HF 1130

as introduced - 88th Legislature (2013 - 2014) Posted on 03/04/2013 01:52pm

A bill for an act
relating to energy; establishing rate schedules for certain renewable energy
projects; establishing surcharge on electricity consumption; requiring reports;
proposing coding for new law in Minnesota Statutes, chapter 216B.

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

Section 1.

[216B.152] CITATION.

Sections 216B.152 to 216B.1565 may be referred to as the "Energy Security and
Economic Development Act of 2013."

Sec. 2.

[216B.1525] DEFINITIONS.

Subdivision 1.

Scope.

For purposes of sections 216B.152 to 216B.1565, the
following terms have the meanings given them.

Subd. 2.

Capacity.

"Capacity" means the nameplate capacity of a renewable
electricity generator.

Subd. 3.

Community-based energy development project or C-BED project.

"Community-based energy development project" or "C-BED project" has the meaning
given in section 216B.1612, subdivision 2, paragraph (h).

Subd. 4.

Electric utility.

"Electric utility" means a public utility providing electric
service, or a generation or cooperative electric association that elects to be subject to rate
regulation by the commission under section 216B.026.

Subd. 5.

Electrical distribution system.

"Electrical distribution system" means
that portion of the electric power system over which the Federal Energy Regulatory
Commission does not have authority to interconnect electric generators that sell electricity
in intrastate commerce only.

Subd. 6.

Open field project.

"Open field project" means a photovoltaic device that
has no physical connection to a building other than electric lines to transport electricity.

Subd. 7.

Photovoltaic device.

"Photovoltaic device" has the meaning given in
section 216C.06, subdivision 16.

Subd. 8.

Qualifying owner.

"Qualifying owner" has the meaning given in section
216B.1612, subdivision 2, paragraph (c).

Subd. 9.

Reasonable profit.

"Reasonable profit" means a rate of profit equal to the
average rate of return on equity approved by the commission in general rate cases for
electric utilities during the previous 12 months.

Subd. 10.

Renewable electricity generator.

"Renewable electricity generator"
means a project:

(1) that generates electrical energy by means of a wind energy conversion system,
photovoltaic device, or anaerobic digester; and

(2) in which one or more qualifying owners has at least a 51 percent ownership
interest.

Subd. 11.

Rooftop project.

"Rooftop project" means a project in which a
photovoltaic device is physically attached to the roof of a building.

Subd. 12.

Wind energy conversion system or WECS.

"Wind energy conversion
system" or "WECS" has the meaning given in section 216C.06, subdivision 19.

Sec. 3.

[216B.153] STANDARD RENEWABLE RATE ESTABLISHED.

A standard renewable rate is established to provide opportunities for Minnesotans
to own and invest in renewable electricity generation by requiring utilities to purchase
electrical energy at a just and reasonable price from Minnesota-owned renewable
electricity generation projects connected to the electrical distribution system consistent
with the standard terms and rates provided in sections 216B.152 to 216B.1565.

Sec. 4.

[216B.1535] STANDARD RENEWABLE RATE.

Subdivision 1.

Utilities to offer standard renewable rate.

By December 1,
2013, each electric utility providing electric service at retail shall file for commission
approval a standard renewable rate consistent with this section. Within 90 days of the first
commission approval order under this section, each cooperative electric association,
generation and transmission cooperative electric association, and municipal power agency
shall adopt a standard renewable rate as consistent as possible with this section.

Subd. 2.

Standard renewable rate objective.

The objective of the standard
renewable rate is to promote a rate of development of renewable electricity generators
that will contribute significantly to accomplishing the renewable energy objectives and
standards in section 216B.1691, subdivisions 2 and 2a.

Subd. 3.

Application.

The standard renewable rate applies to:

(1) a wind energy conversion system with a capacity no greater than seven
megawatts; and

(2) a photovoltaic system with a capacity no greater than 500 kilowatts.

Subd. 4.

Standard renewable rate components.

The standard renewable rate
has two components:

(1) the utility purchasing the energy shall pay the highest price determined under
section 216B.164, based on project size; and

(2) an incentive payment paid from the public benefits surcharge account established
in section 216B.155 equal to the difference between the standard renewable rate for the
relevant project type and size determined under this section and the amount in clause (1).

Subd. 5.

Standard renewable rate terms.

An electric utility shall enter into a
power purchase agreement with the qualifying owners of a renewable electricity generator
connected to the electrical distribution system to purchase all of the electricity produced
by the renewable electricity generator. The term of the power purchase agreement must
not be less than 20 years from the date of commissioning of the renewable electricity
generator. The rates of the power purchase agreement must be the rates established by
the commission under subdivision 7 or 8. The standard renewable rates established under
this section must remain constant over the entire term of a power purchase agreement,
except as provided for in subdivision 6.

Subd. 6.

Standard renewable rate; interim values.

Until the commission
determines the final standard renewable rates under subdivision 7, the interim standard
renewable rates are:

(1) for wind energy conversion systems during the first five years following
commissioning of a project, $....... per kilowatt-hour;

(2) for wind energy conversion systems during years six through 20 following
commissioning of a project:

(i) whose capacity is 40 kilowatts or less, $....... per kilowatt-hour;

(ii) whose capacity exceeds 40 kilowatts but is no greater than 100 kilowatts, $.......
per kilowatt-hour;

(iii) whose capacity exceeds 100 kilowatts but is no greater than 1,000 kilowatts,
$....... per kilowatt-hour; and

(iv) whose capacity exceeds 1,000 kilowatts but is no greater than seven megawatts,
$....... per kilowatt-hour;

(3) for open field or rooftop solar photovoltaic devices:

(i) whose capacity is five kilowatts or less, $....... per kilowatt-hour;

(ii) whose capacity exceeds five kilowatts but is no greater than ten kilowatts, $.......
per kilowatt-hour;

(iii) whose capacity exceeds ten kilowatts but is no greater than 100 kilowatts,
$....... per kilowatt-hour; and

(iv) whose capacity exceeds 100 kilowatts but is less than 500 kilowatts, $.......
per kilowatt-hour.

Subd. 7.

Standard renewable rate; final values.

(a) By October 1, 2013, the
commission shall determine a final standard rate for each project type and size listed
in subdivision 6. The commission shall review each interim standard renewable rate
established in subdivision 6 to determine if it is a reasonable approximation of the rate
that would be established by applying the criteria in this subdivision. If the commission
so determines, it shall approve the interim standard renewable rate as a final standard
renewable rate. Otherwise, the commission shall calculate the final standard renewable
rate by applying the criteria in paragraph (b).

(b) The commission shall calculate a final standard renewable rate by first
determining, for each project type and size listed in subdivision 6:

(1) the cost of generation, based on economic analysis;

(2) the amount of federal, state, and utility subsidies, including grants, tax credits,
and rebates, that a renewable electricity generator is likely to obtain for such projects,
but excluding tradeable renewable energy credits, a tax under chapter 272, or financial
incentives available to businesses that do not generate electricity from renewable sources;

(3) a reasonable profit; and

(4) any adjustment the commission determines is the minimum amount necessary to
ensure that the objective in subdivision 2 is met.

(c) The commission shall calculate the standard renewable rate by adding the
amounts in paragraph (b), clauses (1), (3), and (4), and subtracting the amount in
paragraph (b), clause (2), from the total.

(d) The commission shall not approve a standard rate exceeding $....... per
kilowatt-hour.

Subd. 8.

Standard renewable rate review and adjustment.

(a) Beginning
February 1, 2015, and annually thereafter, the commission shall review the standard
renewable rate and, if it determines that the standard renewable rate is not a reasonable
approximation of the rate that would be calculated under subdivision 7, paragraph (b),
using the most recent available data, or is not efficacious in achieving the objectives
described in subdivision 2, may adjust the standard renewable rate. In determining
whether the standard renewable rate should be adjusted, the commission shall consider:

(1) the rate of penetration of wind, photovoltaic devices, and anaerobic digester
facilities in Minnesota's electricity generation sector, as compared with the state's
renewable energy goals enumerated in section 216B.1691, subdivision 2a;

(2) whether the implementation of a standard obligation has been modified by the
commission under section 216B.1691, subdivision 2b; and

(3) the account balance in the public benefits surcharge account established under
section 216B.155.

(b) The commission may not approve a standard renewable rate that is less than the
cost of generating electricity from a renewable electricity generator plus a reasonable profit.

(c) After notice and hearing and upon finding that the objectives in section 216B.1691
are not likely to be met without extending this standard renewable rate to renewable
electricity projects connected to the electrical transmission system, the commission may
require electric utilities to enter into power purchase agreements with qualifying owners at
rates in accordance with subdivisions 6 to 8 as are necessary to achieve those objectives.

Subd. 9.

Sale to nonqualifying owners limited.

During the term of a power
purchase agreement entered into under the standard renewable rate established in this
section, no qualifying owner may voluntarily sell its ownership interest in the renewable
energy generator unless the sale is to another qualifying owner and is approved by the
commission. This subdivision does not restrict transfers of interest by means other than
voluntary sales.

Subd. 10.

Ownership limit.

A single qualifying or nonqualifying owner receiving
payments under a standard renewable rate established in this section may own:

(1) up to 100 percent of a single project for each of the three technologies eligible
to receive such payments, but may own no more than 15 percent of any other project
receiving a standard renewable rate under this section; and

(2) in aggregate, projects or portions of projects with a combined capacity of no
more than 12 megawatts.

Subd. 11.

WECS capacity calculation.

For the purposes of this section and section
216B.1555, the total size of a wind energy conversion system must be determined in the
same manner as in section 216C.41, subdivision 5, paragraphs (b) and (c).

Subd. 12.

Interconnection.

(a) The standard renewable rate in this section must
provide that electric utilities will interconnect renewable energy generators to the electrical
distribution system under the jurisdiction of the commission to the maximum extent of
state jurisdiction allowed under federal law.

(b) The commission shall consult with the Federal Energy Regulatory Commission,
the Midwest Independent Transmission System Operator, Incorporated, and other
appropriate entities to establish an interconnection request review procedure to promptly
and efficiently determine whether or not the commission may interconnect a renewable
energy generator that requests interconnection under state authority.

(c) The commission shall issue orders necessary to establish interconnection
standard renewable rates for the standardized, cost-effective, timely, reliable, and safe
interconnection of renewable electricity generators under state authority.

(d) The commission shall establish standard interconnection contracts and
interconnection schedules.

(e) An electric utility's costs associated with the interconnection of renewable
electricity generators, including direct interconnection costs, distribution system
enhancements, and electric utility compliance costs, are recoverable as provided in section
216B.154.

Subd. 13.

Standard contract.

The commission shall approve a standard contract to
be used in all power purchase agreements under the standard renewable rate established
under this section. The contract must include the price paid for each kilowatt-hour
generated, a method to adjust the price for inflation, and the duration of the contract.

Sec. 5.

[216B.154] COST RECOVERY.

The commission shall require an electric utility to file rate schedules containing
provisions for the automatic adjustment of charges for electric utility service in direct
relation to the cost of electricity purchased from renewable electricity generators under
the standard renewable rate established under sections 216B.152 to 216B.1565 and all
other costs required to comply with the standard renewable rate established under section
216B.1535.

Sec. 6.

[216B.1545] INFORMATION REQUIRED.

(a) By March 1, 2015, and each year thereafter, a utility that has filed with the
commission a standard renewable rate established in this section shall report to the
commission, for the previous calendar year, the following quantities:

(1) the total number of kilowatt-hours purchased under contracts utilizing the
standard renewable rate established under section 216B.1535;

(2) the total revenues paid by the utility for electricity purchased under contracts
utilizing the standard renewable rate established under section 216B.1535; and

(3) the total number of kilowatt-hours sold to Minnesota retail customers.

(b) Upon request, renewable energy generators, qualifying owners that own all or
part of a renewable energy generator, and electric utilities shall provide the commission
any information that may be relevant to the commission performing its duties under
sections 216B.152 to 216B.1565, including but not limited to project development
costs, equipment costs, electricity production costs, interconnection costs, automatic
rate adjustments, and compliance costs.

Sec. 7.

[216B.155] PUBLIC BENEFITS SURCHARGE.

Subdivision 1.

Surcharge.

There is established a public benefits surcharge on each
kilowatt-hour of electricity sold at retail to Minnesota customers by an electric utility. The
surcharge must be collected by each electric utility and remitted to the commissioner of
commerce each month.

Subd. 2.

Amount.

Beginning July 1, 2013, the public benefits surcharge is
$0.00025 per kilowatt-hour and increases to $0.0005 per kilowatt-hour on July 1, 2014,
to $0.00075 per kilowatt-hour on July 1, 2015, and to $0.001 per kilowatt-hour on July
1, 2016, and thereafter.

Subd. 3.

Account.

The public benefits surcharge account is established in the
special revenue fund in the state treasury. The commissioner of commerce shall deposit
all proceeds from the surcharge established in subdivision 1 into the account monthly.
Other funds may be deposited into the account, including those voluntarily contributed by
ratepayers under subdivision 6. Interest accrued on the account balance remains in the
account. The account balance does not cancel to the general fund, but remains in the
account for disbursement under subdivision 4.

Subd. 4.

Expenditures.

The commissioner of commerce may make expenditures
from the account for the following purposes:

(1) to make incentive payments to owners of renewable electricity generators, as
specified in section 216B.1555; and

(2) to reimburse the commission for reasonable costs of annually reviewing the
standard renewable rate under section 216B.1535, subdivision 8.

Subd. 5.

Exceptions.

The public benefits surcharge may not be charged to:

(1) the electricity consumption of a retail industrial electric customer that exceeds
....... kilowatt-hours in a month; or

(2) a residential customer who receives the low-income electric rate discount under
section 216B.16, subdivision 14.

Subd. 6.

Ratepayer contributions.

An electric utility must offer its customers the
option of making voluntary contributions to the account created in this section through
the utility bill.

Sec. 8.

[216B.1555] STANDARD RENEWABLE RATE INCENTIVE PAYMENTS.

Subdivision 1.

Incentive payment; appropriation.

(a) Incentive payments to a
project that receives a rate under section 216B.1535 must be made according to this section.

(b) Payment may only be made upon receipt by the commissioner of commerce of
a standard renewable rate incentive payment application that establishes the applicant's
eligibility to receive a standard renewable rate incentive payment and that satisfies other
requirements the commissioner deems necessary. The application must be in a form and
submitted at a time established by the commissioner.

(c) There is annually appropriated from the public benefits surcharge account under
section 216B.155 to the commissioner of commerce funds sufficient to make the payments
required under this section.

Subd. 2.

Payment period.

(a) A facility may receive payments under this section
throughout the term of the power purchase agreement.

(b) The payment period begins and runs consecutively from the date the facility
begins generating electricity.

Subd. 3.

Amount of payment.

An incentive payment is based on the number of
kilowatt-hours of electricity generated. The amount of the payment per kilowatt-hour
generated is the difference between the average price per kilowatt-hour contained in power
purchase agreements signed during calendar year 2012 and approved by the commission
for C-BED projects under section 216B.1612, and the standard renewable rate established
in section 216B.1535, subdivisions 6 to 8.

Subd. 4.

Ownership; financing; cure.

(a) A subsequent owner of a renewable
electricity generator receiving payments under this section may continue to receive the
incentive payment for the duration of the original payment period if the subsequent owner
qualifies for the incentive under section 216B.1535.

(b) Nothing in this section may be construed to deny an incentive payment to
an otherwise qualified renewable electricity generator that has obtained debt or equity
financing for construction or operation as long as the ownership requirements of section
216B.1535 are met. If, during the incentive payment period for a qualified renewable
electricity generator, the owner of the renewable electricity generator is in default of a
lending agreement and the lender takes possession of and operates the renewable electricity
generator and makes reasonable efforts to transfer ownership of the renewable electricity
generator to an entity other than the lender, the lender may continue to receive the incentive
payment for electricity generated and sold by the renewable electricity generator for a
period not to exceed 18 months. A lender who takes possession of a renewable electricity
generator shall notify the commissioner immediately on taking possession and, at least
quarterly, document efforts to transfer ownership of the renewable electricity generator.

(c) If, during the incentive payment period, a qualified renewable electricity
generator loses the right to receive the incentive because of changes in ownership, the
renewable electricity generator may regain the right to receive the incentive upon cure
of the ownership structure that resulted in the loss of eligibility and may reapply for the
incentive, but in no case may the payment period be extended beyond the original limit
established in the power purchase agreement.

(d) A subsequent or requalifying owner under paragraph (b) or (c) retains the
renewable electricity generator's original priority order for incentive payments as long as
the ownership structure requalifies within two years from the date the renewable electricity
generator became unqualified or two years from the date a lender takes possession.

Subd. 5.

Eligibility process.

(a) A qualifying renewable electricity generator is
eligible for the incentive on the date the commissioner receives:

(1) an application for payment of the incentive;

(2) one of the following:

(i) a copy of a signed power purchase agreement;

(ii) a copy of a binding agreement other than a power purchase agreement to sell
electricity generated by the project to a third person; or

(iii) if the renewable electricity generator's developer or owner will sell electricity to
its own members or customers, a copy of the purchase order for equipment to construct
the renewable electricity generator with a delivery date and a copy of a signed receipt
for a nonrefundable deposit; and

(3) any other information the commissioner deems necessary to determine whether
the proposed renewable electricity generator qualifies for the incentive under this section.

(b) The commissioner shall determine whether a renewable electricity generator
qualifies for the incentive and respond in writing to the applicant approving or denying the
application within 15 working days of receipt of the information required in paragraph
(a). A renewable electricity generator that is not operational within 18 months of receipt
of a letter of approval is no longer approved for the incentive. The commissioner shall
notify an applicant of potential loss of approval not less than 60 days before the end of the
18-month period. Eligibility for a renewable electricity generator that loses approval may
be reestablished as of the date the commissioner receives a new completed application.

Sec. 9.

[216B.156] LOAN ELIGIBILITY.

A renewable electricity generator is eligible for a loan under section 216C.39,
subdivision 5.

Sec. 10.

[216B.1565] REPORT.

By January 1 of 2015 and 2016 and every four years thereafter, the commission shall
submit a report to the governor and legislature that must include all of the following:

(1) the number of new renewable electricity generators in this state and the
environmental effects of the addition of those generators, including, but not limited to, the
effects on progress toward achieving the renewable energy objectives and standards in
section 216B.1691;

(2) recommendations for legislation and changes to the rates in section 216B.1535,
if any; and

(3) actions taken by the commission to implement sections 216B.152 to 216B.1565
and to use the standard renewable rate to achieve the renewable energy objectives and
standards in section 216B.1691.

Sec. 11. EFFECTIVE DATE.

Sections 1 to 10 are effective the day following final enactment.