1.1                          A bill for an act 
  1.2             relating to energy; providing for the phaseout of 
  1.3             nuclear reactors; replacement of nuclear energy with 
  1.4             alternative sources; acceleration with respect to the 
  1.5             metropolitan emissions reduction plan; increasing 
  1.6             funding for conservation improvements; amending 
  1.7             Minnesota Statutes 2002, sections 216B.241, 
  1.8             subdivisions 1a, 2; 216B.50, by adding a subdivision.  
  1.9   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.10     Section 1.  [LEGISLATIVE FINDINGS.] 
  1.11     (a) The legislature affirms the findings enacted in Laws 
  1.12  1994, chapter 641, article 2, that: 
  1.13     (1) there is great uncertainty over the means and costs of 
  1.14  disposing of radioactive wastes generated at nuclear generation 
  1.15  facilities; 
  1.16     (2) current and future electric ratepayers are at risk to 
  1.17  pay for these uncertain and potentially enormous costs; and 
  1.18     (3) these costs could cause economic hardship for the 
  1.19  citizens of this state and damage the state's economic health.  
  1.20  These economic risks are compounded by the increased risks 
  1.21  associated with the aging of Minnesota's nuclear reactors; the 
  1.22  possibility of a catastrophic event on nuclear facilities in the 
  1.23  state; the vulnerability of the site due to its location near 
  1.24  the headwaters of the Mississippi river; and the challenges the 
  1.25  federal government faces to site and construct a federal nuclear 
  1.26  repository in which to store spent nuclear fuel generated in 
  1.27  Minnesota. 
  2.1      (b) The legislature also finds that: 
  2.2      (1) Minnesota's homegrown renewable energy resources have 
  2.3   been proven to be extensive, economic, and reliable over the 
  2.4   last decade, and investments in such resources have generated 
  2.5   great economic benefits to the local and state economies; and 
  2.6      (2) the deployment of high-efficiency generation, such as 
  2.7   combined heat and power facilities and the potential for 
  2.8   increased conservation efforts, holds great promise for the 
  2.9   state. 
  2.10     (c) Additionally, the legislature affirms and adopts the 
  2.11  findings of the Minnesota pollution control agency that 
  2.12  repowering coal-fired power plants with natural gas provides 
  2.13  environmental and public health benefits at least commensurate 
  2.14  with the economic costs of repowering. 
  2.15     (d) Therefore, the legislature determines that the state 
  2.16  must continue the transition away from reliance on nuclear 
  2.17  generation, in order to reduce financial and other risks to 
  2.18  Minnesota citizens and ratepayers and to vastly increase the 
  2.19  utilization of Minnesota's homegrown energy resources.  
  2.20  Continuing the transition will provide dramatic benefits to the 
  2.21  state and local economies, while protecting Minnesota's 
  2.22  environment and natural resources for the enjoyment and use by 
  2.23  future generations. 
  2.24     Sec. 2.  Minnesota Statutes 2002, section 216B.241, 
  2.25  subdivision 1a, is amended to read: 
  2.26     Subd. 1a.  [INVESTMENT, EXPENDITURE, AND CONTRIBUTION; 
  2.27  PUBLIC UTILITY.] (a) For purposes of this subdivision and 
  2.28  subdivision 2, "public utility" has the meaning given it in 
  2.29  section 216B.02, subdivision 4.  Each public utility shall spend 
  2.30  and invest for energy conservation improvements under this 
  2.31  subdivision and subdivision 2 the following amounts: 
  2.32     (1) for a utility that furnishes gas service, 0.5 percent 
  2.33  of its gross operating revenues from service provided in the 
  2.34  state; 
  2.35     (2) for a utility that furnishes electric service, 1.5 
  2.36  percent of its gross operating revenues from service provided in 
  3.1   the state; and 
  3.2      (3) for a utility that furnishes electric service and that 
  3.3   operates a nuclear-powered electric generating plant within the 
  3.4   state, two three percent of its gross operating revenues from 
  3.5   service provided in the state. 
  3.6      For purposes of this paragraph (a), "gross operating 
  3.7   revenues" do not include revenues from large electric customer 
  3.8   facilities exempted by the commissioner under paragraph (b). 
  3.9      (b) The owner of a large electric customer facility may 
  3.10  petition the commissioner to exempt both electric and gas 
  3.11  utilities serving the large energy customer facility from the 
  3.12  investment and expenditure requirements of paragraph (a) with 
  3.13  respect to retail revenues attributable to the facility.  At a 
  3.14  minimum, the petition must be supported by evidence relating to 
  3.15  competitive or economic pressures on the customer and a showing 
  3.16  by the customer of reasonable efforts to identify, evaluate, and 
  3.17  implement cost-effective conservation improvements at the 
  3.18  facility.  If a petition is filed on or before October 1 of any 
  3.19  year, the order of the commissioner to exempt revenues 
  3.20  attributable to the facility can be effective no earlier than 
  3.21  January 1 of the following year.  The commissioner shall not 
  3.22  grant an exemption if the commissioner determines that granting 
  3.23  the exemption is contrary to the public interest.  The 
  3.24  commissioner may, after investigation, rescind any exemption 
  3.25  granted under this paragraph upon a determination that 
  3.26  cost-effective energy conservation improvements are available at 
  3.27  the large electric customer facility.  For the purposes of this 
  3.28  paragraph, "cost-effective" means that the projected total cost 
  3.29  of the energy conservation improvement at the large electric 
  3.30  customer facility is less than the projected present value of 
  3.31  the energy and demand savings resulting from the energy 
  3.32  conservation improvement.  For the purposes of investigations by 
  3.33  the commissioner under this paragraph, the owner of any large 
  3.34  electric customer facility shall, upon request, provide the 
  3.35  commissioner with updated information comparable to that 
  3.36  originally supplied in or with the owner's original petition 
  4.1   under this paragraph. 
  4.2      (c) The commissioner may require investments or spending 
  4.3   greater than the amounts required under this subdivision for a 
  4.4   public utility whose most recent advance forecast required under 
  4.5   section 216B.2422 or 216C.17 projects a peak demand deficit of 
  4.6   100 megawatts or greater within five years under mid-range 
  4.7   forecast assumptions.  
  4.8      (d) A public utility or owner of a large electric customer 
  4.9   facility may appeal a decision of the commissioner under 
  4.10  paragraph (b) or (c) to the commission under subdivision 2.  In 
  4.11  reviewing a decision of the commissioner under paragraph (b) or 
  4.12  (c), the commission shall rescind the decision if it finds that 
  4.13  the required investments or spending will: 
  4.14     (1) not result in cost-effective energy conservation 
  4.15  improvements; or 
  4.16     (2) otherwise not be in the public interest. 
  4.17     (e) Each utility shall determine what portion of the amount 
  4.18  it sets aside for conservation improvement will be used for 
  4.19  conservation improvements under subdivision 2 and what portion 
  4.20  it will contribute to the energy and conservation account 
  4.21  established in subdivision 2a.  A public utility may propose to 
  4.22  the commissioner to designate that all or a portion of funds 
  4.23  contributed to the account established in subdivision 2a be used 
  4.24  for research and development projects that can best be 
  4.25  implemented on a statewide basis.  Contributions must be 
  4.26  remitted to the commissioner by February 1 of each year.  
  4.27  Nothing in this subdivision prohibits a public utility from 
  4.28  spending or investing for energy conservation improvement more 
  4.29  than required in this subdivision. 
  4.30     Sec. 3.  Minnesota Statutes 2002, section 216B.241, 
  4.31  subdivision 2, is amended to read: 
  4.32     Subd. 2.  [PROGRAMS.] (a) The commissioner may require 
  4.33  public utilities to make investments and expenditures in energy 
  4.34  conservation improvements, explicitly setting forth the interest 
  4.35  rates, prices, and terms under which the improvements must be 
  4.36  offered to the customers.  The required programs must cover a 
  5.1   two-year period.  Public utilities shall file conservation 
  5.2   improvement plans by June 1, on a schedule determined by order 
  5.3   of the commissioner.  Plans received by a public utility by June 
  5.4   1 must be approved or approved as modified by the commissioner 
  5.5   by December 1 of that same year.  The commissioner shall give 
  5.6   special consideration and encouragement to programs that bring 
  5.7   about significant net savings through the use of 
  5.8   energy-efficient lighting.  The commissioner shall evaluate the 
  5.9   program on the basis of cost effectiveness and the reliability 
  5.10  of technologies employed.  The commissioner's order must provide 
  5.11  to the extent practicable for a free choice, by consumers 
  5.12  participating in the program, of the device, method, material, 
  5.13  or project constituting the energy conservation improvement and 
  5.14  for a free choice of the seller, installer, or contractor of the 
  5.15  energy conservation improvement, provided that the device, 
  5.16  method, material, or project seller, installer, or contractor is 
  5.17  duly licensed, certified, approved, or qualified, including 
  5.18  under the residential conservation services program, where 
  5.19  applicable.  
  5.20     (b) The commissioner may require a utility to make an 
  5.21  energy conservation improvement investment or expenditure 
  5.22  whenever the commissioner finds that the improvement will result 
  5.23  in energy savings at a total cost to the utility less than the 
  5.24  cost to the utility to produce or purchase an equivalent amount 
  5.25  of new supply of energy.  The commissioner shall nevertheless 
  5.26  ensure that every public utility operate one or more programs 
  5.27  under periodic review by the department.  
  5.28     (c) Each public utility subject to subdivision 1a may spend 
  5.29  and invest annually up to ten percent of the total amount 
  5.30  required to be spent and invested on energy conservation 
  5.31  improvements under this section by the utility on research and 
  5.32  development projects that meet the definition of energy 
  5.33  conservation improvement in subdivision 1 and that are funded 
  5.34  directly by the public utility.  
  5.35     (d) A public utility may not spend for or invest in energy 
  5.36  conservation improvements that directly benefit a large electric 
  6.1   customer facility for which the commissioner has issued an 
  6.2   exemption pursuant to subdivision 1a, paragraph (b).  The 
  6.3   commissioner shall consider and may require a utility to 
  6.4   undertake a program suggested by an outside source, including a 
  6.5   political subdivision or a nonprofit or community organization. 
  6.6      (e) The commissioner may, by order, establish a list of 
  6.7   programs that may be offered as energy conservation improvements 
  6.8   by a public utility, municipal utility, cooperative electric 
  6.9   association, or other entity providing conservation services 
  6.10  pursuant to this section.  The list of programs may include 
  6.11  rebates for high-efficiency appliances, rebates or subsidies for 
  6.12  high-efficiency lamps, small business energy audits, and 
  6.13  building recommissioning.  The commissioner may, by order, 
  6.14  change this list to add or subtract programs as the commissioner 
  6.15  determines is necessary to promote efficient and effective 
  6.16  conservation programs. 
  6.17     (f) The commissioner shall ensure that a portion of the 
  6.18  money spent on residential conservation improvement programs is 
  6.19  devoted to programs that directly address the needs of renters 
  6.20  and low-income persons, in proportion to the amount the utility 
  6.21  has historically spent on such programs based on the most recent 
  6.22  three-year average relative to the utility's total conservation 
  6.23  spending under this section, unless an insufficient number of 
  6.24  appropriate programs are available. 
  6.25     (g) A utility, a political subdivision, or a nonprofit or 
  6.26  community organization that has suggested a program, the 
  6.27  attorney general acting on behalf of consumers and small 
  6.28  business interests, or a utility customer that has suggested a 
  6.29  program and is not represented by the attorney general under 
  6.30  section 8.33 may petition the commission to modify or revoke a 
  6.31  department decision under this section, and the commission may 
  6.32  do so if it determines that the program is not cost effective, 
  6.33  does not adequately address the residential conservation 
  6.34  improvement needs of low-income persons, has a long-range 
  6.35  negative effect on one or more classes of customers, or is 
  6.36  otherwise not in the public interest.  The commission shall 
  7.1   reject a petition that, on its face, fails to make a reasonable 
  7.2   argument that a program is not in the public interest. 
  7.3      (h) The commissioner may order a public utility to include, 
  7.4   with the filing of the utility's proposed conservation 
  7.5   improvement plan under paragraph (a), the results of an 
  7.6   independent audit of the utility's conservation improvement 
  7.7   programs and expenditures performed by the department or an 
  7.8   auditor with experience in the provision of energy conservation 
  7.9   and energy efficiency services approved by the commissioner and 
  7.10  chosen by the utility.  The audit must specify the energy 
  7.11  savings or increased efficiency in the use of energy within the 
  7.12  service territory of the utility that is the result of the 
  7.13  spending and investments.  The audit must evaluate the cost 
  7.14  effectiveness of the utility's conservation programs. 
  7.15     (i) Up to three percent of a utility's conservation 
  7.16  spending obligation under this section may be used for program 
  7.17  pre-evaluation, testing, and monitoring and program audit and 
  7.18  evaluation.  
  7.19     (j) At least 33 percent of a utility's conservation 
  7.20  spending obligation under subdivision 1a, paragraph (a), clauses 
  7.21  (2) and (3), must be targeted to reduce baseload energy use as 
  7.22  defined by the commissioner.  Priorities for the use of funds 
  7.23  expended under this paragraph are to reduce the energy costs of 
  7.24  schools and government buildings and to promote economic 
  7.25  development by reducing the energy costs of businesses.  
  7.26     Sec. 4.  Minnesota Statutes 2002, section 216B.50, is 
  7.27  amended by adding a subdivision to read: 
  7.28     Subd. 4.  [SALE OR OTHER TRANSFER OF NUCLEAR GENERATION 
  7.29  FACILITY.] The commission may not approve the sale or other 
  7.30  transfer by a public utility of a nuclear generation facility 
  7.31  until all of the waste generated by and stored at that facility 
  7.32  has left the state for permanent or interim storage elsewhere.  
  7.33     Sec. 5.  [PHASEOUT OF MINNESOTA'S NUCLEAR REACTORS.] 
  7.34     The public utilities commission may not approve or allow 
  7.35  recovery of any expenditures related to: 
  7.36     (1) the replacement of the steam generators at unit 1 of 
  8.1   the Prairie Island nuclear generation facility; 
  8.2      (2) continued operation of the unit 1 reactor at Prairie 
  8.3   Island beyond June 30, 2005; or 
  8.4      (3) continued operation of the unit 2 reactor at Prairie 
  8.5   Island after the earlier of the expiration of its federal 
  8.6   operating license in 2014 or the exhaustion of the storage 
  8.7   capacity authorized by Laws 1994, chapter 641. 
  8.8      Sec. 6.  [REPLACEMENT OF PRAIRIE ISLAND UNIT 1.] 
  8.9      Subdivision 1.  [REPLACEMENT PLAN.] (a) Within 90 days of 
  8.10  the date of enactment of this section, the public utility that 
  8.11  owns the Prairie Island nuclear generation facility shall 
  8.12  present its plan to the public utilities commission for the 
  8.13  replacement of the 525 megawatts of capacity and associated 
  8.14  energy provided by the unit 1 reactor at the Prairie Island 
  8.15  nuclear generation facility.  In developing this plan, the 
  8.16  public utility may select from the pool of bids submitted but 
  8.17  not selected in the most recent all-source competitive bid 
  8.18  process, docket no. E-002/M-01-1618, applying preferred electric 
  8.19  generation source guidelines in Minnesota Statutes 2002, section 
  8.20  216C.051, subdivision 7.  At least 200 megawatts of accredited 
  8.21  capacity must come from wind.  No coal-fired resource may be 
  8.22  selected unless the commission finds that the proposed project 
  8.23  results in no carbon emissions, due to proposed sequestration 
  8.24  measures and that the project will utilize the best available 
  8.25  control technology identified by the federal Environmental 
  8.26  Protection Agency.  
  8.27     (b) To the extent transmission capacity is needed to serve 
  8.28  wind generation selected as part of the plan required in 
  8.29  paragraph (a), that transmission capacity qualifies for rate 
  8.30  treatment provided under Minnesota Statutes 2002, section 
  8.31  216B.1645, provided the utility coordinates the construction of 
  8.32  the transmission capacity with the signing of power purchase 
  8.33  agreements for the wind generation. 
  8.34     (c) The plan must provide, to the extent practicable, 
  8.35  reassignment of employees to jobs at comparable compensation 
  8.36  levels.  For those employees who are not reassigned, the plan 
  9.1   shall provide for severance payments in an amount not less than 
  9.2   one year's salary and for payment of health care benefits for 
  9.3   one year.  
  9.4      (d) The plan must also provide for the needs of the Prairie 
  9.5   Island Indian community with respect to emergency evacuation 
  9.6   concerns, land and compensation for potential relocation of 
  9.7   tribal residents, and a comprehensive health study.  
  9.8      (e) The public utilities commission shall approve or modify 
  9.9   the utility's proposed plan within 90 days of the date of 
  9.10  filing, consistent with the public interest. 
  9.11     Subd. 2.  [METROPOLITAN EMISSIONS REDUCTION PLAN.] (a) The 
  9.12  public utility that owns the Prairie Island nuclear generation 
  9.13  facility may, in conjunction with its decommissioning of unit 1, 
  9.14  accelerate its plans to repower two of its coal-fired generation 
  9.15  facilities in the metropolitan area with natural gas, as 
  9.16  described in its metropolitan emissions reduction plan the 
  9.17  utility filed with the public utilities commission in July 
  9.18  2002.  If the utility commits, as part of the plan submitted to 
  9.19  the commission under subdivision 1, to repower those facilities 
  9.20  and place the resulting natural gas-fired generation facilities 
  9.21  into service no later than June 30, 2005, the utility: 
  9.22     (1) may expand the generating capacity of those two 
  9.23  facilities up to a total 200 megawatts more than the 351 
  9.24  megawatts which utility proposed to expand the generation 
  9.25  capacity of those facilities in its July 2002 filing; and 
  9.26     (2) must count the 200 megawatts of additional capacity 
  9.27  authorized by this paragraph towards the 525 megawatts of 
  9.28  replacement capacity needed under subdivision 1, but is not 
  9.29  required to count the 351 megawatts of expanded generation 
  9.30  capacity in its July 2002 filing towards that replacement 
  9.31  capacity. 
  9.32     (b) If the public utility exercises the option provided for 
  9.33  in subdivision 1, the public utilities commission shall, 
  9.34  notwithstanding contrary provisions of Minnesota Statutes 2002, 
  9.35  section 216B.1692: 
  9.36     (1) consider the two repowering projects as proposed in the 
 10.1   July 2002 filing, as well as the additional 200 megawatts, to be 
 10.2   qualifying projects under Minnesota Statutes 2002, section 
 10.3   216B.1692, subdivision 1, if the commission finds that these 
 10.4   projects meet the requirements of clauses (1) and (3) of that 
 10.5   subdivision; and 
 10.6      (2) approve an emissions reduction rider that allows the 
 10.7   utility to recover the costs of the proposed projects, including 
 10.8   the costs of the additional 200 megawatts, subject to the 
 10.9   provisions of Minnesota Statutes 2002, section 216B.1692, 
 10.10  subdivision 5, paragraphs (b) and (c). 
 10.11     (c) If the public utility exercises the option provided for 
 10.12  in subdivision 1, no additional authorizations under Minnesota 
 10.13  Statutes 2002, section 216B.243, are required for the repowering 
 10.14  projects, including the additional 200 megawatts of capacity, or 
 10.15  for any necessary transmission or pipeline infrastructure the 
 10.16  commission determines is necessary to the projects. 
 10.17     Sec. 7.  [REPLACEMENT OF PRAIRIE ISLAND UNIT 2.] 
 10.18     Subdivision 1.  [WIND ENERGY CAPACITY.] (a) The public 
 10.19  utilities commission shall ensure that the 525 megawatts of 
 10.20  capacity and associated energy provided by the unit 2 reactor at 
 10.21  Prairie Island is replaced with:  (1) 300 megawatts of 
 10.22  accredited wind capacity; and (2) a combination of other 
 10.23  Minnesota homegrown renewable energy resources described in 
 10.24  subdivision 3, to the greatest extent those are demonstrated to 
 10.25  practicable and economic, or natural gas. 
 10.26     (b) Wind energy capacity developed under this subdivision 
 10.27  is exempt from Minnesota Statutes, section 216B.243, and 
 10.28  competitive bidding required under Minnesota Statutes, section 
 10.29  216B.2422, provided the utility commits to: 
 10.30     (1) provide for significant local equity participation in 
 10.31  the development of that wind energy capacity; and 
 10.32     (2) make a good faith effort to persuade regional 
 10.33  reliability organizations to recognize the maximum defensible 
 10.34  accreditation for intermittent resources. 
 10.35     Subd. 2.  [PLAN; DEMONSTRATION PROJECTS.] (a) By January 1, 
 10.36  2005, the public utility shall present its draft plan for 
 11.1   replacement of Prairie Island unit 2 to the legislative electric 
 11.2   energy task force.  Upon completion of the review by the task 
 11.3   force, the utility may modify its plan, and file the plan with 
 11.4   the public utilities commission for the commission's approval or 
 11.5   modification.  The plan shall include detailed analyses for at 
 11.6   least three demonstration projects, utilizing the fuels and 
 11.7   technologies described in subdivision 3. 
 11.8      (b) In developing the plan and demonstration projects under 
 11.9   this section, the public utility shall work in collaboration 
 11.10  with, and may propose demonstration projects jointly with, the 
 11.11  University of Minnesota at Morris, representatives from farming 
 11.12  cooperatives and associations, commodity groups, local economic 
 11.13  development organizations, cooperative and municipal utilities, 
 11.14  and communities seeking to offset local energy consumption with 
 11.15  renewable resources. 
 11.16     (c) The public utilities commission shall approve or modify 
 11.17  the plan within 120 days of its receipt.  In considering the 
 11.18  demonstration plans proposed by the utility and others, the 
 11.19  commission shall give preference to proposals that use the fuels 
 11.20  and technologies described in subdivision 3 in community 
 11.21  district energy systems or combined heat and power applications. 
 11.22     Subd. 3.  [ELIGIBLE FUELS AND TECHNOLOGIES.] The energy 
 11.23  fuels and technologies that the public utility shall consider 
 11.24  and analyze for demonstration projects are: 
 11.25     (1) alternative fuels derived from soybean and other 
 11.26  agricultural plant oils or animal fats; 
 11.27     (2) combustion of barley hulls, corn, or soy-based products 
 11.28  or other agricultural products as a fuel for electric 
 11.29  generation; 
 11.30     (3) wood residue biomass from the wood products industry in 
 11.31  Minnesota or other wood products grown in Minnesota; and 
 11.32     (4) methane or other combustible gases derived from the 
 11.33  processing of plant or animal wastes. 
 11.34     Sec. 8.  [MINIMIZING RATE IMPACTS.] 
 11.35     The public utilities commission, in authorizing the 
 11.36  recovery of costs under sections 6 and 7, shall amortize those 
 12.1   costs over a period not less than 20 years and shall take into 
 12.2   account damages received from the federal government relating to 
 12.3   its breach of contract under the federal Nuclear Waste Policy 
 12.4   Act.  
 12.5      Sec. 9.  [EFFECTIVE DATE.] 
 12.6      Sections 1 to 8 are effective the day following final 
 12.7   enactment.