1.1 	A bill for an act
1.2 	relating to energy; increasing renewable energy production incentives; 
1.3 	providing for early identification and reconnection of heat-disconnected 
1.4 	customers; requiring affordability programs for low-income natural gas heating 
1.5 	customers; modifying provisions for determining required investments in energy 
1.6 	conservation improvements and renewable energy projects; providing for 
1.7 	payments to certain qualified energy facilities; regulating deliveries of fuel oil 
1.8 	and propane gas to low-income customers; exempting certain biomass generation 
1.9 	facility and renewable generation facility from utility regulations; authorizing 
1.10 	use of petroleum violation escrow funds for energy grants; requiring a study; 
1.11 	appropriating money;amending Minnesota Statutes 2004, sections 216B.16, 
1.12 	subdivision 15; 216B.241, subdivision 1a, by adding a subdivision; 216C.37, 
1.13 	subdivision 1; 216C.41, subdivision 4, by adding a subdivision; Minnesota 
1.14 	Statutes 2005 Supplement, sections 116C.779, subdivision 2; 216B.241, 
1.15 	subdivisions 1b, 2; 216C.41, subdivisions 3, 5a; proposing coding for new law 
1.16 	in Minnesota Statutes, chapters 216B; 216C; 325E.
1.17 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.18 	Section 1. Minnesota Statutes 2005 Supplement, section 116C.779, subdivision 2, 
1.19 	is amended to read:
1.20 		Subd. 2.Renewable energy production incentive. (a) Until January 1, 2018, 
1.21 	up to $10,900,000 $11,840,000 annually must be allocated from available funds in the 
1.22 	account to fund renewable energy production incentives and grants for qualified on-farm 
1.23 	biogas recovery facilities. $9,400,000 $10,340,000 of this annual amount is for incentives 
1.24 	for up to 200 megawatts of electricity generated by wind energy conversion systems 
1.25 	that are eligible for the incentives under section 216C.41. The balance of this amount,
1.26 	Up to $1,500,000 $500,000  annually, may be used for production incentives for on-farm 
1.27 	biogas recovery facilities that are eligible for the incentive under section 216C.41 or 
1.28 	for production incentives for other renewables, to be provided in the same manner as 
1.29 	under section 216C.41. Up to $1,000,000 may be used for grants for qualified on-farm 
2.1 	biogas recovery facilities, as provided in section 216C.42. Any portion of the $10,900,000
2.2 	$11,840,000 not expended in any calendar year for the incentive is available for other 
2.3 	spending purposes under this section. This subdivision does not create an obligation to 
2.4 	contribute funds to the account.
2.5 	(b) The Department of Commerce shall determine eligibility of projects under 
2.6 	section 216C.41 for the purposes of this subdivision. At least quarterly, the Department of 
2.7 	Commerce shall notify the public utility of the name and address of each eligible project 
2.8 	owner and the amount due to each project under section 216C.41. The public utility shall 
2.9 	make payments within 15 working days after receipt of notification of payments due.

2.10 	Sec. 2. [216B.096] EARLY IDENTIFICATION OF HEAT-DISCONNECTED 
2.11 	CUSTOMERS.
2.12 		Subdivision 1.Definitions. For the purposes of this section, the terms defined in this 
2.13 	subdivision have the meanings given them:
2.14 	(a) "Heat-affected customer" means a residential customer heating with electricity 
2.15 	or natural gas.
2.16 	(b) "Heating season" means the period between October 15 and the following 
2.17 	April 15.
2.18 	(c) "Utility" means a public utility serving residential customers who heat with 
2.19 	electricity or natural gas.
2.20 		Subd. 2.Early identification. Beginning no later than September 15, a utility 
2.21 	must attempt to contact heat-affected customers in occupied dwellings whose service 
2.22 	was disconnected after the previous heating season to establish payment arrangements 
2.23 	or a reconnection plan in order to restore service. A record must be made of all contacts 
2.24 	and attempted contacts.
2.25 		Subd. 3.Report to commission. Annually on November 1, a utility must file with 
2.26 	the commission a report specifying the number of heat-affected customers in occupied 
2.27 	dwellings whose service is disconnected on October 1 and on October 15. If heat-affected 
2.28 	customers remain disconnected on October 15, each utility shall file a weekly report, 
2.29 	beginning November 1, specifying the number of heat-affected customers that are or 
2.30 	remain disconnected from service during the current heating season.

2.31 	Sec. 3. Minnesota Statutes 2004, section 216B.16, subdivision 15, is amended to read:
2.32 		Subd. 15.Low-income programs. (a) The commission may consider ability to 
2.33 	pay as a factor in setting utility rates and may must establish programs for low-income 
2.34 	residential ratepayers in order to ensure affordable, reliable, and continuous service 
3.1 	to low-income utility customers. By September 1, 2006, public utilities that serve 
3.2 	low-income natural gas heating customers, except any public utility operating a 
3.3 	low-income program under subdivision 14, must file an affordability program with the 
3.4 	commission. A program must be implemented upon approval by the commission.
3.5 	(b) The purpose of the low-income programs is to lower the percentage of income 
3.6 	that participating low-income households devote to energy bills, to increase participating 
3.7 	customer payments, to decrease or eliminate participating customer arrears, and to lower 
3.8 	the utility costs associated with participating customer account collection activities. 
3.9 	In ordering low-income programs, the commission may require public utilities to file 
3.10 	program evaluations, including the coordination of other available low-income bill 
3.11 	payment and conservation resources and the effect of the program on:
3.12 	(1) reducing the percentage of income that participating households devote to energy 
3.13 	bills; 
3.14 	(2) service disconnections; and 
3.15 	(3) customer payment behavior, utility collection costs, arrearages, and bad debt.
3.16 	(c) The commission shall issue orders necessary to implement, administer, and 
3.17 	recover the costs, including administrative costs, of a program on a timely basis.

3.18 	Sec. 4. Minnesota Statutes 2004, section 216B.241, subdivision 1a, is amended to read:
3.19 		Subd. 1a.Investment, expenditure, and contribution; public utility. (a) For 
3.20 	purposes of this subdivision and subdivision 2, "public utility" has the meaning given it 
3.21 	in section  216B.02, subdivision 4. Each public utility shall spend and invest for energy 
3.22 	conservation improvements under this subdivision and subdivision 2 the following 
3.23 	amounts: 
3.24 	(1) for a utility that furnishes gas service, 0.5 percent of its gross operating revenues 
3.25 	from service provided in the state;
3.26 	(2) for a utility that furnishes electric service, 1.5 percent of its gross operating 
3.27 	revenues from service provided in the state; and
3.28 	(3) for a utility that furnishes electric service and that operates a nuclear-powered 
3.29 	electric generating plant within the state, two percent of its gross operating revenues 
3.30 	from service provided in the state.
3.31 	For purposes of this paragraph (a), "gross operating revenues" do not include 
3.32 	revenues from large electric customer facilities exempted by the commissioner under 
3.33 	paragraph (b).
3.34 	The gross operating revenue to be used in determining the amount of spending 
3.35 	and investment required under this subdivision is the revenue for the year preceding the 
4.1 	year that a proposed plan is filed with the commissioner. The commissioner may adjust 
4.2 	the spending required after the first or subsequent year of a plan to reflect more recent 
4.3 	available revenue figures.
4.4 	(b) The owner of a large electric customer facility may petition the commissioner 
4.5 	to exempt both electric and gas utilities serving the large energy customer facility from 
4.6 	the investment and expenditure requirements of paragraph (a) with respect to retail 
4.7 	revenues attributable to the facility. At a minimum, the petition must be supported by 
4.8 	evidence relating to competitive or economic pressures on the customer and a showing 
4.9 	by the customer of reasonable efforts to identify, evaluate, and implement cost-effective 
4.10 	conservation improvements at the facility. If a petition is filed on or before October 1 of 
4.11 	any year, the order of the commissioner to exempt revenues attributable to the facility can 
4.12 	be effective no earlier than January 1 of the following year. The commissioner shall not 
4.13 	grant an exemption if the commissioner determines that granting the exemption is contrary 
4.14 	to the public interest. The commissioner may, after investigation, rescind any exemption 
4.15 	granted under this paragraph upon a determination that cost-effective energy conservation 
4.16 	improvements are available at the large electric customer facility. For the purposes of this 
4.17 	paragraph, "cost-effective" means that the projected total cost of the energy conservation 
4.18 	improvement at the large electric customer facility is less than the projected present value 
4.19 	of the energy and demand savings resulting from the energy conservation improvement. 
4.20 	For the purposes of investigations by the commissioner under this paragraph, the owner 
4.21 	of any large electric customer facility shall, upon request, provide the commissioner 
4.22 	with updated information comparable to that originally supplied in or with the owner's 
4.23 	original petition under this paragraph.
4.24 	(c) The commissioner may require investments or spending greater than the amounts 
4.25 	required under this subdivision for a public utility whose most recent advance forecast 
4.26 	required under section  216B.2422 or  216C.17 projects a peak demand deficit of 100 
4.27 	megawatts or greater within five years under midrange forecast assumptions. 
4.28 	(d) A public utility or owner of a large electric customer facility may appeal 
4.29 	a decision of the commissioner under paragraph (b) or (c) to the commission under 
4.30 	subdivision 2. In reviewing a decision of the commissioner under paragraph (b) or (c), 
4.31 	the commission shall rescind the decision if it finds that the required investments or 
4.32 	spending will:
4.33 	(1) not result in cost-effective energy conservation improvements; or
4.34 	(2) otherwise not be in the public interest.
4.35 	(e) Each utility shall determine what portion of the amount it sets aside for 
4.36 	conservation improvement will be used for conservation improvements under subdivision 
5.1 	2 and what portion it will contribute to the energy and conservation account established in 
5.2 	subdivision 2a. A public utility may propose to the commissioner to designate that all 
5.3 	or a portion of funds contributed to the account established in subdivision 2a be used 
5.4 	for research and development projects that can best be implemented on a statewide 
5.5 	basis. Contributions must be remitted to the commissioner by February 1 of each year. 
5.6 	Nothing in this subdivision prohibits a public utility from spending or investing for energy 
5.7 	conservation improvement more than required in this subdivision.

5.8 	Sec. 5. Minnesota Statutes 2005 Supplement, section 216B.241, subdivision 1b, 
5.9 	is amended to read:
5.10 		Subd. 1b.Conservation improvement by cooperative association or 
5.11 	municipality. (a) This subdivision applies to:
5.12 	(1) a cooperative electric association that provides retail service to its members;
5.13 	(2) a municipality that provides electric service to retail customers; and
5.14 	(3) a municipality with gross operating revenues in excess of $5,000,000 from sales 
5.15 	of natural gas to retail customers.
5.16 	(b) Each cooperative electric association and municipality subject to this subdivision 
5.17 	shall spend and invest for energy conservation improvements under this subdivision 
5.18 	the following amounts:
5.19 	(1) for a municipality, 0.5 percent of its gross operating revenues from the sale of 
5.20 	gas and 1.5 percent of its gross operating revenues from the sale of electricity, excluding 
5.21 	gross operating revenues from electric and gas service provided in the state to large 
5.22 	electric customer facilities; and
5.23 	(2) for a cooperative electric association, 1.5 percent of its gross operating revenues 
5.24 	from service provided in the state, excluding gross operating revenues from service 
5.25 	provided in the state to large electric customer facilities indirectly through a distribution 
5.26 	cooperative electric association.
5.27 	The gross operating revenue to be used in determining the amount of spending 
5.28 	and investment required under this subdivision is the revenue for the year preceding the 
5.29 	year that a proposed plan is filed with the commissioner. The commissioner may adjust 
5.30 	the spending required after the first or subsequent year of a plan to reflect more recent 
5.31 	available revenue figures.
5.32 	(c) Each municipality and cooperative electric association subject to this subdivision 
5.33 	shall identify and implement energy conservation improvement spending and investments 
5.34 	that are appropriate for the municipality or association, except that a municipality or 
5.35 	association may not spend or invest for energy conservation improvements that directly 
6.1 	benefit a large electric customer facility for which the commissioner has issued an 
6.2 	exemption under subdivision 1a, paragraph (b).
6.3 	(d) Each municipality and cooperative electric association subject to this subdivision 
6.4 	may spend and invest annually up to ten percent of the total amount required to be spent 
6.5 	and invested on energy conservation improvements under this subdivision on research 
6.6 	and development projects that meet the definition of energy conservation improvement 
6.7 	in subdivision 1 and that are funded directly by the municipality or cooperative electric 
6.8 	association.
6.9 	(e) Load-management activities that do not reduce energy use but that increase the 
6.10 	efficiency of the electric system may be used to meet 50 percent of the conservation 
6.11 	investment and spending requirements of this subdivision.
6.12 	(f) A generation and transmission cooperative electric association that provides 
6.13 	energy services to cooperative electric associations that provide electric service at retail to 
6.14 	consumers may invest in energy conservation improvements on behalf of the associations 
6.15 	it serves and may fulfill the conservation, spending, reporting, and energy savings goals on 
6.16 	an aggregate basis. A municipal power agency or other not-for-profit entity that provides 
6.17 	energy service to municipal utilities that provide electric service at retail may invest in 
6.18 	energy conservation improvements on behalf of the municipal utilities it serves and may 
6.19 	fulfill the conservation, spending, reporting, and energy savings goals on an aggregate 
6.20 	basis, under an agreement between the municipal power agency or not-for-profit entity 
6.21 	and each municipal utility for funding the investments.
6.22 	(g) At least every four years, on a schedule determined by the commissioner, each 
6.23 	municipality or cooperative shall file an overview of its conservation improvement plan 
6.24 	with the commissioner. With this overview, the municipality or cooperative shall also 
6.25 	provide an evaluation to the commissioner detailing its energy conservation improvement 
6.26 	spending and investments for the previous period. The evaluation must briefly describe 
6.27 	each conservation program and must specify the energy savings or increased efficiency in 
6.28 	the use of energy within the service territory of the utility or association that is the result 
6.29 	of the spending and investments. The evaluation must analyze the cost-effectiveness 
6.30 	of the utility's or association's conservation programs, using a list of baseline energy 
6.31 	and capacity savings assumptions developed in consultation with the department. 
6.32 	The commissioner shall review each evaluation and make recommendations, where 
6.33 	appropriate, to the municipality or association to increase the effectiveness of conservation 
6.34 	improvement activities. Up to three percent of a utility's conservation spending obligation 
6.35 	under this section may be used for program pre-evaluation, testing, and monitoring and 
6.36 	program evaluation. The overview and evaluation filed by a municipality with less than 
7.1 	60,000,000 kilowatt hours in annual retail sales of electric service may consist of a letter 
7.2 	from the governing board of the municipal utility to the department providing the amount 
7.3 	of annual conservation spending required of that municipality and certifying that the 
7.4 	required amount has been spent on conservation programs pursuant to this subdivision.
7.5 	(h) The commissioner shall also review each evaluation for whether a portion of the 
7.6 	money spent on residential conservation improvement programs is devoted to programs 
7.7 	that directly address the needs of renters and low-income persons unless an insufficient 
7.8 	number of appropriate programs are available. For the purposes of this subdivision and 
7.9 	subdivision 2, "low-income" means an income at or below 50 percent of the state median 
7.10 	income.
7.11 	(i) As part of its spending for conservation improvement, a municipality or 
7.12 	association may contribute to the energy and conservation account. A municipality or 
7.13 	association may propose to the commissioner to designate that all or a portion of funds 
7.14 	contributed to the account be used for research and development projects that can best 
7.15 	be implemented on a statewide basis. Any amount contributed must be remitted to the 
7.16 	commissioner by February 1 of each year.
7.17 	(j) A municipality may spend up to 50 percent of its required spending under this 
7.18 	section to refurbish an existing district heating or cooling system. This paragraph expires 
7.19 	July 1, 2007. After July 1, 2007, and until July 1, 2011, expenditures made to refurbish 
7.20 	an existing heating or cooling system are considered to be load-management activities 
7.21 	under paragraph (e).

7.22 	Sec. 6. Minnesota Statutes 2005 Supplement, section 216B.241, subdivision 2, is 
7.23 	amended to read:
7.24 		Subd. 2.Programs. (a) The commissioner may require public utilities to make 
7.25 	investments and expenditures in energy conservation improvements, explicitly setting 
7.26 	forth the interest rates, prices, and terms under which the improvements must be offered to 
7.27 	the customers. The required programs must cover no more than a four-year period. Public 
7.28 	utilities shall file conservation improvement plans by June 1, on a schedule determined 
7.29 	by order of the commissioner, but at least every four years. Plans received by a public 
7.30 	utility by June 1 must be approved or approved as modified by the commissioner by 
7.31 	December 1 of that same year. The commissioner shall give special consideration and 
7.32 	encouragement to programs that bring about significant net savings through the use of 
7.33 	energy-efficient lighting. The commissioner shall evaluate the program on the basis of 
7.34 	cost-effectiveness and the reliability of technologies employed. The commissioner's order 
7.35 	must provide to the extent practicable for a free choice, by consumers participating in the 
8.1 	program, of the device, method, material, or project constituting the energy conservation 
8.2 	improvement and for a free choice of the seller, installer, or contractor of the energy 
8.3 	conservation improvement, provided that the device, method, material, or project seller, 
8.4 	installer, or contractor is duly licensed, certified, approved, or qualified, including under 
8.5 	the residential conservation services program, where applicable.
8.6 	(b) The commissioner may require a utility to make an energy conservation 
8.7 	improvement investment or expenditure whenever the commissioner finds that the 
8.8 	improvement will result in energy savings at a total cost to the utility less than the cost 
8.9 	to the utility to produce or purchase an equivalent amount of new supply of energy. The 
8.10 	commissioner shall nevertheless ensure that every public utility operate one or more 
8.11 	programs under periodic review by the department.
8.12 	(c) Each public utility subject to subdivision 1a may spend and invest annually up to 
8.13 	ten percent of the total amount required to be spent and invested on energy conservation 
8.14 	improvements under this section by the utility on research and development projects 
8.15 	that meet the definition of energy conservation improvement in subdivision 1 and that 
8.16 	are funded directly by the public utility.
8.17 	(d) A public utility may not spend for or invest in energy conservation improvements 
8.18 	that directly benefit a large electric customer facility for which the commissioner has 
8.19 	issued an exemption pursuant to subdivision 1a, paragraph (b). The commissioner shall 
8.20 	consider and may require a utility to undertake a program suggested by an outside source, 
8.21 	including a political subdivision or a nonprofit or community organization.
8.22 	(e) The commissioner may, by order, establish a list of programs that may be 
8.23 	offered as energy conservation improvements by a public utility, municipal utility, 
8.24 	cooperative electric association, or other entity providing conservation services pursuant 
8.25 	to this section. The list of programs may include rebates for high-efficiency appliances, 
8.26 	rebates or subsidies for high-efficiency lamps, small business energy audits, and building 
8.27 	recommissioning. The commissioner may, by order, change this list to add or subtract 
8.28 	programs as the commissioner determines is necessary to promote efficient and effective 
8.29 	conservation programs.
8.30 	(f) The commissioner shall ensure that a portion of the money spent on residential 
8.31 	conservation improvement programs is devoted to programs that directly address the 
8.32 	needs of renters and low-income persons, in proportion to the amount the utility has 
8.33 	historically spent on such programs based on the most recent three-year average relative to 
8.34 	the utility's total conservation spending under this section, unless an insufficient number 
8.35 	of appropriate programs are available. including low-income renters. In approving 
8.36 	spending and energy savings goals for conservation improvement programs targeted to 
9.1 	low-income persons, the commissioner shall consider historic spending levels, the number 
9.2 	of participating households, and energy savings achieved under these programs targeted 
9.3 	to low-income persons and the number of low-income persons residing in the utility's 
9.4 	service area. A utility that furnishes gas service must spend at least 0.2 percent of its 
9.5 	gross operating revenues from service provided to residential customers in this state on 
9.6 	conservation improvement programs targeted to low-income persons.
9.7 	(g) A utility, a political subdivision, or a nonprofit or community organization 
9.8 	that has suggested a program, the attorney general acting on behalf of consumers and 
9.9 	small business interests, or a utility customer that has suggested a program and is not 
9.10 	represented by the attorney general under section 8.33 may petition the commission to 
9.11 	modify or revoke a department decision under this section, and the commission may do 
9.12 	so if it determines that the program is not cost-effective, does not adequately address the 
9.13 	residential conservation improvement needs of low-income persons, has a long-range 
9.14 	negative effect on one or more classes of customers, or is otherwise not in the public 
9.15 	interest. The commission shall reject a petition that, on its face, fails to make a reasonable 
9.16 	argument that a program is not in the public interest.
9.17 	(h) The commissioner may order a public utility to include, with the filing of the 
9.18 	utility's proposed conservation improvement plan under paragraph (a), the results of an 
9.19 	independent audit of the utility's conservation improvement programs and expenditures 
9.20 	performed by the department or an auditor with experience in the provision of energy 
9.21 	conservation and energy efficiency services approved by the commissioner and chosen by 
9.22 	the utility. The audit must specify the energy savings or increased efficiency in the use 
9.23 	of energy within the service territory of the utility that is the result of the spending and 
9.24 	investments. The audit must evaluate the cost-effectiveness of the utility's conservation 
9.25 	programs.
9.26 	(i) Up to three percent of a utility's conservation spending obligation under this 
9.27 	section may be used for program pre-evaluation, testing, and monitoring and program 
9.28 	audit and evaluation.

9.29 	Sec. 7. Minnesota Statutes 2004, section 216B.241, is amended by adding a 
9.30 	subdivision to read:
9.31 		Subd. 2c.Renewable energy projects. Up to five percent of a utility's conservation 
9.32 	spending obligation under this section may be used for a project located in this state that 
9.33 	produces electricity from an eligible energy technology as defined in section 216B.1691, 
9.34 	subdivision 1, paragraph (a), clauses (1) and (2), provided that: 
10.1 	(1) the project is eligible to be counted toward a utility's renewable energy objective, 
10.2 	as defined in section 216B.1691, subdivision 2, paragraph (a); 
10.3 	(2) the project produces electricity continuously at an essentially constant rate; and
10.4 	(3) the project is owned by a qualifying owner as defined in section 216B.1612, 
10.5 	subdivision 2, paragraph (c).

10.6 	Sec. 8. Minnesota Statutes 2004, section 216C.37, subdivision 1, is amended to read:
10.7 		Subdivision 1.Definitions. In this section:
10.8 	(a) "Commissioner" means the commissioner of commerce.
10.9 	(b) "Energy conservation investments" means all capital expenditures that are 
10.10 	associated with conservation measures identified in an energy project study, including 
10.11 	renewable energy measures, and that have a ten-year or less payback period.
10.12 	(c) "Municipality" means any county, statutory or home rule charter city, town, 
10.13 	school district, or any combination of those units operating under an agreement to jointly 
10.14 	undertake projects authorized in this section.
10.15 	(d) "Energy project study" means a study of one or more energy-related capital 
10.16 	improvement projects analyzed in sufficient detail to support a financing application. At a 
10.17 	minimum, it must include one year of energy consumption and cost data, a description 
10.18 	of existing conditions, a description of proposed conditions, a detailed description of the 
10.19 	costs of the project, and calculations sufficient to document the proposed energy savings.

10.20 	Sec. 9. Minnesota Statutes 2005 Supplement, section 216C.41, subdivision 3, is 
10.21 	amended to read:
10.22 		Subd. 3.Eligibility window. (a) Except as provided in subdivision 3a, payments 
10.23 	may be made under this section only for electricity generated:
10.24 	(1) from a qualified hydroelectric facility that is operational and generating 
10.25 	electricity before December 31, 2007 2009;
10.26 	(2) from a qualified wind energy conversion facility that is operational and 
10.27 	generating electricity before January 1, 2007; or, from a qualified wind energy conversion 
10.28 	facility that is owned by a school district and that begins generating electricity after 
10.29 	January 1, 2007, and before January 1, 2012; or
10.30 	(3) from a qualified on-farm biogas recovery facility from July 1, 2001, through 
10.31 	December 31, 2017.
10.32 	(b) The provisions of section 123B.02, subdivision 21, apply to wind energy 
10.33 	conversion systems owned by school districts eligible to receive payments under this 
10.34 	subdivision.

11.1 	Sec. 10. Minnesota Statutes 2004, section 216C.41, is amended by adding a 
11.2 	subdivision to read:
11.3 		Subd. 3a.Payments for gas production. A qualified on-farm biogas recovery 
11.4 	facility is eligible to receive renewable energy production incentives if it produces gas. 
11.5 	The amount of the incentive paid to a qualified on-farm biogas recovery facility shall be 
11.6 	equivalent, on a per million Btu basis, to 1.5 cents per kilowatt hour, as determined by the 
11.7 	Department of Commerce. No qualified on-farm biogas recovery facility may receive an 
11.8 	annual incentive payment in excess of $250,000.

11.9 	Sec. 11. Minnesota Statutes 2004, section 216C.41, subdivision 4, is amended to read:
11.10 		Subd. 4.Payment period. (a) A facility may receive payments under this section for 
11.11 	a ten-year period. No payment under this section may be made for electricity generated:
11.12 	(1) by a qualified hydroelectric facility after December 31, 2017 2019;
11.13 	(2) by a qualified wind energy conversion facility after December 31, 2017, except 
11.14 	that a qualified wind energy conversion facility owned by a school district may receive 
11.15 	payments until December 31, 2022; or
11.16 	(3) by a qualified on-farm biogas recovery facility after December 31, 2015.
11.17 	(b) The payment period begins and runs consecutively from the date the facility 
11.18 	begins generating electricity or, in the case of refurbishment of a hydropower facility, after 
11.19 	substantial repairs to the hydropower facility dam funded by the incentive payments are 
11.20 	initiated.

11.21 	Sec. 12. Minnesota Statutes 2005 Supplement, section 216C.41, subdivision 5a, 
11.22 	is amended to read:
11.23 		Subd. 5a.Renewable development account. The Department of Commerce 
11.24 	shall authorize payment of the renewable energy production incentive to wind energy 
11.25 	conversion systems for 200 megawatts of nameplate capacity, and for an additional 20 
11.26 	megawatts of nameplate capacity for wind energy conversion systems owned by school 
11.27 	districts that begin generating electricity after January 1, 2007,  and to on-farm biogas 
11.28 	recovery facilities. Payment of the incentive shall be made from the renewable energy 
11.29 	development account as provided under section 116C.779, subdivision 2.

11.30 	Sec. 13. [216C.42] ON-FARM BIOGAS RECOVERY GRANTS.
11.31 		Subdivision 1.Definitions. (a) "Qualified on-farm biogas recovery facility" means 
11.32 	an anaerobic digester system that:
11.33 	(1) is located at the site of an agricultural operation; 
12.1 	(2) is owned by an entity that is not prohibited from owning agricultural land under 
12.2 	section 500.24 and that owns or rents the land where the facility is located; and
12.3 	(3) is owned by a qualified owner as defined in section 216B.1612, subdivision 2, 
12.4 	paragraph (c).
12.5 	(b) "Anaerobic digester system" means a system of components that processes 
12.6 	animal waste based on the absence of oxygen and produces gas.
12.7 	(c) "Commissioner" means the commissioner of agriculture.
12.8 		Subd. 2.Eligibility. Subject to the availability of funds, the commissioner shall 
12.9 	approve grants to a qualified owner of a qualified on-farm biogas recovery facility for the 
12.10 	total installed costs of capital investments associated with the facility, up to a maximum of 
12.11 	$500,000. 
12.12 		Subd. 3.Application. Application for a grant under this section shall be made by a 
12.13 	qualified owner to the commissioner on a form the commissioner prescribes by rule. The 
12.14 	commissioner shall review each application to determine:
12.15 	(1) whether the application is complete;
12.16 	(2) whether the information, calculations, and estimates contained in the application 
12.17 	are appropriate, accurate, and reasonable;
12.18 	(3) whether the project is eligible for a grant;
12.19 	(4) the amount of the grant for which the project is eligible; and
12.20 	(5) other funding sources the owner proposes to use to finance the project in addition 
12.21 	to a grant authorized by this section.
12.22 	An applicant may submit only one grant application each year under this section.
12.23 		Subd. 4.Additional information. During application review, the commissioner 
12.24 	may request additional information about a proposed project, including information on 
12.25 	project cost. Failure to provide information requested disqualifies a grant application.
12.26 		Subd. 5.Public accessibility of grant application data. Data contained in an 
12.27 	application submitted to the commissioner for a grant under this section, including 
12.28 	supporting technical documentation, is classified as "public data not on individuals" under 
12.29 	section 13.02, subdivision 14.
12.30 		Subd. 6.Rules. The commissioner shall adopt rules necessary to implement this 
12.31 	section. The rules shall contain at a minimum:
12.32 	(1) standards for project eligibility;
12.33 	(2) criteria for reviewing grant applications; and
12.34 	(3) procedures and guidelines for program monitoring and evaluation.
12.35 		Subd. 7.Right of first refusal. A utility that provides electric service at retail has 
12.36 	the right of first refusal for any gas produced by a qualified on-farm biogas recovery 
13.1 	facility that has received a grant under this section. Any gas generated by a qualified 
13.2 	on-farm biogas recovery facility awarded a grant under this section that is purchased by a 
13.3 	utility may be counted as part of the utility's good faith effort to meet its renewable energy 
13.4 	objective under section 216B.1691, subdivision 2. 
13.5 		Subd. 8.Appropriation. Up to $1,000,000 is appropriated annually from the 
13.6 	renewable development account through fiscal year 2015 to the commissioner of 
13.7 	agriculture for the purpose of providing grants to qualified on-farm biogas recovery 
13.8 	facilities.

13.9 	Sec. 14. [325E.027] LOW-INCOME CUSTOMERS; DELIVERED HEATING 
13.10 	FUEL VENDOR'S OBLIGATION.
13.11 	A dealer or distributor of liquid propane gas or number 1 or number 2 fuel oil may 
13.12 	not refuse to deliver liquid propane gas or number 1 or number 2 fuel oil within their 
13.13 	normal delivery area to any person who receives direct grants under the low-income 
13.14 	home energy assistance program if that person has requested delivery, the dealer or 
13.15 	distributor has product available, and the person requesting delivery is capable of making 
13.16 	full payment at the time of delivery and is not in arrears regarding any previous fuel 
13.17 	purchase from that dealer or distributor. A distributor or dealer making delivery to a 
13.18 	person receiving direct grants from the low-income home energy assistance program may 
13.19 	not charge that person any additional costs or fees that would not be charged to any other 
13.20 	customer and shall make available to that person any discount programs on the same basis 
13.21 	as the dealer or distributor makes available to any other customer.

13.22 	Sec. 15. BIOMASS GENERATION FACILITY AGREEMENT.
 13.23 	The Department of Commerce may facilitate the development of an agreement 
13.24 	between the owners of a biomass-fueled electric generation facility located in Scott 
13.25 	County and the electric utility in whose service area the facility is located. The facility 
13.26 	must be adjacent to an agricultural product processing plant that uses heat from the 
13.27 	biomass facility in its production process. Electricity produced by the biomass-fueled 
13.28 	electric generation facility must be used only for the operations of the owners of the 
13.29 	biomass facility and for wholesale sales.

13.30 	Sec. 16. ETHANOL PLANT; RENEWABLE GENERATION FACILITY 
13.31 	CLARIFICATION.
 13.32 	Consistent with Minnesota Statutes, section 216B.02, subdivision 4, which provides 
13.33 	that no person shall be deemed a public utility if it produces or furnishes service to less 
14.1 	than 25 persons, the owner and operator of an electric generation facility, which is located 
14.2 	in Faribault County and consists of two wind turbines, adjacent to an ethanol plant, 
14.3 	is not a public utility if the electricity produced by the turbines is used solely for the 
14.4 	operations of the ethanol plant. The providing of electric service by those two turbines 
14.5 	to the ethanol plant does not require the consent of the electric utility in whose service 
14.6 	area the plant is located.

14.7 	EFFECTIVE DATE. This section is effective the day following final enactment.

14.8 	Sec. 17. PETROLEUM VIOLATION ESCROW FUNDS.
 14.9 	Petroleum violation escrow funds appropriated to the commissioner of commerce by 
14.10 	Laws 1988, chapter 686, article 1, section 38, for state energy loan programs for schools, 
14.11 	hospitals, and public buildings may also be used for energy grants to those entities.

14.12 	Sec. 18. PROMOTING CONSERVATION THROUGH UTILITY RATES; 
14.13 	STUDY.
 14.14 	The Legislative Electric Energy Task Force must study the issue of the use of 
14.15 	utility rates as an incentive to conservation, including the separation of utility revenues 
14.16 	from sales. The study may include both gas and electric utility rates. The task force may 
14.17 	contract for all or part of the study, including contracting with other state agencies. The 
14.18 	study must be completed by January 15, 2007.