1.1 	A bill for an act
1.2 	relating to energy; modifying or adding provisions relating to energy 
1.3 	conservation improvement programs and funding, electric utility infrastructure 
1.4 	cost recovery, the state energy conservation goal, energy savings goals and 
1.5 	programs, energy conservation improvement costs recovery and incentive plans, 
1.6 	a decoupling rate mechanism for utilities, energy efficiency contracts, energy 
1.7 	audit programs, and residential energy covenants; abolishing rules relating to 
1.8 	residential energy conservation programs and energy audits of rental buildings;
1.9 	amending Minnesota Statutes 2006, sections 123B.65, subdivision 2; 216B.16, 
1.10 	subdivisions 1, 6b; 216B.241; 216C.31; 471.345, subdivision 13; 504B.161, 
1.11 	subdivision 1; proposing coding for new law in Minnesota Statutes, chapter 
1.12 	216B; repealing Minnesota Statutes 2006, sections 216B.165; 216C.27; 216C.30, 
1.13 	subdivision 5; Minnesota Rules, parts 7635.0100; 7635.0110; 7635.0120; 
1.14 	7635.0130; 7635.0140; 7635.0150; 7635.0160; 7635.0170; 7635.0180; 
1.15 	7635.0200; 7635.0210; 7635.0220; 7635.0230; 7635.0240; 7635.0250; 
1.16 	7635.0260; 7635.0300; 7635.0310; 7635.0320; 7635.0330; 7635.0340; 
1.17 	7635.0400; 7635.0410; 7635.0420; 7635.0500; 7635.0510; 7635.0520; 
1.18 	7635.0530; 7635.0600; 7635.0610; 7635.0620; 7635.0630; 7635.0640; 
1.19 	7635.1000; 7635.1010; 7635.1020; 7635.1030; 7655.0100; 7655.0120; 
1.20 	7655.0200; 7655.0210; 7655.0220; 7655.0230; 7655.0240; 7655.0250; 
1.21 	7655.0260; 7655.0270; 7655.0280; 7655.0290; 7655.0300; 7655.0310; 
1.22 	7655.0320; 7655.0330; 7655.0400; 7655.0410; 7655.0420.
1.23 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.24 	ARTICLE 1
1.25 	ENERGY EFFICIENCY AND CONSERVATION

1.26 	Section 1. Minnesota Statutes 2006, section 216B.16, subdivision 1, is amended to read:
1.27 		Subdivision 1.Notice. Unless the commission otherwise orders, no public utility 
1.28 	shall change a rate which has been duly established under this chapter, except upon 60 
1.29 	days' notice to the commission. The notice shall include statements of facts, expert 
1.30 	opinions, substantiating documents, and exhibits, supporting the change requested, and 
1.31 	state the change proposed to be made in the rates then in force and the time when the 
2.1 	modified rates will go into effect. If the filing utility does not have an approved energy 
2.2 	conservation improvement plan on file with the department, it shall also include in its 
2.3 	notice an energy conservation plan pursuant to section 216B.241. A filing utility subject to 
2.4 	rate regulation under section 216B.026 shall reference in its notice the energy conservation 
2.5 	improvement plans of the generation and transmission cooperative providing energy 
2.6 	conservation improvement programs to members of the filing utility pursuant to section 
2.7 	216B.241. The filing utility shall give written notice, as approved by the commission, of 
2.8 	the proposed change to the governing body of each municipality and county in the area 
2.9 	affected. All proposed changes shall be shown by filing new schedules or shall be plainly 
2.10 	indicated upon schedules on file and in force at the time. 

2.11 	Sec. 2. Minnesota Statutes 2006, section 216B.16, subdivision 6b, is amended to read:
2.12 		Subd. 6b.Energy conservation improvement. (a) Except as otherwise provided 
2.13 	in this subdivision, all investments and expenses of a public utility as defined in 
2.14 	section 216B.241, subdivision 1, paragraph (e) (i), incurred in connection with energy 
2.15 	conservation improvements shall be recognized and included by the commission in the 
2.16 	determination of just and reasonable rates as if the investments and expenses were directly 
2.17 	made or incurred by the utility in furnishing utility service. 
2.18 	(b) After December 31, 1999, Investments and expenses for energy conservation 
2.19 	improvements shall not be included by the commission in the determination of (i) just and 
2.20 	reasonable electric and gas rates for retail electric and gas service provided to large electric 
2.21 	customer facilities that have been exempted by the commissioner of the department 
2.22 	pursuant to section 216B.241, subdivision 1a, paragraph (b); or (ii) just and reasonable 
2.23 	gas rates for large energy facilities. However, no public utility shall be prevented from 
2.24 	recovering its investment in energy conservation improvements from all customers that 
2.25 	were made on or before December 31, 1999, in compliance with the requirements of 
2.26 	section 216B.241.
2.27 	(c) The commission may permit a public utility to file rate schedules providing for 
2.28 	annual recovery of the costs of energy conservation improvements. These rate schedules 
2.29 	may be applicable to less than all the customers in a class of retail customers if necessary to 
2.30 	reflect the differing minimum spending requirements of section 216B.241, subdivision 1a. 
2.31 	After December 31, 1999, The commission shall allow a public utility, without requiring 
2.32 	a general rate filing under this section, to reduce the electric and gas rates applicable to 
2.33 	large electric customer facilities that have been exempted by the commissioner of the 
2.34 	department pursuant to section 216B.241, subdivision 1a, paragraph (b), and to reduce the 
2.35 	gas rate applicable to a large energy facility by an amount that reflects the elimination 
3.1 	of energy conservation improvement investments or expenditures for those facilities 
3.2 	required on or before December 31, 1999. In the event that the commission has set 
3.3 	electric or gas rates based on the use of an accounting methodology that results in the cost 
3.4 	of conservation improvements being recovered from utility customers over a period of 
3.5 	years, the rate reduction may occur in a series of steps to coincide with the recovery of 
3.6 	balances due to the utility for conservation improvements made by the utility on or before 
3.7 	December 31, 1999 2007. 

3.8 	Sec. 3. [216B.1636] RECOVERY OF ELECTRIC UTILITY INFRASTRUCTURE 
3.9 	COSTS.
3.10 		Subdivision 1.Definitions. (a) "Electric utility" means a public utility as defined in 
3.11 	section 216B.02, subdivision 4, that furnishes electric service to retail customers.
3.12 	(b) "Electric utility infrastructure costs" or "EUIC" means costs for electric utility 
3.13 	infrastructure projects that were not included in the electric utility's rate base in its most 
3.14 	recent general rate case.
3.15 	(c) "Electric utility infrastructure projects" means projects that:
3.16 	(1) replace or modify existing electric utility infrastructure, including utility-owned 
3.17 	buildings, if the replacement or modification is shown to conserve energy or use energy 
3.18 	more efficiently, consistent with section 216B.241, subdivision 1c; or
3.19 	(2) conserve energy or use energy more efficiently by using waste heat recovery 
3.20 	converted into electricity as defined in section 216B.241, subdivision 1, paragraph (n).
3.21 		Subd. 2.Filing. (a) The commission may approve an electric utility's petition for 
3.22 	a rate schedule to recover EUIC under this section. An electric utility may petition the 
3.23 	commission to recover a rate of return, income taxes on the rate of return, incremental 
3.24 	property taxes, if any, plus incremental depreciation expense associated with EUIC.
3.25 	(b) The filing is subject to the following:
3.26 	(1) an electric utility may submit a filing under this section no more than once 
3.27 	per year; and
3.28 	(2) an electric utility must file sufficient information to satisfy the commission 
3.29 	regarding the proposed EUIC or be subject to denial by the commission. The information 
3.30 	includes, but is not limited to:
3.31 	(i) the location, description, and costs associated with the project;
3.32 	(ii) evidence that the electric utility infrastructure project will conserve energy or use 
3.33 	energy more efficiently than similar utility facilities currently used by the electric utility;
3.34 	(iii) the proposed schedule for implementation;
4.1 	(iv) a description of the costs, and salvage value, if any, associated with the existing 
4.2 	infrastructure replaced or modified as a result of the project;
4.3 	(v) the proposed rate design and an explanation of why the proposed rate design 
4.4 	is in the public interest;
4.5 	(vi) the magnitude of timing of any known future electric utility projects that the 
4.6 	utility may seek to recover under this section;
4.7 	(vii) the magnitude of EUIC in relation to the electric utility's base revenue as 
4.8 	approved by the commission in the electric utility's most recent general rate case, 
4.9 	exclusive of fuel cost adjustments; 
4.10 	(viii) the magnitude of EUIC in relation to the electric utility's capital expenditures 
4.11 	since its most recent general rate case;
4.12 	(ix) the amount of time since the utility last filed a general rate case and the utility's 
4.13 	reasons for seeking recovery outside of a general rate case; 
4.14 	(x) documentation supporting the calculation of the EUIC; and
4.15 	(xi) a cost and benefit analysis showing that the electric utility infrastructure project 
4.16 	is in the public interest.
4.17 	Upon approval of the proposed projects and associated EUIC rate schedule, the utility 
4.18 	may implement the electric utility infrastructure projects.
4.19 		Subd. 3.Commission authority; orders. The commission may issue orders 
4.20 	necessary to implement and administer this section.

4.21 	Sec. 4. [216B.2401] ENERGY CONSERVATION POLICY GOAL.
4.22 	It is the energy policy of the state of Minnesota to achieve annual energy savings 
4.23 	equal to 1.5 percent of annual retail energy sales of electricity and natural gas directly 
4.24 	through energy conservation improvement programs and rate design, and indirectly 
4.25 	through energy codes and appliance standards, programs designed to transform the market 
4.26 	or change consumer behavior,  energy savings resulting from efficiency improvements to 
4.27 	the utility infrastructure and system, and other efforts to promote energy efficiency and 
4.28 	energy conservation.

4.29 	Sec. 5. Minnesota Statutes 2006, section 216B.241, is amended to read:
4.30 	216B.241 ENERGY CONSERVATION IMPROVEMENT.
4.31 		Subdivision 1.Definitions. For purposes of this section and section 216B.16, 
4.32 	subdivision 6b, the terms defined in this subdivision have the meanings given them. 
4.33 	(a) "Commission" means the Public Utilities Commission.
4.34 	(b) "Commissioner" means the commissioner of commerce.
5.1 	(c) "Customer facility" means all buildings, structures, equipment, and installations 
5.2 	at a single site.
5.3 	(d) "Department" means the Department of Commerce.
5.4 	(e) "Energy conservation" means demand-side management of energy supplies 
5.5 	resulting in a net reduction in energy use. Load management that reduces overall energy 
5.6 	use is energy conservation.
5.7 	(f) "Energy efficiency" means measures or programs, including energy conservation 
5.8 	measures or programs, that target consumer behavior, equipment, processes, or devices 
5.9 	designed to produce either an absolute decrease in consumption of electric energy or 
5.10 	natural gas or a decrease in consumption of electric energy or natural gas on a per unit 
5.11 	of production basis without a reduction in the quality or level of service provided to 
5.12 	the energy consumer.
5.13 	(g) "Energy conservation improvement" means a project that results in energy 
5.14 	efficiency or energy conservation. Energy conservation improvement does not include 
5.15 	waste heat recovery converted into electricity or electric utility infrastructure projects 
5.16 	approved by the commission under section 216B.1636.
5.17 	(g) (h) "Gross annual retail energy sales" means annual electric sales to all retail 
5.18 	customers in a utility's or association's Minnesota service territory or natural gas 
5.19 	throughput to all retail customers, including natural gas transportation customers, on a 
5.20 	utility's distribution system in Minnesota. For purposes of this section, gross annual 
5.21 	retail energy sales exclude gas sales to a large energy facility and gas and electric sales 
5.22 	to a large electric customer facility exempted by the commissioner under subdivision 
5.23 	1a, paragraph (b).
5.24 	(i)  "Investments and expenses of a public utility" includes the investments and 
5.25 	expenses incurred by a public utility in connection with an energy conservation 
5.26 	improvement, including but not limited to:
5.27 	(1) the differential in interest cost between the market rate and the rate charged on a 
5.28 	no-interest or below-market interest loan made by a public utility to a customer for the 
5.29 	purchase or installation of an energy conservation improvement;
5.30 	(2) the difference between the utility's cost of purchase or installation of energy 
5.31 	conservation improvements and any price charged by a public utility to a customer for 
5.32 	such improvements.
5.33 	(h) (j) "Large electric customer facility" means a customer facility that imposes a 
5.34 	peak electrical demand on an electric utility's system of not less than 20,000 kilowatts, 
5.35 	measured in the same way as the utility that serves the customer facility measures 
6.1 	electrical demand for billing purposes, and for which electric services are provided at 
6.2 	retail on a single bill by a utility operating in the state.
6.3 	(i) (k) "Large energy facility" has the meaning given it in section 216B.2421, 
6.4 	subdivision 2, clause (1).
6.5 	(l) "Load management" means an activity, service, or technology to change the 
6.6 	timing or the efficiency of a customer's use of energy that allows a utility or a customer 
6.7 	to respond to wholesale market fluctuations or to reduce the overall peak demand for 
6.8 	energy or capacity.
6.9 	(m) "Low income programs" means energy conservation improvement programs 
6.10 	that directly serve the needs of low income persons, including low income renters.
6.11 	(n) "Waste heat recovery converted into electricity" means an energy recovery 
6.12 	process that converts otherwise lost energy from the heat of exhaust stacks or pipes used 
6.13 	for engines or manufacturing or industrial processes, or the reduction of high pressure 
6.14 	in water or gas pipelines.
6.15 		Subd. 1a.Investment, expenditure, and contribution; public utility. (a) For 
6.16 	purposes of this subdivision and subdivision 2, "public utility" has the meaning given it 
6.17 	in section 216B.02, subdivision 4. Each public utility shall spend and invest for energy 
6.18 	conservation improvements under this subdivision and subdivision 2 the following 
6.19 	amounts: 
6.20 	(1) for a utility that furnishes gas service, 0.5 percent of its gross operating revenues 
6.21 	from service provided in the state;
6.22 	(2) for a utility that furnishes electric service, 1.5 percent of its gross operating 
6.23 	revenues from service provided in the state; and
6.24 	(3) for a utility that furnishes electric service and that operates a nuclear-powered 
6.25 	electric generating plant within the state, two percent of its gross operating revenues 
6.26 	from service provided in the state.
6.27 	For purposes of this paragraph (a), "gross operating revenues" do not include 
6.28 	revenues from large electric customer facilities exempted by the commissioner under 
6.29 	paragraph (b).
6.30 	(b) The owner of a large electric customer facility may petition the commissioner 
6.31 	to exempt both electric and gas utilities serving the large energy customer facility from 
6.32 	the investment and expenditure requirements of paragraph (a) with respect to retail 
6.33 	revenues attributable to the facility. At a minimum, the petition must be supported by 
6.34 	evidence relating to competitive or economic pressures on the customer and a showing 
6.35 	by the customer of reasonable efforts to identify, evaluate, and implement cost-effective 
6.36 	conservation improvements at the facility. If a petition is filed on or before October 1 of 
7.1 	any year, the order of the commissioner to exempt revenues attributable to the facility can 
7.2 	be effective no earlier than January 1 of the following year. The commissioner shall 
7.3 	not grant an exemption if the commissioner determines that granting the exemption is 
7.4 	contrary to the public interest. The commissioner may, after investigation, rescind any 
7.5 	exemption granted under this paragraph upon a determination that cost-effective the 
7.6 	customer is not continuing to make reasonable efforts to identify, evaluate, and implement
7.7 	energy conservation improvements are available at the large electric customer facility. 
7.8 	For the purposes of this paragraph, "cost-effective" means that the projected total cost of 
7.9 	the energy conservation improvement at the large electric customer facility is less than 
7.10 	the projected present value of the energy and demand savings resulting from the energy 
7.11 	conservation improvement. For the purposes of investigations by the commissioner under 
7.12 	this paragraph, the owner of any large electric customer facility shall, upon request, 
7.13 	provide the commissioner with updated information comparable to that originally supplied 
7.14 	in or with the owner's original petition under this paragraph.
7.15 	(c) The commissioner may require investments or spending greater than the amounts 
7.16 	required under this subdivision for a public utility whose most recent advance forecast 
7.17 	required under section 216B.2422 or 216C.17 projects a peak demand deficit of 100 
7.18 	megawatts or greater within five years under midrange forecast assumptions. 
7.19 	(d) A public utility or owner of a large electric customer facility may appeal 
7.20 	a decision of the commissioner under paragraph (b) or (c) to the commission under 
7.21 	subdivision 2. In reviewing a decision of the commissioner under paragraph (b) or (c), 
7.22 	the commission shall rescind the decision if it finds that the required investments or 
7.23 	spending will:
7.24 	(1) not result in cost-effective energy conservation improvements; or
7.25 	(2) otherwise not be in the public interest.
7.26 	(e) Each utility shall determine what portion of the amount it sets aside for 
7.27 	conservation improvement will be used for conservation improvements under subdivision 
7.28 	2 and what portion it will contribute to the energy and conservation account established in 
7.29 	subdivision 2a. A public utility may propose to the commissioner to designate that all 
7.30 	or a portion of funds contributed to the account established in subdivision 2a be used 
7.31 	for research and development projects that can best be implemented on a statewide 
7.32 	basis. Contributions must be remitted to the commissioner by February 1 of each year. 
7.33 	Nothing in this subdivision prohibits a public utility from spending or investing for energy 
7.34 	conservation improvement more than required in this subdivision.
7.35 		Subd. 1b.Conservation improvement by cooperative association or 
7.36 	municipality. (a) This subdivision applies to:
8.1 	(1) a cooperative electric association that provides retail service to its members;
8.2 	(2) a municipality that provides electric service to retail customers; and
8.3 	(3) a municipality with gross operating revenues in excess of $5,000,000 from 
8.4 	sales of more than 1,000,000,000 cubic feet in annual throughput sales to natural gas 
8.5 	to retail customers.
8.6 	(b) Each cooperative electric association and municipality subject to this subdivision 
8.7 	shall spend and invest for energy conservation improvements under this subdivision 
8.8 	the following amounts:
8.9 	(1) for a municipality, 0.5 percent of its gross operating revenues from the sale of 
8.10 	gas and 1.5 percent of its gross operating revenues from the sale of electricity, excluding 
8.11 	gross operating revenues from electric and gas service provided in the state to large 
8.12 	electric customer facilities; and
8.13 	(2) for a cooperative electric association, 1.5 percent of its gross operating revenues 
8.14 	from service provided in the state, excluding gross operating revenues from service 
8.15 	provided in the state to large electric customer facilities indirectly through a distribution 
8.16 	cooperative electric association.
8.17 	(c) Each municipality and cooperative electric association subject to this subdivision 
8.18 	shall identify and implement energy conservation improvement spending and investments 
8.19 	that are appropriate for the municipality or association, except that a municipality 
8.20 	or association may not spend or invest for energy conservation improvements that 
8.21 	directly benefit a large energy facility or a large electric customer facility for which the 
8.22 	commissioner has issued an exemption under subdivision 1a, paragraph (b).
8.23 	(d) Each municipality and cooperative electric association subject to this subdivision 
8.24 	may spend and invest annually up to ten percent of the total amount required to be spent 
8.25 	and invested on energy conservation improvements under this subdivision on research 
8.26 	and development projects that meet the definition of energy conservation improvement 
8.27 	in subdivision 1 and that are funded directly by the municipality or cooperative electric 
8.28 	association.
8.29 	(e) Load-management activities that do not reduce energy use but that increase the 
8.30 	efficiency of the electric system may be used to meet 50 percent of the conservation 
8.31 	investment and spending requirements of this subdivision.
8.32 	(f) A generation and transmission cooperative electric association that provides 
8.33 	energy services to cooperative electric associations that provide electric service at retail to 
8.34 	consumers may invest in energy conservation improvements on behalf of the associations 
8.35 	it serves and may fulfill the conservation, spending, reporting, and energy savings goals on 
8.36 	an aggregate basis. A municipal power agency or other not-for-profit entity that provides 
9.1 	energy service to municipal utilities that provide electric service at retail may invest in 
9.2 	energy conservation improvements on behalf of the municipal utilities it serves and may 
9.3 	fulfill the conservation, spending, reporting, and energy savings goals on an aggregate 
9.4 	basis, under an agreement between the municipal power agency or not-for-profit entity 
9.5 	and each municipal utility for funding the investments.
9.6 	(g) At least every four years, on a schedule determined by the commissioner, each 
9.7 	municipality or cooperative shall file an overview of its conservation improvement plan 
9.8 	with the commissioner. With this overview,Each municipality or cooperative shall file 
9.9 	energy  conservation improvement plans by June 1 on a schedule determined by order 
9.10 	of the commissioner, but at least every three years. Plans received by June 1 must be 
9.11 	approved or approved as modified by the commissioner by December 1 of the same year. 
9.12 	The municipality or cooperative shall also provide an evaluation to the commissioner 
9.13 	detailing its energy conservation improvement spending and investments for the previous 
9.14 	period. The evaluation must briefly describe each conservation program and must specify 
9.15 	the energy savings or increased efficiency in the use of energy within the service territory 
9.16 	of the utility or association that is the result of the spending and investments. The 
9.17 	evaluation must analyze the cost-effectiveness of the utility's or association's conservation 
9.18 	programs, using a list of baseline energy and capacity savings assumptions developed 
9.19 	in consultation with the department. The commissioner shall review each evaluation 
9.20 	and make recommendations, where appropriate, to the municipality or association to 
9.21 	increase the effectiveness of conservation improvement activities. Up to three percent of 
9.22 	a utility's conservation spending obligation under this section may be used for program 
9.23 	pre-evaluation, testing, and monitoring and program evaluation. The overview and 
9.24 	evaluation filed by a municipality with less than 60,000,000 kilowatt-hours in annual 
9.25 	retail sales of electric service may consist of a letter from the governing board of the 
9.26 	municipal utility to the department providing the amount of annual conservation spending 
9.27 	required of that municipality and certifying that the required amount has been spent on 
9.28 	conservation programs pursuant to this subdivision.
9.29 	(h) The commissioner shall also review each evaluation for whether a portion of the 
9.30 	money spent on residential conservation improvement programs is devoted to programs 
9.31 	that directly address the needs of renters and low-income persons unless an insufficient 
9.32 	number of appropriate programs are available. For the purposes of this subdivision and 
9.33 	subdivision 2, "low-income" means an income at or below 50 percent of the state median 
9.34 	income.
9.35 	(i) As part of its spending for conservation improvement, a municipality or 
9.36 	association may contribute to the energy and conservation account. A municipality or 
10.1 	association may propose to the commissioner to designate that all or a portion of funds 
10.2 	contributed to the account be used for research and development projects that can best 
10.3 	be implemented on a statewide basis. Any amount contributed must be remitted to the 
10.4 	commissioner by February 1 of each year.
10.5 	(j) (h) A municipality may spend up to 50 percent of its required spending under 
10.6 	this section to refurbish an existing district heating or cooling system. This paragraph 
10.7 	expiresuntil July 1, 2007. From July 1, 2007, through June 30, 2011, expenditures made 
10.8 	to refurbish a district heating or cooling system are considered to be load-management 
10.9 	activities under paragraph (e). This paragraph expires July 1, 2011.
10.10 	(i) The commissioner shall consider and may require a utility, association, or 
10.11 	other entity providing energy efficiency and conservation services under this section to 
10.12 	undertake a program suggested by an outside source, including a political subdivision, 
10.13 	nonprofit corporation, or community organization.
10.14 		Subd. 1c.Energy-saving goals. (a) The commissioner shall establish energy-saving 
10.15 	goals for energy conservation improvement expenditures and shall evaluate an energy 
10.16 	conservation improvement program on how well it meets the goals set.
10.17 	(b) Each individual utility and association shall have an annual energy-savings 
10.18 	goal equivalent to 1.5 percent of gross annual retail energy sales unless modified by the 
10.19 	commissioner under paragraph (d). The savings goals must be calculated based on the 
10.20 	most recent three-year weather normalized average.
10.21 	(c) The commissioner must adopt a filing schedule that is designed to have all 
10.22 	utilities and associations operating under an energy savings plan by calendar year 2010.
10.23 	(d) In its energy conservation improvement plan filing, a utility or association may 
10.24 	request the commissioner to adjust its annual energy savings percentage goal based on 
10.25 	its historical conservation investment experience, customer class makeup, load growth, 
10.26 	a conservation potential study, or other factors the commissioner determines warrants 
10.27 	an adjustment. The commissioner may not approve a plan that provides for an annual 
10.28 	energy savings goal of less than one percent of gross annual retail energy sales from 
10.29 	energy conservation improvements. A utility or association may include in its energy 
10.30 	conservation plan energy savings from an electric utility infrastructure project or waste 
10.31 	heat recovery converted into electricity project approved by the commission under section 
10.32 	216B.1636 that may count as energy savings in addition to the minimum energy savings 
10.33 	goal of at least one percent for energy conservation improvements. Electric utility 
10.34 	infrastructure projects must result in increased energy efficiency greater than that which 
10.35 	would have occurred through normal maintenance activity.
11.1 	(e) An energy savings goal is not satisfied by attaining the revenue expenditure 
11.2 	requirements of subdivisions 1a and 1b, but can only be satisfied by meeting the energy 
11.3 	savings goal established in this subdivision.
11.4 	(f) An association or utility is not required to make energy conservation investments 
11.5 	to attain the energy savings goals of this subdivision that are not cost-effective even 
11.6 	if the investment is necessary to attain the energy savings goals. For the purpose of 
11.7 	this paragraph, in determining cost-effectiveness, the commissioner shall consider the 
11.8 	costs and benefits to ratepayers, the utility, participants, and society. In addition, the 
11.9 	commissioner shall consider the rate at which an association or municipal utility is 
11.10 	increasing its energy savings and its expenditures on energy conservation.
11.11 	(g) On an annual basis, the commissioner shall produce and make publicly available 
11.12 	a report on the annual energy savings and estimated carbon dioxide reductions achieved 
11.13 	by the energy conservation improvement programs for the two most recent years for 
11.14 	which data is available. The commissioner shall report on program performance both in 
11.15 	the aggregate and for each entity filing an energy conservation improvement plan for 
11.16 	approval or review by the commissioner.
11.17 	(h) By January 15, 2010, the commissioner shall report to the legislature whether the 
11.18 	spending requirements under subdivisions 1a and 1b are necessary to achieve the energy 
11.19 	savings goals established in this subdivision.
11.20 		Subd. 1d.Cooperative conservation investment increase phase-in Technical 
11.21 	assistance. The increase in required conservation improvement expenditures by a 
11.22 	cooperative electric association that results from the amendments in Laws 2001, chapter 
11.23 	212, article 8, section 6, to subdivision 1b, paragraph (a), clause (1), must be phased 
11.24 	in as follows:
11.25 	(1) at least 25 percent shall be effective in year 2002;
11.26 	(2) at least 50 percent shall be effective in year 2003;
11.27 	(3) at least 75 percent shall be effective in year 2004; and
11.28 	(4) all of the increase shall be effective in year 2005 and thereafter.
11.29 	The commissioner shall evaluate energy conservation improvement programs 
11.30 	on the basis of cost-effectiveness and the reliability of the technologies employed. 
11.31 	The commissioner shall, by order, establish, maintain and update energy savings 
11.32 	assumptions that must be used when filing energy conservation improvement programs. 
11.33 	The commissioner shall establish an inventory of the most effective energy conservation 
11.34 	programs, techniques, and technologies, and encourage all Minnesota utilities to 
11.35 	implement them, where appropriate, in their service territories. The commissioner shall 
11.36 	describe these programs in sufficient detail to provide a utility reasonable guidance 
12.1 	concerning implementation. The commissioner shall prioritize the opportunities in 
12.2 	order of potential energy savings and in order of cost-effectiveness. The commissioner 
12.3 	may contract with a third party to carry out any of the commissioner's duties under 
12.4 	this subdivision, and to obtain technical assistance to evaluate the effectiveness of any 
12.5 	conservation improvement program. The commissioner may assess up to $800,000 
12.6 	annually until June 30, 2009, and $450,000 annually thereafter for the purposes of this 
12.7 	subdivision. The assessments must be deposited in the state treasury and credited to the 
12.8 	energy and conservation account created under subdivision 2a. An assessment made under 
12.9 	this subdivision is not subject to the cap on assessments provided by section 216B.62, or 
12.10 	any other law.
12.11 		Subd. 1e.Applied research and development grants. The commissioner may, by 
12.12 	order, approve and make grants for applied research and development projects of general 
12.13 	applicability that identify new technologies or strategies to maximize energy savings, 
12.14 	improve the effectiveness of energy conservation programs, or document the carbon 
12.15 	dioxide reductions from energy conservation programs. When approving projects, the 
12.16 	commissioner shall consider proposals and comments from utilities and other interested 
12.17 	parties. The commissioner may assess up to $3,600,000 annually for the purposes of this 
12.18 	subdivision. The assessments must be deposited in the state treasury and credited to the 
12.19 	energy and conservation account created under subdivision 2a. An assessment made under 
12.20 	this subdivision is not subject to the cap on assessments provided by section 216B.62, or 
12.21 	any other law.
12.22 		Subd. 1f.Facilities energy efficiency. (a) The commissioner of administration and 
12.23 	the commissioner of commerce shall maintain and, as needed, revise the sustainable 
12.24 	building design guidelines developed under section 16B.325.
12.25 	(b) The commissioner of administration and the commissioner of commerce shall 
12.26 	maintain and update the benchmarking tool developed under Laws 2001, chapter 212, 
12.27 	article 1, section 3, so that all public buildings can use the benchmarking tool to maintain 
12.28 	energy use information for the purposes of establishing energy efficiency benchmarks, 
12.29 	tracking building performance and measuring the results of energy efficiency and 
12.30 	conservation  improvements.
12.31 	(c) The commissioner shall require that utilities include in their conservation 
12.32 	improvement plans programs that facilitate professional engineering verification to qualify 
12.33 	a building as Energy Star-labeled or as Leadership in Energy and Environmental Design 
12.34 	(LEED) certified. The state goal is to achieve certification of 1,000 commercial buildings 
12.35 	as Energy Star-labeled, and 100 commercial buildings as LEED-certified by December 
12.36 	31, 2010.
13.1 	(d) The commissioner may assess up to $500,000 annually for the purposes of this 
13.2 	subdivision. The assessments must be deposited in the state treasury and credited to the 
13.3 	energy and conservation account created under subdivision 2a. An assessment made under 
13.4 	this subdivision is not subject to the cap on assessments provided by section 216B.62, or 
13.5 	any other law.
13.6 		Subd. 2.Programs. (a) The commissioner may require public utilities to make 
13.7 	investments and expenditures in energy conservation improvements, explicitly setting 
13.8 	forth the interest rates, prices, and terms under which the improvements must be offered to 
13.9 	the customers. The required programs must cover no more than a four-year three-year
13.10 	period. Public utilities shall file conservation improvement plans by June 1, on a schedule 
13.11 	determined by order of the commissioner, but at least every four three years. Plans 
13.12 	received by a public utility by June 1 must be approved or approved as modified by the 
13.13 	commissioner by December 1 of that same year. The commissioner shall give special 
13.14 	consideration and encouragement to programs that bring about significant net savings 
13.15 	through the use of energy-efficient lighting. The commissioner shall evaluate the program 
13.16 	on the basis of cost-effectiveness and the reliability of technologies employed. The 
13.17 	commissioner's order must provide to the extent practicable for a free choice, by consumers 
13.18 	participating in the program, of the device, method, material, or project constituting the 
13.19 	energy conservation improvement and for a free choice of the seller, installer, or contractor 
13.20 	of the energy conservation improvement, provided that the device, method, material, or 
13.21 	project seller, installer, or contractor is duly licensed, certified, approved, or qualified, 
13.22 	including under the residential conservation services program, where applicable.
13.23 	(b) The commissioner may require a utility to make an energy conservation 
13.24 	improvement investment or expenditure whenever the commissioner finds that the 
13.25 	improvement will result in energy savings at a total cost to the utility less than the cost 
13.26 	to the utility to produce or purchase an equivalent amount of new supply of energy. The 
13.27 	commissioner shall nevertheless ensure that every public utility operate one or more 
13.28 	programs under periodic review by the department.
13.29 	(c) Each public utility subject to subdivision 1a may spend and invest annually up to 
13.30 	ten percent of the total amount required to be spent and invested on energy conservation 
13.31 	improvements under this section by the utility on research and development projects 
13.32 	that meet the definition of energy conservation improvement in subdivision 1 and that 
13.33 	are funded directly by the public utility.
13.34 	(d) A public utility may not spend for or invest in energy conservation improvements 
13.35 	that directly benefit a large energy facility or a large electric customer facility for which 
13.36 	the commissioner has issued an exemption pursuant to subdivision 1a, paragraph (b). The 
14.1 	commissioner shall consider and may require a utility to undertake a program suggested 
14.2 	by an outside source, including a political subdivision or, a nonprofit corporation, or 
14.3 	community organization.
14.4 	(e) The commissioner may, by order, establish a list of programs that may be 
14.5 	offered as energy conservation improvements by a public utility, municipal utility, 
14.6 	cooperative electric association, or other entity providing conservation services pursuant 
14.7 	to this section. The list of programs may include rebates for high-efficiency appliances, 
14.8 	rebates or subsidies for high-efficiency lamps, small business energy audits, and building 
14.9 	recommissioning. The commissioner may, by order, change this list to add or subtract 
14.10 	programs as the commissioner determines is necessary to promote efficient and effective 
14.11 	conservation programs.
14.12 	(f) The commissioner shall ensure that a portion of the money spent on residential 
14.13 	conservation improvement programs is devoted to programs that directly address the 
14.14 	needs of renters and low-income persons, in proportion to the amount the utility has 
14.15 	historically spent on such programs based on the most recent three-year average relative to 
14.16 	the utility's total conservation spending under this section, unless an insufficient number of 
14.17 	appropriate programs are available.
14.18 	(g) (e) A utility, a political subdivision, or a nonprofit or community organization 
14.19 	that has suggested a program, the attorney general acting on behalf of consumers and 
14.20 	small business interests, or a utility customer that has suggested a program and is not 
14.21 	represented by the attorney general under section 8.33 may petition the commission to 
14.22 	modify or revoke a department decision under this section, and the commission may do 
14.23 	so if it determines that the program is not cost-effective, does not adequately address the 
14.24 	residential conservation improvement needs of low-income persons, has a long-range 
14.25 	negative effect on one or more classes of customers, or is otherwise not in the public 
14.26 	interest. The commission shall reject a petition that, on its face, fails to make a reasonable 
14.27 	argument that a program is not in the public interest.
14.28 	(h) (f) The commissioner may order a public utility to include, with the filing of the 
14.29 	utility's proposed conservation improvement plan under paragraph (a), the results of an 
14.30 	independent audit of the utility's conservation improvement programs and expenditures 
14.31 	performed by the department or an auditor with experience in the provision of energy 
14.32 	conservation and energy efficiency services approved by the commissioner and chosen by 
14.33 	the utility. The audit must specify the energy savings or increased efficiency in the use 
14.34 	of energy within the service territory of the utility that is the result of the spending and 
14.35 	investments. The audit must evaluate the cost-effectiveness of the utility's conservation 
14.36 	programs.
15.1 	(i) Up to three percent of a utility's conservation spending obligation under this 
15.2 	section may be used for program pre-evaluation, testing, and monitoring and program 
15.3 	audit and evaluation.
15.4 		Subd. 2a.Energy and conservation account. The energy and conservation 
15.5 	account is established in the special revenue fund in the state treasury. The commissioner 
15.6 	must deposit money contributed under subdivisions 1a and 1b assessed or contributed 
15.7 	under subdivisions 1d, 1e, 1f, and 7 in the state treasury and credited to the energy and 
15.8 	conservation account in the generalspecial revenue fund. Money in the account is 
15.9 	appropriated to the departmentcommissioner for programs designed to meet the energy 
15.10 	conservation needs of low-income persons and to make energy conservation improvements 
15.11 	in areas not adequately served under subdivision 2, including research and development 
15.12 	projects included in the definition of energy conservation improvement in subdivision 1
15.13 	the purposes of subdivisions 1d, 1e, 1f, and 7. Interest on money in the account accrues to 
15.14 	the account. Using information collected under section 216C.02, subdivision 1, paragraph 
15.15 	(b), the commissioner must, to the extent possible, allocate enough money to programs 
15.16 	for low-income persons to assure that their needs are being adequately addressed. 
15.17 	The commissioner must request the commissioner of finance to transfer money from 
15.18 	the account to the commissioner of education for an energy conservation program for 
15.19 	low-income persons. In establishing programs, the commissioner must consult political 
15.20 	subdivisions and nonprofit and community organizations, especially organizations 
15.21 	engaged in providing energy and weatherization assistance to low-income persons. At 
15.22 	least one program must address the need for energy conservation improvements in areas 
15.23 	in which a high percentage of residents use fuel oil or propane to fuel their source of 
15.24 	home heating. The commissioner may contract with a political subdivision, a nonprofit 
15.25 	or community organization, a public utility, a municipality, or a cooperative electric 
15.26 	association to implement its programs. The commissioner may provide grants to any 
15.27 	person to conduct research and development projects in accordance with this section.
15.28 		Subd. 2b.Recovery of expenses. The commission shall allow a utility to recover 
15.29 	expenses resulting from a conservation improvement program required by the department 
15.30 	and contributions and assessments to the energy and conservation account, unless the 
15.31 	recovery would be inconsistent with a financial incentive proposal approved by the 
15.32 	commission. The commission shall allow a cooperative electric association subject 
15.33 	to rate regulation under section 216B.026, to recover expenses resulting from energy 
15.34 	conservation improvement programs, load management programs, and assessments 
15.35 	and contributions to the energy and conservation account unless the recovery would be 
15.36 	inconsistent with a financial incentive proposal approved by the commission. In addition, 
16.1 	a utility may file annually, or the Public Utilities Commission may require the utility 
16.2 	to file, and the commission may approve, rate schedules containing provisions for the 
16.3 	automatic adjustment of charges for utility service in direct relation to changes in the 
16.4 	expenses of the utility for real and personal property taxes, fees, and permits, the amounts 
16.5 	of which the utility cannot control. A public utility is eligible to file for adjustment for real 
16.6 	and personal property taxes, fees, and permits under this subdivision only if, in the year 
16.7 	previous to the year in which it files for adjustment, it has spent or invested at least 1.75 
16.8 	percent of its gross revenues from provision of electric service, excluding gross operating 
16.9 	revenues from electric service provided in the state to large electric customer facilities for 
16.10 	which the commissioner has issued an exemption under subdivision 1a, paragraph (b), and 
16.11 	0.6 percent of its gross revenues from provision of gas service, excluding gross operating 
16.12 	revenues from gas services provided in the state to large electric customer facilities for 
16.13 	which the commissioner has issued an exemption under subdivision 1a, paragraph (b), for 
16.14 	that year for energy conservation improvements under this section. 
16.15 		Subd. 2c.Performance incentives. By December 31, 2008, the commission 
16.16 	shall review any incentive plan for energy conservation improvement it has approved 
16.17 	under section 216B.16, subdivision 6c, and adjust the utility performance incentives to 
16.18 	recognize making progress toward and meeting the energy savings goals established 
16.19 	in subdivision 1c.
16.20 		Subd. 3.Ownership of energy conservation improvement. An energy 
16.21 	conservation improvement made to or installed in a building in accordance with this 
16.22 	section, except systems owned by the utility and designed to turn off, limit, or vary the 
16.23 	delivery of energy, are the exclusive property of the owner of the building except to the 
16.24 	extent that the improvement is subjected to a security interest in favor of the utility in case 
16.25 	of a loan to the building owner. The utility has no liability for loss, damage or injury 
16.26 	caused directly or indirectly by an energy conservation improvement except for negligence 
16.27 	by the utility in purchase, installation, or modification of the product.
16.28 		Subd. 4.Federal law prohibitions. If investments by public utilities in energy 
16.29 	conservation improvements are in any manner prohibited or restricted by federal law 
16.30 	and there is a provision under which the prohibition or restriction may be waived, then 
16.31 	the commission, the governor, or any other necessary state agency or officer shall take 
16.32 	all necessary and appropriate steps to secure a waiver with respect to those public utility 
16.33 	investments in energy conservation improvements included in this section.
16.34 		Subd. 5.Efficient lighting program. (a) Each public utility, cooperative electric 
16.35 	association, and municipal utility that provides electric service to retail customers shall 
16.36 	include as part of its conservation improvement activities a program to strongly encourage 
17.1 	the use of fluorescent and high-intensity discharge lamps. The program must include at 
17.2 	least a public information campaign to encourage use of the lamps and proper management 
17.3 	of spent lamps by all customer classifications.
17.4 	(b) A public utility that provides electric service at retail to 200,000 or more 
17.5 	customers shall establish, either directly or through contracts with other persons, including 
17.6 	lamp manufacturers, distributors, wholesalers, and retailers and local government units, a 
17.7 	system to collect for delivery to a reclamation or recycling facility spent fluorescent and 
17.8 	high-intensity discharge lamps from households and from small businesses as defined in 
17.9 	section 645.445 that generate an average of fewer than ten spent lamps per year. 
17.10 	(c) A collection system must include establishing reasonably convenient locations 
17.11 	for collecting spent lamps from households and financial incentives sufficient to encourage 
17.12 	spent lamp generators to take the lamps to the collection locations. Financial incentives 
17.13 	may include coupons for purchase of new fluorescent or high-intensity discharge lamps, 
17.14 	a cash back system, or any other financial incentive or group of incentives designed to 
17.15 	collect the maximum number of spent lamps from households and small businesses that is 
17.16 	reasonably feasible.
17.17 	(d) A public utility that provides electric service at retail to fewer than 200,000 
17.18 	customers, a cooperative electric association, or a municipal utility that provides electric 
17.19 	service at retail to customers may establish a collection system under paragraphs (b) and 
17.20 	(c) as part of conservation improvement activities required under this section.
17.21 	(e) The commissioner of the Pollution Control Agency may not, unless clearly 
17.22 	required by federal law, require a public utility, cooperative electric association, or 
17.23 	municipality that establishes a household fluorescent and high-intensity discharge lamp 
17.24 	collection system under this section to manage the lamps as hazardous waste as long as 
17.25 	the lamps are managed to avoid breakage and are delivered to a recycling or reclamation 
17.26 	facility that removes mercury and other toxic materials contained in the lamps prior to 
17.27 	placement of the lamps in solid waste.
17.28 	(f) If a public utility, cooperative electric association, or municipal utility contracts 
17.29 	with a local government unit to provide a collection system under this subdivision, 
17.30 	the contract must provide for payment to the local government unit of all the unit's 
17.31 	incremental costs of collecting and managing spent lamps.
17.32 	(g) All the costs incurred by a public utility, cooperative electric association, or 
17.33 	municipal utility for promotion and collection of fluorescent and high-intensity discharge 
17.34 	lamps under this subdivision are conservation improvement spending under this section.
17.35 		Subd. 6.Renewable energy research. (a) A public utility that owns a nuclear 
17.36 	generation facility in the state shall spend five percent of the total amount that utility 
18.1 	is required to spend under this section to support basic and applied research and 
18.2 	demonstration activities at the University of Minnesota Initiative for Renewable Energy 
18.3 	and the Environment for the development of renewable energy sources and technologies. 
18.4 	The utility shall transfer the required amount to the University of Minnesota on or before 
18.5 	July 1 of each year and that annual amount shall be deducted from the amount of money the 
18.6 	utility is required to spend under this section. The University of Minnesota shall transfer 
18.7 	at least ten percent of these funds to at least one rural campus or experiment station.
18.8 	(b) Research funded under this subdivision shall include:
18.9 	(1) development of environmentally sound production, distribution, and use of 
18.10 	energy, chemicals, and materials from renewable sources;
18.11 	(2) processing and utilization of agricultural and forestry plant products and other 
18.12 	bio-based, renewable sources as a substitute for fossil-fuel-based energy, chemicals, and 
18.13 	materials using a variety of means including biocatalysis, biorefining, and fermentation;
18.14 	(3) conversion of state wind resources to hydrogen for energy storage and 
18.15 	transportation to areas of energy demand;
18.16 	(4) improvements in scalable hydrogen fuel cell technologies; and
18.17 	(5) production of hydrogen from bio-based, renewable sources; and sequestration 
18.18 	of carbon.
18.19 	(c) Notwithstanding other law to the contrary, the utility may, but is not required to, 
18.20 	spend more than two percent of its gross operating revenues from service provided in this 
18.21 	state under this section or section 216B.2411. 
18.22 	(d) This subdivision expires June 30, 2008.
18.23 		Subd. 7.Low-income programs. (a) The commissioner shall ensure that each 
18.24 	utility and association provides low-income programs. When approving spending and 
18.25 	energy savings goals for low-income programs, the commissioner shall consider historic 
18.26 	spending and participation levels, energy savings for low-income programs, and the 
18.27 	number of low-income persons residing in the utility's service territory. A utility that 
18.28 	furnishes gas service must spend at least 0.2 percent of its gross operating revenue from 
18.29 	residential customers in the state on low-income programs. A utility or association that 
18.30 	furnishes electric service must spend at least 0.1 percent of its gross operating revenue 
18.31 	from residential customers in the state on low-income programs. For a generation and 
18.32 	transmission cooperative association, this requirement shall apply to each association's 
18.33 	members' aggregate gross operating revenue from sale of electricity to residential 
18.34 	customers in the state. Beginning in 2010, a utility or association that furnishes electric 
18.35 	service must spend 0.2 percent of its gross operating revenue from residential customers 
18.36 	in the state on low-income programs.
19.1 	(b) To meet the requirements of paragraph (a), a utility or association may contribute 
19.2 	money to the energy and conservation account. An energy conservation improvement plan 
19.3 	must state the amount, if any, of low-income energy conservation improvement money the 
19.4 	utility or association will contribute to the energy and conservation account. Contributions 
19.5 	must be remitted to the commissioner by February 1 of each year.
19.6 	(c) The commissioner shall establish low-income programs to utilize money 
19.7 	contributed to the energy and conservation account under paragraph (b). In establishing 
19.8 	low-income programs, the commissioner shall consult political subdivisions, utilities, and 
19.9 	nonprofit and community organizations, especially organizations engaged in providing 
19.10 	energy and weatherization assistance to low-income persons. Money contributed to 
19.11 	the energy and conservation account under paragraph (b) must provide programs for 
19.12 	low-income persons, including low-income renters, in the service territory of the utility or 
19.13 	association providing the money. The commissioner shall record and report expenditures 
19.14 	and energy savings achieved as a result of low-income programs funded through the 
19.15 	energy and conservation account in the report required under subdivision 1c, paragraph 
19.16 	(g). The commissioner may contract with a political subdivision, nonprofit or community 
19.17 	organization, public utility, municipality, or cooperative electric association to implement 
19.18 	low-income programs funded through the energy and conservation account.
19.19 	(d) A utility or association may petition the commissioner to modify its required 
19.20 	spending under paragraph (a) if the utility or association and the commissioner have been 
19.21 	unable to expend the amount required under paragraph (a) for three consecutive years.
19.22 		Subd. 8.Assessment. The commission or department may assess utilities subject to 
19.23 	this section in proportion to their respective gross operating revenue from sales of gas or 
19.24 	electric service within the state during the last calendar year to carry out the purposes of 
19.25 	subdivisions 1d, 1e, and 1f. Those assessments are not subject to the cap on assessments 
19.26 	provided by section 216B.62, or any other law.

19.27 	Sec. 6. [216B.2412] DECOUPLING OF ENERGY SALES FROM REVENUES.
19.28 		Subdivision 1.Definition and purpose. For the purpose of this section, 
19.29 	"decoupling" means a regulatory tool designed to separate a utility's revenue from changes 
19.30 	in energy sales. The purpose of decoupling is to reduce a utility's disincentive to promote 
19.31 	energy efficiency.
19.32 		Subd. 2.Decoupling criteria. The commission shall, by order, establish criteria 
19.33 	and standards for decoupling. The commission shall design the criteria and standards to 
19.34 	mitigate the impact on public utilities of the energy savings goals under section 216B.241 
20.1 	without adversely affecting utility ratepayers.  In designing the criteria, the commission 
20.2 	shall consider energy efficiency, weather, and cost of capital, among other factors.
20.3 		Subd. 3.Pilot programs. The commission shall allow one or more rate-regulated 
20.4 	utilities to participate in a pilot program to assess the merits of a rate-decoupling strategy 
20.5 	to promote energy efficiency and conservation. Each pilot program must utilize the 
20.6 	criteria and standards established in subdivision 2 and be designed to determine whether 
20.7 	a rate-decoupling strategy achieves energy savings. On or before a date established by 
20.8 	the commission, the commission shall require electric and gas utilities that intend to 
20.9 	implement a decoupling program to file a decoupling pilot plan, which shall be approved 
20.10 	or approved as modified by the commission. A pilot program may not exceed three years 
20.11 	in length. Any extension beyond three years can only be approved in a general rate case, 
20.12 	unless that decoupling program was previously approved as part of a general rate case. 
20.13 	The commission shall report on the programs annually to the chairs of the house of 
20.14 	representatives and senate committees with primary jurisdiction over energy policy.

20.15 	Sec. 7. EFFECTIVE DATE.
 20.16 	This article is effective July 1, 2007.

20.17 	ARTICLE 2
20.18 	MISCELLANEOUS

20.19 	Section 1. Minnesota Statutes 2006, section 123B.65, subdivision 2, is amended to read:
20.20 		Subd. 2.Energy efficiency contract. (a) Notwithstanding any law to the contrary, 
20.21 	a school district may enter into a guaranteed energy savings contract with a qualified 
20.22 	provider to significantly reduce energy or operating costs.
20.23 	(b) Before entering into a contract under this subdivision, the board shall comply 
20.24 	with clauses (1) to (5).
20.25 	(1) The board must seek proposals from multiple qualified providers by publishing 
20.26 	notice of the proposed guaranteed energy savings contract in the board's official newspaper 
20.27 	and in other publications if the board determines that additional publication is necessary to 
20.28 	notify multiple qualified providers.
20.29 	(2) The school board must select the qualified provider that best meets the needs of 
20.30 	the board. The board must provide public notice of the meeting at which it will select the 
20.31 	qualified provider.
20.32 	(3) The contract between the board and the qualified provider must describe the 
20.33 	methods that will be used to calculate the costs of the contract and the operational and 
20.34 	energy savings attributable to the contract.
21.1 	(4) The qualified provider shall issue a report to the board giving a description of all 
21.2 	costs of installations, modifications, or remodeling, including costs of design, engineering, 
21.3 	installation, maintenance, repairs, or debt service, and giving detailed calculations of the 
21.4 	amounts by which energy or operating costs will be reduced and the projected payback 
21.5 	schedule in years.
21.6 	(5) The board must provide published notice of the meeting in which it proposes to 
21.7 	award the contract, the names of the parties to the proposed contract, and the contract's 
21.8 	purpose.
21.9 	(c) The board must provide a copy of any contract entered into under paragraph (a) 
21.10 	and the report provided under paragraph (b), clause (4), to the commissioner of commerce 
21.11 	within 30 days of the effective date of the contract.

21.12 	Sec. 2. Minnesota Statutes 2006, section 216C.31, is amended to read:
21.13 	216C.31 ENERGY AUDIT PROGRAMS.
21.14 	The commissioner shall develop and administer state programs of energy audits of 
21.15 	residential and commercial buildings including those required by United States Code, title 
21.16 	42, sections 8211 to 8222 and sections 8281 to 8284. The commissioner shall continue 
21.17 	to administer the residential energy audit program as originally established under the 
21.18 	provisions of United States Code, title 42, sections 8211 to 8222; through July 1, 1986 
21.19 	irrespective of any prior expiration date provided in United States Code, title 42, section 
21.20 	8216. The commissioner may approve temporary programs if they are likely to result 
21.21 	in the installation of as many conservation measures as would have been installed had 
21.22 	the utility met the requirements of United States Code, title 42, sections 8211 to 8222. 
21.23 	The Consumer Services Division and the attorney general may release information on 
21.24 	consumer comments about the operation of the program to the commissioner the training 
21.25 	and qualifications necessary for the auditing of residential and commercial buildings under 
21.26 	the auspices of a program created under section 216B.2412.

21.27 	Sec. 3. Minnesota Statutes 2006, section 471.345, subdivision 13, is amended to read:
21.28 		Subd. 13.Energy efficiency projects. The following definitions apply to this 
21.29 	subdivision.
21.30 	(a) "Energy conservation measure" means a training program or facility alteration 
21.31 	designed to reduce energy consumption or operating costs and includes:
21.32 	(1) insulation of the building structure and systems within the building;
21.33 	(2) storm windows and doors, caulking or weatherstripping, multiglazed windows 
21.34 	and doors, heat absorbing or heat reflective glazed and coated window and door 
22.1 	systems, additional glazing, reductions in glass area, and other window and door system 
22.2 	modifications that reduce energy consumption;
22.3 	(3) automatic energy control systems;
22.4 	(4) heating, ventilating, or air conditioning system modifications or replacements;
22.5 	(5) replacement or modifications of lighting fixtures to increase the energy efficiency 
22.6 	of the lighting system without increasing the overall illumination of a facility, unless an 
22.7 	increase in illumination is necessary to conform to the applicable state or local building 
22.8 	code for the lighting system after the proposed modifications are made;
22.9 	(6) energy recovery systems;
22.10 	(7) cogeneration systems that produce steam or forms of energy such as heat, as well 
22.11 	as electricity, for use primarily within a building or complex of buildings;
22.12 	(8) energy conservation measures that provide long-term operating cost reductions.
22.13 	(b) "Guaranteed energy savings contract" means a contract for the evaluation 
22.14 	and recommendations of energy conservation measures, and for one or more energy 
22.15 	conservation measures. The contract must provide that all payments, except obligations 
22.16 	on termination of the contract before its expiration, are to be made over time, but not to 
22.17 	exceed 15 years from the date of final installation, and the savings are guaranteed to the 
22.18 	extent necessary to make payments for the systems.
22.19 	(c) "Qualified provider" means a person or business experienced in the design, 
22.20 	implementation, and installation of energy conservation measures. A qualified provider 
22.21 	to whom the contract is awarded shall give a sufficient bond to the municipality for its 
22.22 	faithful performance.
22.23 	Notwithstanding any law to the contrary, a municipality may enter into a guaranteed 
22.24 	energy savings contract with a qualified provider to significantly reduce energy or 
22.25 	operating costs.
22.26 	Before entering into a contract under this subdivision, the municipality shall provide 
22.27 	published notice of the meeting in which it proposes to award the contract, the names of 
22.28 	the parties to the proposed contract, and the contract's purpose.
22.29 	Before installation of equipment, modification, or remodeling, the qualified provider 
22.30 	shall first issue a report, summarizing estimates of all costs of installations, modifications, 
22.31 	or remodeling, including costs of design, engineering, installation, maintenance, repairs, 
22.32 	or debt service, and estimates of the amounts by which energy or operating costs will be 
22.33 	reduced.
22.34 	A guaranteed energy savings contract that includes a written guarantee that savings 
22.35 	will meet or exceed the cost of energy conservation measures is not subject to competitive 
23.1 	bidding requirements of section 471.345 or other law or city charter. The contract is 
23.2 	not subject to section 123B.52. 
23.3 	A municipality may enter into a guaranteed energy savings contract with a qualified 
23.4 	provider if, after review of the report, it finds that the amount it would spend on the energy 
23.5 	conservation measures recommended in the report is not likely to exceed the amount 
23.6 	to be saved in energy and operation costs over 15 years from the date of installation if 
23.7 	the recommendations in the report were followed, and the qualified provider provides a 
23.8 	written guarantee that the energy or operating cost savings will meet or exceed the costs 
23.9 	of the system. The guaranteed energy savings contract may provide for payments over 
23.10 	a period of time, not to exceed 15 years.
23.11 	A municipality may enter into an installment payment contract for the purchase and 
23.12 	installation of energy conservation measures. The contract must provide for payments 
23.13 	of not less than 1/15 of the price to be paid within two years from the date of the first 
23.14 	operation, and the remaining costs to be paid monthly, not to exceed a 15-year term from 
23.15 	the date of the first operation.
23.16 	A municipality entering into a guaranteed energy savings contract shall provide a 
23.17 	copy of the contract and the report from the qualified provider to the commissioner of 
23.18 	commerce within 30 days of the effective date of the contract.
23.19 	Guaranteed energy savings contracts may extend beyond the fiscal year in which 
23.20 	they become effective. The municipality shall include in its annual appropriations measure 
23.21 	for each later fiscal year any amounts payable under guaranteed energy savings contracts 
23.22 	during the year. Failure of a municipality to make such an appropriation does not affect 
23.23 	the validity of the guaranteed energy savings contract or the municipality's obligations 
23.24 	under the contracts.

23.25 	Sec. 4. Minnesota Statutes 2006, section 504B.161, subdivision 1, is amended to read:
23.26 		Subdivision 1.Requirements. In every lease or license of residential premises, the 
23.27 	landlord or licensor covenants:
23.28 	(1) that the premises and all common areas are fit for the use intended by the parties;
23.29 	(2) to keep the premises in reasonable repair during the term of the lease or license, 
23.30 	except when the disrepair has been caused by the willful, malicious, or irresponsible 
23.31 	conduct of the tenant or licensee or a person under the direction or control of the tenant or 
23.32 	licensee; and
23.33 	(3) to make the premises reasonably energy efficient by installing weatherstripping, 
23.34 	caulking, storm windows, and storm doors when the measure will result in energy 
23.35 	procurement cost savings, based on current and projected average residential energy costs 
24.1 	in this state, that will exceed the cost of implementing the measure, including interest, 
24.2 	amortized over the ten-year period following the incurring of the cost; and 
24.3 	(4) to maintain the premises in compliance with the applicable health and safety 
24.4 	laws of the state, including the weatherstripping, caulking, storm window, and storm door 
24.5 	energy efficiency standards for renter-occupied residences prescribed by section 216C.27, 
24.6 	subdivisions 1 and 3, and of the local units of government where the premises are located 
24.7 	during the term of the lease or license, except when violation of the health and safety 
24.8 	laws has been caused by the willful, malicious, or irresponsible conduct of the tenant or 
24.9 	licensee or a person under the direction or control of the tenant or licensee. 
24.10 	The parties to a lease or license of residential premises may not waive or modify the 
24.11 	covenants imposed by this section.

24.12 	Sec. 5.  REPEALER.
 24.13 	Minnesota Statutes 2006, sections 216B.165; 216C.27; and 216C.30, subdivision 5,
24.14 	and Minnesota Rules, parts 7635.0100; 7635.0110; 7635.0120; 7635.0130; 7635.0140; 
24.15 	7635.0150; 7635.0160; 7635.0170; 7635.0180; 7635.0200; 7635.0210; 7635.0220; 
24.16 	7635.0230; 7635.0240; 7635.0250; 7635.0260; 7635.0300; 7635.0310; 7635.0320; 
24.17 	7635.0330; 7635.0340; 7635.0400; 7635.0410; 7635.0420; 7635.0500; 7635.0510; 
24.18 	7635.0520; 7635.0530; 7635.0600; 7635.0610; 7635.0620; 7635.0630; 7635.0640; 
24.19 	7635.1000; 7635.1010; 7635.1020; 7635.1030; 7655.0100; 7655.0120; 7655.0200; 
24.20 	7655.0210; 7655.0220; 7655.0230; 7655.0240; 7655.0250; 7655.0260; 7655.0270; 
24.21 	7655.0280; 7655.0290; 7655.0300; 7655.0310; 7655.0320; 7655.0330; 7655.0400; 
24.22 	7655.0410; and 7655.0420, are repealed, effective July 1, 2007.

24.23 	Sec. 6. EFFECTIVE DATE.
 24.24 	This article is effective July 1, 2007.