1.1 	A bill for an act
1.2 	relating to energy; modifying provisions relating to power transmission lines, 
1.3 	renewable energy obligations, and related activities and costs;amending 
1.4 	Minnesota Statutes 2006, sections 216B.16, subdivision 7b; 216B.1645, 
1.5 	subdivisions 1, 2; 216B.243, by adding a subdivision; Minnesota Statutes 2007 
1.6 	Supplement, section 216B.1645, subdivision 2a.
1.7 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.8 	Section 1. Minnesota Statutes 2006, section 216B.16, subdivision 7b, is amended to 
1.9 	read:
1.10 		Subd. 7b.Transmission cost adjustment. (a) Notwithstanding any other provision 
1.11 	of this chapter, the commission may approve a tariff mechanism for the automatic annual 
1.12 	adjustment of charges for the Minnesota jurisdictional costs of: (i) new transmission 
1.13 	facilities that have been separately filed and reviewed and approved by the commission 
1.14 	under section 216B.243or are certified as a priority project or deemed to be a priority 
1.15 	transmission project under section 216B.2425; and (ii) charges incurred by a utility that 
1.16 	accrue from other transmission owners' regionally planned transmission projects that have 
1.17 	been determined by the Midwest Independent System Operator to benefit the utility, as 
1.18 	provided for under a federally approved tariff.
1.19 	(b) Upon filing by a public utility or utilities providing transmission service, the 
1.20 	commission may approve, reject, or modify, after notice and comment, a tariff that:
1.21 	(1) allows the utility to recover on a timely basis the costs net of revenues of 
1.22 	facilities approved under section 216B.243 or certified or deemed to be certified under 
1.23 	section 216B.2425 or exempt from the requirements of section 216B.243;
1.24 	(2) allows the charges incurred by a utility that accrue from other transmission 
1.25 	owners' regionally planned transmission projects that have been determined by the 
2.1 	Midwest Independent System Operator to benefit the utility, as provided for under a 
2.2 	federally approved tariff;
2.3 	(3) allows a return on investment at the level approved in the utility's last general 
2.4 	rate case, unless a different return is found to be consistent with the public interest;
2.5 	(3) (4) provides a current return on construction work in progress, provided that 
2.6 	recovery from Minnesota retail customers for the allowance for funds used during 
2.7 	construction is not sought through any other mechanism;
2.8 	(4) (5) allows for recovery of other expenses if shown to promote a least-cost project 
2.9 	option or is otherwise in the public interest;
2.10 	(5) (6) allocates project costs appropriately between wholesale and retail customers;
2.11 	(6) (7) provides a mechanism for recovery above cost, if necessary to improve the 
2.12 	overall economics of the project or projects or is otherwise in the public interest; and
2.13 	(7) (8) terminates recovery once costs have been fully recovered or have otherwise 
2.14 	been reflected in the utility's general rates.
2.15 	(c) A public utility may file annual rate adjustments to be applied to customer bills 
2.16 	paid under the tariff approved in paragraph (b). In its filing, the public utility shall provide:
2.17 	(1) a description of and context for the facilities included for recovery;
2.18 	(2) a schedule for implementation of applicable projects;
2.19 	(3) the utility's costs for these projects;
2.20 	(4) a description of the utility's efforts to ensure the lowest costs to ratepayers for 
2.21 	the project; and
2.22 	(5) calculations to establish that the rate adjustment is consistent with the terms 
2.23 	of the tariff established in paragraph (b).
2.24 	(d) Upon receiving a filing for a rate adjustment pursuant to the tariff established in 
2.25 	paragraph (b), the commission shall approve the annual rate adjustments provided that, 
2.26 	after notice and comment, the costs included for recovery through the tariff were or are 
2.27 	expected to be prudently incurred and achieve transmission system improvements at the 
2.28 	lowest feasible and prudent cost to ratepayers.

2.29 	Sec. 2. Minnesota Statutes 2006, section 216B.1645, subdivision 1, is amended to read:
2.30 		Subdivision 1.Commission authority. Upon the petition of a public utility, the 
2.31 	Public Utilities Commission shall approve or disapprove power purchase contracts, 
2.32 	investments, or expenditures entered into or made by the utility to satisfy the wind and 
2.33 	biomass mandates contained in sections 216B.169, 216B.2423, and 216B.2424, and 
2.34 	to satisfy the renewable energy objectives obligations set forth in section 216B.1691, 
2.35 	including reasonable investments and expenditures made to:
3.1 	(1) transmit the electricity generated from sources developed under those sections 
3.2 	that is ultimately used to provide service to the utility's retail customers, including 
3.3 	studies necessary to identify new transmission facilities needed to transmit electricity to 
3.4 	Minnesota retail customers from generating facilities constructed to satisfy the renewable 
3.5 	energy objectives obligations, provided that the costs of the studies have not been 
3.6 	recovered previously under existing tariffs and the utility has filed an application for a 
3.7 	certificate of need or for certification as a priority project under section 216B.2425 for the 
3.8 	new transmission facilities identified in the studies;
3.9 	(2) provide storage facilities for renewable energy generation facilities that 
3.10 	contribute to the reliability, efficiency, or cost-effectiveness of the renewable facilities; or
3.11 	(2) (3) develop renewable energy sources from the account required in section 
3.12 	116C.779.

3.13 	Sec. 3. Minnesota Statutes 2006, section 216B.1645, subdivision 2, is amended to read:
3.14 		Subd. 2.Cost recovery. The expenses incurred by the utility over the duration of 
3.15 	the approved contract or useful life of the investment and expenditures made pursuant 
3.16 	to section 116C.779 shall be recoverable from the ratepayers of the utility, to the extent 
3.17 	they are not offset by utility revenues attributable to the contracts, investments, or 
3.18 	expenditures. Upon petition by a public utility, the commission shall approve or approve 
3.19 	as modified a rate schedule providing for the automatic adjustment of charges to recover 
3.20 	the expenses or costs approved by the commission under subdivision 1, which, in the case 
3.21 	of transmission expenditures, are limited to the portion of actual transmission costs that are 
3.22 	directly allocable to the need to transmit power from the renewable sources of energy. The 
3.23 	commission may not approve recovery of the costs for that portion of the power generated 
3.24 	from sources governed by this section that the utility sells into the wholesale market. 

3.25 	Sec. 4. Minnesota Statutes 2007 Supplement, section 216B.1645, subdivision 2a, 
3.26 	is amended to read:
3.27 		Subd. 2a.Cost recovery for owned renewable facilities. (a) A utility may petition 
3.28 	the commission to approve a rate schedule that provides for the automatic adjustment of 
3.29 	charges to recover prudently incurred investments, expenses, or costs associated with 
3.30 	facilities constructed, owned, or operated by a utility to satisfy the requirements of section 
3.31 	216B.1691, provided those facilities were previously approved by the commission under 
3.32 	section 216B.2422 or 216B.243, or were determined by the commission to be reasonable 
3.33 	and prudent under section 216B.243, subdivision 9. The commission may approve, or
3.34 	approve as modified, a rate schedule that: 
4.1 	(1) allows a utility to recover directly from customers on a timely basis the costs of 
4.2 	qualifying renewable energy projects, including: 
4.3 	(i) return on investment; 
4.4 	(ii) depreciation; 
4.5 	(iii) ongoing operation and maintenance costs; 
4.6 	(iv) taxes; and 
4.7 	(v) costs of transmission and other ancillary expenses directly allocable to 
4.8 	transmitting electricity generated from a project meeting the specifications of this 
4.9 	paragraph; 
4.10 	(2) provides a current return on construction work in progress, provided that recovery 
4.11 	of these costs from Minnesota ratepayers is not sought through any other mechanism; 
4.12 	(3) allows recovery of other expenses incurred that are directly related to a 
4.13 	renewable energy project, including expenses for energy storage, provided that the 
4.14 	utility demonstrates to the commission's satisfaction that the expenses improve project 
4.15 	economics, ensure project implementation, or facilitate coordination with the development 
4.16 	of transmission necessary to transport energy produced by the project to market; 
4.17 	(4) allocates recoverable costs appropriately between wholesale and retail customers; 
4.18 	(5) terminates recovery when costs have been fully recovered or have otherwise 
4.19 	been reflected in a utility's rates. 
4.20 	(b) A petition filed under this subdivision must include: 
4.21 	(1) a description of the facilities for which costs are to be recovered; 
4.22 	(2) an implementation schedule for the facilities; 
4.23 	(3) the utility's costs for the facilities; 
4.24 	(4) a description of the utility's efforts to ensure that costs of the facilities are 
4.25 	reasonable and were prudently incurred; and 
4.26 	(5) a description of the benefits of the project in promoting the development of 
4.27 	renewable energy in a manner consistent with this chapter.

4.28 	Sec. 5. Minnesota Statutes 2006, section 216B.243, is amended by adding a 
4.29 	subdivision to read:
4.30 		Subd. 9.Renewable energy standard facilities. The requirements of this section 
4.31 	do not apply to a wind energy conversion system or a solar electric generation facility 
4.32 	that is intended to be used to meet or exceed the obligations of section 216B.1691; 
4.33 	provided that, after notice and comment, the commission determines that the facility is a 
4.34 	reasonable and prudent approach to meeting the utility's obligations under that section. 
4.35 	When making this determination, the commission may consider the size of the facility 
5.1 	relative to the utility's total need for renewable resources and alternative approaches 
5.2 	for supplying the renewable energy to be supplied by the proposed facility, and must 
5.3 	consider the facility's ability to promote economic development, as required under section 
5.4 	216B.1691, subdivision 9, maintain electric system reliability and consider impacts on 
5.5 	ratepayers, and other criteria as the commission may determine are relevant.