the 
  6.12  heat value of mixed municipal solid waste or refuse-derived fuel 
  6.13  by 2010 and one percent by 2015 2005.  By 2010, one percent of 
  6.14  the eligible energy technology generation required under clauses 
  6.15  (1) and (2) shall be generated by the sources described in this 
  6.16  clause.  An energy recovery facility, as described in 
  6.17  subdivision 1, clause (1), with a power sales agreement in 
  6.18  effect as of the date of this act that terminates after December 
  6.19  31, 2010, does not qualify as an eligible energy technology 
  6.20  unless the agreement provides for rate adjustment in the event 
  6.21  the facility qualifies as a renewable energy source. 
  6.22     (b) Each electric utility shall report on its activities 
  6.23  and progress with regard to these objectives in their filings 
  6.24  under section 216B.2422. 
  6.25     (c) The commission, in consultation with the commissioner 
  6.26  of commerce, shall compile the information provided to the 
  6.27  commission under paragraph (b), and report to the chairs of the 
  6.28  house of representatives and senate committees with jurisdiction 
  6.29  over energy and environment policy issues as to the progress of 
  6.30  utilities in the state in increasing the amount of renewable 
  6.31  energy provided to retail customers, with any recommendations 
  6.32  for regulatory or legislative action, by January 15, 2002. 
  6.33     Sec. 5.  Minnesota Statutes 2002, section 216B.1691, is 
  6.34  amended by adding a subdivision to read: 
  6.35     Subd. 3.  [TRANSMISSION.] (a) Each electric utility shall 
  6.36  determine necessary transmission upgrades to support development 
  7.1   of renewable energy resources required to meet the renewable 
  7.2   energy objective under this section and shall: 
  7.3      (1) seek approval for those upgrades from the appropriate 
  7.4   regional transmission entity or entities at the earliest 
  7.5   practicable date; and 
  7.6      (2) submit to the commission an application for 
  7.7   certificates of need for those transmission upgrades, with a 
  7.8   firm schedule for construction, not later than January 1, 2005. 
  7.9      (b) Transmission capacity upgrades under paragraph (a) 
  7.10  qualify for rate treatment provided under section 216B.1645, 
  7.11  provided the utility coordinates the construction of the 
  7.12  transmission capacity with the signing of power purchase 
  7.13  agreements for wind generation. 
  7.14     Sec. 6.  Minnesota Statutes 2002, section 216B.1691, is 
  7.15  amended by adding a subdivision to read: 
  7.16     Subd. 4.  [REQUIREMENT.] The good faith objective set forth 
  7.17  in subdivision 2 shall be a requirement for the public utility 
  7.18  that owns the Prairie Island nuclear generation plant, unless 
  7.19  the cost of eligible energy technology is found by the 
  7.20  commission to not be the utility's least cost energy source 
  7.21  inclusive of ancillary services costs.  
  7.22     Sec. 7.  Minnesota Statutes 2002, section 216B.2424, 
  7.23  subdivision 5, is amended to read: 
  7.24     Subd. 5.  [MANDATE.] (a) A public utility, as defined in 
  7.25  section 216B.02, subdivision 4, that operates a nuclear-powered 
  7.26  electric generating plant within this state must construct and 
  7.27  operate, purchase, or contract to construct and operate (1) by 
  7.28  December 31, 1998, 50 megawatts of electric energy installed 
  7.29  capacity generated by farm-grown closed-loop biomass scheduled 
  7.30  to be operational by December 31, 2001; and (2) by December 31, 
  7.31  1998, an additional 75 megawatts of installed capacity so 
  7.32  generated scheduled to be operational by December 31, 2002.  
  7.33     (b) Of the 125 megawatts of biomass electricity installed 
  7.34  capacity required under this subdivision, no more than 50 
  7.35  megawatts of this capacity may be provided by a facility that 
  7.36  uses poultry litter as its primary fuel source and any such 
  8.1   facility:  
  8.2      (1) need not use biomass that complies with the definition 
  8.3   in subdivision 1; 
  8.4      (2) must enter into a contract with the public utility for 
  8.5   such capacity, that has an average purchase price per megawatt 
  8.6   hour over the life of the contract that is equal to or less than 
  8.7   the average purchase price per megawatt hour over the life of 
  8.8   the contract in contracts approved by the public utilities 
  8.9   commission before April 1, 2000, to satisfy the mandate of this 
  8.10  section, and file that contract with the public utilities 
  8.11  commission prior to September 1, 2000; and 
  8.12     (3) must schedule such capacity to be operational by 
  8.13  December 31, 2002.  
  8.14     (c) Of the total 125 megawatts of biomass electric energy 
  8.15  installed capacity required under this section, no more than 75 
  8.16  megawatts may be provided by a single project.  
  8.17     (d) Of the 75 megawatts of biomass electric energy 
  8.18  installed capacity required under paragraph (a), clause (2), no 
  8.19  more than 25 33 megawatts of this capacity may be provided by a 
  8.20  St. Paul district heating and cooling system cogeneration 
  8.21  facility utilizing waste wood as a primary fuel source.  The St. 
  8.22  Paul district heating and cooling system cogeneration facility 
  8.23  need not use biomass that complies with the definition in 
  8.24  subdivision 1.  
  8.25     (e) The public utility must accept and consider on an equal 
  8.26  basis with other biomass proposals: 
  8.27     (1) a proposal to satisfy the requirements of this section 
  8.28  that includes a project that exceeds the megawatt capacity 
  8.29  requirements of either paragraph (a), clause (1) or (2), and 
  8.30  that proposes to sell the excess capacity to the public utility 
  8.31  or to other purchasers; and 
  8.32     (2) a proposal for a new facility to satisfy more than ten 
  8.33  but not more than 20 megawatts of the electrical generation 
  8.34  requirements by a small business-sponsored independent power 
  8.35  producer facility to be located within the northern quarter of 
  8.36  the state, which means the area located north of Constitutional 
  9.1   Route No. 8 as described in section 161.114, subdivision 2, and 
  9.2   that utilizes biomass residue wood, sawdust, bark, chipped wood, 
  9.3   or brush to generate electricity.  A facility described in this 
  9.4   clause is not required to utilize biomass complying with the 
  9.5   definition in subdivision 1, but must have the capacity required 
  9.6   by this clause operational by December 31, 2002. 
  9.7      (f) If a public utility files a contract with the 
  9.8   commission for electric energy installed capacity that uses 
  9.9   poultry litter as its primary fuel source, the commission must 
  9.10  do a preliminary review of the contract to determine if it meets 
  9.11  the purchase price criteria provided in paragraph (b), clause 
  9.12  (2), of this subdivision.  The commission shall perform its 
  9.13  review and advise the parties of its determination within 30 
  9.14  days of filing of such a contract by a public utility.  A public 
  9.15  utility may submit by September 1, 2000, a revised contract to 
  9.16  address the commission's preliminary determination.  
  9.17     (g) The commission shall finally approve, modify, or 
  9.18  disapprove no later than July 1, 2001, all contracts submitted 
  9.19  by a public utility as of September 1, 2000, to meet the mandate 
  9.20  set forth in this subdivision.  
  9.21     (h) If a public utility subject to this section exercises 
  9.22  an option to increase the generating capacity of a project in a 
  9.23  contract approved by the commission prior to April 25, 2000, to 
  9.24  satisfy the mandate in this subdivision, the public utility must 
  9.25  notify the commission by September 1, 2000, that it has 
  9.26  exercised the option and include in the notice the amount of 
  9.27  additional megawatts to be generated under the option 
  9.28  exercised.  Any review by the commission of the project after 
  9.29  exercise of such an option shall be based on the same criteria 
  9.30  used to review the existing contract. 
  9.31     (i) A facility specified in this subdivision qualifies for 
  9.32  exemption from property taxation under section 272.02, 
  9.33  subdivision 43. 
  9.34     Sec. 8.  Minnesota Statutes 2002, section 216C.41, 
  9.35  subdivision 1, is amended to read: 
  9.36     Subdivision 1.  [DEFINITIONS.] (a) The definitions in this 
 10.1   subdivision apply to this section. 
 10.2      (b) "Qualified hydroelectric facility" means a 
 10.3   hydroelectric generating facility in this state that: 
 10.4      (1) is located at the site of a dam, if the dam was in 
 10.5   existence as of March 31, 1994; and 
 10.6      (2) begins generating electricity after July 1, 1994, or 
 10.7   generates electricity after substantial refurbishing of a 
 10.8   facility that begins after July 1, 2001. 
 10.9      (c) "Qualified wind energy conversion facility" means a 
 10.10  wind energy conversion system in this state that: 
 10.11     (1) produces two megawatts or less of electricity as 
 10.12  measured by nameplate rating and begins generating electricity 
 10.13  after December 31, 1996, and before July 1, 1999; 
 10.14     (2) begins generating electricity after June 30, 1999, 
 10.15  produces two megawatts or less of electricity as measured by 
 10.16  nameplate rating, and is: 
 10.17     (i) located within one county and owned by a natural person 
 10.18  who owns the land where the facility is sited; 
 10.19     (ii) owned by a Minnesota small business as defined in 
 10.20  section 645.445; 
 10.21     (iii) owned by a Minnesota nonprofit organization; or 
 10.22     (iv) owned by a tribal council if the facility is located 
 10.23  within the boundaries of the reservation; or 
 10.24     (v) owned by a Minnesota municipal utility or a Minnesota 
 10.25  cooperative electric association; or 
 10.26     (vi) owned by a Minnesota political subdivision or local 
 10.27  government, including, but not limited to, a county, statutory 
 10.28  or home rule charter city, town, school district, or any other 
 10.29  local or regional governmental organization such as a board, 
 10.30  commission, or association; or 
 10.31     (3) begins generating electricity after June 30, 1999, 
 10.32  produces seven megawatts or less of electricity as measured by 
 10.33  nameplate rating, and: 
 10.34     (i) is owned by a cooperative organized under chapter 
 10.35  308A other than a Minnesota cooperative electric association; 
 10.36  and 
 11.1      (ii) all shares and membership in the cooperative are held 
 11.2   by natural persons or estates, at least 51 percent of whom 
 11.3   reside in a county or contiguous to a county where the wind 
 11.4   energy production facilities of the cooperative are 
 11.5   located Minnesota residents or estates of persons who were 
 11.6   Minnesota residents. 
 11.7      (d) "Qualified on-farm biogas recovery facility" means an 
 11.8   anaerobic digester system that: 
 11.9      (1) is located at the site of an agricultural operation; 
 11.10     (2) is owned by a natural person who owns or rents the land 
 11.11  where the facility is located; and 
 11.12     (3) begins generating electricity after July 1, 2001.  
 11.13     (e) "Anaerobic digester system" means a system of 
 11.14  components that processes animal waste based on the absence of 
 11.15  oxygen and produces gas used to generate electricity. 
 11.16     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 11.17  following final enactment.  
 11.18     Sec. 9.  Minnesota Statutes 2002, section 216C.41, 
 11.19  subdivision 2, is amended to read: 
 11.20     Subd. 2.  [INCENTIVE PAYMENT; APPROPRIATION.] (a) Incentive 
 11.21  payments must be made according to this section to (1) a 
 11.22  qualified on-farm biogas recovery facility, (2) the owner or 
 11.23  operator of a qualified hydropower facility or qualified wind 
 11.24  energy conversion facility for electric energy generated and 
 11.25  sold by the facility, (3) a publicly owned hydropower facility 
 11.26  for electric energy that is generated by the facility and used 
 11.27  by the owner of the facility outside the facility, or (4) the 
 11.28  owner of a publicly owned dam that is in need of substantial 
 11.29  repair, for electric energy that is generated by a hydropower 
 11.30  facility at the dam and the annual incentive payments will be 
 11.31  used to fund the structural repairs and replacement of 
 11.32  structural components of the dam, or to retire debt incurred to 
 11.33  fund those repairs. 
 11.34     (b) Payment may only be made upon receipt by the 
 11.35  commissioner of finance of an incentive payment application that 
 11.36  establishes that the applicant is eligible to receive an 
 12.1   incentive payment and that satisfies other requirements the 
 12.2   commissioner deems necessary.  The application must be in a form 
 12.3   and submitted at a time the commissioner establishes.  
 12.4      (c) There is annually appropriated from the general fund to 
 12.5   the commissioner of commerce sums sufficient to make the 
 12.6   payments required under this section, other than the amounts 
 12.7   funded by the renewable development account as specified in 
 12.8   subdivision 5a. 
 12.9      Sec. 10.  Minnesota Statutes 2002, section 216C.41, 
 12.10  subdivision 3, is amended to read: 
 12.11     Subd. 3.  [ELIGIBILITY WINDOW.] Payments may be made under 
 12.12  this section only for electricity generated: 
 12.13     (1) from a qualified hydroelectric facility that is 
 12.14  operational and generating electricity before December 31, 2005; 
 12.15     (2) from a qualified wind energy conversion facility that 
 12.16  is operational and generating electricity before January 1, 2005 
 12.17  2007; or 
 12.18     (3) from a qualified on-farm biogas recovery facility from 
 12.19  July 1, 2001, through December 31, 2015. 
 12.20     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 12.21  following final enactment.  
 12.22     Sec. 11.  Minnesota Statutes 2002, section 216C.41, 
 12.23  subdivision 4, is amended to read: 
 12.24     Subd. 4.  [PAYMENT PERIOD.] (a) A facility may receive 
 12.25  payments under this section for a ten-year period.  No payment 
 12.26  under this section may be made for electricity generated: 
 12.27     (1) by a qualified hydroelectric facility after December 
 12.28  31, 2015; 
 12.29     (2) by a qualified wind energy conversion facility after 
 12.30  December 31, 2015 2017; or 
 12.31     (3) by a qualified on-farm biogas recovery facility after 
 12.32  December 31, 2015.  
 12.33     (b) The payment period begins and runs consecutively from 
 12.34  the first year in which electricity generated from the facility 
 12.35  is eligible for incentive payment the date the facility begins 
 12.36  generating electricity or, in the case of refurbishment of a 
 13.1   hydropower facility, after substantial repairs to the hydropower 
 13.2   facility dam funded by the incentive payments are initiated. 
 13.3      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 13.4   following final enactment.  
 13.5      Sec. 12.  Minnesota Statutes 2002, section 216C.41, 
 13.6   subdivision 5, is amended to read: 
 13.7      Subd. 5.  [AMOUNT OF PAYMENT; WIND FACILITIES LIMIT.] (a) 
 13.8   An incentive payment is based on the number of kilowatt hours of 
 13.9   electricity generated. The amount of the payment is: 
 13.10     (1) for a facility described under subdivision 2, paragraph 
 13.11  (a), clause (4), 1.0 cent per kilowatt hour; and 
 13.12     (2) for all other facilities, 1.5 cents per kilowatt hour.  
 13.13  For electricity generated by qualified wind energy conversion 
 13.14  facilities greater than 40 kilowatts nameplate capacity, the 
 13.15  incentive payment under this section is limited to no more than 
 13.16  100 megawatts of nameplate capacity.  During any period in which 
 13.17  qualifying claims for incentive payments exceed 100 megawatts of 
 13.18  nameplate capacity, the payments must be made to producers in 
 13.19  the order in which the production capacity was brought into 
 13.20  production.  
 13.21     (b) For wind energy conversion systems installed and 
 13.22  contracted for after January 1, 2002, the total size of a wind 
 13.23  energy conversion system under this section must be determined 
 13.24  according to this paragraph.  Unless the systems are 
 13.25  interconnected with different distribution systems, the 
 13.26  nameplate capacity of one wind energy conversion system must be 
 13.27  combined with the nameplate capacity of any other wind energy 
 13.28  conversion system that is: 
 13.29     (1) located within five miles of the wind energy conversion 
 13.30  system; 
 13.31     (2) constructed within the same calendar year as the wind 
 13.32  energy conversion system; and 
 13.33     (3) under common ownership. 
 13.34  In the case of a dispute, the commissioner of commerce shall 
 13.35  determine the total size of the system, and shall draw all 
 13.36  reasonable inferences in favor of combining the systems. 
 14.1      (c) In making a determination under paragraph (b), the 
 14.2   commissioner of commerce may determine that two wind energy 
 14.3   conversion systems are under common ownership when the 
 14.4   underlying ownership structure contains similar persons or 
 14.5   entities, even if the ownership shares differ between the two 
 14.6   systems.  Wind energy conversion systems are not under common 
 14.7   ownership solely because the same person or entity provided 
 14.8   equity financing for the systems. 
 14.9      (d) A qualified wind energy conversion system is eligible 
 14.10  for the incentive on the date the commissioner receives: 
 14.11     (1) an application for payment of the incentive; 
 14.12     (2) one of the following: 
 14.13     (i) a copy of a signed power purchase agreement; 
 14.14     (ii) a copy of a binding agreement other than a power 
 14.15  purchase agreement to sell electricity generated by the facility 
 14.16  to a third person; or 
 14.17     (iii) if the facility developer or owner will sell 
 14.18  electricity to its own members or customers, a copy of the 
 14.19  purchase order for equipment to construct the facility with a 
 14.20  delivery date and a copy of a signed receipt for a nonrefundable 
 14.21  deposit; and 
 14.22     (3) any other information the commissioner deems necessary 
 14.23  to determine whether the proposed facility qualifies for the 
 14.24  incentive under this section.  
 14.25     (e) The commissioner or the commissioner's designee shall 
 14.26  determine whether a facility qualifies for the incentive and 
 14.27  respond in writing to the applicant approving or denying the 
 14.28  application within 15 working days of receipt of the information 
 14.29  required in paragraph (d).  A facility that is not operational 
 14.30  within 18 months of receipt of a letter of approval is no longer 
 14.31  approved for the incentive.  The commissioner shall notify an 
 14.32  applicant of potential loss of approval not less than 60 days 
 14.33  prior to the end of the 18-month period.  Eligibility for a 
 14.34  facility that loses approval may be reestablished as of the date 
 14.35  the commissioner receives a new completed application.  Approval 
 14.36  applies only to the person or persons who applied for the 
 15.1   incentive and may not be transferred to any other person or 
 15.2   persons. 
 15.3      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 15.4   following final enactment.  
 15.5      Sec. 13.  Minnesota Statutes 2002, section 216C.41, is 
 15.6   amended by adding a subdivision to read: 
 15.7      Subd. 5a.  [ADDITIONAL SMALL WIND ENERGY PRODUCTION 
 15.8   INCENTIVE.] The state energy office shall authorize payment of 
 15.9   the renewable energy production incentive to wind energy 
 15.10  conversion systems larger than 40 kilowatts in size for 150 
 15.11  megawatts of nameplate capacity in addition to the capacity 
 15.12  authorized under subdivision 5.  Payment of the incentive shall 
 15.13  be made from the renewable energy development account as 
 15.14  provided under section 116C.779, subdivision 3.  Any amount 
 15.15  needed to fully fund incentive payments under this subdivision 
 15.16  in addition to funds available in the renewable energy 
 15.17  development account will be provided under subdivision 2, 
 15.18  notwithstanding the limit specified in subdivision 5.  
 15.19     Sec. 14.  Minnesota Statutes 2002, section 297A.67, is 
 15.20  amended by adding a subdivision to read: 
 15.21     Subd. 31.  [HYDROGEN AND HYDROGEN FUEL CELLS.] (a) Hydrogen 
 15.22  and hydrogen fuel cells are exempt when used to produce 
 15.23  electricity and when used to power a vehicle that is fueled 
 15.24  primarily by hydrogen.  After January 1, 2010, hydrogen must be 
 15.25  generated from the renewable resources specified in section 
 15.26  216B.2422, subdivision 1, paragraph (c), clauses (1) through 
 15.27  (6), to qualify for the exemption provided by this subdivision.  
 15.28     (b) Material and equipment used exclusively for, consumed 
 15.29  in, or incorporated into a hydrogen vehicle fueling station are 
 15.30  exempt.  For purposes of this subdivision, materials and 
 15.31  equipment include, but are not limited to, compressors, storage 
 15.32  cylinders, framing, tubing, fittings, valves, fuel poles, 
 15.33  sensors, and fuel-delivery lines.  
 15.34     Sec. 15.  Minnesota Statutes 2002, section 297B.03, is 
 15.35  amended to read: 
 15.36     297B.03 [EXEMPTIONS.] 
 16.1      There is specifically exempted from the provisions of this 
 16.2   chapter and from computation of the amount of tax imposed by it 
 16.3   the following:  
 16.4      (1) purchase or use, including use under a lease purchase 
 16.5   agreement or installment sales contract made pursuant to section 
 16.6   465.71, of any motor vehicle by the United States and its 
 16.7   agencies and instrumentalities and by any person described in 
 16.8   and subject to the conditions provided in section 297A.67, 
 16.9   subdivision 11; 
 16.10     (2) purchase or use of any motor vehicle by any person who 
 16.11  was a resident of another state or country at the time of the 
 16.12  purchase and who subsequently becomes a resident of Minnesota, 
 16.13  provided the purchase occurred more than 60 days prior to the 
 16.14  date such person began residing in the state of Minnesota and 
 16.15  the motor vehicle was registered in the person's name in the 
 16.16  other state or country; 
 16.17     (3) purchase or use of any motor vehicle by any person 
 16.18  making a valid election to be taxed under the provisions of 
 16.19  section 297A.90; 
 16.20     (4) purchase or use of any motor vehicle previously 
 16.21  registered in the state of Minnesota when such transfer 
 16.22  constitutes a transfer within the meaning of section 118, 331, 
 16.23  332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 
 16.24  1563(a) of the Internal Revenue Code of 1986, as amended through 
 16.25  December 31, 1999; 
 16.26     (5) purchase or use of any vehicle owned by a resident of 
 16.27  another state and leased to a Minnesota based private or for 
 16.28  hire carrier for regular use in the transportation of persons or 
 16.29  property in interstate commerce provided the vehicle is titled 
 16.30  in the state of the owner or secured party, and that state does 
 16.31  not impose a sales tax or sales tax on motor vehicles used in 
 16.32  interstate commerce; 
 16.33     (6) purchase or use of a motor vehicle by a private 
 16.34  nonprofit or public educational institution for use as an 
 16.35  instructional aid in automotive training programs operated by 
 16.36  the institution.  "Automotive training programs" includes motor 
 17.1   vehicle body and mechanical repair courses but does not include 
 17.2   driver education programs; 
 17.3      (7) purchase of a motor vehicle for use as an ambulance by 
 17.4   an ambulance service licensed under section 144E.10; 
 17.5      (8) purchase of a motor vehicle by or for a public library, 
 17.6   as defined in section 134.001, subdivision 2, as a bookmobile or 
 17.7   library delivery vehicle; 
 17.8      (9) purchase of a ready-mixed concrete truck; 
 17.9      (10) purchase or use of a motor vehicle by a town for use 
 17.10  exclusively for road maintenance, including snowplows and dump 
 17.11  trucks, but not including automobiles, vans, or pickup trucks; 
 17.12     (11) purchase or use of a motor vehicle by a corporation, 
 17.13  society, association, foundation, or institution organized and 
 17.14  operated exclusively for charitable, religious, or educational 
 17.15  purposes, except a public school, university, or library, but 
 17.16  only if the vehicle is: 
 17.17     (i) a truck, as defined in section 168.011, a bus, as 
 17.18  defined in section 168.011, or a passenger automobile, as 
 17.19  defined in section 168.011, if the automobile is designed and 
 17.20  used for carrying more than nine persons including the driver; 
 17.21  and 
 17.22     (ii) intended to be used primarily to transport tangible 
 17.23  personal property or individuals, other than employees, to whom 
 17.24  the organization provides service in performing its charitable, 
 17.25  religious, or educational purpose; 
 17.26     (12) purchase of a motor vehicle for use by a transit 
 17.27  provider exclusively to provide transit service is exempt if the 
 17.28  transit provider is either (i) receiving financial assistance or 
 17.29  reimbursement under section 174.24 or 473.384, or (ii) operating 
 17.30  under section 174.29, 473.388, or 473.405; and 
 17.31     (13) purchase or use of a motor vehicle fueled primarily by 
 17.32  hydrogen or hydrogen fuel cells. 
 17.33     Sec. 16.  [DEPARTMENT OF TRADE AND ECONOMIC DEVELOPMENT; 
 17.34  PROGRAM DEVELOPMENT.] 
 17.35     Subdivision 1. [DEVELOPMENT OF BUSINESSES ENGAGED IN 
 17.36  HYDROGEN PRODUCTION.] The department of trade and economic 
 18.1   development must develop a targeted program to promote and 
 18.2   encourage the development and attraction of businesses engaged 
 18.3   in the biocatalysis of agricultural and forestry plant products 
 18.4   for the production of hydrogen, the manufacture of hydrogen fuel 
 18.5   cells, and hydrogen electrolysis from renewable energy sources.  
 18.6   The program may make use of existing departmental programs, 
 18.7   either alone or in combination.  The department shall report to 
 18.8   the legislature by January 15, 2004, on legislative changes or 
 18.9   additional funding needed, if any, to accomplish the purposes of 
 18.10  this section.  
 18.11     Subd. 2.  [ENERGY INNOVATION ZONES.] (a) The commissioner 
 18.12  of trade and economic development, in consultation with the 
 18.13  commissioners of commerce and revenue, shall develop a plan to 
 18.14  designate not more than three energy innovation zones to spur 
 18.15  the development of fuel cells, fuel cell components, hydrogen 
 18.16  infrastructure, and other energy efficiency and renewable energy 
 18.17  technologies in the state.  In developing the criteria for the 
 18.18  designations, the commissioner shall consider: 
 18.19     (1) the availability of business, academic, and government 
 18.20  partners; 
 18.21     (2) the likelihood of establishing a distributed, renewable 
 18.22  energy microgrid to power the zone, providing below-market 
 18.23  electricity and heat to businesses from within the zone; 
 18.24     (3) the prospect of tenants for the zone that will 
 18.25  represent net new jobs to the state; and 
 18.26     (4) the likelihood of the production, storage, 
 18.27  distribution, and use of hydrogen, including its use in fuel 
 18.28  cells, for electricity and heat. 
 18.29     (b) Energy under paragraph (a), clause (2), must come from 
 18.30  one or more of the following renewable sources:  wind, water, 
 18.31  sun, biomass, not including municipal solid waste, or hydrogen 
 18.32  reformed from natural gas up to 2010. 
 18.33     (c) The plan must allow for interested parties to form 
 18.34  energy innovation cooperatives.  In addition, the commissioner 
 18.35  must consider the feasibility of the sale of energy innovation 
 18.36  bonds for the construction of qualifying facilities. 
 19.1      (d) In drafting the plan, the commissioner must consider 
 19.2   incentives for investment in the zone, including 
 19.3      (1) subsidization of construction of qualifying facilities; 
 19.4      (2) long-term contracts for market-rate heat and power; 
 19.5      (3) exemption from laws giving exclusive service territory; 
 19.6      (4) streamlined interconnection to the existing power grid; 
 19.7      (5) exemptions from property tax; 
 19.8      (6) expedited permitting; 
 19.9      (7) methods for providing technical assistance; and 
 19.10     (8) other methods of encouraging the development and use 
 19.11  and development of fuel cell and hydrogen generation 
 19.12  technologies. 
 19.13     (e) The commissioner shall report to the legislature by 
 19.14  January 15, 2004, on legislative changes and necessary funding 
 19.15  to accomplish the purposes of this subdivision. 
 19.16     Sec. 17.  [DEMONSTRATION PROJECT.] 
 19.17     (a) The department of commerce, in cooperation with the 
 19.18  department of trade and economic development, must develop and 
 19.19  issue a request for proposal for the construction of a 
 19.20  hydrogen-to-electricity demonstration project with the following 
 19.21  components:  
 19.22     (1) commercial-scale windmill-powered electrolysis of water 
 19.23  to hydrogen; 
 19.24     (2) on-site storage of hydrogen and fuel cells for 
 19.25  hydrogen-to-electricity conversion to maintain the supply of 
 19.26  electricity in the absence of wind; 
 19.27     (3) a hydrogen pipeline of less than ten miles to a public 
 19.28  facility demonstration site; and 
 19.29     (4) a public facility with on-site hydrogen fuel cells 
 19.30  providing hydrogen-to-electricity and, if practicable, 
 19.31  heating/cooling function.  
 19.32     (b) For purposes of this section, a "public facility" is a 
 19.33  municipal building, public school, state college or university, 
 19.34  or other public building. 
 19.35     Sec. 18.  [RENEWABLE DEVELOPMENT ACCOUNT ADMINISTRATION.] 
 19.36     The public utilities commission may review the 
 20.1   appropriateness of a transfer of the administration of the 
 20.2   renewable development account under Minnesota Statutes, section 
 20.3   116C.779, to an organization with a board of directors that 
 20.4   includes representatives from the public utility currently 
 20.5   administering the fund, environmental organizations, the 
 20.6   Mdewakanton Dakota Community, and other affected communities. 
 20.7                              ARTICLE 3
 20.8                             CONSERVATION
 20.9      Section 1.  [16C.144] [GUARANTEED SAVINGS CONTRACTS.] 
 20.10     Subdivision 1.  [DEFINITIONS.] (a) The following 
 20.11  definitions apply to this subdivision. 
 20.12     (b) "Utility cost-savings measure" means a training program 
 20.13  or facility alteration designed to produce utility cost savings 
 20.14  or maintenance cost savings that includes: 
 20.15     (1) insulation of the building structure and systems within 
 20.16  the building; 
 20.17     (2) storm windows and doors, caulking or weatherstripping, 
 20.18  multiglazed windows and doors, heat absorbing or heat reflective 
 20.19  glazed and coated window and door systems, additional glazing, 
 20.20  reductions in glass area, and other window and door system 
 20.21  modifications that reduce utility consumption; 
 20.22     (3) automatic energy control systems; 
 20.23     (4) heating, ventilating, or air conditioning system 
 20.24  modifications or replacements; 
 20.25     (5) replacement or modifications of lighting fixtures to 
 20.26  increase the energy efficiency of the lighting system without 
 20.27  increasing the overall illumination of a facility, unless an 
 20.28  increase in illumination is necessary to conform to the 
 20.29  applicable state or local building code for the lighting system 
 20.30  after the proposed modifications are made; 
 20.31     (6) energy recovery systems; 
 20.32     (7) cogeneration systems that produce steam or forms of 
 20.33  utility such as heat, as well as electricity, for use primarily 
 20.34  within a building or complex of buildings; 
 20.35     (8) utility cost-savings measures that provide long-term 
 20.36  operating cost reductions; 
 21.1      (9) devices that reduce water consumption or sewer charges; 
 21.2      (10) changes in operation or maintenance practices; 
 21.3      (11) procurement of low-cost utility supplies of all types 
 21.4   including electricity, natural gas, and other fuel sources, and 
 21.5   water; 
 21.6      (12) building operation programs that reduce utility and 
 21.7   operating costs including, but not limited to, computerized 
 21.8   energy management and consumption tracking programs, staff and 
 21.9   occupant training, and other similar activities; 
 21.10     (13) indoor air quality improvements that conform to 
 21.11  applicable building code requirements; 
 21.12     (14) services to reduce utility costs by identifying 
 21.13  utility errors and optimizing existing rate schedules under 
 21.14  which service is provided; or 
 21.15     (15) any other installation, modification of installation, 
 21.16  or remodeling of building infrastructure improvements, including 
 21.17  deferred maintenance improvements, that produce utility or 
 21.18  operational cost savings for their appointed functions in 
 21.19  compliance with applicable state and local building codes. 
 21.20     (c) "Guaranteed savings contract" means a contract for the 
 21.21  evaluation, recommendation, and installation of one or more 
 21.22  utility cost-savings measures.  The contract must provide that 
 21.23  all payments, except obligations on termination of the contract 
 21.24  before its expiration, are to be made over time, but not to 
 21.25  exceed 15 years from the date of final installation, and the 
 21.26  savings are guaranteed to the extent necessary to make payments 
 21.27  for the systems. 
 21.28     (d) "Operation and maintenance cost savings" means a 
 21.29  measurable decrease in operation and maintenance costs that are 
 21.30  a direct result of the implementation of one or more utility 
 21.31  cost-savings measures.  Such savings shall be calculated in 
 21.32  comparison with an established baseline of operation and 
 21.33  maintenance costs. 
 21.34     (e) "Qualified provider" means a person or business 
 21.35  experienced in the design, implementation, and installation of 
 21.36  utility cost-savings measures.  
 22.1      (f) "Capital cost avoidance" means money expended by a 
 22.2   state agency to pay for utility cost-savings measures or 
 22.3   equipment replacement, whose cost has been discounted by any 
 22.4   additional utility and operation savings generated from other 
 22.5   utility cost-savings measures identified in a contract under 
 22.6   this section. 
 22.7      (g) "Utility cost savings" means: 
 22.8      (1) cost savings caused by a reduction in metered or 
 22.9   measured physical quantities of a bulk fuel or utility resulting 
 22.10  from the implementation of one or more utility cost-savings 
 22.11  measures when compared with an established baseline of usage; or 
 22.12     (2) decrease in utility costs as a result of changes in 
 22.13  applicable utility rates or utility service suppliers.  The 
 22.14  decrease must be calculated in comparison with an estimable 
 22.15  baseline of utility costs. 
 22.16     Subd. 2.  [GUARANTEED SAVINGS CONTRACT.] The commissioner 
 22.17  may enter into a guaranteed savings contract with a qualified 
 22.18  provider to significantly reduce utility or operating costs.  
 22.19  The guaranteed savings contract must be completed using a 
 22.20  solicitation.  The qualified provider must give a sufficient 
 22.21  bond to the commissioner for the faithful performance of the 
 22.22  contract. 
 22.23     Before installation of equipment, modification, or 
 22.24  remodeling, the qualified provider shall first issue a report 
 22.25  summarizing estimates of all costs of installations, 
 22.26  modifications, or remodeling, including costs of design, 
 22.27  engineering, installation, maintenance, repairs, or debt 
 22.28  service, and estimates of the amounts by which utility or 
 22.29  operating costs will be reduced. 
 22.30     The commissioner may enter into a guaranteed savings 
 22.31  contract with a qualified provider if, after review of the 
 22.32  report, the commissioner finds that the amount it would spend on 
 22.33  the utility cost-savings measures recommended in the report is 
 22.34  not likely to exceed the amount to be saved in utility and 
 22.35  operation costs over 15 years from the date of installation if 
 22.36  the recommendations in the report were followed, and the 
 23.1   qualified provider provides a written guarantee that the utility 
 23.2   or operating cost savings will meet or exceed the costs of the 
 23.3   system.  The guaranteed savings contract may provide for 
 23.4   payments over a period of time, not to exceed 15 years. 
 23.5      The commissioner may enter into a lease-purchase agreement 
 23.6   with any party for the purchase and installation of utility 
 23.7   cost-savings conservation measures.  The lease is assignable in 
 23.8   accordance with terms approved by the commissioner of finance.  
 23.9   The contract must provide for payments of not less than 1/15 of 
 23.10  the price to be paid within two years from the date of the first 
 23.11  operation, and the remaining costs to be paid monthly, not to 
 23.12  exceed a 15-year term from the date of the first operation. 
 23.13     Subd. 3.  [USE OF CAPITAL COST AVOIDANCE.] The commissioner 
 23.14  may contribute funds for capital cost avoidance for guaranteed 
 23.15  savings contracts.  Use of capital cost avoidance is subject to 
 23.16  the following: 
 23.17     (1) the utility cost-savings measures or equipment 
 23.18  replacement must include facility alteration; 
 23.19     (2) the current facility systems must be consuming excess 
 23.20  maintenance and operating costs; 
 23.21     (3) the savings generated by the utility cost-savings 
 23.22  measures or equipment replacement must be guaranteed; and 
 23.23     (4) the equipment that is replaced must either have 
 23.24  exceeded its useful life as determined by a life-cycle cost 
 23.25  analysis or must be deemed in need of replacement by a 
 23.26  registered professional engineer. 
 23.27     Sec. 2.  Minnesota Statutes 2002, section 216B.241, 
 23.28  subdivision 1a, is amended to read: 
 23.29     Subd. 1a.  [INVESTMENT, EXPENDITURE, AND CONTRIBUTION; 
 23.30  PUBLIC UTILITY.] (a) For purposes of this subdivision and 
 23.31  subdivision 2, "public utility" has the meaning given it in 
 23.32  section 216B.02, subdivision 4.  Each public utility shall spend 
 23.33  and invest for energy conservation improvements under this 
 23.34  subdivision and subdivision 2 the following amounts: 
 23.35     (1) for a utility that furnishes gas service, 0.5 percent 
 23.36  of its gross operating revenues from service provided in the 
 24.1   state; 
 24.2      (2) for a utility that furnishes electric service, 1.5 
 24.3   percent of its gross operating revenues from service provided in 
 24.4   the state; and 
 24.5      (3) for a utility that furnishes electric service and that 
 24.6   operates a nuclear-powered electric generating plant within the 
 24.7   state, two 2.5 percent of its gross operating revenues from 
 24.8   service provided in the state. 
 24.9   For purposes of this paragraph (a), "gross operating revenues" 
 24.10  do not include revenues from large electric customer facilities 
 24.11  exempted by the commissioner under paragraph (b). 
 24.12     (b) The owner of a large electric customer facility may 
 24.13  petition the commissioner to exempt both electric and gas 
 24.14  utilities serving the large energy customer facility from the 
 24.15  investment and expenditure requirements of paragraph (a) with 
 24.16  respect to retail revenues attributable to the facility.  At a 
 24.17  minimum, the petition must be supported by evidence relating to 
 24.18  competitive or economic pressures on the customer and a showing 
 24.19  by the customer of reasonable efforts to identify, evaluate, and 
 24.20  implement cost-effective conservation improvements at the 
 24.21  facility.  If a petition is filed on or before October 1 of any 
 24.22  year, the order of the commissioner to exempt revenues 
 24.23  attributable to the facility can be effective no earlier than 
 24.24  January 1 of the following year.  The commissioner shall not 
 24.25  grant an exemption if the commissioner determines that granting 
 24.26  the exemption is contrary to the public interest.  The 
 24.27  commissioner may, after investigation, rescind any exemption 
 24.28  granted under this paragraph upon a determination that 
 24.29  cost-effective energy conservation improvements are available at 
 24.30  the large electric customer facility.  For the purposes of this 
 24.31  paragraph, "cost-effective" means that the projected total cost 
 24.32  of the energy conservation improvement at the large electric 
 24.33  customer facility is less than the projected present value of 
 24.34  the energy and demand savings resulting from the energy 
 24.35  conservation improvement.  For the purposes of investigations by 
 24.36  the commissioner under this paragraph, the owner of any large 
 25.1   electric customer facility shall, upon request, provide the 
 25.2   commissioner with updated information comparable to that 
 25.3   originally supplied in or with the owner's original petition 
 25.4   under this paragraph. 
 25.5      (c) The commissioner may require investments or spending 
 25.6   greater than the amounts required under this subdivision for a 
 25.7   public utility whose most recent advance forecast required under 
 25.8   section 216B.2422 or 216C.17 projects a peak demand deficit of 
 25.9   100 megawatts or greater within five years under mid-range 
 25.10  forecast assumptions.  
 25.11     (d) A public utility or owner of a large electric customer 
 25.12  facility may appeal a decision of the commissioner under 
 25.13  paragraph (b) or (c) to the commission under subdivision 2.  In 
 25.14  reviewing a decision of the commissioner under paragraph (b) or 
 25.15  (c), the commission shall rescind the decision if it finds that 
 25.16  the required investments or spending will: 
 25.17     (1) not result in cost-effective energy conservation 
 25.18  improvements; or 
 25.19     (2) otherwise not be in the public interest. 
 25.20     (e) Each utility shall determine what portion of the amount 
 25.21  it sets aside for conservation improvement will be used for 
 25.22  conservation improvements under subdivision 2 and what portion 
 25.23  it will contribute to the energy and conservation account 
 25.24  established in subdivision 2a.  A public utility may propose to 
 25.25  the commissioner to designate that all or a portion of funds 
 25.26  contributed to the account established in subdivision 2a be used 
 25.27  for research and development projects that can best be 
 25.28  implemented on a statewide basis.  Contributions must be 
 25.29  remitted to the commissioner by February 1 of each year.  
 25.30  Nothing in this subdivision prohibits a public utility from 
 25.31  spending or investing for energy conservation improvement more 
 25.32  than required in this subdivision. 
 25.33     Sec. 3.  Minnesota Statutes 2002, section 216B.241, 
 25.34  subdivision 1b, is amended to read: 
 25.35     Subd. 1b.  [CONSERVATION IMPROVEMENT BY COOPERATIVE 
 25.36  ASSOCIATION OR MUNICIPALITY.] (a) This subdivision applies to: 
 26.1      (1) a cooperative electric association that provides retail 
 26.2   service to its members; 
 26.3      (2) a municipality that provides electric service to retail 
 26.4   customers; and 
 26.5      (3) a municipality with gross operating revenues in excess 
 26.6   of $5,000,000 from sales of natural gas to retail customers.  
 26.7      (b) Each cooperative electric association and municipality 
 26.8   subject to this subdivision shall spend and invest for energy 
 26.9   conservation improvements under this subdivision the following 
 26.10  amounts: 
 26.11     (1) for a municipality, 0.5 percent of its gross operating 
 26.12  revenues from the sale of gas and 1.5 percent of its gross 
 26.13  operating revenues from the sale of electricity, excluding gross 
 26.14  operating revenues from electric and gas service provided in the 
 26.15  state to large electric customer facilities; and 
 26.16     (2) for a cooperative electric association, 1.5 percent of 
 26.17  its gross operating revenues from service provided in the state, 
 26.18  excluding gross operating revenues from service provided in the 
 26.19  state to large electric customer facilities indirectly through a 
 26.20  distribution cooperative electric association. 
 26.21     (c) Each municipality and cooperative electric association 
 26.22  subject to this subdivision shall identify and implement energy 
 26.23  conservation improvement spending and investments that are 
 26.24  appropriate for the municipality or association, except that a 
 26.25  municipality or association may not spend or invest for energy 
 26.26  conservation improvements that directly benefit a large electric 
 26.27  customer facility for which the commissioner has issued an 
 26.28  exemption under subdivision 1a, paragraph (b). 
 26.29     (d) Each municipality and cooperative electric association 
 26.30  subject to this subdivision may spend and invest annually up to 
 26.31  ten percent of the total amount required to be spent and 
 26.32  invested on energy conservation improvements under this 
 26.33  subdivision on research and development projects that meet the 
 26.34  definition of energy conservation improvement in subdivision 1 
 26.35  and that are funded directly by the municipality or cooperative 
 26.36  electric association.  
 27.1      (e) Load-management activities that do not reduce energy 
 27.2   use but that increase the efficiency of the electric system may 
 27.3   be used to meet the following percentage of the conservation 
 27.4   investment and spending requirements of this subdivision: 
 27.5      (1) 2002 - 90 percent; 
 27.6      (2) 2003 - 80 percent; 
 27.7      (3) 2004 - 65 percent; and 
 27.8      (4) 2005 and thereafter - 50 percent. 
 27.9      (f) A generation and transmission cooperative electric 
 27.10  association that provides energy services to cooperative 
 27.11  electric associations that provide electric service at retail to 
 27.12  consumers may invest in energy conservation improvements on 
 27.13  behalf of the associations it serves and may fulfill the 
 27.14  conservation, spending, reporting, and energy savings goals on 
 27.15  an aggregate basis.  A municipal power agency or other 
 27.16  not-for-profit entity that provides energy service to municipal 
 27.17  utilities that provide electric service at retail may invest in 
 27.18  energy conservation improvements on behalf of the municipal 
 27.19  utilities it serves and may fulfill the conservation, spending, 
 27.20  reporting, and energy savings goals on an aggregate basis, under 
 27.21  an agreement between the municipal power agency or 
 27.22  not-for-profit entity and each municipal utility for funding the 
 27.23  investments. 
 27.24     (g) By June 1, 2002, and every two years thereafter, each 
 27.25  municipality or cooperative shall file an overview of its 
 27.26  conservation improvement plan with the commissioner.  With this 
 27.27  overview, the municipality or cooperative shall also provide an 
 27.28  evaluation to the commissioner detailing its energy conservation 
 27.29  improvement spending and investments for the previous period.  
 27.30  The evaluation must briefly describe each conservation program 
 27.31  and must specify the energy savings or increased efficiency in 
 27.32  the use of energy within the service territory of the utility or 
 27.33  association that is the result of the spending and investments.  
 27.34  The evaluation must analyze the cost effectiveness of the 
 27.35  utility's or association's conservation programs, using a list 
 27.36  of baseline energy and capacity savings assumptions developed in 
 28.1   consultation with the department. 
 28.2   The commissioner shall review each evaluation and make 
 28.3   recommendations, where appropriate, to the municipality or 
 28.4   association to increase the effectiveness of conservation 
 28.5   improvement activities.  Up to three percent of a utility's 
 28.6   conservation spending obligation under this section may be used 
 28.7   for program pre-evaluation, testing, and monitoring and program 
 28.8   evaluation.  The overview filed by a municipality with less than 
 28.9   $2,500,000 in annual gross revenues from the retail sale of 
 28.10  electric service may consist of a letter from the governing 
 28.11  board of the municipal utility to the department providing the 
 28.12  amount of annual conservation spending required of that 
 28.13  municipality and certifying that the required amount has been 
 28.14  spent on conservation programs pursuant to this subdivision.  
 28.15     (h) The commissioner shall also review each evaluation for 
 28.16  whether a portion of the money spent on residential conservation 
 28.17  improvement programs is devoted to programs that directly 
 28.18  address the needs of renters and low-income persons unless an 
 28.19  insufficient number of appropriate programs are available.  For 
 28.20  the purposes of this subdivision and subdivision 2, "low-income" 
 28.21  means an income at or below 50 percent of the state median 
 28.22  income.  
 28.23     (i) As part of its spending for conservation improvement, a 
 28.24  municipality or association may contribute to the energy and 
 28.25  conservation account.  A municipality or association may propose 
 28.26  to the commissioner to designate that all or a portion of funds 
 28.27  contributed to the account be used for research and development 
 28.28  projects that can best be implemented on a statewide basis.  Any 
 28.29  amount contributed must be remitted to the commissioner by 
 28.30  February 1 of each year. 
 28.31     (j) A municipality may spend up to 50 percent of its 
 28.32  required spending under this section to refurbish an existing 
 28.33  district heating or cooling system. 
 28.34     Sec. 4.  Minnesota Statutes 2002, section 216B.241, 
 28.35  subdivision 2, is amended to read: 
 28.36     Subd. 2.  [PROGRAMS.] (a) The commissioner may require 
 29.1   public utilities to make investments and expenditures in energy 
 29.2   conservation improvements, explicitly setting forth the interest 
 29.3   rates, prices, and terms under which the improvements must be 
 29.4   offered to the customers.  The required programs must cover a 
 29.5   two-year period.  Public utilities shall file conservation 
 29.6   improvement plans by June 1, on a schedule determined by order 
 29.7   of the commissioner.  Plans received by a public utility by June 
 29.8   1 must be approved or approved as modified by the commissioner 
 29.9   by December 1 of that same year.  The commissioner shall give 
 29.10  special consideration and encouragement to programs that bring 
 29.11  about significant net savings through the use of 
 29.12  energy-efficient lighting.  The commissioner shall evaluate the 
 29.13  program on the basis of cost effectiveness and the reliability 
 29.14  of technologies employed.  The commissioner's order must provide 
 29.15  to the extent practicable for a free choice, by consumers 
 29.16  participating in the program, of the device, method, material, 
 29.17  or project constituting the energy conservation improvement and 
 29.18  for a free choice of the seller, installer, or contractor of the 
 29.19  energy conservation improvement, provided that the device, 
 29.20  method, material, or project seller, installer, or contractor is 
 29.21  duly licensed, certified, approved, or qualified, including 
 29.22  under the residential conservation services program, where 
 29.23  applicable.  
 29.24     (b) The commissioner may require a utility to make an 
 29.25  energy conservation improvement investment or expenditure 
 29.26  whenever the commissioner finds that the improvement will result 
 29.27  in energy savings at a total cost to the utility less than the 
 29.28  cost to the utility to produce or purchase an equivalent amount 
 29.29  of new supply of energy.  The commissioner shall nevertheless 
 29.30  ensure that every public utility operate one or more programs 
 29.31  under periodic review by the department.  
 29.32     (c) Each public utility subject to subdivision 1a may spend 
 29.33  and invest annually up to ten percent of the total amount 
 29.34  required to be spent and invested on energy conservation 
 29.35  improvements under this section by the utility on research and 
 29.36  development projects that meet the definition of energy 
 30.1   conservation improvement in subdivision 1 and that are funded 
 30.2   directly by the public utility.  
 30.3      (d) A public utility may not spend for or invest in energy 
 30.4   conservation improvements that directly benefit a large electric 
 30.5   customer facility for which the commissioner has issued an 
 30.6   exemption pursuant to subdivision 1a, paragraph (b).  The 
 30.7   commissioner shall consider and may require a utility to 
 30.8   undertake a program suggested by an outside source, including a 
 30.9   political subdivision or a nonprofit or community organization. 
 30.10     (e) The commissioner may, by order, establish a list of 
 30.11  programs that may be offered as energy conservation improvements 
 30.12  by a public utility, municipal utility, cooperative electric 
 30.13  association, or other entity providing conservation services 
 30.14  pursuant to this section.  The list of programs may include 
 30.15  rebates for high-efficiency appliances, rebates or subsidies for 
 30.16  high-efficiency lamps, small business energy audits, and 
 30.17  building recommissioning.  The commissioner may, by order, 
 30.18  change this list to add or subtract programs as the commissioner 
 30.19  determines is necessary to promote efficient and effective 
 30.20  conservation programs. 
 30.21     (f) The commissioner shall ensure that a portion of the 
 30.22  money spent on residential conservation improvement programs is 
 30.23  devoted to programs that directly address the needs of renters 
 30.24  and low-income persons, in proportion to the amount the utility 
 30.25  has historically spent on such programs based on the most recent 
 30.26  three-year average relative to the utility's total conservation 
 30.27  spending under this section, unless an insufficient number of 
 30.28  appropriate programs are available. 
 30.29     (g) A utility, a political subdivision, or a nonprofit or 
 30.30  community organization that has suggested a program, the 
 30.31  attorney general acting on behalf of consumers and small 
 30.32  business interests, or a utility customer that has suggested a 
 30.33  program and is not represented by the attorney general under 
 30.34  section 8.33 may petition the commission to modify or revoke a 
 30.35  department decision under this section, and the commission may 
 30.36  do so if it determines that the program is not cost effective, 
 31.1   does not adequately address the residential conservation 
 31.2   improvement needs of low-income persons, has a long-range 
 31.3   negative effect on one or more classes of customers, or is 
 31.4   otherwise not in the public interest.  The commission shall 
 31.5   reject a petition that, on its face, fails to make a reasonable 
 31.6   argument that a program is not in the public interest. 
 31.7      (h) The commissioner may order a public utility to include, 
 31.8   with the filing of the utility's proposed conservation 
 31.9   improvement plan under paragraph (a), the results of an 
 31.10  independent audit of the utility's conservation improvement 
 31.11  programs and expenditures performed by the department or an 
 31.12  auditor with experience in the provision of energy conservation 
 31.13  and energy efficiency services approved by the commissioner and 
 31.14  chosen by the utility.  The audit must specify the energy 
 31.15  savings or increased efficiency in the use of energy within the 
 31.16  service territory of the utility that is the result of the 
 31.17  spending and investments.  The audit must evaluate the cost 
 31.18  effectiveness of the utility's conservation programs. 
 31.19     (i) Up to three percent of a utility's conservation 
 31.20  spending obligation under this section may be used for program 
 31.21  pre-evaluation, testing, and monitoring and program audit and 
 31.22  evaluation.  
 31.23     (j) At least 33 percent of an electric utility's 
 31.24  conservation spending under subdivision 1a, paragraph (a), 
 31.25  clauses (2) and (3), must be used to provide programs and direct 
 31.26  incentives to reduce baseload energy use as defined by the 
 31.27  commissioner provided the cost of these conservation measures is 
 31.28  less than the cost of new energy supplies.  
 31.29     Sec. 5.  Minnesota Statutes 2002, section 471.345, 
 31.30  subdivision 13, is amended to read: 
 31.31     Subd. 13.  [ENERGY EFFICIENCY PROJECTS.] The following 
 31.32  definitions apply to this subdivision. 
 31.33     (a) "Energy conservation measure" means a training program 
 31.34  or facility alteration designed to reduce energy consumption or 
 31.35  operating costs and includes: 
 31.36     (1) insulation of the building structure and systems within 
 32.1   the building; 
 32.2      (2) storm windows and doors, caulking or weatherstripping, 
 32.3   multiglazed windows and doors, heat absorbing or heat reflective 
 32.4   glazed and coated window and door systems, additional glazing, 
 32.5   reductions in glass area, and other window and door system 
 32.6   modifications that reduce energy consumption; 
 32.7      (3) automatic energy control systems; 
 32.8      (4) heating, ventilating, or air conditioning system 
 32.9   modifications or replacements; 
 32.10     (5) replacement or modifications of lighting fixtures to 
 32.11  increase the energy efficiency of the lighting system without 
 32.12  increasing the overall illumination of a facility, unless an 
 32.13  increase in illumination is necessary to conform to the 
 32.14  applicable state or local building code for the lighting system 
 32.15  after the proposed modifications are made; 
 32.16     (6) energy recovery systems; 
 32.17     (7) cogeneration systems that produce steam or forms of 
 32.18  energy such as heat, as well as electricity, for use primarily 
 32.19  within a building or complex of buildings; 
 32.20     (8) energy conservation measures that provide long-term 
 32.21  operating cost reductions.  
 32.22     (b) "Guaranteed energy savings contract" means a contract 
 32.23  for the evaluation and recommendations of energy conservation 
 32.24  measures, and for one or more energy conservation measures.  The 
 32.25  contract must provide that all payments, except obligations on 
 32.26  termination of the contract before its expiration, are to be 
 32.27  made over time, but not to exceed ten 15 years from the date of 
 32.28  final installation, and the savings are guaranteed to the extent 
 32.29  necessary to make payments for the systems. 
 32.30     (c) "Qualified provider" means a person or business 
 32.31  experienced in the design, implementation, and installation of 
 32.32  energy conservation measures.  A qualified provider to whom the 
 32.33  contract is awarded shall give a sufficient bond to the 
 32.34  municipality for its faithful performance. 
 32.35     Notwithstanding any law to the contrary, a municipality may 
 32.36  enter into a guaranteed energy savings contract with a qualified 
 33.1   provider to significantly reduce energy or operating costs. 
 33.2      Before entering into a contract under this subdivision, the 
 33.3   municipality shall provide published notice of the meeting in 
 33.4   which it proposes to award the contract, the names of the 
 33.5   parties to the proposed contract, and the contract's purpose. 
 33.6      Before installation of equipment, modification, or 
 33.7   remodeling, the qualified provider shall first issue a report, 
 33.8   summarizing estimates of all costs of installations, 
 33.9   modifications, or remodeling, including costs of design, 
 33.10  engineering, installation, maintenance, repairs, or debt 
 33.11  service, and estimates of the amounts by which energy or 
 33.12  operating costs will be reduced. 
 33.13     A guaranteed energy savings contract that includes a 
 33.14  written guarantee that savings will meet or exceed the cost of 
 33.15  energy conservation measures is not subject to competitive 
 33.16  bidding requirements of section 471.345 or other law or city 
 33.17  charter.  The contract is not subject to section 123B.52. 
 33.18     A municipality may enter into a guaranteed energy savings 
 33.19  contract with a qualified provider if, after review of the 
 33.20  report, it finds that the amount it would spend on the energy 
 33.21  conservation measures recommended in the report is not likely to 
 33.22  exceed the amount to be saved in energy and operation costs over 
 33.23  ten 15 years from the date of installation if the 
 33.24  recommendations in the report were followed, and the qualified 
 33.25  provider provides a written guarantee that the energy or 
 33.26  operating cost savings will meet or exceed the costs of the 
 33.27  system.  The guaranteed energy savings contract may provide for 
 33.28  payments over a period of time, not to exceed ten 15 years. 
 33.29     A municipality may enter into an installment payment 
 33.30  contract for the purchase and installation of energy 
 33.31  conservation measures.  The contract must provide for payments 
 33.32  of not less than one-tenth 1/15 of the price to be paid within 
 33.33  two years from the date of the first operation, and the 
 33.34  remaining costs to be paid monthly, not to exceed a ten-year 
 33.35  15-year term from the date of the first operation. 
 33.36     Guaranteed energy savings contracts may extend beyond the 
 34.1   fiscal year in which they become effective.  The municipality 
 34.2   shall include in its annual appropriations measure for each 
 34.3   later fiscal year any amounts payable under guaranteed energy 
 34.4   savings contracts during the year.  Failure of a municipality to 
 34.5   make such an appropriation does not affect the validity of the 
 34.6   guaranteed energy savings contract or the municipality's 
 34.7   obligations under the contracts. 
 34.8      Sec. 6.  [SUNSET.] 
 34.9      Minnesota Statutes, section 216B.241, subdivision 1b, 
 34.10  paragraph (j), expires as of July 1, 2007. 
 34.11                             ARTICLE 4
 34.12                          OTHER PROVISIONS
 34.13     Section 1.  Minnesota Statutes 2002, section 216A.03, 
 34.14  subdivision 1, is amended to read: 
 34.15     Subdivision 1.  [MEMBERS.] The public utilities commission 
 34.16  shall consist of five members.  The terms of members shall be 
 34.17  six years and until their successors have been appointed and 
 34.18  qualified.  Each commissioner shall be appointed by the governor 
 34.19  by and with the advice and consent of the senate.  Not more than 
 34.20  three commissioners shall belong to the same political party.  
 34.21  At least one commissioner two commissioners must have been be 
 34.22  domiciled at the time of appointment outside the seven-county 
 34.23  metropolitan area.  If the membership of the commission after 
 34.24  July 31, 1986 August 1, 2003, does not consist of at least one 
 34.25  member two members domiciled at the time of appointment outside 
 34.26  the seven-county metropolitan area, the membership shall conform 
 34.27  to this requirement following normal attrition of the present 
 34.28  commissioners.  The governor when selecting commissioners shall 
 34.29  give consideration to persons learned in the law or persons who 
 34.30  have engaged in the profession of engineering, public 
 34.31  accounting, property and utility valuation, finance, physical or 
 34.32  natural sciences, production agriculture, or natural resources 
 34.33  as well as being representative of the general public. 
 34.34     For purposes of this subdivision, "seven-county 
 34.35  metropolitan area" means Anoka, Carver, Dakota, Hennepin, 
 34.36  Ramsey, Scott, and Washington counties. 
 35.1      Sec. 2.  Minnesota Statutes 2002, section 216B.02, is 
 35.2   amended by adding a subdivision to read: 
 35.3      Subd. 1b.  [COMMISSIONER.] "Commissioner" means the 
 35.4   commissioner of commerce. 
 35.5      Sec. 3.  Minnesota Statutes 2002, section 216B.095, is 
 35.6   amended to read: 
 35.7      216B.095 [DISCONNECTION DURING COLD WEATHER.] 
 35.8      The commission shall amend its rules governing 
 35.9   disconnection of residential utility customers who are unable to 
 35.10  pay for utility service during cold weather to include the 
 35.11  following: 
 35.12     (1) coverage of customers whose household income is less 
 35.13  than 50 percent of the state median income; 
 35.14     (2) a requirement that a customer who pays the utility at 
 35.15  least ten percent of the customer's income or the full amount of 
 35.16  the utility bill, whichever is less, in a cold weather month 
 35.17  cannot be disconnected during that month.  The customer's income 
 35.18  means the actual monthly income of the customer or the average 
 35.19  monthly income of the customer computed on an annual calendar 
 35.20  year, whichever is less, and does not include any amount 
 35.21  received for energy assistance; 
 35.22     (3) that the ten percent figure in clause (2) must be 
 35.23  prorated between energy providers proportionate to each 
 35.24  provider's share of the customer's total energy costs where the 
 35.25  customer receives service from more than one provider; 
 35.26     (4) verification of income by the local energy assistance 
 35.27  provider or the utility, unless the customer is automatically 
 35.28  eligible for protection against disconnection as a recipient of 
 35.29  any form of public assistance, including energy assistance, that 
 35.30  uses income eligibility in an amount at or below the income 
 35.31  eligibility in clause (1); 
 35.32     (5) a requirement that the customer receive referrals to 
 35.33  energy assistance, weatherization, conservation, or other 
 35.34  programs likely to reduce the customer's energy bills; and 
 35.35     (6) a requirement that customers who have demonstrated an 
 35.36  inability to pay on forms provided for that purpose by the 
 36.1   utility, and who make reasonably timely payments to the utility 
 36.2   under a payment plan that considers the financial resources of 
 36.3   the household, cannot be disconnected from utility service from 
 36.4   October 15 through April 15.  A customer who is receiving energy 
 36.5   assistance is deemed to have demonstrated an inability to pay. 
 36.6      For the purposes of this section, disconnection includes a 
 36.7   service or load limiter or any device that limits or interrupts 
 36.8   electric service in any way. 
 36.9      Sec. 4.  Minnesota Statutes 2002, section 216B.097, is 
 36.10  amended by adding a subdivision to read: 
 36.11     Subd. 4.  [APPLICATION TO SERVICE LIMITERS.] For the 
 36.12  purposes of this section, disconnection includes a service or 
 36.13  load limiter or any device that limits or interrupts electric 
 36.14  service in any way. 
 36.15     Sec. 5.  [216B.0975] [DISCONNECTION DURING EXTREME HEAT 
 36.16  CONDITIONS; RECONNECTION.] 
 36.17     A utility may not effect an involuntary disconnection of 
 36.18  services in affected counties when an excessive heat watch, heat 
 36.19  advisory, or excessive heat warning issued by the national 
 36.20  weather service is in effect.  For purposes of this section, 
 36.21  "utility" means a public utility providing electric service, 
 36.22  municipal utility, or cooperative electric association. 
 36.23     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 36.24  following final enactment.  
 36.25     Sec. 6.  Minnesota Statutes 2002, section 216C.051, 
 36.26  subdivision 1, is amended to read: 
 36.27     Subdivision 1.  [FINDINGS.] The legislature finds that it 
 36.28  needs more information on the future management of high-level 
 36.29  radioactive waste, the costs of that management, and the 
 36.30  technical and economic feasibility of utilizing alternative 
 36.31  energy resources.  Before any legislative determinations may be 
 36.32  reasonably made that are more specific than the determinations 
 36.33  made in Laws 1994, chapter 641, the legislature needs detailed, 
 36.34  credible, and reliable information on these issues various 
 36.35  energy resources capable of being developed within the state.  
 36.36  The legislative electric energy task force exists to study 
 37.1   issues related to future electric energy sources and costs and 
 37.2   to make recommendations for legislation.  However, new issues 
 37.3   with respect to the state's energy future have arisen since the 
 37.4   task force received its original charge that must be evaluated.  
 37.5   The legislature further finds that it may be in the state's 
 37.6   economic interest to more fully develop indigenous renewable 
 37.7   energy resources for use by citizens of the state and export to 
 37.8   neighboring states.  Such development may benefit the state 
 37.9   economy by attracting investment capital to economically 
 37.10  stressed areas of the state for the development and manufacture 
 37.11  of such energy resources, and by avoiding health care and other 
 37.12  costs associated with more traditional energy sources. 
 37.13     Sec. 7.  Minnesota Statutes 2002, section 216C.051, 
 37.14  subdivision 2, is amended to read: 
 37.15     Subd. 2.  [ESTABLISHMENT.] (a) There is established a 
 37.16  legislative electric energy task force to study future electric 
 37.17  energy sources and costs and to make recommendations for 
 37.18  legislation for an environmentally and economically sustainable 
 37.19  and advantageous electric energy supply. 
 37.20     (b) The task force consists of: 
 37.21     (1) ten eight members of the house of representatives 
 37.22  including the chairs of the environment and natural resources 
 37.23  committee and regulated industries subcommittee committees and 
 37.24  eight six members to be appointed by the speaker of the 
 37.25  house, four two of whom must be from the minority caucus; and 
 37.26     (2) ten eight members of the senate including the chairs of 
 37.27  the environment and natural resources and jobs, energy, and 
 37.28  community development commerce and utilities committees and 
 37.29  eight six members to be appointed by the subcommittee on 
 37.30  committees, four two of whom must be from the minority caucus. 
 37.31     (c) The task force may employ staff, contract for 
 37.32  consulting services, and may reimburse the expenses of persons 
 37.33  requested to assist it in its duties other than state employees 
 37.34  or employees of electric utilities.  The director of the 
 37.35  legislative coordinating commission shall assist the task force 
 37.36  in administrative matters.  The task force shall elect cochairs, 
 38.1   one member of the house and one member of the senate from among 
 38.2   the committee and subcommittee chairs named to the committee.  
 38.3   The task force members from the house shall elect the house 
 38.4   cochair, and the task force members from the senate shall elect 
 38.5   the senate cochair. 
 38.6      Sec. 8.  Minnesota Statutes 2002, section 216C.051, 
 38.7   subdivision 3, is amended to read: 
 38.8      Subd. 3.  [FUTURE ENERGY SOLUTIONS; TECHNICAL AND ECONOMIC 
 38.9   ANALYSIS.] (a) In light of the electric energy guidelines 
 38.10  established in subdivision 7 and in light of existing 
 38.11  conservation improvement programs and plans, utility resource 
 38.12  plans, and other existing energy plans and analyses, the 
 38.13  legislative task force on energy shall undertake an analysis of 
 38.14  the technical and economic feasibility of an electric energy 
 38.15  future for the state that relies on environmentally and 
 38.16  economically sustainable and advantageous electric energy supply 
 38.17  utility resource plans and competitive bidding dockets before 
 38.18  the commission, the task force shall gather information and make 
 38.19  recommendations to the legislature regarding potential electric 
 38.20  energy resources and modes of energy production.  The task force 
 38.21  shall may contract with one or more energy policy experts and 
 38.22  energy economists to assist it in its analysis.  The task force 
 38.23  may not contract for service nor employ any person who was 
 38.24  involved in any capacity in any portion of any proceeding before 
 38.25  the public utilities commission, the administrative law judge, 
 38.26  the state court of appeals, or the United States Nuclear 
 38.27  Regulatory Commission related to the dry cask storage proposal 
 38.28  on Prairie Island.  The task force must gather information on at 
 38.29  least the following electric energy resources, but may expand 
 38.30  its inquiry as warranted by the information collected: 
 38.31     (1) wind energy; 
 38.32     (2) hydrogen as a fuel carrier produced from renewable and 
 38.33  fossil fuel resources; 
 38.34     (3) biomass; 
 38.35     (4) decomposition gases produced by solid waste management 
 38.36  facilities; and 
 39.1      (5) solid waste as a direct fuel or refuse-derived fuel.  
 39.2      In addition, the task force must gather information on at 
 39.3   least the following modes of electric energy production or 
 39.4   demand-side efficiency: 
 39.5      (1) demand-side management and energy efficiency; 
 39.6      (2) combined heat and power; 
 39.7      (3) district heating and cooling; 
 39.8      (4) distributed generation; 
 39.9      (5) use of hydrogen as an energy carrier; 
 39.10     (6) combined-cycle coal gasification with carbon 
 39.11  sequestration; and 
 39.12     (7) imports of power from outside the state.  
 39.13     (b) The analysis must address In evaluating these electric 
 39.14  energy resources and modes of electric energy production, the 
 39.15  task force must consider at least the following: 
 39.16     (1) to the best of forecasting abilities, how much electric 
 39.17  generation capacity and demand for electric energy is necessary 
 39.18  to maintain a strong economy and a high quality of life in the 
 39.19  state over the next 15 to 20 years; how is this demand level 
 39.20  affected by achievement of the maximum reasonably feasible and 
 39.21  cost-effective demand side management and generation and 
 39.22  distribution efficiencies; 
 39.23     (2) what alternative forms of energy can provide a stable 
 39.24  supply of energy and are producible and sustainable in the state 
 39.25  and at what cost; 
 39.26     (3) what are the costs to the state and ratepayers to 
 39.27  ensure that new electric energy generation utilizes less 
 39.28  environmentally damaging sources; how do those costs change as 
 39.29  the time frame for development and implementation of new 
 39.30  generation sources is compressed; 
 39.31     (4) what are the implications for delivery systems for 
 39.32  energy produced in areas of the state that do not now have 
 39.33  high-volume transmission capability; are new transmission 
 39.34  technologies being developed that can address some of the 
 39.35  concerns with transmission; can a more dispersed electric 
 39.36  generation system lessen the need for long-distance 
 40.1   transmission; 
 40.2      (5) what are the actual costs and benefits of purchasing 
 40.3   electricity and fuel to generate electricity from outside the 
 40.4   state; what are the present costs to the state's economy of 
 40.5   exporting a large percentage of the state's energy dollars and 
 40.6   what is the future economic impact of continuing to do so; 
 40.7      (6) are there benefits to be had from a large immediate 
 40.8   investment in quickly implementing alternative electric energy 
 40.9   sources in terms of developing an exportable technology and/or 
 40.10  commodity; is it feasible to turn around the flow of dollars for 
 40.11  energy so that the state imports dollars and exports energy and 
 40.12  energy technology; what is a reasonable time frame for the shift 
 40.13  if it is possible; 
 40.14     (7) are there taxation or regulatory barriers to developing 
 40.15  more sustainable and less problematic electric energy 
 40.16  generation; what are they specifically and how can they be 
 40.17  specifically addressed; 
 40.18     (8) can an approach be developed that moves quickly to 
 40.19  development and implementation of alternative energy sources 
 40.20  that can be forgiving of interim failures but that is also 
 40.21  sufficiently deliberate to ensure ultimate success on a large 
 40.22  scale; and 
 40.23     (9) in what specific ways can the state assist regional 
 40.24  energy suppliers to accelerate phasing out energy production 
 40.25  processes that produce wastes or emissions that must necessarily 
 40.26  be carefully controlled and monitored to minimize adverse 
 40.27  effects on the environment and human health and to assist in 
 40.28  developing and implementing base load energy production that 
 40.29  both prevents or minimizes by its nature adverse environmental 
 40.30  and human health effects and utilizes resources that are 
 40.31  available or producible in the state; 
 40.32     (10) whether there is a need to establish additional 
 40.33  dislocated worker assistance for workers at the Prairie Island 
 40.34  nuclear power plant; if so, how that assistance should be 
 40.35  structured; 
 40.36     (11) can the state monitor, evaluate, and affect federal 
 41.1   actions relating to permanent storage of high-level radioactive 
 41.2   waste; what actions by the state over what period of time would 
 41.3   expedite federal action to take responsibility for the waste; 
 41.4      (12) should the state establish a legislative oversight 
 41.5   commission on energy issues; should the responsibilities of an 
 41.6   oversight commission be coordinated with the activities of the 
 41.7   public utilities commission and the department of public service 
 41.8   and if so, how; and 
 41.9      (13) is it feasible to convert existing nuclear power and 
 41.10  coal-fired electric generating plants to utilization of energy 
 41.11  sources that result in significantly less environmental damage; 
 41.12  if so, what are the short-term and long-term costs and benefits 
 41.13  of doing so; how do shorter or longer time periods for 
 41.14  conversion affect the cost/benefit analysis. 
 41.15     (c) The task force must study issues related to the 
 41.16  transportation of spent nuclear fuel from this state to interim 
 41.17  or permanent repositories outside this state.  The task force 
 41.18  shall identify potential routes which avoid population centers.  
 41.19     Sec. 9.  Minnesota Statutes 2002, section 216C.051, is 
 41.20  amended by adding a subdivision to read: 
 41.21     Subd. 4a.  [REPORT AND RECOMMENDATIONS.] By January 15, 
 41.22  2005, and every two years thereafter, the task force shall 
 41.23  submit a report to the chairs of the committees in the house of 
 41.24  representatives and in the senate that have responsibility for 
 41.25  energy and for environmental and natural resources issues that 
 41.26  contains an overview of information gathered and analyses that 
 41.27  have been prepared, a critique of how the information and 
 41.28  analyses will assist in implementation of the energy 
 41.29  conservation and sources for generation policies and goals in 
 41.30  chapters 216B and 216C, and specific recommendations for 
 41.31  legislative action that will ensure development and 
 41.32  implementation of electric energy policy that will provide the 
 41.33  state with adequate, sustainable, and economic electric power 
 41.34  for the long-term while utilizing, to the maximum reasonable 
 41.35  extent, energy resources that are available or producible within 
 41.36  the state and while developing, maintaining, and strengthening a 
 42.1   viable and robust energy and utility infrastructure.  
 42.2      Sec. 10.  Minnesota Statutes 2002, section 216C.051, 
 42.3   subdivision 9, is amended to read: 
 42.4      Subd. 9.  [EXPIRATION.] This section is repealed June 
 42.5   30, 2005 2007. 
 42.6      Sec. 11.  Minnesota Statutes 2002, section 216C.052, 
 42.7   subdivision 2, is amended to read: 
 42.8      Subd. 2.  [ADMINISTRATIVE ISSUES.] (a) The commissioner may 
 42.9   select the administrator who shall serve for a four-year term.  
 42.10  The administrator may not have been a party or a participant in 
 42.11  a commission energy proceeding for at least one year prior to 
 42.12  selection by the commissioner.  The commissioner shall oversee 
 42.13  and direct the work of the administrator, annually review the 
 42.14  expenses of the administrator, and annually approve the budget 
 42.15  of the administrator.  The administrator may hire staff and may 
 42.16  contract for technical expertise in performing duties when 
 42.17  existing state resources are required for other state 
 42.18  responsibilities or when special expertise is required.  The 
 42.19  salary of the administrator is governed by section 15A.0815, 
 42.20  subdivision 2. 
 42.21     (b) Costs relating to a specific proceeding, analysis, or 
 42.22  project are not general administrative costs.  For purposes of 
 42.23  this section, "energy utility" means public utilities, 
 42.24  generation and transmission cooperative electric associations, 
 42.25  and municipal power agencies providing natural gas or electric 
 42.26  service in the state.  
 42.27     (c) The department of commerce shall pay: 
 42.28     (1) the general administrative costs of the administrator, 
 42.29  not to exceed $1,500,000 $1,000,000 in a fiscal year, and shall 
 42.30  assess energy utilities for reimbursement for those 
 42.31  administrative costs.  These costs must be consistent with the 
 42.32  budget approved by the commissioner under paragraph (a).  The 
 42.33  department shall apportion the costs among all energy utilities 
 42.34  in proportion to their respective gross operating revenues from 
 42.35  sales of gas or electric service within the state during the 
 42.36  last calendar year, and shall then render a bill to each utility 
 43.1   on a regular basis; and 
 43.2      (2) costs relating to a specific proceeding analysis or 
 43.3   project and shall render a bill for reimbursement to the 
 43.4   specific energy utility or utilities participating in the 
 43.5   proceeding, analysis, or project directly, either at the 
 43.6   conclusion of a particular proceeding, analysis, or project, or 
 43.7   from time to time during the course of the proceeding, analysis, 
 43.8   or project. 
 43.9      (d) For purposes of administrative efficiency, the 
 43.10  department shall assess energy utilities and issue bills in 
 43.11  accordance with the billing and assessment procedures provided 
 43.12  in section 216B.62, to the extent that these procedures do not 
 43.13  conflict with this subdivision.  The amount of the bills 
 43.14  rendered by the department under paragraph (c) must be paid by 
 43.15  the energy utility into an account in the special revenue fund 
 43.16  in the state treasury within 30 days from the date of billing 
 43.17  and is appropriated to the commissioner for the purposes 
 43.18  provided in this section.  The commission shall approve or 
 43.19  approve as modified a rate schedule providing for the automatic 
 43.20  adjustment of charges to recover amounts paid by utilities under 
 43.21  this section.  All amounts assessed under this section are in 
 43.22  addition to amounts appropriated to the commission and the 
 43.23  department by other law.  
 43.24     Sec. 12.  [REFURBISHMENT OF METROPOLITAN GENERATING 
 43.25  PLANTS.] 
 43.26     (a) The public utility that owns the Prairie Island nuclear 
 43.27  generation facility shall immediately provide all remaining 
 43.28  information that the commission may request with regard to its 
 43.29  plans to undertake the repowering and upgrading of its electric 
 43.30  generation facilities located in the metropolitan area, as 
 43.31  described in its metropolitan emission reduction plan filed with 
 43.32  the public utilities commission in July 2002.  The commission 
 43.33  shall within three months render its decision on the plan. 
 43.34     (b) Notwithstanding Minnesota Statutes, section 216B.1692, 
 43.35  subdivision 1, clause (2), and subdivision 5, paragraphs (c) and 
 43.36  (d), all investments in repowering, emissions reduction 
 44.1   technologies and equipment, and power plant rehabilitation and 
 44.2   life extension described in the primary emissions reduction 
 44.3   proposal filed in July 2002 and currently pending before the 
 44.4   commission are deemed qualifying projects under Minnesota 
 44.5   Statutes, section 216B.1692, and all costs related to all such 
 44.6   investments are eligible for rider recovery under Minnesota 
 44.7   Statutes, section 216B.1692, subdivision 5.  
 44.8      Sec. 13.  [REDUCTION OF BIOMASS MANDATE.] 
 44.9      Notwithstanding Minnesota Statutes, section 216B.2424, the 
 44.10  biomass electric energy mandate shall be reduced from 125 
 44.11  megawatts to 83 megawatts.  The public utilities commission 
 44.12  shall not approve any request for assignment, amendment, or 
 44.13  deadline extension beyond January 1, 2004, for any contract 
 44.14  previously approved to satisfy a portion of the biomass mandate. 
 44.15     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 44.16  following final enactment.  
 44.17     Sec. 14.  [REPEALER.] 
 44.18     Minnesota Statutes 2002, section 216C.051, subdivisions 4 
 44.19  and 5, are repealed. 
 44.20                             ARTICLE 5
 44.21                       ENERGY ENTERPRISE ZONE
 44.22     Section 1.  [CREATION OF AN ENERGY ENTERPRISE ZONE.] 
 44.23     Subdivision 1.  [PURPOSE.] In order to encourage the 
 44.24  state's interest in innovative clean energy sources and in 
 44.25  recovery in the most economically problematic regions of the 
 44.26  state, an energy enterprise zone is hereby authorized, to 
 44.27  consist of: 
 44.28     (1) one or more industrial sites capable of hosting at 
 44.29  least 750 megawatts of baseload or intermediate electrical 
 44.30  generation capacity, which shall not exceed 5,000 acres; and 
 44.31     (2) one or more sites capable of hosting up to 250 
 44.32  megawatts of renewable or hydrogen-fueled electrical generation 
 44.33  capacity not to exceed the aggregate of 250 megawatts.  
 44.34     Subd. 2.  [ELIGIBILITY FOR ENERGY ENTERPRISE ZONE 
 44.35  DESIGNATION.] In order to be eligible for designation as an 
 44.36  energy enterprise zone under this section, a proposed energy 
 45.1   project must: 
 45.2      (1) make use of an innovative generation technology with 
 45.3   production efficiencies greater than traditional generation 
 45.4   technologies and with significantly reduced emissions; 
 45.5      (2) be located in the taconite tax relief area of the state 
 45.6   on a site with infrastructure to support new or expanded 
 45.7   development and be designated by the commissioner of the iron 
 45.8   range resources and rehabilitation board under subdivision 3; 
 45.9   and 
 45.10     (3) for the renewable or hydrogen-fueled project sites, use 
 45.11  as a primary fuel source solar, wind, fuel cells, or biomass 
 45.12  energy, or hydroelectric energy with a capacity of less than 60 
 45.13  megawatts.  
 45.14     Subd. 3.  [DESIGNATION OF ELIGIBLE AREA.] Upon receiving a 
 45.15  proposal for an energy enterprise zone under this section, the 
 45.16  commissioner of the iron range resources and rehabilitation 
 45.17  board shall determine whether the energy project satisfies the 
 45.18  criteria in subdivision 1 and shall designate the energy 
 45.19  enterprise zone.  The commissioner shall give priority to any 
 45.20  projects that have received prior financial and other support 
 45.21  from the board.  
 45.22     Subd. 4.  [TAX EXEMPTIONS.] (a) Effective upon designation, 
 45.23  the owner of and investors in the energy enterprise zone, with 
 45.24  respect to the operations of the zone, are: 
 45.25     (1) exempt from the individual income tax under Minnesota 
 45.26  Statutes, chapter 290; and 
 45.27     (2) exempt from the corporate franchise tax under Minnesota 
 45.28  Statutes, chapter 290. 
 45.29     (b) In addition, the property in the energy enterprise zone 
 45.30  is exempt from taxation under Minnesota Statutes, section 
 45.31  272.01.  The exemption is limited to improvements and personal 
 45.32  property, such as attached machinery, and does not apply to land.
 45.33     (c) In addition, the income generated by facilities in the 
 45.34  energy enterprise zone and received by the owner of the zone is 
 45.35  to be subtracted from federal taxable income and excluded from 
 45.36  alternative minimum taxable income under Minnesota Statutes, 
 46.1   section 290.0921, subdivision 3. 
 46.2      (d) In addition, purchases of tangible personal property, 
 46.3   fuel, or taxable services by a person for use in a trade or 
 46.4   business are exempt from the sales and use taxes imposed under 
 46.5   Minnesota Statutes, chapter 297A, if the property or services 
 46.6   are primarily used or consumed by the facilities in the zone.  
 46.7      (e) In addition, the purchase and use of construction 
 46.8   materials and supplies for constructing improvements to real 
 46.9   property in the zone are exempt from the sales and use taxes 
 46.10  imposed under Minnesota Statutes, chapter 297A, if the 
 46.11  improvements after completion of construction are to be used in 
 46.12  the conduct of a trade or business.  This exemption applies 
 46.13  regardless of whether the purchases are made by the business or 
 46.14  a contractor. 
 46.15     (f) In addition, the owner of the zone may elect to employ 
 46.16  an accelerated five-year depreciation schedule for corporate and 
 46.17  franchise tax purposes. 
 46.18     (g) The incentives listed in this subdivision also apply to 
 46.19  costs associated with necessary transmission infrastructure 
 46.20  construction and improvements wherever located. 
 46.21     Subd. 5.  [REGULATORY INCENTIVES.] Projects designated as 
 46.22  energy enterprise zones under this section: 
 46.23     (1) shall, prior to the approval by the commission of any 
 46.24  arrangement of an eligible entity to build or expand a 
 46.25  fossil-fuel-fired generation facility, or to enter into an 
 46.26  agreement to purchase capacity or energy from such a facility 
 46.27  for a term exceeding five years, be considered as a supply 
 46.28  option for such generation facility, and the commission shall 
 46.29  ensure such consideration and take any action with respect to 
 46.30  such supply proposal that it deems to be in the best interest of 
 46.31  ratepayers.  "Eligible entity" means any entity subject to the 
 46.32  resource planning requirements of this section and whose most 
 46.33  recent resource plan demonstrates a need for at least 450 
 46.34  megawatts of new generation capacity or energy resources; 
 46.35     (2) shall, subject to approval of the terms and conditions 
 46.36  thereof by the commission, be entitled to enter into a contract 
 47.1   with an eligible entity to provide 450 megawatts of baseload 
 47.2   capacity and energy under a long-term contract; and 
 47.3      (3) shall make a good-faith effort to secure funding from 
 47.4   the United States Department of Energy and the United States 
 47.5   Department of Agriculture to conduct a demonstration project at 
 47.6   the facility for either geologic or terrestrial carbon 
 47.7   sequestration projects to achieve reductions in facility 
 47.8   emissions or carbon dioxide.