HF 436

1st Committee Engrossment - 85th Legislature (2007 - 2008) Posted on 12/22/2009 12:37pm

1.1A bill for an act

1.2relating to energy; enacting the Next Generation Energy Act of 2007, the Global
1.3Warming Mitigation Act of 2007, and the Community-Based Development Act
1.4of 2007; modifying or adding provisions related to state energy policy goals for
1.5fossil fuel-use reduction and renewable energy use, energy efficiency, energy
1.6conservation improvement, recovery of energy-related utility costs, energy
1.7savings, energy audits, electric utility renewable energy obligations of 25 percent
1.8by 2025, community-based energy development, the transition to an energy
1.9savings requirement for electric and natural gas utilities, addressing climate
1.10change, the reliability administrator, the delegation to counties for permitting
1.11wind projects under 25 megawatts, reducing greenhouse gas emissions, and
1.12allocation of financial penalties against utilities; requiring studies and reports;
1.13making technical and clarifying changes;amending Minnesota Statutes 2006,
1.14sections 123B.65, subdivision 2; 216B.16, subdivisions 1, 6b; 216B.1612;
1.15216B.1645, by adding subdivisions; 216B.169; 216B.1691, subdivisions 5,
1.16as amended, 7, as added; 216B.241; 216C.05; 216C.052; 216C.31; 471.345,
1.17subdivision 13; 500.30, subdivision 2; 504B.161, subdivision 1; proposing
1.18coding for new law in Minnesota Statutes, chapters 216B; 216F; proposing
1.19coding for new law as Minnesota Statutes, chapter 216H; repealing Minnesota
1.20Statutes 2006, sections 216B.165; 216C.27; 216C.30, subdivision 5; Laws 2007,
1.21chapter 3, section 3; Minnesota Rules, parts 7635.0100; 7635.0110; 7635.0120;
1.227635.0130; 7635.0140; 7635.0150; 7635.0160; 7635.0170; 7635.0180;
1.237635.0200; 7635.0210; 7635.0220; 7635.0230; 7635.0240; 7635.0250;
1.247635.0260; 7635.0300; 7635.0310; 7635.0320; 7635.0330; 7635.0340;
1.257635.0400; 7635.0410; 7635.0420; 7635.0500; 7635.0510; 7635.0520;
1.267635.0530; 7635.0600; 7635.0610; 7635.0620; 7635.0630; 7635.0640;
1.277635.1000; 7635.1010; 7635.1020; 7635.1030; 7655.0100; 7655.0120;
1.287655.0200; 7655.0210; 7655.0220; 7655.0230; 7655.0240; 7655.0250;
1.297655.0260; 7655.0270; 7655.0280; 7655.0290; 7655.0300; 7655.0310;
1.307655.0320; 7655.0330; 7655.0400; 7655.0410; 7655.0420.
1.31BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.32ARTICLE 1

1.33GENERAL PROVISIONS

1.34    Section 1. TITLE.
2.1    This act may be cited as the Next Generation Energy Act of 2007.

2.2    Sec. 2. Minnesota Statutes 2006, section 216C.05, is amended to read:
2.3216C.05 FINDINGS AND PURPOSE.
2.4    Subdivision 1. Energy planning. The legislature finds and declares that continued
2.5growth in demand for energy will cause severe social and economic dislocations, and that
2.6the state has a vital interest in providing for: increased efficiency in energy consumption,
2.7the development and use of renewable energy resources wherever possible, and the
2.8creation of an effective energy forecasting, planning, and education program.
2.9    The legislature further finds and declares that the protection of life, safety, and
2.10financial security for citizens during an energy crisis is of paramount importance.
2.11    Therefore, the legislature finds that it is in the public interest to review, analyze, and
2.12encourage those energy programs that will minimize the need for annual increases in
2.13fossil fuel consumption by 1990 and the need for additional electrical generating plants,
2.14and provide for an optimum combination of energy sources consistent with environmental
2.15protection and the protection of citizens.
2.16    The legislature intends to monitor, through energy policy planning and
2.17implementation, the transition from historic growth in energy demand to a period when
2.18demand for traditional fuels becomes stable and the supply of renewable energy resources
2.19is readily available and adequately utilized.
2.20    Subd. 2. Energy policy goals. It is the energy policy of the state of Minnesota that:
2.21    (1) the per capita use of fossil fuel as an energy input be reduced by 15 percent by
2.22the year 2015, through increased reliance on energy efficiency and renewable energy
2.23alternatives; and
2.24    (2) 25 percent of the total energy used in the state be derived from renewable energy
2.25resources by the year 2025.

2.26ARTICLE 2

2.27ENERGY EFFICIENCY AND CONSERVATION

2.28    Section 1. Minnesota Statutes 2006, section 216B.16, subdivision 1, is amended to read:
2.29    Subdivision 1. Notice. Unless the commission otherwise orders, no public utility
2.30shall change a rate which has been duly established under this chapter, except upon 60
2.31days' notice to the commission. The notice shall include statements of facts, expert
2.32opinions, substantiating documents, and exhibits, supporting the change requested, and
2.33state the change proposed to be made in the rates then in force and the time when the
2.34modified rates will go into effect. If the filing utility does not have an approved energy
3.1conservation improvement plan on file with the department, it shall also include in its
3.2notice an energy conservation plan pursuant to section 216B.241. A filing utility subject to
3.3rate regulation under section 216B.026 shall reference in its notice the energy conservation
3.4improvement plans of the generation and transmission cooperative providing energy
3.5conservation improvement programs to members of the filing utility pursuant to section
3.6216B.241. The filing utility shall give written notice, as approved by the commission, of
3.7the proposed change to the governing body of each municipality and county in the area
3.8affected. All proposed changes shall be shown by filing new schedules or shall be plainly
3.9indicated upon schedules on file and in force at the time.

3.10    Sec. 2. Minnesota Statutes 2006, section 216B.16, subdivision 6b, is amended to read:
3.11    Subd. 6b. Energy conservation improvement. (a) Except as otherwise provided
3.12in this subdivision, all investments and expenses of a public utility as defined in
3.13section 216B.241, subdivision 1, paragraph (e) (i), incurred in connection with energy
3.14conservation improvements shall be recognized and included by the commission in the
3.15determination of just and reasonable rates as if the investments and expenses were directly
3.16made or incurred by the utility in furnishing utility service.
3.17    (b) After December 31, 1999, Investments and expenses for energy conservation
3.18improvements shall not be included by the commission in the determination of (i) just and
3.19reasonable electric and gas rates for retail electric and gas service provided to large electric
3.20customer facilities that have been exempted by the commissioner of the department
3.21pursuant to section 216B.241, subdivision 1a, paragraph (b); or (ii) just and reasonable
3.22gas rates for large energy facilities. However, no public utility shall be prevented from
3.23recovering its investment in energy conservation improvements from all customers that
3.24were made on or before December 31, 1999, in compliance with the requirements of
3.25section 216B.241.
3.26    (c) The commission may permit a public utility to file rate schedules providing for
3.27annual recovery of the costs of energy conservation improvements. These rate schedules
3.28may be applicable to less than all the customers in a class of retail customers if necessary to
3.29reflect the differing minimum spending requirements of section 216B.241, subdivision 1a.
3.30After December 31, 1999,. The commission shall allow a public utility, without requiring
3.31a general rate filing under this section, to reduce the electric and gas rates applicable to
3.32large electric customer facilities that have been exempted by the commissioner of the
3.33department pursuant to section 216B.241, subdivision 1a, paragraph (b), and to reduce the
3.34gas rate applicable to a large energy facility by an amount that reflects the elimination
3.35of energy conservation improvement investments or expenditures for those facilities
4.1required on or before December 31, 1999. In the event that the commission has set
4.2electric or gas rates based on the use of an accounting methodology that results in the cost
4.3of conservation improvements being recovered from utility customers over a period of
4.4years, the rate reduction may occur in a series of steps to coincide with the recovery of
4.5balances due to the utility for conservation improvements made by the utility on or before
4.6December 31, 1999 2007.

4.7    Sec. 3. [216B.1636] RECOVERY OF ELECTRIC UTILITY INFRASTRUCTURE
4.8COSTS.
4.9    Subdivision 1. Definitions. (a) "Electric utility" means a public utility as defined in
4.10section 216B.02, subdivision 4, that furnishes electric service to retail customers.
4.11    (b) "Electric utility infrastructure costs" or "EUIC" means costs for electric utility
4.12infrastructure projects that were not included in the electric utility's rate base in its most
4.13recent general rate case.
4.14    (c) "Electric utility infrastructure projects" means projects that:
4.15    (1) replace or modify existing electric utility infrastructure, including utility-owned
4.16buildings, if the replacement or modification is shown to conserve energy or use energy
4.17more efficiently, consistent with section 216B.241, subdivision 1c; or
4.18    (2) conserve energy or use energy more efficiently by using waste heat recovery
4.19converted into electricity as defined in section 216B.241, subdivision 1, paragraph (n).
4.20    Subd. 2. Filing. (a) The commission may approve an electric utility's petition for
4.21a rate schedule to recover EUIC under this section. An electric utility may petition the
4.22commission to recover a rate of return, income taxes on the rate of return, incremental
4.23property taxes, if any, plus incremental depreciation expense associated with EUIC.
4.24    (b) The filing is subject to the following:
4.25    (1) an electric utility may submit a filing under this section no more than once
4.26per year; and
4.27    (2) an electric utility must file sufficient information to satisfy the commission
4.28regarding the proposed EUIC or be subject to denial by the commission, which
4.29information includes, but is not limited to:
4.30    (i) the location, description, and costs associated with the project;
4.31    (ii) evidence that the electric utility infrastructure project will conserve energy or use
4.32energy more efficiently than similar utility facilities currently used by the electric utility;
4.33    (iii) the proposed schedule for implementation;
4.34    (iv) a description of the costs, and salvage value, if any, associated with the existing
4.35infrastructure replaced or modified as a result of the project;
5.1    (v) the proposed rate design and an explanation of why the proposed rate design
5.2is in the public interest;
5.3    (vi) the magnitude and timing of any known future electric utility projects that the
5.4utility may seek to recover under this section;
5.5    (vii) the magnitude of EUIC in relation to the electric utility's base revenue as
5.6approved by the commission in the electric utility's most recent general rate case,
5.7exclusive of fuel cost adjustments;
5.8    (viii) the magnitude of EUIC in relation to the electric utility's capital expenditures
5.9since its most recent general rate case;
5.10    (ix) the amount of time since the utility last filed a general rate case and the utility's
5.11reasons for seeking recovery outside of a general rate case;
5.12    (x) documentation supporting the calculation of the EUIC; and
5.13    (xi) a cost and benefit analysis showing that the electric utility infrastructure project
5.14is in the public interest.
5.15    (c) Upon approval of the proposed projects and associated EUIC rate schedule, the
5.16utility may implement the electric utility infrastructure projects.
5.17    Subd. 3. Commission authority; orders. The commission may issue orders
5.18necessary to implement and administer this section.

5.19    Sec. 4. [216B.2401] ENERGY CONSERVATION POLICY GOAL.
5.20    It is the energy policy of the state of Minnesota to achieve annual energy savings
5.21equal to 1.5 percent of annual retail energy sales of electricity and natural gas directly
5.22through energy conservation improvement programs and rate design, and indirectly
5.23through energy codes and appliance standards, programs designed to transform the market
5.24or change consumer behavior, efficiency improvements to the utility infrastructure and
5.25system, and other efforts to promote energy efficiency and energy conservation.

5.26    Sec. 5. Minnesota Statutes 2006, section 216B.241, is amended to read:
5.27216B.241 ENERGY CONSERVATION IMPROVEMENT.
5.28    Subdivision 1. Definitions. For purposes of this section and section 216B.16,
5.29subdivision 6b , the terms defined in this subdivision have the meanings given them.
5.30    (a) "Commission" means the Public Utilities Commission.
5.31    (b) "Commissioner" means the commissioner of commerce.
5.32    (c) "Customer facility" means all buildings, structures, equipment, and installations
5.33at a single site.
5.34    (d) "Department" means the Department of Commerce.
6.1    (e) "Energy conservation" means demand-side management of energy supplies
6.2resulting in a net reduction in energy use. Load management that reduces overall energy
6.3use is energy conservation.
6.4    (f) "Energy conservation improvement" means a project that results in energy
6.5efficiency or energy conservation. Energy conservation improvement does not include
6.6waste heat recovery converted into electricity or electric utility infrastructure projects
6.7approved by the commission under section 216B.1636.
6.8    (g) "Energy efficiency" refers to measures or programs, including energy
6.9conservation measures or programs, that target consumer behavior, equipment, processes,
6.10or devices designed to produce either an absolute decrease in consumption of electric
6.11energy or natural gas or a decrease in consumption of electric energy or natural gas on a
6.12per unit of production basis without a reduction in the quality or level of service provided
6.13to the energy consumer.
6.14    (g) (h) "Gross annual retail energy sales" means annual electric sales to all retail
6.15customers in a utility's or association's Minnesota service territory or natural gas
6.16throughput to all retail customers, including natural gas transportation customers, on a
6.17utility's distribution system in Minnesota. For purposes of this section, gross annual
6.18retail energy sales exclude gas sales to a large energy facility and gas and electric sales
6.19to a large electric customer facility exempted by the commissioner under subdivision
6.201a, paragraph (b).
6.21    (i) "Investments and expenses of a public utility" includes the investments and
6.22expenses incurred by a public utility in connection with an energy conservation
6.23improvement, including but not limited to:
6.24    (1) the differential in interest cost between the market rate and the rate charged on a
6.25no-interest or below-market interest loan made by a public utility to a customer for the
6.26purchase or installation of an energy conservation improvement;
6.27    (2) the difference between the utility's cost of purchase or installation of energy
6.28conservation improvements and any price charged by a public utility to a customer for
6.29such improvements.
6.30    (h) (j) "Large electric customer facility" means a customer facility that imposes a
6.31peak electrical demand on an electric utility's system of not less than 20,000 kilowatts,
6.32measured in the same way as the utility that serves the customer facility measures
6.33electrical demand for billing purposes, and for which electric services are provided at
6.34retail on a single bill by a utility operating in the state.
6.35    (i) (k) "Large energy facility" has the meaning given it in section 216B.2421,
6.36subdivision 2, clause (1).
7.1    (l) "Load management" means an activity, service, or technology to change the
7.2timing or the efficiency of a customer's use of energy that allows a utility or a customer
7.3to respond to wholesale market fluctuations or to reduce the overall peak demand for
7.4energy or capacity.
7.5    (m) "Low-income programs" means energy conservation improvement programs
7.6that directly serve the needs of low-income persons, including low-income renters.
7.7    (n) "Waste heat recovery converted into electricity" means an energy recovery
7.8process that converts otherwise lost energy from the heat of exhaust stacks or pipes used
7.9for engines or manufacturing or industrial processes, or the reduction of high pressure
7.10in water or gas pipelines.
7.11    Subd. 1a. Investment, expenditure, and contribution; public utility. (a) For
7.12purposes of this subdivision and subdivision 2, "public utility" has the meaning given it
7.13in section 216B.02, subdivision 4. Each public utility shall spend and invest for energy
7.14conservation improvements under this subdivision and subdivision 2 the following
7.15amounts:
7.16    (1) for a utility that furnishes gas service, 0.5 percent of its gross operating revenues
7.17from service provided in the state;
7.18    (2) for a utility that furnishes electric service, 1.5 percent of its gross operating
7.19revenues from service provided in the state; and
7.20    (3) for a utility that furnishes electric service and that operates a nuclear-powered
7.21electric generating plant within the state, two percent of its gross operating revenues
7.22from service provided in the state.
7.23    For purposes of this paragraph (a), "gross operating revenues" do not include
7.24revenues from large electric customer facilities exempted by the commissioner under
7.25paragraph (b).
7.26    (b) The owner of a large electric customer facility may petition the commissioner
7.27to exempt both electric and gas utilities serving the large energy customer facility from
7.28the investment and expenditure requirements of paragraph (a) with respect to retail
7.29revenues attributable to the facility. At a minimum, the petition must be supported by
7.30evidence relating to competitive or economic pressures on the customer and a showing
7.31by the customer of reasonable efforts to identify, evaluate, and implement cost-effective
7.32conservation improvements at the facility. If a petition is filed on or before October 1 of
7.33any year, the order of the commissioner to exempt revenues attributable to the facility can
7.34be effective no earlier than January 1 of the following year. The commissioner shall
7.35not grant an exemption if the commissioner determines that granting the exemption is
7.36contrary to the public interest. The commissioner may, after investigation, rescind any
8.1exemption granted under this paragraph upon a determination that cost-effective the
8.2customer is not continuing to make reasonable efforts to identify, evaluate, and implement
8.3energy conservation improvements are available at the large electric customer facility.
8.4For the purposes of this paragraph, "cost-effective" means that the projected total cost of
8.5the energy conservation improvement at the large electric customer facility is less than
8.6the projected present value of the energy and demand savings resulting from the energy
8.7conservation improvement. For the purposes of investigations by the commissioner under
8.8this paragraph, the owner of any large electric customer facility shall, upon request,
8.9provide the commissioner with updated information comparable to that originally supplied
8.10in or with the owner's original petition under this paragraph.
8.11    (c) The commissioner may require investments or spending greater than the amounts
8.12required under this subdivision for a public utility whose most recent advance forecast
8.13required under section 216B.2422 or 216C.17 projects a peak demand deficit of 100
8.14megawatts or greater within five years under midrange forecast assumptions.
8.15    (d) A public utility or owner of a large electric customer facility may appeal
8.16a decision of the commissioner under paragraph (b) or (c) to the commission under
8.17subdivision 2. In reviewing a decision of the commissioner under paragraph (b) or (c),
8.18the commission shall rescind the decision if it finds that the required investments or
8.19spending will:
8.20    (1) not result in cost-effective energy conservation improvements; or
8.21    (2) otherwise not be in the public interest.
8.22    (e) Each utility shall determine what portion of the amount it sets aside for
8.23conservation improvement will be used for conservation improvements under subdivision
8.242 and what portion it will contribute to the energy and conservation account established in
8.25subdivision 2a. A public utility may propose to the commissioner to designate that all
8.26or a portion of funds contributed to the account established in subdivision 2a be used
8.27for research and development projects that can best be implemented on a statewide
8.28basis. Contributions must be remitted to the commissioner by February 1 of each year.
8.29Nothing in this subdivision prohibits a public utility from spending or investing for energy
8.30conservation improvement more than required in this subdivision.
8.31    Subd. 1b. Conservation improvement by cooperative association or
8.32municipality. (a) This subdivision applies to:
8.33    (1) a cooperative electric association that provides retail service to its members;
8.34    (2) a municipality that provides electric service to retail customers; and
9.1    (3) a municipality with gross operating revenues in excess of $5,000,000 from
9.2sales of more than 1,000,000,000 cubic feet in annual throughput sales to natural gas
9.3to retail customers.
9.4    (b) Each cooperative electric association and municipality subject to this subdivision
9.5shall spend and invest for energy conservation improvements under this subdivision
9.6the following amounts:
9.7    (1) for a municipality, 0.5 percent of its gross operating revenues from the sale of
9.8gas and 1.5 percent of its gross operating revenues from the sale of electricity, excluding
9.9gross operating revenues from electric and gas service provided in the state to large
9.10electric customer facilities; and
9.11    (2) for a cooperative electric association, 1.5 percent of its gross operating revenues
9.12from service provided in the state, excluding gross operating revenues from service
9.13provided in the state to large electric customer facilities indirectly through a distribution
9.14cooperative electric association.
9.15    (c) Each municipality and cooperative electric association subject to this subdivision
9.16shall identify and implement energy conservation improvement spending and investments
9.17that are appropriate for the municipality or association, except that a municipality
9.18or association may not spend or invest for energy conservation improvements that
9.19directly benefit a large energy facility or a large electric customer facility for which the
9.20commissioner has issued an exemption under subdivision 1a, paragraph (b).
9.21    (d) Each municipality and cooperative electric association subject to this subdivision
9.22may spend and invest annually up to ten percent of the total amount required to be spent
9.23and invested on energy conservation improvements under this subdivision on research
9.24and development projects that meet the definition of energy conservation improvement
9.25in subdivision 1 and that are funded directly by the municipality or cooperative electric
9.26association.
9.27    (e) Load-management activities that do not reduce energy use but that increase the
9.28efficiency of the electric system may be used to meet 50 percent of the conservation
9.29investment and spending requirements of this subdivision.
9.30    (f) A generation and transmission cooperative electric association that provides
9.31energy services to cooperative electric associations that provide electric service at retail to
9.32consumers may invest in energy conservation improvements on behalf of the associations
9.33it serves and may fulfill the conservation, spending, reporting, and energy savings goals on
9.34an aggregate basis. A municipal power agency or other not-for-profit entity that provides
9.35energy service to municipal utilities that provide electric service at retail may invest in
9.36energy conservation improvements on behalf of the municipal utilities it serves and may
10.1fulfill the conservation, spending, reporting, and energy savings goals on an aggregate
10.2basis, under an agreement between the municipal power agency or not-for-profit entity
10.3and each municipal utility for funding the investments.
10.4    (g) At least every four years, on a schedule determined by the commissioner, each
10.5municipality or cooperative shall file an overview of its conservation improvement plan
10.6with the commissioner. With this overview, Each municipality or cooperative shall file
10.7energy conservation improvement plans by June 1 on a schedule determined by order
10.8of the commissioner, but at least every three years. Plans received by June 1 must be
10.9approved or approved as modified by the commissioner by December 1 of the same year.
10.10The municipality or cooperative shall also provide an evaluation to the commissioner
10.11detailing its energy conservation improvement spending and investments for the previous
10.12period. The evaluation must briefly describe each conservation program and must specify
10.13the energy savings or increased efficiency in the use of energy within the service territory
10.14of the utility or association that is the result of the spending and investments. The
10.15evaluation must analyze the cost-effectiveness of the utility's or association's conservation
10.16programs, using a list of baseline energy and capacity savings assumptions developed
10.17in consultation with the department. The commissioner shall review each evaluation
10.18and make recommendations, where appropriate, to the municipality or association to
10.19increase the effectiveness of conservation improvement activities. Up to three percent of
10.20a utility's conservation spending obligation under this section may be used for program
10.21pre-evaluation, testing, and monitoring and program evaluation. The overview and
10.22evaluation filed by a municipality with less than 60,000,000 kilowatt-hours in annual
10.23retail sales of electric service may consist of a letter from the governing board of the
10.24municipal utility to the department providing the amount of annual conservation spending
10.25required of that municipality and certifying that the required amount has been spent on
10.26conservation programs pursuant to this subdivision.
10.27    (h) The commissioner shall also review each evaluation for whether a portion of the
10.28money spent on residential conservation improvement programs is devoted to programs
10.29that directly address the needs of renters and low-income persons unless an insufficient
10.30number of appropriate programs are available. For the purposes of this subdivision and
10.31subdivision 2, "low-income" means an income at or below 50 percent of the state median
10.32income.
10.33    (i) As part of its spending for conservation improvement, a municipality or
10.34association may contribute to the energy and conservation account. A municipality or
10.35association may propose to the commissioner to designate that all or a portion of funds
10.36contributed to the account be used for research and development projects that can best
11.1be implemented on a statewide basis. Any amount contributed must be remitted to the
11.2commissioner by February 1 of each year.
11.3    (j) (h) A municipality may spend up to 50 percent of its required spending under
11.4this section to refurbish an existing district heating or cooling system. This paragraph
11.5expires until July 1, 2007. From July 1, 2007, through June 30, 2011, expenditures made
11.6to refurbish a district heating or cooling system are considered to be load-management
11.7activities under paragraph (e). This paragraph expires July 1, 2011.
11.8    (i) The commissioner shall consider and may require a utility, association, or
11.9other entity providing energy efficiency and conservation services under this section to
11.10undertake a program suggested by an outside source, including a political subdivision,
11.11nonprofit corporation, or community organization.
11.12    Subd. 1c. Energy-saving goals. (a) The commissioner shall establish energy-saving
11.13goals for energy conservation improvement expenditures and shall evaluate an energy
11.14conservation improvement program on how well it meets the goals set.
11.15    (b) Each individual utility and association shall have an annual energy-savings
11.16goal equivalent to 1.5 percent of gross annual retail energy sales unless modified by the
11.17commissioner under paragraph (d). The savings goals must be calculated based on the
11.18most recent three-year weather normalized average.
11.19    (c) The commissioner must adopt a filing schedule that is designed to have all
11.20utilities and associations operating under an energy savings plan by calendar year 2010.
11.21    (d) In its energy conservation improvement plan filing, a utility or association may
11.22request the commissioner to adjust its annual energy savings percentage goal based on
11.23its historical conservation investment experience, customer class makeup, load growth,
11.24a conservation potential study, or other factors the commissioner determines warrants
11.25an adjustment. The commissioner may not approve a plan that provides for an annual
11.26energy savings goal of less than one percent of gross annual retail energy sales from
11.27energy conservation improvements. A utility or association may include in its energy
11.28conservation plan energy savings from an electric utility infrastructure project or waste
11.29heat recovery converted into electricity project approved by the commission under section
11.30216B.1636 that may count as energy savings in addition to the minimum energy savings
11.31goal of at least one percent for energy conservation improvements. Electric utility
11.32infrastructure projects must result in increased energy efficiency greater than that which
11.33would have occurred through normal maintenance activity.
11.34    (e) An energy savings goal is not satisfied by attaining the revenue expenditure
11.35requirements of subdivisions 1a and 1b, but can only be satisfied by meeting the energy
11.36savings goal established in this subdivision.
12.1    (f) An association or utility is not required to make energy conservation investments
12.2to attain the energy savings goals of this subdivision that are not cost-effective even
12.3if the investment is necessary to attain the energy savings goals. For the purpose of
12.4this paragraph, in determining cost-effectiveness, the commissioner shall consider the
12.5costs and benefits to ratepayers, the utility, participants, and society. In addition, the
12.6commissioner shall consider the rate at which an association or municipal utility is
12.7increasing its energy savings and its expenditures on energy conservation.
12.8    (g) On an annual basis, the commissioner shall produce and make publicly available
12.9a report on the annual energy savings and estimated carbon dioxide reductions achieved
12.10by the energy conservation improvement programs for the two most recent years for
12.11which data is available. The commissioner shall report on program performance both in
12.12the aggregate and for each entity filing an energy conservation improvement plan for
12.13approval or review by the commissioner.
12.14    (h) By January 15, 2010, the commissioner shall report to the legislature whether the
12.15spending requirements under subdivisions 1a and 1b are necessary to achieve the energy
12.16savings goals established in this subdivision.
12.17    Subd. 1d. Cooperative conservation investment increase phase-in Technical
12.18assistance. The increase in required conservation improvement expenditures by a
12.19cooperative electric association that results from the amendments in Laws 2001, chapter
12.20212, article 8, section 6, to subdivision 1b, paragraph (a), clause (1), must be phased
12.21in as follows:
12.22    (1) at least 25 percent shall be effective in year 2002;
12.23    (2) at least 50 percent shall be effective in year 2003;
12.24    (3) at least 75 percent shall be effective in year 2004; and
12.25    (4) all of the increase shall be effective in year 2005 and thereafter.
12.26    The commissioner shall evaluate energy conservation improvement programs
12.27on the basis of cost-effectiveness and the reliability of the technologies employed.
12.28The commissioner shall, by order, establish, maintain, and update energy savings
12.29assumptions that must be used when filing energy conservation improvement programs.
12.30The commissioner shall establish an inventory of the most effective energy conservation
12.31programs, techniques, and technologies, and encourage all Minnesota utilities to
12.32implement them, where appropriate, in their service territories. The commissioner shall
12.33describe these programs in sufficient detail to provide a utility reasonable guidance
12.34concerning implementation. The commissioner shall prioritize the opportunities in
12.35order of potential energy savings and in order of cost-effectiveness. The commissioner
12.36may contract with a third party to carry out any of the commissioner's duties under
13.1this subdivision, and to obtain technical assistance to evaluate the effectiveness of any
13.2conservation improvement program. The commissioner may assess up to $800,000
13.3annually until June 30, 2009, and $450,000 annually thereafter for the purposes of this
13.4subdivision. The assessments must be deposited into the energy and conservation account
13.5created under subdivision 2a. An assessment made under this subdivision is not subject to
13.6the cap on assessments provided by section 216B.62, or any other law.
13.7    Subd. 1e. Applied research and development grants. The commissioner may, by
13.8order, approve and make grants for applied research and development projects of general
13.9applicability that identify new technologies or strategies to maximize energy savings,
13.10improve the effectiveness of energy conservation programs, or document the carbon
13.11dioxide reductions from energy conservation programs. When approving projects, the
13.12commissioner shall consider proposals and comments from utilities and other interested
13.13parties. The commissioner may assess up to $3,600,000 annually for the purposes of this
13.14subdivision. The assessments must be deposited into the energy and conservation account
13.15created under subdivision 2a. An assessment made under this subdivision is not subject to
13.16the cap on assessments provided by section 216B.62, or any other law.
13.17    Subd. 1f. Facilities energy efficiency. (a) The Department of Administration
13.18and the Department of Commerce shall maintain and, as needed, revise the sustainable
13.19building design guidelines developed under section 16B.325.
13.20    (b) The Department of Administration and the Department of Commerce shall
13.21maintain and update the benchmarking tool developed under Laws 2001, chapter 212,
13.22article 1, section 3, so that all public buildings can use the benchmarking tool to maintain
13.23energy use information for the purposes of establishing energy efficiency benchmarks,
13.24tracking building performance, and measuring the results of energy efficiency and
13.25conservation improvements.
13.26    (c) The commissioner shall require that utilities include in their conservation
13.27improvement plans programs that facilitate professional engineering verification to qualify
13.28a building as Energy Star-labeled or as Leadership in Energy and Environmental Design
13.29(LEED) certified. The state goal is to achieve certification of 1,000 commercial buildings
13.30as Energy Star-labeled, and 100 commercial buildings as LEED-certified by December
13.3131, 2010.
13.32    (d) The commissioner may assess up to $500,000 annually for the purposes of this
13.33subdivision. The assessments must be deposited into the energy and conservation account
13.34created under subdivision 2a. An assessment made under this subdivision is not subject to
13.35the cap on assessments provided by section 216B.62, or any other law.
14.1    Subd. 2. Programs. (a) The commissioner may require public utilities to make
14.2investments and expenditures in energy conservation improvements, explicitly setting
14.3forth the interest rates, prices, and terms under which the improvements must be offered to
14.4the customers. The required programs must cover no more than a four-year three-year
14.5period. Public utilities shall file conservation improvement plans by June 1, on a schedule
14.6determined by order of the commissioner, but at least every four three years. Plans
14.7received by a public utility by June 1 must be approved or approved as modified by the
14.8commissioner by December 1 of that same year. The commissioner shall give special
14.9consideration and encouragement to programs that bring about significant net savings
14.10through the use of energy-efficient lighting. The commissioner shall evaluate the program
14.11on the basis of cost-effectiveness and the reliability of technologies employed. The
14.12commissioner's order must provide to the extent practicable for a free choice, by consumers
14.13participating in the program, of the device, method, material, or project constituting the
14.14energy conservation improvement and for a free choice of the seller, installer, or contractor
14.15of the energy conservation improvement, provided that the device, method, material, or
14.16project seller, installer, or contractor is duly licensed, certified, approved, or qualified,
14.17including under the residential conservation services program, where applicable.
14.18    (b) The commissioner may require a utility to make an energy conservation
14.19improvement investment or expenditure whenever the commissioner finds that the
14.20improvement will result in energy savings at a total cost to the utility less than the cost
14.21to the utility to produce or purchase an equivalent amount of new supply of energy. The
14.22commissioner shall nevertheless ensure that every public utility operate one or more
14.23programs under periodic review by the department.
14.24    (c) Each public utility subject to subdivision 1a may spend and invest annually up to
14.25ten percent of the total amount required to be spent and invested on energy conservation
14.26improvements under this section by the utility on research and development projects
14.27that meet the definition of energy conservation improvement in subdivision 1 and that
14.28are funded directly by the public utility.
14.29    (d) A public utility may not spend for or invest in energy conservation improvements
14.30that directly benefit a large energy facility or a large electric customer facility for which
14.31the commissioner has issued an exemption pursuant to subdivision 1a, paragraph (b). The
14.32commissioner shall consider and may require a utility to undertake a program suggested
14.33by an outside source, including a political subdivision or, a nonprofit corporation, or
14.34community organization.
14.35    (e) The commissioner may, by order, establish a list of programs that may be
14.36offered as energy conservation improvements by a public utility, municipal utility,
15.1cooperative electric association, or other entity providing conservation services pursuant
15.2to this section. The list of programs may include rebates for high-efficiency appliances,
15.3rebates or subsidies for high-efficiency lamps, small business energy audits, and building
15.4recommissioning. The commissioner may, by order, change this list to add or subtract
15.5programs as the commissioner determines is necessary to promote efficient and effective
15.6conservation programs.
15.7    (f) The commissioner shall ensure that a portion of the money spent on residential
15.8conservation improvement programs is devoted to programs that directly address the
15.9needs of renters and low-income persons, in proportion to the amount the utility has
15.10historically spent on such programs based on the most recent three-year average relative to
15.11the utility's total conservation spending under this section, unless an insufficient number of
15.12appropriate programs are available.
15.13    (g) (e) A utility, a political subdivision, or a nonprofit or community organization
15.14that has suggested a program, the attorney general acting on behalf of consumers and
15.15small business interests, or a utility customer that has suggested a program and is not
15.16represented by the attorney general under section 8.33 may petition the commission to
15.17modify or revoke a department decision under this section, and the commission may do
15.18so if it determines that the program is not cost-effective, does not adequately address the
15.19residential conservation improvement needs of low-income persons, has a long-range
15.20negative effect on one or more classes of customers, or is otherwise not in the public
15.21interest. The commission shall reject a petition that, on its face, fails to make a reasonable
15.22argument that a program is not in the public interest.
15.23    (h) (f) The commissioner may order a public utility to include, with the filing of the
15.24utility's proposed conservation improvement plan under paragraph (a), the results of an
15.25independent audit of the utility's conservation improvement programs and expenditures
15.26performed by the department or an auditor with experience in the provision of energy
15.27conservation and energy efficiency services approved by the commissioner and chosen by
15.28the utility. The audit must specify the energy savings or increased efficiency in the use
15.29of energy within the service territory of the utility that is the result of the spending and
15.30investments. The audit must evaluate the cost-effectiveness of the utility's conservation
15.31programs.
15.32    (i) Up to three percent of a utility's conservation spending obligation under this
15.33section may be used for program pre-evaluation, testing, and monitoring and program
15.34audit and evaluation.
15.35    Subd. 2a. Energy and conservation account. The energy and conservation
15.36account is established in the special revenue fund in the state treasury. The commissioner
16.1must deposit money contributed under subdivisions 1a and 1b assessed or contributed
16.2under subdivisions 1d, 1e, 1f, and 7 in the energy and conservation account in the
16.3general special revenue fund. Money in the account is appropriated to the department
16.4for programs designed to meet the energy conservation needs of low-income persons
16.5and to make energy conservation improvements in areas not adequately served under
16.6subdivision 2, including research and development projects included in the definition of
16.7energy conservation improvement in subdivision 1 the purposes of subdivisions 1d, 1e,
16.81f, and 7. Interest on money in the account accrues to the account. Using information
16.9collected under section 216C.02, subdivision 1, paragraph (b), the commissioner must,
16.10to the extent possible, allocate enough money to programs for low-income persons to
16.11assure that their needs are being adequately addressed. The commissioner must request
16.12the commissioner of finance to transfer money from the account to the commissioner of
16.13education for an energy conservation program for low-income persons. In establishing
16.14programs, the commissioner must consult political subdivisions and nonprofit and
16.15community organizations, especially organizations engaged in providing energy and
16.16weatherization assistance to low-income persons. At least one program must address
16.17the need for energy conservation improvements in areas in which a high percentage of
16.18residents use fuel oil or propane to fuel their source of home heating. The commissioner
16.19may contract with a political subdivision, a nonprofit or community organization, a public
16.20utility, a municipality, or a cooperative electric association to implement its programs. The
16.21commissioner may provide grants to any person to conduct research and development
16.22projects in accordance with this section.
16.23    Subd. 2b. Recovery of expenses. The commission shall allow a utility to recover
16.24expenses resulting from a conservation improvement program required by the department
16.25and contributions and assessments to the energy and conservation account, unless the
16.26recovery would be inconsistent with a financial incentive proposal approved by the
16.27commission. The commission shall allow a cooperative electric association subject
16.28to rate regulation under section 216B.026, to recover expenses resulting from energy
16.29conservation improvement programs, load management programs, and assessments
16.30and contributions to the energy and conservation account unless the recovery would be
16.31inconsistent with a financial incentive proposal approved by the commission. In addition,
16.32a utility may file annually, or the Public Utilities Commission may require the utility
16.33to file, and the commission may approve, rate schedules containing provisions for the
16.34automatic adjustment of charges for utility service in direct relation to changes in the
16.35expenses of the utility for real and personal property taxes, fees, and permits, the amounts
16.36of which the utility cannot control. A public utility is eligible to file for adjustment for real
17.1and personal property taxes, fees, and permits under this subdivision only if, in the year
17.2previous to the year in which it files for adjustment, it has spent or invested at least 1.75
17.3percent of its gross revenues from provision of electric service, excluding gross operating
17.4revenues from electric service provided in the state to large electric customer facilities for
17.5which the commissioner has issued an exemption under subdivision 1a, paragraph (b), and
17.60.6 percent of its gross revenues from provision of gas service, excluding gross operating
17.7revenues from gas services provided in the state to large electric customer facilities for
17.8which the commissioner has issued an exemption under subdivision 1a, paragraph (b), for
17.9that year for energy conservation improvements under this section.
17.10    Subd. 2c. Performance incentives. By December 31, 2008, the commission
17.11shall review any incentive plan for energy conservation improvement it has approved
17.12under section 216B.16, subdivision 6c, and adjust the utility performance incentives to
17.13recognize making progress toward and meeting the energy savings goals established
17.14in subdivision 1c.
17.15    Subd. 3. Ownership of energy conservation improvement. An energy
17.16conservation improvement made to or installed in a building in accordance with this
17.17section, except systems owned by the utility and designed to turn off, limit, or vary the
17.18delivery of energy, are the exclusive property of the owner of the building except to the
17.19extent that the improvement is subjected to a security interest in favor of the utility in case
17.20of a loan to the building owner. The utility has no liability for loss, damage or injury
17.21caused directly or indirectly by an energy conservation improvement except for negligence
17.22by the utility in purchase, installation, or modification of the product.
17.23    Subd. 4. Federal law prohibitions. If investments by public utilities in energy
17.24conservation improvements are in any manner prohibited or restricted by federal law
17.25and there is a provision under which the prohibition or restriction may be waived, then
17.26the commission, the governor, or any other necessary state agency or officer shall take
17.27all necessary and appropriate steps to secure a waiver with respect to those public utility
17.28investments in energy conservation improvements included in this section.
17.29    Subd. 5. Efficient lighting program. (a) Each public utility, cooperative electric
17.30association, and municipal utility that provides electric service to retail customers shall
17.31include as part of its conservation improvement activities a program to strongly encourage
17.32the use of fluorescent and high-intensity discharge lamps. The program must include at
17.33least a public information campaign to encourage use of the lamps and proper management
17.34of spent lamps by all customer classifications.
17.35    (b) A public utility that provides electric service at retail to 200,000 or more
17.36customers shall establish, either directly or through contracts with other persons, including
18.1lamp manufacturers, distributors, wholesalers, and retailers and local government units, a
18.2system to collect for delivery to a reclamation or recycling facility spent fluorescent and
18.3high-intensity discharge lamps from households and from small businesses as defined in
18.4section 645.445 that generate an average of fewer than ten spent lamps per year.
18.5    (c) A collection system must include establishing reasonably convenient locations
18.6for collecting spent lamps from households and financial incentives sufficient to encourage
18.7spent lamp generators to take the lamps to the collection locations. Financial incentives
18.8may include coupons for purchase of new fluorescent or high-intensity discharge lamps,
18.9a cash back system, or any other financial incentive or group of incentives designed to
18.10collect the maximum number of spent lamps from households and small businesses that is
18.11reasonably feasible.
18.12    (d) A public utility that provides electric service at retail to fewer than 200,000
18.13customers, a cooperative electric association, or a municipal utility that provides electric
18.14service at retail to customers may establish a collection system under paragraphs (b) and
18.15(c) as part of conservation improvement activities required under this section.
18.16    (e) The commissioner of the Pollution Control Agency may not, unless clearly
18.17required by federal law, require a public utility, cooperative electric association, or
18.18municipality that establishes a household fluorescent and high-intensity discharge lamp
18.19collection system under this section to manage the lamps as hazardous waste as long as
18.20the lamps are managed to avoid breakage and are delivered to a recycling or reclamation
18.21facility that removes mercury and other toxic materials contained in the lamps prior to
18.22placement of the lamps in solid waste.
18.23    (f) If a public utility, cooperative electric association, or municipal utility contracts
18.24with a local government unit to provide a collection system under this subdivision,
18.25the contract must provide for payment to the local government unit of all the unit's
18.26incremental costs of collecting and managing spent lamps.
18.27    (g) All the costs incurred by a public utility, cooperative electric association, or
18.28municipal utility for promotion and collection of fluorescent and high-intensity discharge
18.29lamps under this subdivision are conservation improvement spending under this section.
18.30    Subd. 6. Renewable energy research. (a) A public utility that owns a nuclear
18.31generation facility in the state shall spend five percent of the total amount that utility
18.32is required to spend under this section to support basic and applied research and
18.33demonstration activities at the University of Minnesota Initiative for Renewable Energy
18.34and the Environment for the development of renewable energy sources and technologies.
18.35The utility shall transfer the required amount to the University of Minnesota on or before
18.36July 1 of each year and that annual amount shall be deducted from the amount of money the
19.1utility is required to spend under this section. The University of Minnesota shall transfer
19.2at least ten percent of these funds to at least one rural campus or experiment station.
19.3    (b) Research funded under this subdivision shall include:
19.4    (1) development of environmentally sound production, distribution, and use of
19.5energy, chemicals, and materials from renewable sources;
19.6    (2) processing and utilization of agricultural and forestry plant products and other
19.7bio-based, renewable sources as a substitute for fossil-fuel-based energy, chemicals, and
19.8materials using a variety of means including biocatalysis, biorefining, and fermentation;
19.9    (3) conversion of state wind resources to hydrogen for energy storage and
19.10transportation to areas of energy demand;
19.11    (4) improvements in scalable hydrogen fuel cell technologies; and
19.12    (5) production of hydrogen from bio-based, renewable sources; and sequestration
19.13of carbon.
19.14    (c) Notwithstanding other law to the contrary, the utility may, but is not required to,
19.15spend more than two percent of its gross operating revenues from service provided in this
19.16state under this section or section 216B.2411.
19.17    (d) This subdivision expires June 30, 2008.
19.18    Subd. 7. Low-income programs. (a) The commissioner shall ensure that each
19.19utility and association provides low-income programs. When approving spending and
19.20energy savings goals for low-income programs, the commissioner shall consider historic
19.21spending and participation levels, energy savings for low-income programs, and the
19.22number of low-income persons residing in the utility's service territory. A utility that
19.23furnishes gas service must spend at least 0.2 percent of its gross operating revenue from
19.24residential customers in the state on low-income programs. A utility or association that
19.25furnishes electric service must spend at least 0.1 percent of its gross operating revenue
19.26from residential customers in the state on low-income programs. For a generation and
19.27transmission cooperative association, this requirement shall apply to each association's
19.28members' aggregate gross operating revenue from sale of electricity to residential
19.29customers in the state. Beginning in 2010, a utility or association that furnishes electric
19.30service must spend 0.2 percent of its gross operating revenue from residential customers
19.31in the state on low-income programs.
19.32    (b) To meet the requirements of paragraph (a), a utility or association may contribute
19.33funds to the energy and conservation account. An energy conservation improvement plan
19.34must state the amount, if any, of low-income energy conservation improvement funds the
19.35utility or association will contribute to the energy and conservation account. Contributions
19.36must be remitted to the commissioner by February 1 of each year.
20.1    (c) The commissioner shall establish low-income programs to utilize funds
20.2contributed to the energy and conservation account under paragraph (b). In establishing
20.3low-income programs, the commissioner shall consult political subdivisions, utilities, and
20.4nonprofit and community organizations, especially organizations engaged in providing
20.5energy and weatherization assistance to low-income persons. Money contributed to
20.6the energy and conservation account under paragraph (b) must provide programs for
20.7low-income persons, including low-income renters, in the service territory of the utility or
20.8association providing the funds. The commissioner shall record and report expenditures
20.9and energy savings achieved as a result of low-income programs funded through the
20.10energy and conservation account in the report required under subdivision 1c, paragraph
20.11(g). The commissioner may contract with a political subdivision, nonprofit or community
20.12organization, public utility, municipality, or cooperative electric association to implement
20.13low-income programs funded through the energy and conservation account.
20.14    (d) A utility or association may petition the commissioner to modify its required
20.15spending under paragraph (a) if the utility or association and the commissioner have been
20.16unable to expend the amount required under paragraph (a) for three consecutive years.
20.17    Subd. 8. Assessment. The commission or department may assess utilities subject to
20.18this section in proportion to their respective gross operating revenue from sales of gas or
20.19electric service within the state during the last calendar year to carry out the purposes of
20.20subdivisions 1d, 1e, and 1f. Those assessments are not subject to the cap on assessments
20.21provided by section 216B.62, or any other law.

20.22    Sec. 6. [216B.2412] DECOUPLING OF ENERGY SALES FROM REVENUES.
20.23    Subdivision 1. Definition and purpose. For the purpose of this section,
20.24"decoupling" means a regulatory tool designed to separate a utility's revenue from changes
20.25in energy sales. The purpose of decoupling is to reduce a utility's disincentive to promote
20.26energy efficiency.
20.27    Subd. 2. Decoupling criteria. The commission shall, by order, establish criteria
20.28and standards for decoupling. The commission shall design the criteria and standards to
20.29mitigate the impact on public utilities of the energy savings goals under section 216B.241
20.30without adversely affecting utility ratepayers. In designing the criteria, the commission
20.31shall consider energy efficiency, weather, and cost of capital, among other factors.
20.32    Subd. 3. Pilot programs. The commission shall allow one or more rate-regulated
20.33utilities to participate in a pilot program to assess the merits of a rate-decoupling strategy
20.34to promote energy efficiency and conservation. Each pilot program must utilize the
20.35criteria and standards established in subdivision 2 and be designed to determine whether
21.1a rate-decoupling strategy achieves energy savings. On or before a date established by
21.2the commission, the commission shall require electric and gas utilities that intend to
21.3implement a decoupling program to file a decoupling pilot plan which shall be approved
21.4or approved as modified by the commission. A pilot program may not exceed three years
21.5in length. Any extension beyond three years can only be approved in a general rate case,
21.6unless that decoupling program was previously approved as part of a general rate case.
21.7The commission shall report on the programs annually to the chairs of the house of
21.8representatives and senate committees with primary jurisdiction over energy policy.

21.9    Sec. 7. REVISOR'S INSTRUCTION.
21.10    The revisor of statutes shall change the reference to "section 216B.241, subdivision
21.111, paragraph (i)" found in section 216B.2411, subdivision 1, to read "section 216B.241,
21.12subdivision 1."

21.13    Sec. 8. EFFECTIVE DATE.
21.14    This article is effective July 1, 2007.

21.15ARTICLE 3

21.16MISCELLANEOUS

21.17    Section 1. Minnesota Statutes 2006, section 123B.65, subdivision 2, is amended to read:
21.18    Subd. 2. Energy efficiency contract. (a) Notwithstanding any law to the contrary,
21.19a school district may enter into a guaranteed energy savings contract with a qualified
21.20provider to significantly reduce energy or operating costs.
21.21    (b) Before entering into a contract under this subdivision, the board shall comply
21.22with clauses (1) to (5).
21.23    (1) The board must seek proposals from multiple qualified providers by publishing
21.24notice of the proposed guaranteed energy savings contract in the board's official newspaper
21.25and in other publications if the board determines that additional publication is necessary to
21.26notify multiple qualified providers.
21.27    (2) The school board must select the qualified provider that best meets the needs of
21.28the board. The board must provide public notice of the meeting at which it will select the
21.29qualified provider.
21.30    (3) The contract between the board and the qualified provider must describe the
21.31methods that will be used to calculate the costs of the contract and the operational and
21.32energy savings attributable to the contract.
22.1    (4) The qualified provider shall issue a report to the board giving a description of all
22.2costs of installations, modifications, or remodeling, including costs of design, engineering,
22.3installation, maintenance, repairs, or debt service, and giving detailed calculations of the
22.4amounts by which energy or operating costs will be reduced and the projected payback
22.5schedule in years.
22.6    (5) The board must provide published notice of the meeting in which it proposes to
22.7award the contract, the names of the parties to the proposed contract, and the contract's
22.8purpose.
22.9    (c) The board must provide a copy of any contract entered into under paragraph (a)
22.10and the report provided under paragraph (b), clause (4), to the commissioner of commerce
22.11within 30 days of the effective date of the contract.

22.12    Sec. 2. Minnesota Statutes 2006, section 216C.31, is amended to read:
22.13216C.31 ENERGY AUDIT PROGRAMS.
22.14    The commissioner shall develop and administer state programs of energy audits of
22.15residential and commercial buildings including those required by United States Code, title
22.1642, sections 8211 to 8222 and sections 8281 to 8284. The commissioner shall continue
22.17to administer the residential energy audit program as originally established under the
22.18provisions of United States Code, title 42, sections 8211 to 8222; through July 1, 1986
22.19irrespective of any prior expiration date provided in United States Code, title 42, section
22.208216. The commissioner may approve temporary programs if they are likely to result
22.21in the installation of as many conservation measures as would have been installed had
22.22the utility met the requirements of United States Code, title 42, sections 8211 to 8222.
22.23The Consumer Services Division and the attorney general may release information on
22.24consumer comments about the operation of the program to the commissioner the training
22.25and qualifications necessary for the auditing of residential and commercial buildings under
22.26the auspices of a program created under section 216B.2412.

22.27    Sec. 3. Minnesota Statutes 2006, section 471.345, subdivision 13, is amended to read:
22.28    Subd. 13. Energy efficiency projects. The following definitions apply to this
22.29subdivision.
22.30    (a) "Energy conservation measure" means a training program or facility alteration
22.31designed to reduce energy consumption or operating costs and includes:
22.32    (1) insulation of the building structure and systems within the building;
22.33    (2) storm windows and doors, caulking or weatherstripping, multiglazed windows
22.34and doors, heat absorbing or heat reflective glazed and coated window and door
23.1systems, additional glazing, reductions in glass area, and other window and door system
23.2modifications that reduce energy consumption;
23.3    (3) automatic energy control systems;
23.4    (4) heating, ventilating, or air conditioning system modifications or replacements;
23.5    (5) replacement or modifications of lighting fixtures to increase the energy efficiency
23.6of the lighting system without increasing the overall illumination of a facility, unless an
23.7increase in illumination is necessary to conform to the applicable state or local building
23.8code for the lighting system after the proposed modifications are made;
23.9    (6) energy recovery systems;
23.10    (7) cogeneration systems that produce steam or forms of energy such as heat, as well
23.11as electricity, for use primarily within a building or complex of buildings;
23.12    (8) energy conservation measures that provide long-term operating cost reductions.
23.13    (b) "Guaranteed energy savings contract" means a contract for the evaluation
23.14and recommendations of energy conservation measures, and for one or more energy
23.15conservation measures. The contract must provide that all payments, except obligations
23.16on termination of the contract before its expiration, are to be made over time, but not to
23.17exceed 15 years from the date of final installation, and the savings are guaranteed to the
23.18extent necessary to make payments for the systems.
23.19    (c) "Qualified provider" means a person or business experienced in the design,
23.20implementation, and installation of energy conservation measures. A qualified provider
23.21to whom the contract is awarded shall give a sufficient bond to the municipality for its
23.22faithful performance.
23.23    Notwithstanding any law to the contrary, a municipality may enter into a guaranteed
23.24energy savings contract with a qualified provider to significantly reduce energy or
23.25operating costs.
23.26    Before entering into a contract under this subdivision, the municipality shall provide
23.27published notice of the meeting in which it proposes to award the contract, the names of
23.28the parties to the proposed contract, and the contract's purpose.
23.29    Before installation of equipment, modification, or remodeling, the qualified provider
23.30shall first issue a report, summarizing estimates of all costs of installations, modifications,
23.31or remodeling, including costs of design, engineering, installation, maintenance, repairs,
23.32or debt service, and estimates of the amounts by which energy or operating costs will be
23.33reduced.
23.34    A guaranteed energy savings contract that includes a written guarantee that savings
23.35will meet or exceed the cost of energy conservation measures is not subject to competitive
24.1bidding requirements of section 471.345 or other law or city charter. The contract is
24.2not subject to section 123B.52.
24.3    A municipality may enter into a guaranteed energy savings contract with a qualified
24.4provider if, after review of the report, it finds that the amount it would spend on the energy
24.5conservation measures recommended in the report is not likely to exceed the amount
24.6to be saved in energy and operation costs over 15 years from the date of installation if
24.7the recommendations in the report were followed, and the qualified provider provides a
24.8written guarantee that the energy or operating cost savings will meet or exceed the costs
24.9of the system. The guaranteed energy savings contract may provide for payments over
24.10a period of time, not to exceed 15 years.
24.11    A municipality may enter into an installment payment contract for the purchase and
24.12installation of energy conservation measures. The contract must provide for payments
24.13of not less than 1/15 of the price to be paid within two years from the date of the first
24.14operation, and the remaining costs to be paid monthly, not to exceed a 15-year term from
24.15the date of the first operation.
24.16    A municipality entering into a guaranteed energy savings contract shall provide a
24.17copy of the contract and the report from the qualified provider to the commissioner of
24.18commerce within 30 days of the effective date of the contract.
24.19    Guaranteed energy savings contracts may extend beyond the fiscal year in which
24.20they become effective. The municipality shall include in its annual appropriations measure
24.21for each later fiscal year any amounts payable under guaranteed energy savings contracts
24.22during the year. Failure of a municipality to make such an appropriation does not affect
24.23the validity of the guaranteed energy savings contract or the municipality's obligations
24.24under the contracts.

24.25    Sec. 4. Minnesota Statutes 2006, section 504B.161, subdivision 1, is amended to read:
24.26    Subdivision 1. Requirements. (a) In every lease or license of residential premises,
24.27the landlord or licensor covenants:
24.28    (1) that the premises and all common areas are fit for the use intended by the parties;
24.29    (2) to keep the premises in reasonable repair during the term of the lease or license,
24.30except when the disrepair has been caused by the willful, malicious, or irresponsible
24.31conduct of the tenant or licensee or a person under the direction or control of the tenant or
24.32licensee; and
24.33    (3) to make the premises reasonably energy efficient by installing weatherstripping,
24.34caulking, storm windows, and storm doors when any such measure will result in energy
24.35procurement cost savings, based on current and projected average residential energy costs
25.1in Minnesota, that will exceed the cost of implementing that measure, including interest,
25.2amortized over the ten-year period following the incurring of the cost; and
25.3    (4) to maintain the premises in compliance with the applicable health and safety
25.4laws of the state, including the weatherstripping, caulking, storm window, and storm door
25.5energy efficiency standards for renter-occupied residences prescribed by section 216C.27,
25.6subdivisions 1 and 3 , and of the local units of government where the premises are located
25.7during the term of the lease or license, except when violation of the health and safety
25.8laws has been caused by the willful, malicious, or irresponsible conduct of the tenant or
25.9licensee or a person under the direction or control of the tenant or licensee.
25.10    (b) The parties to a lease or license of residential premises may not waive or modify
25.11the covenants imposed by this section.

25.12    Sec. 5. REPEALER.
25.13Minnesota Statutes 2006, sections 216B.165; 216C.27; and 216C.30, subdivision 5,
25.14and Minnesota Rules, parts 7635.0100; 7635.0110; 7635.0120; 7635.0130; 7635.0140;
25.157635.0150; 7635.0160; 7635.0170; 7635.0180; 7635.0200; 7635.0210; 7635.0220;
25.167635.0230; 7635.0240; 7635.0250; 7635.0260; 7635.0300; 7635.0310; 7635.0320;
25.177635.0330; 7635.0340; 7635.0400; 7635.0410; 7635.0420; 7635.0500; 7635.0510;
25.187635.0520; 7635.0530; 7635.0600; 7635.0610; 7635.0620; 7635.0630; 7635.0640;
25.197635.1000; 7635.1010; 7635.1020; 7635.1030; 7655.0100; 7655.0120; 7655.0200;
25.207655.0210; 7655.0220; 7655.0230; 7655.0240; 7655.0250; 7655.0260; 7655.0270;
25.217655.0280; 7655.0290; 7655.0300; 7655.0310; 7655.0320; 7655.0330; 7655.0400;
25.227655.0410; and 7655.0420, are repealed, effective July 1, 2007.

25.23    Sec. 6. EFFECTIVE DATE.
25.24    This article is effective July 1, 2007.

25.25ARTICLE 4

25.26COMMUNITY-BASED ENERGY DEVELOPMENT

25.27    Section 1. CITATION.
25.28    This article may be cited as the Community-Based Energy Development Act of 2007.

25.29    Sec. 2. Minnesota Statutes 2006, section 216B.1612, is amended to read:
25.30216B.1612 COMMUNITY-BASED ENERGY DEVELOPMENT; TARIFF.
25.31    Subdivision 1. Tariff establishment. A tariff shall be established to optimize local,
25.32regional, and state benefits from wind renewable energy development and to facilitate
26.1widespread development of community-based wind renewable energy projects throughout
26.2Minnesota.
26.3    Subd. 2. Definitions. (a) The terms used in this section have the meanings given
26.4them in this subdivision.
26.5    (b) "C-BED tariff" or "tariff" means a community-based energy development tariff.
26.6    (c) "Qualifying owner" means:
26.7    (1) a Minnesota resident;
26.8    (2) a limited liability company that is organized under the laws of this state chapter
26.9322B and that is made up of members who are Minnesota residents;
26.10    (3) a Minnesota nonprofit organization organized under chapter 317A;
26.11    (4) a Minnesota cooperative association organized under chapter 308A or 308B,
26.12other than including a rural electric cooperative association or a generation and
26.13transmission cooperative on behalf of and at the request of a member distribution utility;
26.14    (5) a Minnesota political subdivision or local government other than including,
26.15but not limited to, a municipal electric utility or a municipal power agency on behalf
26.16of and at the request of a member distribution utility, including, but not limited to, a
26.17county, statutory or home rule charter city, town, school district, or public or private
26.18higher education institution or any other local or regional governmental organization such
26.19as a board, commission, or association; or
26.20    (6) a tribal council.
26.21    (d) "Net present value rate" means a rate equal to the net present value of the
26.22nominal payments to a project divided by the total expected energy production of the
26.23project over the life of its power purchase agreement.
26.24    (e) "Standard reliability criteria" means:
26.25    (1) can be safely integrated into and operated within the utility's grid without causing
26.26any adverse or unsafe consequences; and
26.27    (2) is consistent with the utility's resource needs as identified in its most recent
26.28resource plan submitted under section 216B.2422.
26.29    (f) "Renewable" means a technology listed in section 216B.1691, subdivision 1,
26.30paragraph (a).
26.31    (g) "Community-based energy project" or "C-BED project" means a new wind
26.32renewable energy project that:
26.33    (1) has no single qualifying owner owning more than 15 percent of a C-BED project
26.34that consists of more than two turbines; or
27.1    (2) for C-BED projects of one or two turbines, is owned entirely by one or more
27.2qualifying owners, with at least 51 percent of the total financial benefits over the life of the
27.3project flowing to qualifying owners; and
27.4    (1) provides that at least 51 percent of the total payments made as a direct result of a
27.5power purchase agreement or similar agreement with a utility accrue to:
27.6    (i) qualifying owners, in the form of net cash payments under the power purchase
27.7agreement that amount to no less than 35 percent made over the term of the power
27.8purchase agreement;
27.9    (ii) owners of land upon which a project is sited, in the form of easement or lease
27.10payments;
27.11    (iii) local units of government, in the form of taxes paid under section 272.029; and
27.12    (iv) lenders chartered under section 46.044, in the form of interest paid on C-BED
27.13project debt financed by a lender;
27.14    (2) allows, if the project is a wind energy project consisting of more than two
27.15turbines, no single qualifying owner to own more than 15 percent of the project;
27.16    (3) allows, if the project is a wind energy project, a public entity listed in paragraph
27.17(b), clause (5), except for a municipal utility, to own more than 15 percent of the project;
27.18and
27.19    (3) (4) has a resolution of support adopted by the county board of each county in
27.20which the project is to be located, or in the case of a project located within the boundaries
27.21of a reservation, the tribal council for that reservation.
27.22    Subd. 3. Tariff rate. (a) The tariff described in subdivision 4 must have a rate
27.23schedule that allows for a rate up to a 2.7 cents per kilowatt-hour net present value rate
27.24over the 20-year life of the power purchase agreement. The tariff must provide for a rate
27.25that is higher in the first ten years of the power purchase agreement than in the last ten
27.26years. The discount rate required to calculate the net present value must be the utility's
27.27normal discount rate used for its other business purposes.
27.28    (b) The commission shall consider mechanisms to encourage the aggregation
27.29of C-BED projects.
27.30    (c) The commission shall require that qualifying and nonqualifying owners provide
27.31sufficient security to secure performance under the power purchase agreement, and shall
27.32prohibit the transfer of the C-BED project to a nonqualifying owner during the initial
27.3320 years of the contract.
27.34    Subd. 4. Utilities to offer tariff. By December 1, 2005 2007, each public utility
27.35providing electric service at retail shall file for commission approval a community-based
27.36energy development tariff consistent with subdivision 3. Within 90 days of the
28.1first commission approval order under this subdivision, each municipal power
28.2agency and generation and transmission cooperative electric association shall adopt a
28.3community-based energy development tariff as consistent as possible with subdivision 3.
28.4    Subd. 5. Priority for C-BED projects. (a) A utility subject to section 216B.1691
28.5that needs to construct new generation, or purchase the output from new generation, as
28.6part of its plan to satisfy its good faith objective and standard under that section should
28.7must take reasonable steps to determine if one or more C-BED projects are available that
28.8meet the utility's cost and reliability requirements, applying standard reliability criteria, to
28.9fulfill some or all of the identified need at minimal impact to customer rates.
28.10    Nothing in this section shall be construed to obligate a utility to enter into a power
28.11purchase agreement under a C-BED tariff developed under this section. A utility whose
28.12renewable energy plan has been approved by the commission under section 216B.1645,
28.13subdivision 2a, must negotiate in good faith with developers of C-BED projects that meet
28.14the specifications of this paragraph and whose aggregated capacity is equal to the capacity
28.15of C-BED projects identified in the plan from which the utility intends to purchase energy.
28.16    (b) Each utility shall include in its resource plan submitted under section 216B.2422
28.17a description of its efforts to purchase energy from C-BED projects, including a list of the
28.18projects under contract and the amount of C-BED energy purchased.
28.19    (c) The commission shall consider the efforts and activities of a utility to purchase
28.20energy from C-BED projects when evaluating its good faith effort towards meeting the
28.21renewable energy objective under section 216B.1691.
28.22    (d) A municipal power agency or generation and transmission cooperative shall,
28.23when issuing a request for proposals for C-BED projects to satisfy its standard obligation
28.24under section 216B.1691, provide notice to its member distribution utilities that they
28.25may propose, in partnership with other qualifying owners, a C-BED project for the
28.26consideration of the municipal power agency or generation and transmission cooperative.
28.27    Subd. 6. Property owner participation. To the extent feasible, a developer of a
28.28C-BED project must provide, in writing, an opportunity to invest in the C-BED project to
28.29each property owner on whose property a high-voltage transmission line is constructed
28.30that will transmit the energy generated by the C-BED project to market. This subdivision
28.31applies if the property is located and the owner resides in the county where the C-BED
28.32project is located.
28.33    Subd. 7. Other C-BED tariff issues. (a) A community-based project developer
28.34and a utility shall negotiate the rate and power purchase agreement terms consistent with
28.35the tariff established under subdivision 4.
29.1    (b) At the discretion of the developer, a community-based project developer and
29.2a utility may negotiate a power purchase agreement with terms different from the tariff
29.3established under subdivision 4.
29.4    (c) A qualifying owner, or any combination of qualifying owners, may develop a
29.5joint venture project with a nonqualifying wind renewable energy project developer.
29.6However, the terms of the C-BED tariff may only apply to the portion of the energy
29.7production of the total project that is directly proportional to the equity share of the project
29.8owned by the qualifying owners.
29.9    (d) A project that is operating under a power purchase agreement under a C-BED
29.10tariff is not eligible for net energy billing under section 216B.164, subdivision 3, or for
29.11production incentives under section 216C.41.
29.12    (e) A public utility must receive commission approval of a power purchase
29.13agreement for a C-BED tariffed project. The commission shall provide the utility's
29.14ratepayers an opportunity to address the reasonableness of the proposed power purchase
29.15agreement. Unless a party objects to a contract within 30 days of submission of the
29.16contract to the commission the contract is deemed approved.
29.17    Subd. 8. Community energy partnerships. A utility providing electric service
29.18to retail or wholesale customers in Minnesota and an independent power producer may
29.19participate, and are encouraged to participate, in a community-based energy project, as
29.20owner, equity partner, or provider of technical or financial assistance, subject to the limits
29.21specified in this section.
29.22    Subd. 9. C-BED advisory determination. A developer of a proposed project may
29.23request the commissioner of commerce to issue an advisory determination as to whether
29.24the proposed project qualifies as a C-BED project under this section. The request must
29.25be made on a form and under a procedure approved by the commissioner. A positive
29.26advisory determination of the commissioner under this subdivision establishes a rebuttable
29.27presumption that the project qualifies as a C-BED project.

29.28    Sec. 3. Minnesota Statutes 2006, section 216B.1645, is amended by adding a
29.29subdivision to read:
29.30    Subd. 2a. Utility ownership of renewable resources. (a) A utility may construct,
29.31own, and operate generation facilities used to satisfy the requirements of section
29.32216B.1691, notwithstanding any competitive resource acquisition process established
29.33under section 216B.2422, subdivision 5.
29.34    (b) In lieu of any competitive resource acquisition process, a utility that owns a
29.35nuclear generation facility and intends to construct, own, or operate facilities under this
30.1section shall file with the commission on or before March 1, 2008, a renewable energy
30.2plan setting forth the manner in which the utility proposes to meet the requirements of
30.3section 216B.1691, including a proposed schedule for purchasing renewable energy from
30.4C-BED and non-C-BED projects, a proposed schedule of acquisition and construction
30.5of generation facilities and their expected in-service dates, and proposed transmission
30.6resources associated with the facilities, including a proposed construction schedule and
30.7expected in-service date for any transmission sources that need to be constructed to
30.8deliver the electricity generated by the facilities. The plan must also contain alternative
30.9means of providing the energy generated by the facilities described in the plan, and
30.10must compare the costs of delivering energy from these alternative means and from the
30.11facilities identified in the plan. The utility shall update the plan as necessary in its filing
30.12under section 216B.2422.
30.13    (c) The commission shall approve the plan unless it determines, after public hearing
30.14and comment, that the plan:
30.15    (1) imposes excessive costs on ratepayers;
30.16    (2) does not reasonably allocate resources among utility-owned generation facilities,
30.17energy purchased from C-BED and non-C-BED projects, and generation facilities selected
30.18in a competitive selection process under section 216B.2422, subdivision 5; or
30.19    (3) does not maximize benefits to Minnesota citizens, as required by section
30.20216B.1691, subdivision 9.
30.21Nothing in this section prohibits a utility from seeking and securing approval from the
30.22commission to implement projects prior to submission of the plan required under this
30.23section.

30.24    Sec. 4. Minnesota Statutes 2006, section 216B.1645, is amended by adding a
30.25subdivision to read:
30.26    Subd. 2b. Cost recovery for owned renewable facilities. (a) A utility may petition
30.27the commission to approve a rate schedule that provides for the automatic adjustment of
30.28charges to recover prudently incurred investments, expenses, or costs associated with
30.29facilities constructed, owned, or operated by a utility to satisfy the requirements of section
30.30216B.1691, provided those facilities were previously approved by the commission under
30.31section 216B.2422 or 216B.243. The commission may approve, or approve as modified, a
30.32rate schedule that:
30.33    (1) allows a utility to recover directly from customers on a timely basis the costs of
30.34qualifying renewable energy projects, including:
30.35    (i) return on investment;
31.1    (ii) depreciation;
31.2    (iii) ongoing operation and maintenance costs;
31.3    (iv) taxes; and
31.4    (v) costs of transmission and other ancillary expenses directly allocable to
31.5transmitting electricity generated from a project meeting the specifications of this
31.6paragraph;
31.7    (2) provides a current return on construction work in progress, provided that recovery
31.8of these costs from Minnesota ratepayers is not sought through any other mechanism;
31.9    (3) allows recovery of other expenses incurred that are directly related to a renewable
31.10energy project, provided that the utility demonstrates to the commission's satisfaction that
31.11the expenses improve project economics, ensure project implementation, or facilitate
31.12coordination with the development of transmission necessary to transport energy produced
31.13by the project to market;
31.14    (4) allocates recoverable costs appropriately between wholesale and retail customers;
31.15    (5) terminates recovery when costs have been fully recovered or have otherwise
31.16been reflected in a utility's rates.
31.17    (b) A petition filed under this subdivision must include:
31.18    (1) a description of the facilities for which costs are to be recovered;
31.19    (2) an implementation schedule for the facilities;
31.20    (3) the utility's costs for the facilities;
31.21    (4) a description of the utility's efforts to ensure that costs of the facilities are
31.22reasonable and were prudently incurred; and
31.23    (5) a description of the benefits of the project in promoting the development of
31.24renewable energy in a manner consistent with this chapter.

31.25    Sec. 5. [216B.1681] CURTAILMENT PAYMENTS.
31.26    The commission shall, by September 1, 2007, initiate a review of curtailment
31.27payments for wind energy projects to assess whether utilities are unduly discriminating
31.28among project ownership structures in regard to the contractual availability of curtailment
31.29payments.

31.30    Sec. 6. Minnesota Statutes 2006, section 216B.169, is amended to read:
31.31216B.169 RENEWABLE AND HIGH-EFFICIENCY ENERGY RATE
31.32OPTIONS COMMUNITY-BASED ENERGY DEVELOPMENT GREEN PRICING
31.33OPTION.
32.1    Subdivision 1. Definitions. For the purposes of this section, the following terms
32.2have the meanings given them.
32.3    (a) "Utility" means a public utility, municipal utility, or cooperative electric
32.4association providing electric service at retail to Minnesota consumers.
32.5    (b) "Renewable energy" has the meaning given in section 216B.2422, subdivision 1,
32.6paragraph (c) "Eligible energy technology" has the meaning given in section 216B.1691,
32.7subdivision 1.
32.8    (c) "High-efficiency, low-emissions, distributed generation" means a distributed
32.9generation facility of no more than ten megawatts of interconnected capacity that is
32.10certified by the commissioner under subdivision 3 as a high-efficiency, low-emissions
32.11facility "Community-based energy development project" or "C-BED project" has the
32.12meaning given in section 216B.1612, subdivision 2, paragraph (g).
32.13    Subd. 2. Renewable and high-efficiency energy rate options C-BED green
32.14pricing programs. (a) Each utility shall offer its customers, and shall advertise
32.15the offer at least annually quarterly, one or more options that allow a customer to
32.16determine that a certain amount of the electricity generated or purchased on behalf of the
32.17customer is renewable energy or energy generated by high-efficiency, low-emissions,
32.18distributed generation such as fuel cells and microturbines fueled by a renewable fuel a
32.19community-based energy development project or is provided through the purchase of
32.20renewable energy credits from a C-BED project.
32.21    (b) Each public utility shall file an implementation plan within 90 days of July 1,
32.222001 2007, to implement paragraph (a).
32.23    (c) Rates charged to customers must be calculated using the utility's cost of acquiring
32.24the energy for the customer and must:
32.25    (1) reflect the difference between the cost of generating or purchasing the renewable
32.26C-BED energy or credits and the cost of generating or purchasing the same amount of
32.27nonrenewable energy or credits from non-C-BED sources; and
32.28    (2) be distributed on a per kilowatt-hour basis among all customers who choose to
32.29participate in the program.
32.30    (d) Implementation of these rate options may reflect a reasonable amount of lead
32.31time necessary to arrange acquisition of the energy. The utility may must acquire the
32.32energy demanded by customers, in whole or in part, through procuring or generating
32.33the renewable C-BED energy directly, or through the purchase of credits from a provider
32.34that has received certification of eligible power supply pursuant to subdivision 3 issued
32.35under the program established by the commission under section 216B.1691, subdivision
32.364, if available. If a utility is not able to arrange an adequate supply of renewable or
33.1high-efficiency C-BED energy or credits to meet its customers' demand under this section,
33.2the utility must file a report with the commission detailing its efforts and reasons for
33.3its failure.
33.4    Subd. 3. Certification and tradeable credits. (a) The commissioner shall certify a
33.5power supply or supplies as eligible to satisfy customer requirements under this section
33.6upon finding:
33.7    (1) the power supply is renewable energy or energy generated by high-efficiency,
33.8low-emissions, distributed generation meets the requirements of section 216B.1612; and
33.9    (2) the sales arrangements of energy from the supplies are such that the power
33.10supply is only sold once to retail consumers.
33.11    (b) To facilitate compliance with this section, the commission may, by order,
33.12establish a program for tradeable credits for eligible power supplies.
33.13    Subd. 4. C-BED logo. (a) The commissioner of commerce shall design or
33.14contract for the design of a logo that qualifying entities may affix to their products and
33.15to advertising for their products that contains the words "100% Minnesota Renewable
33.16Energy." The logo may also contain a standardized pictorial representation or design.
33.17    (b) The commissioner of commerce shall certify in writing that an entity is
33.18authorized to use the logo if the commissioner determines that all the electricity consumed
33.19by an applicant is purchased directly, or by purchasing credits from a C-BED project.
33.20The commissioner of commerce shall develop forms and procedures to govern the
33.21application and certification processes and the use of the logo by an entity that receives
33.22certification. No person may use the logo without certification from the commissioner.
33.23For the purposes of this subdivision, "qualifying entity" means a person or entity that has
33.24received certification from the commissioner of commerce granting the entity authority to
33.25use the C-BED logo in the manner prescribed by the commissioner.

33.26    Sec. 7. Minnesota Statutes 2006, section 216C.052, is amended to read:
33.27216C.052 RELIABILITY ADMINISTRATOR.
33.28    Subdivision 1. Responsibilities. (a) There is established the position of reliability
33.29administrator in the Public Utilities Commission Department of Commerce. The
33.30administrator shall act as a source of independent expertise and a technical advisor to
33.31the commissioner, the commission and the public on issues related to the reliability of
33.32the electric system. In conducting its work, the administrator shall provide assistance
33.33to the commission commissioner in administering and implementing the commission's
33.34department's duties under sections 216B.1612, 216B.1691, 216B.2422, 216B.2425, and
34.1216B.243 ; chapters 216E, 216F, and 216G; and rules associated with those provisions.
34.2Subject to resource constraints, the reliability administrator may also and shall also:
34.3    (1) model and monitor the use and operation of the energy infrastructure in the
34.4state, including generation facilities, transmission lines, natural gas pipelines, and other
34.5energy infrastructure;
34.6    (2) develop and present to the commission and parties technical analyses of proposed
34.7infrastructure projects, and provide technical advice to the commission;
34.8    (3) present independent, factual, expert, and technical information on infrastructure
34.9proposals and reliability issues at public meetings hosted by the task force, the
34.10Environmental Quality Board, the department, or the commission.
34.11    (b) Upon request and subject to resource constraints, the administrator shall
34.12provide technical assistance regarding matters unrelated to applications for infrastructure
34.13improvements to the task force, the department, or the commission.
34.14    (c) The administrator may not advocate for any particular outcome in a commission
34.15proceeding, but may give technical advice to the commission as to the impact on the
34.16reliability of the energy system of a particular project or projects.
34.17    Subd. 2. Administrative issues. (a) The commission commissioner may select the
34.18administrator who shall serve for a four-year term. The administrator must demonstrate
34.19technical training, expertise, or experience in energy reliability issues, and may not have
34.20been a party or a participant in a commission energy proceeding for at least one year
34.21prior to selection by the commission commissioner. The commission commissioner
34.22shall oversee and direct the work of the administrator, annually review the expenses of
34.23the administrator, and annually approve the budget of the administrator. Pursuant to
34.24commission approval, The administrator may hire staff and may contract for technical
34.25expertise in performing duties when existing state resources are required for other state
34.26responsibilities or when special expertise is required. The salary of the administrator is
34.27governed by section 15A.0815, subdivision 2.
34.28    (b) Costs relating to a specific proceeding, analysis, or project are not general
34.29administrative costs. For purposes of this section, "energy utility" means public utilities,
34.30generation and transmission cooperative electric associations, and municipal power
34.31agencies providing natural gas or electric service in the state.
34.32    (c) The commission Department of Commerce shall pay:
34.33    (1) the general administrative costs of the administrator, not to exceed $1,000,000 in
34.34a fiscal year, and shall assess energy utilities for those administrative costs. These costs
34.35must be consistent with the budget approved by the commission commissioner under
34.36paragraph (a). The commission department shall apportion the costs among all energy
35.1utilities in proportion to their respective gross operating revenues from sales of gas or
35.2electric service within the state during the last calendar year, and shall then render a
35.3bill to each utility on a regular basis; and
35.4    (2) costs relating to a specific proceeding analysis or project and shall render a bill to
35.5the specific energy utility or utilities participating in the proceeding, analysis, or project
35.6directly, either at the conclusion of a particular proceeding, analysis, or project, or from
35.7time to time during the course of the proceeding, analysis, or project.
35.8    (d) For purposes of administrative efficiency, the commission department shall
35.9assess energy utilities and issue bills in accordance with the billing and assessment
35.10procedures provided in section 216B.62, to the extent that these procedures do not
35.11conflict with this subdivision. The amount of the bills rendered by the commission
35.12department under paragraph (c) must be paid by the energy utility into an account in the
35.13special revenue fund in the state treasury within 30 days from the date of billing and is
35.14appropriated to the commission department for the purposes provided in this section.
35.15The commission shall approve or approve as modified a rate schedule providing for the
35.16automatic adjustment of charges to recover amounts paid by utilities under this section.
35.17All amounts assessed under this section are in addition to amounts appropriated to the
35.18commission and the department by other law.
35.19    Subd. 3. Assessment and appropriation. In addition to the amount noted in
35.20subdivision 2, the commission commissioner may assess utilities, using the mechanism
35.21specified in that subdivision, up to an additional $500,000 annually through June 30,
35.222008. The amounts assessed under this subdivision are appropriated to the commission
35.23commissioner, and some or all of the amounts assessed may be transferred to the
35.24commissioner of administration, for the purposes specified in section 16B.325 and Laws
35.252001, chapter 212, article 1, section 3, as needed to implement those sections.
35.26    Subd. 4. Expiration. Subdivisions 1 and 2 expire June 30, 2007 2012. Subdivision
35.273 expires June 30, 2008.

35.28    Sec. 8. [216F.011] SIZE DETERMINATION.
35.29    (a) The total size of a combination of wind energy conversion systems for the
35.30purpose of determining jurisdictional siting authority under sections 216F.01 to 216F.07
35.31must be determined according to this section. The nameplate capacity of one wind energy
35.32conversion system must be combined with the nameplate capacity of any other wind
35.33energy conversion system that:
35.34    (1) is located within five miles of the wind energy conversion system;
36.1    (2) is constructed within the same 12-month period as the wind energy conversion
36.2system; and
36.3    (3) exhibits characteristics of being a single development, including but not limited
36.4to ownership structure, an umbrella sales arrangement, shared interconnection, revenue
36.5sharing arrangements, and common debt or equity financing.
36.6    (b) The commissioner shall prepare and make available the necessary forms and
36.7guidance for project developers to make a request for determination. Upon written
36.8request of a project developer, the commissioner of commerce shall provide a written
36.9determination under this section within 30 days of receipt of the request and information
36.10necessary to make a determination. In the case of a dispute, the chair of the Public Utilities
36.11Commission shall determine the total size of the system and shall draw all reasonable
36.12inferences in favor of combining the systems.
36.13    (c) An application to a county for a permit for a wind energy conversion system is
36.14not complete without a jurisdictional determination made under this section.

36.15    Sec. 9. [216F.08] PERMIT AUTHORITY; ASSUMPTION BY COUNTIES.
36.16    Subdivision 1. Definition. For the purposes of this subdivision, the term
36.17"processing" means:
36.18    (1) the distribution to applicants of application and determination forms provided
36.19by the commission;
36.20    (2) the receipt and examination of completed application forms, and the certification,
36.21in writing, to the commission either that the LWECS for which a permit was issued by the
36.22county will comply with applicable rules and standards or, if the facility will not comply,
36.23the respects in which a variance is required for the issuance of a permit; and
36.24    (3) rendering to applicants, upon request, assistance for the proper completion of
36.25an application.
36.26    Subd. 2. Counties; processing applications for LWECS site permits. (a) Any
36.27Minnesota county board may, by resolution and upon written notice to the Public Utilities
36.28Commission, assume responsibility for processing applications for permits required
36.29under this chapter for LWECS with a combined nameplate capacity of less than 25,000
36.30kilowatts. The responsibility for permit application processing, if assumed by a county,
36.31may be delegated by the county board to an appropriate county officer or employee.
36.32Processing by a county must be done in accordance with procedures and processes
36.33established under chapter 394.
36.34    (b) A county board that exercises its option under paragraph (a) and assumes
36.35responsibility for processing applications for permits for LWECS within its borders
37.1is responsible for issuing, denying, modifying, imposing conditions upon, or revoking
37.2permits under this section or rules adopted pursuant to it. The action of the county board
37.3with regard to a permit application is final, subject to appeal as provided in section 394.27.
37.4    (c) In adopting and enforcing rules or standards under this subdivision, the
37.5commission shall cooperate closely with counties and other governmental agencies.
37.6    (d) The commission shall work with counties and wind developers to notify and
37.7educate stakeholders with regard to rules or standards under this section at the time the
37.8rules or standards are being developed and adopted and at least every two years thereafter.
37.9    (e) The commission shall, by order, establish general permit standards governing site
37.10permits for LWECS under this section. These general permit standards must apply both to
37.11permits issued by counties and to permits issued by the commission directly for LWECS
37.12with a combined nameplate capacity of less than 25,000 kilowatts. The order must contain
37.13minimum standards necessary to ensure the protection of human health and safety and
37.14wind resources on adjacent land and must be consistent with the general provisions of wind
37.15permits issued by the commission in the five years prior to enactment of this provision.
37.16    (f) The commission and the commissioner of commerce shall provide technical
37.17assistance to a county with respect to the processing of LWECS site permit applications
37.18by the county.
37.19    (g) A county may adopt by ordinance standards for LWECS that are more stringent
37.20than standards in commission rules or in the commission's permit standards. The
37.21commission, in considering a permit for LWECS in a county that has adopted more
37.22stringent standards, shall incorporate and apply those more stringent standards, unless the
37.23commission finds there is good cause not to do so.

37.24    Sec. 10. Minnesota Statutes 2006, section 500.30, subdivision 2, is amended to read:
37.25    Subd. 2. Like any conveyance. Any property owner may grant a solar or wind
37.26easement in the same manner and with the same effect as a conveyance of an interest in
37.27real property. The easements shall be created in writing and shall be filed, duly recorded,
37.28and indexed in the office of the recorder of the county in which the easement is granted.
37.29No duly recorded easement shall be unenforceable on account of lack of privity of estate or
37.30privity of contract; such easements shall run with the land or lands benefited and burdened
37.31and shall constitute a perpetual easement, except that an easement may terminate upon the
37.32conditions stated therein or pursuant to the provisions of section 500.20. A wind easement
37.33or lease of wind rights shall also terminate after five years from the date the easement is
37.34created or lease is entered into, if a wind energy project on the property to which the
37.35easement or lease applies does not begin commercial operation within the five-year period.
38.1EFFECTIVE DATE.This section is effective the day following final enactment,
38.2and applies to wind easements created and wind rights leases entered into on and after
38.3the effective date of this section.

38.4    Sec. 11. STATEWIDE STUDY OF DISPERSED GENERATION POTENTIAL.
38.5    Subdivision 1. Definition. "Dispersed generation" means an electric generation
38.6project with a generating capacity between ten and 40 megawatts that utilizes an eligible
38.7energy technology, as defined in Minnesota Statutes, section 216B.1691, subdivision 1,
38.8paragraph (a).
38.9    Subd. 2. Study participants. Each electric utility subject to Minnesota Statutes,
38.10section 216B.1691, must participate collaboratively in conducting a two-phase study of
38.11the potential for dispersed generation projects that can be developed in Minnesota.
38.12    Subd. 3. First phase study content; report. In the first phase of the study,
38.13participants must analyze the impacts of the addition of a total of 600 megawatts of
38.14new dispersed generation projects distributed among the following Minnesota electric
38.15transmission planning zones: the Northeast zone, the Northwest zone, the Southeast
38.16zone, the Southwest zone, and the West-Central zone. Study participants must use a
38.17generally accepted 2010 year transmission system model including all transmission
38.18facilities expected to be operating in 2010. The study must take into consideration
38.19regional projected load growth, planned changes in the bulk transmission network, and the
38.20long-range transmission conceptual plan being developed under Laws 2007, chapter 3,
38.21section 2. In determining locations for the installation of dispersed generation projects
38.22that consist of wind energy conversion systems, the study should consider, at a minimum,
38.23wind resource availability, existing and contracted wind projects, and current dispersed
38.24generation projects in the Midwest Independent System Operator interconnection queue.
38.25The study must analyze the impacts of individual projects and all projects in aggregate on
38.26the transmission system, and identify specific modifications to the transmission system
38.27necessary to remedy any problems caused by the installation of dispersed generation
38.28projects, including cost estimates for the modifications. The study must analyze the
38.29additional dispersed generation projects connected at the lowest voltage level transmission
38.30that exists in the vicinity of the projected generation sites. A preliminary analysis to
38.31identify transmission system problems must be conducted with the projects installed
38.32at initially selected locations. The technical review committee may, after reviewing
38.33the locations selected for installation, recommend moving the installation sites to new
38.34locations to reduce undesirable transmission system impacts. The commissioner of
39.1commerce must submit a report containing the findings and recommendations of the first
39.2phase of the study to the commission no later than June 15, 2008.
39.3    Subd. 4. Second phase study content; report. In the second phase of the study,
39.4participants must analyze the impacts of an additional total of 600 megawatts of dispersed
39.5generation projects installed among the five transmission planning zones, or a higher total
39.6capacity amount if agreed to by both the utilities and the technical review committee. The
39.7utilities must employ an analysis method similar to that used in the first phase of the study,
39.8and must use the most recent information available, including information developed in
39.9the first phase. The second phase of the study must use a generally accepted 2013 year
39.10transmission system model including all transmission facilities that are expected to be
39.11in service at that time. The commissioner of commerce must submit a report containing
39.12the findings and recommendations of the second phase of the study to the commission no
39.13later than September 15, 2009.
39.14    Subd. 5. Technical review committee. Prior to the start of the first phase of
39.15the study, the commissioner of commerce shall appoint a technical review committee
39.16consisting of between ten and 15 individuals with experience and expertise in electric
39.17transmission system engineering, renewable energy generation technology, and dispersed
39.18generation project development, including representatives from the federal Department
39.19of Energy, the Midwest Independent System Operator, and stakeholder interests. The
39.20technical review committee must oversee both phases of the study, and must:
39.21    (1) make recommendations to the utilities regarding the proposed methods and
39.22assumptions to be used in the technical study;
39.23    (2) in conjunction with the appropriate utilities, hold public meetings on each phase
39.24of the study in each electricity transmission planning zone prior to the beginning of each
39.25phase of study, after the impact analysis is completed, and when a draft final report is
39.26available; and
39.27    (3) review the initial and final drafts of the study and make recommendations for
39.28improvement, including with respect to problems associated with the interconnections
39.29among utility systems that may be amenable to solution through cooperation between the
39.30utilities in each zone. During each phase of the study, the technical review committee
39.31may recommend that the installation of dispersed generation projects be moved to new
39.32locations that cause fewer undesirable transmission system impacts.

39.33    Sec. 12. TRANSFERRING RELIABILITY ADMINISTRATOR
39.34RESPONSIBILITIES.
40.1    All responsibilities, as defined in Minnesota Statutes, section 15.039, subdivision
40.21, held by the Public Utilities Commission relating to the reliability administrator under
40.3Minnesota Statutes, section 216C.052, are transferred to the Minnesota Department of
40.4Commerce under Minnesota Statutes, section 15.039.

40.5    Sec. 13. TRANSMISSION AUTHORITY AND INTERCONNECTION
40.6EVALUATIONS.
40.7    The reliability administrator shall, in consultation with interested stakeholders:
40.8    (1) review the structures, powers, and duties for constructing, owning, maintaining,
40.9and operating transmission facilities of state transmission authorities established in
40.10Kansas, North Dakota, South Dakota, and Wyoming, and evaluate whether the existence
40.11of a similar organization in Minnesota would have the potential to increase the reliability
40.12and efficiency of the electrical grid in the state; hasten the development of needed
40.13transmission lines; accelerate the development of renewable energy projects, especially in
40.14rural areas of the state; and reduce delivered energy costs to Minnesota ratepayers; and
40.15    (2) assess the potential for and barriers to interconnecting dispersed generation
40.16projects to locations on the electric grid where a generator interconnection would not be
40.17subject to the interconnection rules of the Federal Energy Regulatory Commission or the
40.18Midwest Independent System Operator.
40.19No technical or engineering analyses are necessary in order to complete these duties. The
40.20reliability administrator must report its findings and any recommendations to the chairs of
40.21the senate and house of representatives committees with jurisdiction over energy policy by
40.22February 15, 2008.

40.23    Sec. 14. REPEALER.
40.24Laws 2007, chapter 3, section 3, is repealed.

40.25ARTICLE 5

40.26GLOBAL WARMING MITIGATION

40.27    Section 1. [216H.001] FINDINGS; CITATION.
40.28    (a) The legislature finds that the state has a vital interest in preventing or mitigating
40.29harms associated with global warming and in reducing Minnesota's greenhouse gas
40.30emissions. The legislature recognizes that substantial reductions in emissions of
40.31greenhouse gases are necessary to avoid dangerous climate changes in the future. The
40.32legislature finds that taking steps to reduce Minnesota's greenhouse gas emissions today
40.33and planning for long-term reductions will reduce the need for more disruptive emission
41.1reductions later, and that to achieve the purposes of this act, all emissions associated
41.2with electricity generated or consumed within the state must be subject to the state's
41.3emissions-reduction goals. The legislature further finds that Minnesota's economy will
41.4benefit by showing leadership in the transition away from climate-damaging technologies
41.5and toward renewable power, biofuels, and energy efficiency. The legislature recognizes
41.6that achieving these ends will only occur by close cooperation with other states and may
41.7require the state to enter into binding agreements with other units of government.
41.8    (b) This chapter may be referred to as the Global Warming Mitigation Act of 2007.

41.9    Sec. 2. [216H.01] DEFINITIONS.
41.10    Subdivision 1. Scope. For the purposes of this chapter, the terms defined in this
41.11section have the meanings given them.
41.12    Subd. 2. Allowance. "Allowance" means limited authorization from a state
41.13regulatory agency to emit up to one ton of carbon dioxide or carbon dioxide equivalent
41.14into the atmosphere. This limited authorization does not constitute a property right.
41.15    Subd. 3. Cap and trade system. "Cap and trade system" means a regulatory system
41.16that imposes a limit on the aggregate air pollutant emissions of a group of sources, requires
41.17those subject to the cap to own an allowance for each ton of the air pollutant emitted, and
41.18allows for market-based trading of those allowances.
41.19    Subd. 4. Carbon dioxide equivalent. "Carbon dioxide equivalent" means the
41.20quantity of a given greenhouse gas multiplied by its global warming potential.
41.21    Subd. 5. Global warming potential. "Global warming potential" means a measure
41.22of the radiative efficiency or heat-absorbing ability of a particular gas relative to that of
41.23carbon dioxide after taking into account the decay rate of each gas, that is, the amount
41.24removed from the atmosphere over a given number of years, relative to that of carbon
41.25dioxide.
41.26    Subd. 6. Greenhouse gas emissions source. "Greenhouse gas emissions source"
41.27means any anthropogenic physical unit or process that releases greenhouse gases into
41.28the atmosphere.
41.29    Subd. 7. Greenhouse gases. "Greenhouse gases" include carbon dioxide, methane,
41.30nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride or any other
41.31chemical that is determined by the Pollution Control Agency to contribute comparably to
41.32global climate change and that is emitted by anthropogenic sources.
41.33    Subd. 8. New large energy facility. "New large energy facility" means a large
41.34energy facility, as defined in section 216B.2421, subdivision 2, clauses (1) to (8), that
41.35is not in operation as of January 1, 2007, but does not include a facility that (1) uses
42.1natural gas as a primary fuel, (2) is designed to provide peaking, emergency backup,
42.2or contingency services, (3) uses a simple cycle turbine technology, (4) is capable of
42.3achieving full load operations within 45 minutes of startup, and (5) has received a
42.4certificate of need under section 216B.243.
42.5    Subd. 9. Person. "Person" has the meaning given in section 216E.01.
42.6    Subd. 10. Statewide greenhouse gas emissions. "Statewide greenhouse gas
42.7emissions" means the total annual emissions of greenhouse gases within the state and all
42.8emissions of greenhouse gases from the generation of electricity imported from outside the
42.9state and consumed in Minnesota. Emissions associated with transmission and distribution
42.10line losses are included in this definition. Statewide emissions are expressed in tons of
42.11carbon dioxide equivalent. Carbon dioxide that is injected into geological formations to
42.12prevent its release to the atmosphere in compliance with applicable laws, and emissions
42.13associated with the combustion of fuels other than coal, petroleum, and natural gas are not
42.14counted as contributing to statewide greenhouse gas emissions.
42.15    Subd. 11. Statewide power sector carbon dioxide emissions. "Statewide power
42.16sector carbon dioxide emissions" means the total annual emissions of carbon dioxide from
42.17the generation of electricity within the state and all emissions of carbon dioxide from the
42.18generation of electricity imported from outside the state and consumed in Minnesota.
42.19Emissions associated with transmission and distribution line losses are included in this
42.20definition. Carbon dioxide that is injected into geological formations to prevent its release
42.21to the atmosphere in compliance with applicable laws, and emissions associated with
42.22the combustion of fuels other than coal, petroleum, and natural gas are not counted as
42.23contributing to statewide power sector carbon dioxide emissions.

42.24    Sec. 3. [216H.02] GREENHOUSE GAS EMISSIONS-REDUCTION GOALS.
42.25    It is the state's goal to reduce statewide greenhouse gas emissions to a level at least
42.2615 percent below 2005 emission levels by 2015, to a level at least 30 percent below 2005
42.27emission levels by 2025, and to a level at least 80 percent below 2005 emission levels
42.28by 2050.

42.29    Sec. 4. [216H.04] GREENHOUSE GAS EMISSIONS-REDUCTION PLAN.
42.30    Subdivision 1. Plan for achieving reductions. (a) By February 1, 2008, the
42.31commissioners of the Pollution Control Agency and the Department of Commerce shall
42.32submit a plan to the chairs of the senate and house of representatives committees with
42.33jurisdiction over energy and environmental policy that contains recommendations on how
42.34best to achieve the statewide greenhouse gas emissions-reduction goals established under
43.1section 216H.02. The plan must also identify how best to reduce statewide greenhouse gas
43.2emissions to a level at least 45 percent below 2005 levels by 2025. The plan must identify,
43.3develop, and integrate a full range of greenhouse gas emissions-reduction activities across
43.4all economic sectors, regions, and energy uses in the state, and estimate the costs and
43.5benefits of each action. The plan must:
43.6    (1) estimate statewide greenhouse gas emissions for 2005 and make projections of
43.7statewide greenhouse gas emissions for 2015, 2025, and 2050;
43.8    (2) estimate the statewide greenhouse gas emissions reductions anticipated from
43.9implementation of existing state policies;
43.10    (3) include a cap and trade system as described in subdivision 3;
43.11    (4) recommend additional policies to achieve statewide greenhouse gas
43.12emissions-reduction goals;
43.13    (5) include provisions that will ensure that existing policies are evaluated, and that at
43.14least every five years any policy changes needed to achieve the statewide greenhouse gas
43.15emissions-reduction goals are developed and recommended for legislative action;
43.16    (6) recommend a system to require the reporting of statewide greenhouse gas
43.17emissions, identifying which facilities must report, how emission estimates should be
43.18made, and other reporting requirements that will ensure the collection of emissions
43.19information needed to reliably document statewide greenhouse gas emission levels and
43.20implement the plan; and
43.21    (7) evaluate the option of exempting a project from the prohibitions contained in
43.22section 216H.05, subdivision 1, if the project contributes a specified fee per ton of carbon
43.23dioxide emissions emitted annually by the project, the proceeds of which would be used to
43.24fund permanent, quantifiable, verifiable, and enforceable reductions in greenhouse gas
43.25emissions that would not otherwise have occurred.
43.26    (b) In formulating the plan, the commissioners shall consider the broadest possible
43.27set of mechanisms to reduce emissions, including, but not limited to, expanding the
43.28electric sector cap and trade system established under subdivision 3 to include emissions
43.29sources other than electricity generation and greenhouse gases other than carbon dioxide;
43.30scheduling reductions of the emissions cap; imposing greenhouse gas taxes, fines, and
43.31other penalties; adopting emissions-reduction performance standards for sources of
43.32greenhouse gases; establishing financial or other incentives to promote activities that will
43.33reduce greenhouse gases; and enhancing existing policies that have the effect of lowering
43.34greenhouse gas emissions.
43.35    Subd. 2. Planning process. The plan required under subdivision 1 must be
43.36developed through a structured, broadly inclusive stakeholder-based review of potential
44.1policies and initiatives that can be implemented in Minnesota to reduce greenhouse gas
44.2emissions. The stakeholder-based review process must be conducted by a nationally
44.3recognized independent expert entity. The commissioner of commerce shall coordinate
44.4executive branch participation with this stakeholder process.
44.5    Subd. 3. Cap and trade system. (a) The plan must include a cap and trade system
44.6incorporating, at a minimum, statewide power sector carbon dioxide emissions. The
44.7cap and trade plan must:
44.8    (1) set an emissions cap at an initial level to prevent significant increases in statewide
44.9greenhouse gas emissions above current levels, with a schedule for lowering the cap
44.10periodically to help meet the state's emissions-reduction targets;
44.11    (2) maximize Minnesota's ability to enter into allowance trading relationships with
44.12other states that have established or are in the process of establishing a cap and trade
44.13system regulating greenhouse gas emissions;
44.14    (3) evaluate the feasibility of implementing a cap and trade system that does not
44.15encompass the entire United States, and identify the impacts on the efficiency and
44.16effectiveness of the cap and trade system if restricted to Minnesota alone, if expanded
44.17to include surrounding midwestern states, and if Minnesota were to join other emerging
44.18regional systems with states that are planning to implement a cap and trade system;
44.19    (4) evaluate whether and to what extent a party subject to the cap should receive
44.20credit for offsetting emissions by implementing projects that reduce greenhouse gas
44.21emissions from sources not subject to the cap or absorb and sequester greenhouse gases
44.22from the atmosphere;
44.23    (5) include methods to ensure that all emissions reductions associated with projects
44.24listed in clause (4) are permanent, quantifiable, verifiable, enforceable, and would not
44.25have otherwise occurred;
44.26    (6) be designed to ensure that the proceeds from auctioning allowances are used to
44.27benefit the public, including to help meet the state's emissions-reduction goals in the most
44.28efficient and least disruptive way;
44.29    (7) estimate likely allowance prices under various scenarios, including the impact
44.30on allowance prices of constructing additional power plants subject to the cap and trade
44.31system;
44.32    (8) recommend ways to minimize any rate impacts on energy consumers;
44.33    (9) suggest procedures to award appropriate credit to entities that have voluntarily
44.34reduced their greenhouse gas emissions prior to implementation of the cap and trade
44.35system;
45.1    (10) ensure to the extent practicable that emissions reductions made in this state do
45.2not cause emissions increases outside the state;
45.3    (11) identify technologies and industries likely to thrive in a carbon-constrained
45.4future;
45.5    (12) maximize economic development in rural areas from the development of
45.6renewable energy sources and proven terrestrial sequestration practices; and
45.7    (13) suggest methods to calculate carbon dioxide emissions associated with
45.8electricity imported from outside the state.
45.9    Subd. 4. Regional activities. It shall be an executive branch responsibility to work
45.10with other states in the midwest region to develop and implement a regional approach to
45.11reducing greenhouse gas emissions from activities in the region, including consulting
45.12on expanding the cap and trade system described in subdivision 3. The commissioner
45.13of commerce shall coordinate Minnesota's regional activities under this subdivision
45.14and report to the legislative committees in the senate and house of representatives with
45.15jurisdiction over energy and environmental policy by February 1, 2008, and February 1,
45.162009, on the progress made and recommendations for further action.

45.17    Sec. 5. [216H.05] NO LONG-TERM INCREASE FROM POWER PLANTS.
45.18    Subdivision 1. Long-term increased emissions from power plants prohibited.
45.19    Until the cap and trade system described in section 216H.04, subdivision 3, is fully
45.20implemented, and except as allowed in subdivision 2, no person shall:
45.21    (1) construct within the state a new large energy facility that would contribute to
45.22statewide power sector carbon dioxide emissions;
45.23    (2) import or commit to import from outside the state power from a new large energy
45.24facility that would contribute to statewide power sector carbon dioxide emissions; or
45.25    (3) enter into a new long-term power purchase agreement that would increase
45.26statewide power sector carbon dioxide emissions. For purposes of this section, a long-term
45.27power purchase agreement means an agreement to purchase 50 megawatts of capacity or
45.28more for a term exceeding five years. This prohibition does not apply to an agreement in
45.29effect as of January 1, 2007, nor to the renewal of such an agreement.
45.30    Subd. 2. Exception for facilities that offset emissions. (a) The prohibitions in
45.31subdivision 1 do not apply if the project proponent demonstrates to the Public Utilities
45.32Commission's satisfaction that it will offset the new contribution to statewide power sector
45.33carbon dioxide emissions with a carbon dioxide reduction project identified in paragraph
45.34(b) and in compliance with paragraph (c).
46.1    (b) A project proponent may offset the new contribution to statewide power sector
46.2carbon dioxide emissions in either, or a combination of both, of the following ways:
46.3    (1) by reducing an existing facility's contribution to statewide power sector carbon
46.4dioxide emissions in an amount equal to or greater than the proposed new contribution to
46.5statewide power sector carbon dioxide emissions; or
46.6    (2) by purchasing carbon dioxide allowances from a state or group of states that
46.7has a mandatory carbon dioxide cap and trade system in place that produces verifiable
46.8emissions reductions.
46.9    (c) The Public Utilities Commission shall not find that a proposed carbon dioxide
46.10reduction project identified in paragraph (b) acceptably offsets a new contribution
46.11to statewide power sector carbon dioxide emissions unless the proposed offsets are
46.12permanent, quantifiable, verifiable, enforceable, and would not have otherwise occurred.
46.13Emissions that have been offset under this subdivision and emissions exempted under
46.14subdivision 3 continue to be subject to the requirements of the cap and trade system
46.15described in section 216H.04, subdivision 3, when implemented.
46.16    Subd. 3. Exception for new steel production facility. The prohibitions in
46.17subdivision 1 do not apply to increases in statewide power sector carbon dioxide
46.18emissions from that portion of a new large energy facility or new long-term power
46.19purchase agreement that supplies electricity to a new steel production project located in a
46.20taconite tax relief area that has applied for an air quality permit from the Pollution Control
46.21Agency prior to January 1, 2007, provided that the commission determines that the new
46.22steel production project is designed to meet the highest energy efficiency standards in its
46.23industry.
46.24    Subd. 4. Enforcement. Whenever the commission or department determines that
46.25any person is violating or about to violate this section, it shall refer the matter to the
46.26attorney general who shall take appropriate legal action. This section may be enforced by
46.27the attorney general on the same basis as a law listed in section 8.31, subdivision 1.

46.28    Sec. 6. [216H.06] GREENHOUSE GAS EMISSIONS CONSIDERATION IN
46.29RESOURCE PLANNING.
46.30    By January 1, 2008, the Public Utilities Commission shall establish an estimate of
46.31the likely range of costs of future carbon dioxide regulation on electricity generation.
46.32The estimate, which may be made in a commission order, must be used in all electricity
46.33generation resource acquisition proceedings. The estimates, and annual updates, must be
46.34made following informal proceedings that allow interested parties to submit comments.

47.1    Sec. 7. [216H.07] ENFORCEABILITY.
47.2    In addition to any other remedies provided by law, the failure to carry out any
47.3requirement established by or pursuant to this chapter shall be treated as a violation of an
47.4environmental standard and is enforceable under chapter 116B.

47.5ARTICLE 6

47.6RENEWABLE ENERGY STANDARDS

47.7    Section 1. Minnesota Statutes 2006, section 216B.1691, subdivision 5, as amended by
47.8Laws 2007, chapter 3, section 1, subdivision 5, is amended to read:
47.9    Subd. 5. Technology based on fuel combustion. (a) Electricity produced by fuel
47.10combustion through fuel blending or co-firing under paragraph (b) may only count toward
47.11a utility's objectives or standards if the generation facility:
47.12    (1) was constructed in compliance with new source performance standards
47.13promulgated under the federal Clean Air Act for a generation facility of that type; or
47.14    (2) employs the maximum achievable or best available control technology available
47.15for a generation facility of that type.
47.16    (b) An eligible energy technology may blend or co-fire a fuel listed in subdivision
47.171, paragraph (a), clause (1) (5), with other fuels in the generation facility, but only the
47.18percentage of electricity that is attributable to a fuel listed in that clause can be counted
47.19toward an electric utility's renewable energy objectives.

47.20    Sec. 2. Minnesota Statutes 2006, section 216B.1691, subdivision 7, as added by Laws
47.212007, chapter 3, section 1, subdivision 7, is amended to read:
47.22    Subd. 7. Compliance. The commission must regularly investigate whether an
47.23electric utility is in compliance with its good-faith objective under subdivision 2 and
47.24standard obligation under subdivision 2a. If the commission finds noncompliance, it may
47.25order the electric utility to construct facilities, purchase energy generated by eligible
47.26energy technology, purchase renewable energy credits, or engage in other activities
47.27to achieve compliance. If an electric utility fails to comply with an order under this
47.28subdivision, the commission may impose a financial penalty on the electric utility in an
47.29amount not to exceed the estimated cost of the electric utility to achieve compliance. The
47.30penalty may not exceed the lesser of the cost of constructing facilities or purchasing
47.31credits. The commission must deposit financial penalties imposed under this subdivision
47.32in the energy and conservation account established in the special revenue fund under
47.33section 216B.241, subdivision 2a. This subdivision is in addition to and does not limit any
47.34other authority of the commission to enforce this section.