1.1 	A bill for an act
1.2 	relating to energy; requiring reports on utility customers; authorizing prepurchase 
1.3 	propane fuel program; providing for residential heat reconnection arrangements; 
1.4 	modifying provisions for assisting low-income residential heating customers; 
1.5 	defining "gross operating revenue" for energy conservation investment; 
1.6 	providing for statewide energy-saving objectives; defining "energy conservation 
1.7 	investments" to include renewable energy measures; clarifying status of 
1.8 	biomass generation facility and renewable generation facility; authorizing 
1.9 	petroleum violation escrow funds to be used for energy grants; requiring a 
1.10 	study;amending Minnesota Statutes 2004, sections 216B.16, subdivision 15; 
1.11 	216B.241, subdivisions 1a, 1c, 6; 216C.37, subdivision 1; Minnesota Statutes 
1.12 	2005 Supplement, section 216B.241, subdivisions 1b, 2; proposing coding for 
1.13 	new law in Minnesota Statutes, chapters 216B; 325E.
1.14 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.15 	Section 1. [216B.091] UTILITY CUSTOMER.
1.16 		Subdivision 1.Monthly reports. (a) Each natural gas and electric public utility 
1.17 	must submit a monthly report to the commission that includes the following information:
1.18 	(1) number of residential customers;
1.19 	(2) total number and dollar amount of residential customer accounts past due;
1.20 	(3) average residential customer past due amount;
1.21 	(4) total dollars received from the low-income home energy assistance program 
1.22 	and from other sources;
1.23 	(5) average monthly residential bill;
1.24 	(6) revenue from sales to residential accounts;
1.25 	(7) total residential write-offs due to uncollectible bills;
1.26 	(8) number of disconnection notices mailed to customers;
1.27 	(9) number of residential accounts disconnected; and
1.28 	(10) number of residential primary heating accounts reconnected to service.
2.1 	(b) During the period from October 15 to April 15, monthly reports must also 
2.2 	include the following information:
2.3 	(1) number of cold weather protection requests;
2.4 	(2) number of reconnection plan requests received and granted;
2.5 	(3) number of inability to pay requests received and granted;
2.6 	(4) number of ten-percent plans received and granted;
2.7 	(5) number of payment schedule requests received and granted; and 
2.8 	(6) all other information currently provided to the commission in monthly cold 
2.9 	weather rule reports.
2.10 		Subd. 2.Commission report. On or about September 30 of each year, the 
2.11 	commission must issue a report that summarizes the monthly data provided under 
2.12 	subdivision 1 by each natural gas and electric public utility for the period beginning 
2.13 	July 1 to the following June 30 of that year.

2.14 	EFFECTIVE DATE. This section is effective July 1, 2006, provided that the first 
2.15 	report under subdivision 2 is due on or about September 30, 2007.

2.16 	Sec. 2. [216B.0951] PREPURCHASE PROPANE FUEL PROGRAM.
2.17 		Subdivision 1.Created. The commissioner shall operate, or contract to operate, a 
2.18 	prepurchase delivered fuel program.
2.19 	The commissioner shall each July and August purchase the lesser of one-third of the 
2.20 	liquid propane fuel consumed by low-income home energy assistance program recipients 
2.21 	during the previous heating season or the amount that can be purchased with available 
2.22 	funds. The prepurchase delivered fuel program must be available statewide through each 
2.23 	local agency that administers the energy assistance program. The commissioner may 
2.24 	decide to limit or not engage in prepurchasing if the commissioner finds that there is a 
2.25 	reasonable likelihood that prepurchasing will not provide fuel-cost savings.
2.26 		Subd. 2.Hedge account. The commissioner may establish a hedge account with 
2.27 	realized program savings due to prepurchasing. The account must be used to compensate 
2.28 	program recipients an amount up to the difference in cost for fuel provided to the recipient 
2.29 	if winter-delivered fuel prices are lower than the prepurchase or summer-fill price. No 
2.30 	more than ten percent of the aggregate prepurchase program savings may be used to 
2.31 	establish the hedge account. 
2.32 		Subd. 3.Report. The department shall issue an annual report, made available 
2.33 	electronically on its Web site and in print upon request, which contains the following 
2.34 	information:
2.35 	(1) the cost per gallon of the prepurchased fuel;
3.1 	(2) the total gallons of fuel prepurchased;
3.2 	(3) the average cost of propane and fuel oil by month between October and the 
3.3 	following April;
3.4 	(4) the number of energy assistance program households receiving prepurchased 
3.5 	fuel; and 
3.6 	(5) the average savings accruing or benefit increase provided to energy assistance 
3.7 	households.

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

3.9 	Sec. 3. [216B.096] EARLY IDENTIFICATION OF HEAT-DISCONNECTED 
3.10 	CUSTOMERS.
3.11 		Subdivision 1.Definitions. For the purposes of this section, the terms defined in this 
3.12 	subdivision have the meanings given them:
3.13 	(a) "Heat-affected customer" means a residential customer heating with electricity 
3.14 	or natural gas.
3.15 	(b) "Heating season" means the period between October 15 and the following 
3.16 	April 15.
3.17 	(c) "Utility" means a public utility serving residential customers who heat with 
3.18 	electricity or natural gas.
3.19 		Subd. 2.Early identification. Beginning no later than September 15, a utility 
3.20 	must attempt to contact heat-affected customers in occupied dwellings whose service 
3.21 	was disconnected after the previous heating season to establish payment arrangements 
3.22 	or a reconnection plan in order to restore service. A record must be made of all contacts 
3.23 	and attempted contacts.
3.24 		Subd. 3.Report to commission. Annually on November 1, a utility must file with 
3.25 	the commission a report specifying the number of heat-affected customers in occupied 
3.26 	dwellings whose service is disconnected on October 1 and on October 15. If heat-affected 
3.27 	customers remain disconnected on October 15, each utility shall file a weekly report, 
3.28 	beginning November 1, specifying the number of heat-affected customers that are or 
3.29 	remain disconnected from service during the current heating season.

3.30 	Sec. 4. Minnesota Statutes 2004, section 216B.16, subdivision 15, is amended to read:
3.31 		Subd. 15.Low-income programs. (a) The commission may consider ability to 
3.32 	pay as a factor in setting utility rates and may must establish programs for low-income 
3.33 	residential ratepayers in order to ensure affordable, reliable, and continuous service 
3.34 	to low-income utility customers. By September 1, 2006, public utilities that serve 
4.1 	low-income natural gas heating customers, except any public utility operating a 
4.2 	low-income program under subdivision 14, must file an affordability program with the 
4.3 	commission. A program must be implemented upon approval by the commission.
4.4 	(b) The purpose of the low-income programs is to lower the percentage of income 
4.5 	that participating low-income households devote to energy bills, to increase participating 
4.6 	customer payments, to decrease or eliminate participating customer arrears, and to lower 
4.7 	the utility costs associated with participating customer account collection activities. 
4.8 	In ordering low-income programs, the commission may require public utilities to file 
4.9 	program evaluations, including the coordination of other available low-income bill 
4.10 	payment and conservation resources and the effect of the program on:
4.11 	(1) reducing the percentage of income that participating households devote to energy 
4.12 	bills;
4.13 	(2) service disconnections; and
4.14 	(3) customer payment behavior, utility collection costs, arrearages, and bad debt.
4.15 	(c) The commission shall issue orders necessary to implement, administer, and 
4.16 	recover the costs, including administrative costs, of a program on a timely basis.

4.17 	Sec. 5. Minnesota Statutes 2004, section 216B.241, subdivision 1a, is amended to read:
4.18 		Subd. 1a.Investment, expenditure, and contribution; public utility. (a) For 
4.19 	purposes of this subdivision and subdivision 2, "public utility" has the meaning given it 
4.20 	in section  216B.02, subdivision 4. Each public utility shall spend and invest for energy 
4.21 	conservation improvements under this subdivision and subdivision 2 the following 
4.22 	amounts: 
4.23 	(1) for a utility that furnishes gas service, 0.5 percent of its gross operating revenues 
4.24 	from service provided in the state;
4.25 	(2) for a utility that furnishes electric service, 1.5 percent of its gross operating 
4.26 	revenues from service provided in the state; and
4.27 	(3) for a utility that furnishes electric service and that operates a nuclear-powered 
4.28 	electric generating plant within the state, two percent of its gross operating revenues 
4.29 	from service provided in the state.
4.30 	For purposes of this paragraph (a), "gross operating revenues" do not include 
4.31 	revenues from large electric customer facilities exempted by the commissioner under 
4.32 	paragraph (b).
4.33 	The gross operating revenue to be used in determining the amount of spending 
4.34 	and investment required under this subdivision is the revenue for the year preceding the 
4.35 	year that a proposed plan is filed with the commissioner. The commissioner may adjust 
5.1 	the spending required after the first or subsequent year of a plan to reflect more recent 
5.2 	available revenue figures.
5.3 	(b) The owner of a large electric customer facility may petition the commissioner 
5.4 	to exempt both electric and gas utilities serving the large energy customer facility from 
5.5 	the investment and expenditure requirements of paragraph (a) with respect to retail 
5.6 	revenues attributable to the facility. At a minimum, the petition must be supported by 
5.7 	evidence relating to competitive or economic pressures on the customer and a showing 
5.8 	by the customer of reasonable efforts to identify, evaluate, and implement cost-effective 
5.9 	conservation improvements at the facility. If a petition is filed on or before October 1 of 
5.10 	any year, the order of the commissioner to exempt revenues attributable to the facility can 
5.11 	be effective no earlier than January 1 of the following year. The commissioner shall not 
5.12 	grant an exemption if the commissioner determines that granting the exemption is contrary 
5.13 	to the public interest. The commissioner may, after investigation, rescind any exemption 
5.14 	granted under this paragraph upon a determination that cost-effective energy conservation 
5.15 	improvements are available at the large electric customer facility. For the purposes of this 
5.16 	paragraph, "cost-effective" means that the projected total cost of the energy conservation 
5.17 	improvement at the large electric customer facility is less than the projected present value 
5.18 	of the energy and demand savings resulting from the energy conservation improvement. 
5.19 	For the purposes of investigations by the commissioner under this paragraph, the owner 
5.20 	of any large electric customer facility shall, upon request, provide the commissioner 
5.21 	with updated information comparable to that originally supplied in or with the owner's 
5.22 	original petition under this paragraph.
5.23 	(c) The commissioner may require investments or spending greater than the amounts 
5.24 	required under this subdivision for a public utility whose most recent advance forecast 
5.25 	required under section  216B.2422 or  216C.17 projects a peak demand deficit of 100 
5.26 	megawatts or greater within five years under midrange forecast assumptions. 
5.27 	(d) A public utility or owner of a large electric customer facility may appeal 
5.28 	a decision of the commissioner under paragraph (b) or (c) to the commission under 
5.29 	subdivision 2. In reviewing a decision of the commissioner under paragraph (b) or (c), 
5.30 	the commission shall rescind the decision if it finds that the required investments or 
5.31 	spending will:
5.32 	(1) not result in cost-effective energy conservation improvements; or
5.33 	(2) otherwise not be in the public interest.
5.34 	(e) Each utility shall determine what portion of the amount it sets aside for 
5.35 	conservation improvement will be used for conservation improvements under subdivision 
5.36 	2 and what portion it will contribute to the energy and conservation account established in 
6.1 	subdivision 2a. A public utility may propose to the commissioner to designate that all 
6.2 	or a portion of funds contributed to the account established in subdivision 2a be used 
6.3 	for research and development projects that can best be implemented on a statewide 
6.4 	basis. Contributions must be remitted to the commissioner by February 1 of each year. 
6.5 	Nothing in this subdivision prohibits a public utility from spending or investing for energy 
6.6 	conservation improvement more than required in this subdivision.

6.7 	Sec. 6. Minnesota Statutes 2005 Supplement, section 216B.241, subdivision 1b, 
6.8 	is amended to read:
6.9 		Subd. 1b.Conservation improvement by cooperative association or 
6.10 	municipality. (a) This subdivision applies to:
6.11 	(1) a cooperative electric association that provides retail service to its members;
6.12 	(2) a municipality that provides electric service to retail customers; and
6.13 	(3) a municipality with gross operating revenues in excess of $5,000,000 from sales 
6.14 	of natural gas to retail customers.
6.15 	(b) Each cooperative electric association and municipality subject to this subdivision 
6.16 	shall spend and invest for energy conservation improvements under this subdivision 
6.17 	the following amounts:
6.18 	(1) for a municipality, 0.5 percent of its gross operating revenues from the sale of 
6.19 	gas and 1.5 percent of its gross operating revenues from the sale of electricity, excluding 
6.20 	gross operating revenues from electric and gas service provided in the state to large 
6.21 	electric customer facilities; and
6.22 	(2) for a cooperative electric association, 1.5 percent of its gross operating revenues 
6.23 	from service provided in the state, excluding gross operating revenues from service 
6.24 	provided in the state to large electric customer facilities indirectly through a distribution 
6.25 	cooperative electric association.
6.26 	The gross operating revenue to be used in determining the amount of spending 
6.27 	and investment required under this subdivision is the revenue for the year preceding the 
6.28 	year that a proposed plan is filed with the commissioner. The commissioner may adjust 
6.29 	the spending required after the first or subsequent year of a plan to reflect more recent 
6.30 	available revenue figures.
6.31 	(c) Each municipality and cooperative electric association subject to this subdivision 
6.32 	shall identify and implement energy conservation improvement spending and investments 
6.33 	that are appropriate for the municipality or association, except that a municipality or 
6.34 	association may not spend or invest for energy conservation improvements that directly 
7.1 	benefit a large electric customer facility for which the commissioner has issued an 
7.2 	exemption under subdivision 1a, paragraph (b).
7.3 	(d) Each municipality and cooperative electric association subject to this subdivision 
7.4 	may spend and invest annually up to ten percent of the total amount required to be spent 
7.5 	and invested on energy conservation improvements under this subdivision on research 
7.6 	and development projects that meet the definition of energy conservation improvement 
7.7 	in subdivision 1 and that are funded directly by the municipality or cooperative electric 
7.8 	association.
7.9 	(e) Load-management activities that do not reduce energy use but that increase the 
7.10 	efficiency of the electric system may be used to meet 50 percent of the conservation 
7.11 	investment and spending requirements of this subdivision.
7.12 	(f) A generation and transmission cooperative electric association that provides 
7.13 	energy services to cooperative electric associations that provide electric service at retail to 
7.14 	consumers may invest in energy conservation improvements on behalf of the associations 
7.15 	it serves and may fulfill the conservation, spending, reporting, and energy savings goals on 
7.16 	an aggregate basis. A municipal power agency or other not-for-profit entity that provides 
7.17 	energy service to municipal utilities that provide electric service at retail may invest in 
7.18 	energy conservation improvements on behalf of the municipal utilities it serves and may 
7.19 	fulfill the conservation, spending, reporting, and energy savings goals on an aggregate 
7.20 	basis, under an agreement between the municipal power agency or not-for-profit entity 
7.21 	and each municipal utility for funding the investments.
7.22 	(g) At least every four years, on a schedule determined by the commissioner, each 
7.23 	municipality or cooperative shall file an overview of its conservation improvement plan 
7.24 	with the commissioner. With this overview, the municipality or cooperative shall also 
7.25 	provide an evaluation to the commissioner detailing its energy conservation improvement 
7.26 	spending and investments for the previous period. The evaluation must briefly describe 
7.27 	each conservation program and must specify the energy savings or increased efficiency in 
7.28 	the use of energy within the service territory of the utility or association that is the result 
7.29 	of the spending and investments. The evaluation must analyze the cost-effectiveness 
7.30 	of the utility's or association's conservation programs, using a list of baseline energy 
7.31 	and capacity savings assumptions developed in consultation with the department. 
7.32 	The commissioner shall review each evaluation and make recommendations, where 
7.33 	appropriate, to the municipality or association to increase the effectiveness of conservation 
7.34 	improvement activities. Up to three percent of a utility's conservation spending obligation 
7.35 	under this section may be used for program pre-evaluation, testing, and monitoring and 
7.36 	program evaluation. The overview and evaluation filed by a municipality with less than 
8.1 	60,000,000 kilowatt hours in annual retail sales of electric service may consist of a letter 
8.2 	from the governing board of the municipal utility to the department providing the amount 
8.3 	of annual conservation spending required of that municipality and certifying that the 
8.4 	required amount has been spent on conservation programs pursuant to this subdivision.
8.5 	(h) The commissioner shall also review each evaluation for whether a portion of the 
8.6 	money spent on residential conservation improvement programs is devoted to programs 
8.7 	that directly address the needs of renters and low-income persons unless an insufficient 
8.8 	number of appropriate programs are available. For the purposes of this subdivision and 
8.9 	subdivision 2, "low-income" means an income at or below 50 percent of the state median 
8.10 	income.
8.11 	(i) As part of its spending for conservation improvement, a municipality or 
8.12 	association may contribute to the energy and conservation account. A municipality or 
8.13 	association may propose to the commissioner to designate that all or a portion of funds 
8.14 	contributed to the account be used for research and development projects that can best 
8.15 	be implemented on a statewide basis. Any amount contributed must be remitted to the 
8.16 	commissioner by February 1 of each year.
8.17 	(j) A municipality may spend up to 50 percent of its required spending under this 
8.18 	section to refurbish an existing district heating or cooling system. This paragraph expires 
8.19 	July 1, 2007.

8.20 	Sec. 7. Minnesota Statutes 2004, section 216B.241, subdivision 1c, is amended to read:
8.21 		Subd. 1c.Energy-saving goals objectives. (a) The commissioner shall establish 
8.22 	statewide energy-saving goals objectives for all gas and electric energy conservation 
8.23 	improvement expenditures and shall evaluate anmonitor energy conservation 
8.24 	improvement program on how well it meets the goals set programs for success in meeting 
8.25 	the statewide objectives. The commissioner must present a report on these objectives to 
8.26 	the legislature by January 15, 2007.
8.27 	(b) The commissioner shall, consistent with other law, commencing with calendar 
8.28 	year 2008, establish annual statewide electric capacity and energy savings objectives for 
8.29 	electric conservation investment programs that the commissioner deems to be in the 
8.30 	public interest. The commissioner may establish these objectives based upon utility 
8.31 	integrated resource plans, cost-effectiveness potential, utility load-growth projections, and 
8.32 	other factors. 
8.33 	The commissioner shall, consistent with other law, allocate statewide capacity and 
8.34 	energy savings objectives among public utilities, cooperative electric associations, and 
8.35 	municipals as determined by the commissioner to result in the greatest likelihood of 
9.1 	meeting the statewide objective. In determining the allocation of capacity and energy 
9.2 	savings objectives, the commissioner shall consider individual utilities' load-growth 
9.3 	projections, cost-effective savings potential, and past performance.
9.4 	(c) The commissioner shall, consistent with other law, commencing with calendar 
9.5 	year 2008, establish annual statewide natural gas savings objectives for natural gas 
9.6 	conservation investment programs that the commissioner deems to be in the public 
9.7 	interest. The commissioner may establish these goals based upon utility forecasts, 
9.8 	cost-effectiveness potential, and other sources.
9.9 	The commissioner shall determine and allocate statewide capacity and energy 
9.10 	savings objectives among public utilities and municipal utilities having an investment 
9.11 	obligation under this section related to gas revenues so as to result in the greatest 
9.12 	likelihood of meeting the statewide objective. In determining the allocation of capacity 
9.13 	and energy savings objectives, the commissioner shall consider individual utilities' 
9.14 	load-growth projections, cost-effective savings potential, and past performance.
9.15 	(d) The commissioner shall annually report the success in meeting these statewide 
9.16 	and individual utility objectives under this subdivision in a publicly available format.
9.17 	(e) An objective allocation by the commissioner under this subdivision does not 
9.18 	create an additional conservation investment spending obligation.

9.19 	Sec. 8. Minnesota Statutes 2005 Supplement, section 216B.241, subdivision 2, is 
9.20 	amended to read:
9.21 		Subd. 2.Programs. (a) The commissioner may require public utilities to make 
9.22 	investments and expenditures in energy conservation improvements, explicitly setting 
9.23 	forth the interest rates, prices, and terms under which the improvements must be offered to 
9.24 	the customers. The required programs must cover no more than a four-year period. Public 
9.25 	utilities shall file conservation improvement plans by June 1, on a schedule determined 
9.26 	by order of the commissioner, but at least every four years. Plans received by a public 
9.27 	utility by June 1 must be approved or approved as modified by the commissioner by 
9.28 	December 1 of that same year. The commissioner shall give special consideration and 
9.29 	encouragement to programs that bring about significant net savings through the use of 
9.30 	energy-efficient lighting. The commissioner shall evaluate the program on the basis of 
9.31 	cost-effectiveness and the reliability of technologies employed. The commissioner's order 
9.32 	must provide to the extent practicable for a free choice, by consumers participating in the 
9.33 	program, of the device, method, material, or project constituting the energy conservation 
9.34 	improvement and for a free choice of the seller, installer, or contractor of the energy 
9.35 	conservation improvement, provided that the device, method, material, or project seller, 
10.1 	installer, or contractor is duly licensed, certified, approved, or qualified, including under 
10.2 	the residential conservation services program, where applicable.
10.3 	(b) The commissioner may require a utility to make an energy conservation 
10.4 	improvement investment or expenditure whenever the commissioner finds that the 
10.5 	improvement will result in energy savings at a total cost to the utility less than the cost 
10.6 	to the utility to produce or purchase an equivalent amount of new supply of energy. The 
10.7 	commissioner shall nevertheless ensure that every public utility operate one or more 
10.8 	programs under periodic review by the department.
10.9 	(c) Each public utility subject to subdivision 1a may spend and invest annually up to 
10.10 	ten percent of the total amount required to be spent and invested on energy conservation 
10.11 	improvements under this section by the utility on research and development projects 
10.12 	that meet the definition of energy conservation improvement in subdivision 1 and that 
10.13 	are funded directly by the public utility.
10.14 	(d) A public utility may not spend for or invest in energy conservation improvements 
10.15 	that directly benefit a large electric customer facility for which the commissioner has 
10.16 	issued an exemption pursuant to subdivision 1a, paragraph (b). The commissioner shall 
10.17 	consider and may require a utility to undertake a program suggested by an outside source, 
10.18 	including a political subdivision or a nonprofit or community organization.
10.19 	(e) The commissioner may, by order, establish a list of programs that may be 
10.20 	offered as energy conservation improvements by a public utility, municipal utility, 
10.21 	cooperative electric association, or other entity providing conservation services pursuant 
10.22 	to this section. The list of programs may include rebates for high-efficiency appliances, 
10.23 	rebates or subsidies for high-efficiency lamps, small business energy audits, and building 
10.24 	recommissioning. The commissioner may, by order, change this list to add or subtract 
10.25 	programs as the commissioner determines is necessary to promote efficient and effective 
10.26 	conservation programs.
10.27 	(f) The commissioner shall ensure that a portion of the money spent on residential 
10.28 	conservation improvement programs is devoted to programs that directly address the 
10.29 	needs of renters and low-income persons, in proportion to the amount the utility has 
10.30 	historically spent on such programs based on the most recent three-year average relative to 
10.31 	the utility's total conservation spending under this section, unless an insufficient number 
10.32 	of appropriate programs are available including low-income renters. When approving 
10.33 	spending and energy savings goals for low-income conservation improvement programs, 
10.34 	the commissioner shall consider historic spending, participation and energy savings for 
10.35 	low-income programs, and the number of low-income persons residing in the utility's 
10.36 	service territory. A utility that furnishes gas service must spend at least 0.2 percent 
11.1 	of its gross operating revenue from residential customers on low-income conservation 
11.2 	improvement programs.
11.3 	(g) A utility, a political subdivision, or a nonprofit or community organization 
11.4 	that has suggested a program, the attorney general acting on behalf of consumers and 
11.5 	small business interests, or a utility customer that has suggested a program and is not 
11.6 	represented by the attorney general under section 8.33 may petition the commission to 
11.7 	modify or revoke a department decision under this section, and the commission may do 
11.8 	so if it determines that the program is not cost-effective, does not adequately address the 
11.9 	residential conservation improvement needs of low-income persons, has a long-range 
11.10 	negative effect on one or more classes of customers, or is otherwise not in the public 
11.11 	interest. The commission shall reject a petition that, on its face, fails to make a reasonable 
11.12 	argument that a program is not in the public interest.
11.13 	(h) The commissioner may order a public utility to include, with the filing of the 
11.14 	utility's proposed conservation improvement plan under paragraph (a), the results of an 
11.15 	independent audit of the utility's conservation improvement programs and expenditures 
11.16 	performed by the department or an auditor with experience in the provision of energy 
11.17 	conservation and energy efficiency services approved by the commissioner and chosen by 
11.18 	the utility. The audit must specify the energy savings or increased efficiency in the use 
11.19 	of energy within the service territory of the utility that is the result of the spending and 
11.20 	investments. The audit must evaluate the cost-effectiveness of the utility's conservation 
11.21 	programs.
11.22 	(i) Up to three percent of a utility's conservation spending obligation under this 
11.23 	section may be used for program pre-evaluation, testing, and monitoring and program 
11.24 	audit and evaluation.

11.25 	Sec. 9. Minnesota Statutes 2004, section 216B.241, subdivision 6, is amended to read:
11.26 		Subd. 6.Renewable energy research. (a) A public utility that owns a nuclear 
11.27 	generation facility in the state shall spend five percent of the total amount that utility 
11.28 	is required to spend under this section to support basic and applied research and 
11.29 	demonstration activities at the University of Minnesota Initiative for Renewable Energy 
11.30 	and the Environment for the development of renewable energy sources and technologies. 
11.31 	The utility shall transfer the required amount to the University of Minnesota on or before 
11.32 	July 1 of each year and that annual amount shall be deducted from the amount of money the 
11.33 	utility is required to spend under this section. The University of Minnesota shall transfer 
11.34 	at least ten percent of these funds to at least one rural campus or experiment station.
11.35 	(b) Research funded under this subdivision shall include:
12.1 	(1) development of environmentally sound production, distribution, and use of 
12.2 	energy, chemicals, and materials from renewable sources;
12.3 	(2) processing and utilization of agricultural and forestry plant products and other 
12.4 	bio-based, renewable sources as a substitute for fossil-fuel-based energy, chemicals, and 
12.5 	materials using a variety of means including biocatalysis, biorefining, and fermentation;
12.6 	(3) conversion of state wind resources to hydrogen for energy storage and 
12.7 	transportation to areas of energy demand;
12.8 	(4) improvements in scalable hydrogen fuel cell technologies; and
12.9 	(5) production of hydrogen from bio-based, renewable sources; and sequestration 
12.10 	of carbon.
12.11 	(c) Notwithstanding other law to the contrary, the utility may, but is not required to, 
12.12 	spend more than two percent of its gross operating revenues from service provided in this 
12.13 	state under this section or section  216B.2411.
12.14 	(d) This subdivision expires June 30, 2008.

12.15 	Sec. 10. Minnesota Statutes 2004, section 216C.37, subdivision 1, is amended to read:
12.16 		Subdivision 1.Definitions. In this section:
12.17 	(a) "Commissioner" means the commissioner of commerce.
12.18 	(b) "Energy conservation investments" means all capital expenditures that are 
12.19 	associated with conservation measures identified in an energy project study, including 
12.20 	renewable energy measures, and that have a ten-year or less payback period.
12.21 	(c) "Municipality" means any county, statutory or home rule charter city, town, 
12.22 	school district, or any combination of those units operating under an agreement to jointly 
12.23 	undertake projects authorized in this section.
12.24 	(d) "Energy project study" means a study of one or more energy-related capital 
12.25 	improvement projects analyzed in sufficient detail to support a financing application. At a 
12.26 	minimum, it must include one year of energy consumption and cost data, a description 
12.27 	of existing conditions, a description of proposed conditions, a detailed description of the 
12.28 	costs of the project, and calculations sufficient to document the proposed energy savings.

12.29 	Sec. 11. [325E.027] LOW-INCOME CUSTOMERS; DELIVERED HEATING 
12.30 	FUEL VENDOR'S OBLIGATION.
12.31 	A dealer or distributor of liquid propane gas or number 1 or number 2 fuel oil may 
12.32 	not refuse to deliver liquid propane gas or number 1 or number 2 fuel oil within their 
12.33 	normal delivery area to any person who receives direct grants under the low-income home 
12.34 	energy assistance program if that person has requested delivery, the dealer or distributor 
13.1 	has product available and the person requesting delivery is capable of making full payment 
13.2 	at the time of delivery, and is not in arrears regarding any previous fuel purchase from that 
13.3 	dealer or distributor. A distributor or dealer making delivery to a person receiving direct 
13.4 	grants from the low-income home energy assistance program may not charge that person 
13.5 	any additional costs or fees that would not be charged to any other customer and shall 
13.6 	make available to that person any discount programs on the same basis as the dealer or 
13.7 	distributor makes available to any other customer.

13.8 	Sec. 12. BIOMASS GENERATION FACILITY CLARIFICATION.
 13.9 	Consistent with Minnesota Statutes, section 216B.02, subdivision 4, that no person 
13.10 	shall be deemed a public utility if it produces or furnishes service to less than 25 persons, 
13.11 	the owner and operator of an up-to-15-megawatt, biomass-fueled, electric generation 
13.12 	facility located in Scott County, adjacent to an agricultural product processing plant that 
13.13 	uses the heat from the biomass facility in its production process, is not a public utility if 
13.14 	the electricity produced by the biomass facility is used solely for the operations of the 
13.15 	owners of the biomass facility and for wholesale sales. The providing of electric service 
13.16 	by the biomass facility to the owners of the facility does not require the consent of the 
13.17 	public utility in whose service area the agricultural product processing plant is located.

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

13.19 	Sec. 13. ETHANOL PLANT; RENEWABLE GENERATION FACILITY 
13.20 	CLARIFICATION.
 13.21 	Consistent with Minnesota Statutes, section 216B.02, subdivision 4, that no person 
13.22 	shall be deemed a public utility if it produces or furnishes service to less than 25 persons, 
13.23 	the owner and operator of an electric generation facility located in Faribault County 
13.24 	consisting of two wind turbines, adjacent to an ethanol plant, is not a public utility if 
13.25 	the electricity produced by the turbines is used solely for the operations of the ethanol 
13.26 	plant. The providing of electric service by those two turbines to the ethanol plant does not 
13.27 	require the consent of the electric utility in whose service area the plant is located.

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

13.29 	Sec. 14. PETROLEUM VIOLATION ESCROW FUNDS.
 13.30 	Petroleum violation escrow funds appropriated to the commissioner of commerce by 
13.31 	Laws 1988, chapter 686, article 1, section 38, for state energy loan programs for schools, 
13.32 	hospitals, and public buildings may also be used for energy grants to those entities.

14.1 	Sec. 15. PROMOTING CONSERVATION THROUGH UTILITY RATES; 
14.2 	STUDY.
 14.3 	The Legislative Electric Energy Task Force must study the issue of the use of 
14.4 	utility rates as an incentive to conservation, including the separation of utility revenues 
14.5 	from sales. The study may include both gas and electric utility rates. The task force may 
14.6 	contract for all or part of the study, including contracting with other state agencies. The 
14.7 	study must be completed by January 15, 2007.