HF 1052

as introduced - 87th Legislature (2011 - 2012) Posted on 03/14/2011 10:06am

A bill for an act
relating to energy; permitting certain energy customers to seek exemptions from a
utility's conservation investment program; making clarifying changes; amending
Minnesota Statutes 2010, sections 216B.02, by adding a subdivision; 216B.16,
subdivision 6b; 216B.1636, subdivision 1; 216B.241, subdivisions 1, 1a, 2.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2010, section 216B.02, is amended by adding a
subdivision to read:

new text begin Subd. 1b. new text end

new text begin Commissioner. new text end

new text begin "Commissioner" means the commissioner of the
Minnesota Department of Commerce.
new text end

Sec. 2.

Minnesota Statutes 2010, section 216B.16, subdivision 6b, is amended to read:

Subd. 6b.

Energy conservation improvement.

(a) Except as otherwise provided
in this subdivision, all investments and expenses of a public utility as defined in section
216B.241, subdivision 1, paragraph (i), incurred in connection with energy conservation
improvements shall be recognized and included by the commission in the determination of
just and reasonable rates as if the investments and expenses were directly made or incurred
by the utility in furnishing utility service.

(b) new text begin The commission shall not include new text end investments and expenses for energy
conservation improvements deleted text begin shall not be included by the commission deleted text end in deleted text begin the determination
of deleted text end new text begin determining new text end (i) just and reasonable electric and gas rates for retail electric and gas
service provided to large electric customer facilities that have been exempted by the
commissioner deleted text begin of the department pursuant to deleted text end new text begin under new text end section 216B.241, subdivision 1a,
paragraph (b); or (ii) just and reasonable gas rates for large energy facilities new text begin , large gas
customer facilities that have been exempted by the commissioner under section 216B.241,
subdivision 1a, paragraph (d), or by the commission under section 216B.241, subdivision
2, or commercial gas customer facilities that are not large gas customer facilities that have
been exempted by the commissioner under section 216B.241, subdivision 1a, paragraph
(e), or by the commission under section 216B.241, subdivision 2 new text end .

(c) The commission may permit a public utility to file rate schedules providing for
annual recovery of the costs of energy conservation improvements. These rate schedules
may be applicable to less than all the customers in a class of retail customers if necessary
to reflect the requirements of section 216B.241. The commission shall allow a public
utility, without requiring a general rate filing under this section, to reduce the electric and
gas rates applicable to large electric customer facilities that have been exempted by the
commissioner deleted text begin of the department pursuant to deleted text end new text begin under new text end section 216B.241, subdivision 1a,
paragraph (b) new text begin , or by the commission under section 216B.241, subdivision 2 new text end , and to reduce
the gas rate applicable to a large energy facility new text begin , a large gas customer facility or commercial
gas customer facility that is not a large gas customer facility that has been exempted by
the commissioner under section 216B.241, subdivision 1a, paragraph (d) or (e), or by
the commission under section 216B.241, subdivision 2, new text end by an amount that reflects the
elimination of energy conservation improvement investments or expenditures for those
facilities. In the event that the commission has set electric or gas rates based on the use of
an accounting methodology that results in the cost of conservation improvements being
recovered from utility customers over a period of years, the rate reduction may occur in a
series of steps to coincide with the recovery of balances due to the utility for conservation
improvements made by the utility on or before December 31, 2007.

(d) Investments and expenses of a public utility shall not include electric utility
infrastructure costs as defined in section 216B.1636, subdivision 1, paragraph (b).

Sec. 3.

Minnesota Statutes 2010, section 216B.1636, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(a) "Electric utility" means a public utility as defined in
section 216B.02, subdivision 4, that furnishes electric service to retail customers.

(b) "Electric utility infrastructure costs" or "EUIC" means costs for electric utility
infrastructure projects that were not included in the electric utility's rate base in its most
recent general rate case.

(c) "Electric utility infrastructure projects" means projects owned by an electric
utility that:

(1) replace or modify existing electric utility infrastructure, including utility-owned
buildings, if the replacement or modification is shown to conserve energy or use energy
more efficiently, consistent with section 216B.241, subdivision 1c; or

(2) conserve energy or use energy more efficiently by using waste heat recovery
converted into electricity as defined in section 216B.241, subdivision 1, paragraph deleted text begin (n) deleted text end new text begin (o) new text end .

Sec. 4.

Minnesota Statutes 2010, section 216B.241, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

For purposes of this section and section 216B.16,
subdivision 6b, the terms defined in this subdivision have the meanings given them.

(a) "Commission" means the Public Utilities Commission.

(b) "Commissioner" means the commissioner of commerce.

(c) "Customer facility" means all buildings, structures, equipment, and installations
at a single site.

(d) "Department" means the Department of Commerce.

(e) "Energy conservation" means demand-side management of energy supplies
resulting in a net reduction in energy use. Load management that reduces overall energy
use is energy conservation.

(f) "Energy conservation improvement" means a project that results in energy
efficiency or energy conservation. Energy conservation improvement may include waste
heat recovery converted into electricity but does not include electric utility infrastructure
projects approved by the commission under section 216B.1636.

(g) "Energy efficiency" means measures or programs, including energy conservation
measures or programs, that target consumer behavior, equipment, processes, or devices
designed to produce either an absolute decrease in consumption of electric energy or
natural gas or a decrease in consumption of electric energy or natural gas on a per unit
of production basis without a reduction in the quality or level of service provided to
the energy consumer.

(h) "Gross annual retail energy sales" means annual electric sales to all retail
customers in a utility's or association's Minnesota service territory or natural gas
throughput to all retail customers, including natural gas transportation customers, on a
utility's distribution system in Minnesota. For purposes of this section, gross annual
retail energy sales exclude new text begin :
new text end

new text begin (1) new text end gas sales to new text begin :
new text end

new text begin (i) new text end a large energy facility new text begin ;
new text end

new text begin (ii) a large gas customer facility exempted by the commissioner under subdivision
1a, paragraph (d), or by the commission under section 216B.241, subdivision 2; and
new text end

new text begin (iii) a commercial gas customer facility exempted by the commissioner under
subdivision 1a, paragraph (e), or by the commissioner under section 216B.241, subdivision
2; new text end and

new text begin (2) new text end gas and electric sales to a large electric customer facility exempted by the
commissioner under subdivision 1a, paragraph (b) new text begin , or by the commission under
subdivision 2 new text end .

(i) "Investments and expenses of a public utility" includes the investments and
expenses incurred by a public utility in connection with an energy conservation
improvement, including but not limited to:

(1) the differential in interest cost between the market rate and the rate charged on a
no-interest or below-market interest loan made by a public utility to a customer for the
purchase or installation of an energy conservation improvement;

(2) the difference between the utility's cost of purchase or installation of energy
conservation improvements and any price charged by a public utility to a customer for
such improvements.

(j) "Large electric customer facility" means a customer facility that imposes a
peak electrical demand on an electric utility's system of not less than 20,000 kilowatts,
measured in the same way as the utility that serves the customer facility measures
electrical demand for billing purposes, and for which electric services are provided at
retail on a single bill by a utility operating in the state.

(k) "Large energy facility" has the meaning given it in section 216B.2421,
subdivision 2, clause (1).

(l) new text begin "Large gas customer facility" means a customer facility that consumes 500
million cubic feet or more of natural gas annually.
new text end

new text begin (m) new text end "Load management" means an activity, service, or technology to change the
timing or the efficiency of a customer's use of energy that allows a utility or a customer to
respond to wholesale market fluctuations or to reduce peak demand for energy or capacity.

deleted text begin (m) deleted text end new text begin (n) new text end "Low-income programs" means energy conservation improvement programs
that directly serve the needs of low-income persons, including low-income renters.

deleted text begin (n) deleted text end new text begin (o) new text end "Waste heat recovery converted into electricity" means an energy recovery
process that converts otherwise lost energy from the heat of exhaust stacks or pipes used
for engines or manufacturing or industrial processes, or the reduction of high pressure
in water or gas pipelines.

Sec. 5.

Minnesota Statutes 2010, section 216B.241, subdivision 1a, is amended to read:

Subd. 1a.

Investment, expenditure, and contribution; public utility.

(a) For
purposes of this subdivision and subdivision 2, "public utility" has the meaning given it
in section 216B.02, subdivision 4. Each public utility shall spend and invest for energy
conservation improvements under this subdivision and subdivision 2 the following
amounts:

(1) for a utility that furnishes gas service, 0.5 percent of its gross operating revenues
from service provided in the state;

(2) for a utility that furnishes electric service, 1.5 percent of its gross operating
revenues from service provided in the state; and

(3) for a utility that furnishes electric service and that operates a nuclear-powered
electric generating plant within the state, two percent of its gross operating revenues
from service provided in the state.

For purposes of this paragraph (a), "gross operating revenues" do not include
revenues from large electric customer facilities exempted by the commissioner under
paragraph (b).

(b) The owner of a large electric customer facility may petition the commissioner
to exempt both electric and gas utilities serving the large energy customer facility from
the investment and expenditure requirements of paragraph (a) with respect to retail
revenues attributable to the facility. At a minimum, the petition must be supported by
evidence relating to competitive or economic pressures on the customer and a showing
by the customer of reasonable efforts to identify, evaluate, and implement cost-effective
conservation improvements at the facility. If a petition is filed on or before October 1 of
any year, the order of the commissioner to exempt revenues attributable to the facility can
be effective no earlier than January 1 of the following year. The commissioner shall not
grant an exemption if the commissioner determines that granting the exemption is contrary
to the public interest. The commissioner may, after investigation, rescind any exemption
granted under this paragraph upon a determination that the customer is not continuing
to make reasonable efforts to identify, evaluate, and implement energy conservation
improvements at the large electric customer facility. For the purposes of investigations
by the commissioner under this paragraph, the owner of any large electric new text begin or large gas
new text end customer facility shall, upon request, provide the commissioner with updated information
comparable to that originally supplied in or with the owner's original petition under this
paragraph.

(c) The commissioner may require investments or spending greater than the amounts
required under this subdivision for a public utility whose most recent advance forecast
required under section 216B.2422 or 216C.17 projects a peak demand deficit of 100
megawatts or greater within five years under midrange forecast assumptions.

(d) new text begin The owner of a large gas customer facility may petition the commissioner
to exempt a gas utility serving the large gas customer facility from the investment and
expenditure requirements of paragraph (a) with respect to retail revenues attributable
to the facility. At a minimum, the petition must be supported by evidence relating to
competitive or economic pressures on the customer and a showing by the customer
of reasonable efforts to identify, evaluate, and implement cost-effective conservation
improvements at the facility. If a petition is filed on or before October 1 of any year, the
order of the commissioner to exempt revenues attributable to the facility can be effective
no earlier than January 1 of the following year. The commissioner shall not grant an
exemption if the commissioner determines that granting the exemption is contrary to the
public interest. The commissioner may, after investigation, rescind any exemption granted
under this paragraph upon a determination that the customer is not continuing to make
reasonable efforts to identify, evaluate, and implement energy conservation improvements
at the large gas customer facility. For the purposes of investigations by the commissioner
under this paragraph, the owner of any large gas customer facility shall, upon request,
provide the commissioner with updated information comparable to that originally supplied
in or with the owner's original petition under this paragraph.
new text end

new text begin (e) A commercial gas customer facility that is not a large gas customer facility may
petition the commissioner to exempt gas utilities serving the commercial gas customer
facility from the investment and expenditure requirements of paragraph (a) with respect
to retail revenues attributable to the facility. The petition must be supported by evidence
demonstrating that the commercial gas customer facility has or can reasonably acquire the
capability to bypass use of the utility's gas distribution system by obtaining natural gas
directly from a supplier not regulated by the commission.
new text end

new text begin (f) new text end A public utility or owner of a large electric new text begin or large gas new text end customer facility new text begin , or of a
commercial gas customer facility that is not a large gas customer facility, new text end may appeal a
decision of the commissioner under paragraph (b) deleted text begin or deleted text end new text begin , new text end (c) new text begin , (d), or (e) new text end to the commission
under subdivision 2. In reviewing a decision of the commissioner under paragraph (b)
deleted text begin or deleted text end new text begin , new text end (c) new text begin , (d), or (e) new text end , the commission shall rescind the decision if it finds that the required
investments or spending will:

(1) not result in cost-effective energy conservation improvements; or

(2) otherwise not be in the public interest.

Sec. 6.

Minnesota Statutes 2010, section 216B.241, subdivision 2, is amended to read:

Subd. 2.

Programs.

(a) The commissioner may require public utilities to make
investments and expenditures in energy conservation improvements, explicitly setting
forth the interest rates, prices, and terms under which the improvements must be offered to
the customers. The required programs must cover no more than a three-year period. Public
utilities shall file conservation improvement plans by June 1, on a schedule determined by
order of the commissioner, but at least every three years. Plans received by a public utility
by June 1 must be approved or approved as modified by the commissioner by December
1 of that same year. The commissioner shall evaluate the program on the basis of
cost-effectiveness and the reliability of technologies employed. The commissioner's order
must provide to the extent practicable for a free choice, by consumers participating in the
program, of the device, method, material, or project constituting the energy conservation
improvement and for a free choice of the seller, installer, or contractor of the energy
conservation improvement, provided that the device, method, material, or project seller,
installer, or contractor is duly licensed, certified, approved, or qualified, including under
the residential conservation services program, where applicable.

(b) The commissioner may require a utility to make an energy conservation
improvement investment or expenditure whenever the commissioner finds that the
improvement will result in energy savings at a total cost to the utility less than the cost
to the utility to produce or purchase an equivalent amount of new supply of energy. The
commissioner shall nevertheless ensure that every public utility operate one or more
programs under periodic review by the department.

(c) Each public utility subject to subdivision 1a may spend and invest annually up to
ten percent of the total amount required to be spent and invested on energy conservation
improvements under this section by the utility on research and development projects
that meet the definition of energy conservation improvement in subdivision 1 and that
are funded directly by the public utility.

(d) A public utility may not spend for or invest in energy conservation improvements
that directly benefit a large energy facility or a large electric customer facility for which
the commissioner has issued an exemption pursuant to subdivision 1a, paragraph (b).
The commissioner shall consider and may require a utility to undertake a program
suggested by an outside source, including a political subdivision, a nonprofit corporation,
or community organization.

(e) A utility, a political subdivision, or a nonprofit or community organization
that has suggested a program, the attorney general acting on behalf of consumers and
small business interests, or a utility customer that has suggested a program and is not
represented by the attorney general under section 8.33 may petition the commission to
modify or revoke a department decision under this section, and the commission may do
so if it determines that the program is not cost-effective, does not adequately address the
residential conservation improvement needs of low-income persons, has a long-range
negative effect on one or more classes of customers, or is otherwise not in the public
interest. The commission shall reject a petition that, on its face, fails to make a reasonable
argument that a program is not in the public interest.

(f) The commissioner may order a public utility to include, with the filing of the
utility's proposed conservation improvement plan under paragraph (a), the results of an
independent audit of the utility's conservation improvement programs and expenditures
performed by the department or an auditor with experience in the provision of energy
conservation and energy efficiency services approved by the commissioner and chosen by
the utility. The audit must specify the energy savings or increased efficiency in the use
of energy within the service territory of the utility that is the result of the spending and
investments. The audit must evaluate the cost-effectiveness of the utility's conservation
programs.

new text begin (g) A gas utility may not spend for or invest in energy conservation improvements
that directly benefit a large gas customer facility or commercial gas customer facility that
is not a large gas customer facility for which the commissioner has issued an exemption
pursuant to subdivision 1a, paragraph (d) or (e). The commissioner shall consider and
may require a utility to undertake a program suggested by an outside source, including a
political subdivision, a nonprofit corporation, or community organization.
new text end

Sec. 7. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 to 6 are effective the day following final enactment.
new text end