HF 2869

as introduced - 89th Legislature (2015 - 2016) Posted on 03/22/2016 08:01am

A bill for an act
relating to energy; clarifying eligible reimbursement costs; amending Minnesota
Statutes 2014, section 216B.2424, subdivision 5a.

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

Section 1.

Minnesota Statutes 2014, section 216B.2424, subdivision 5a, is amended to
read:

Subd. 5a.

Reduction of biomass mandate.

(a) Notwithstanding subdivision 5, the
biomass electric energy mandate must be reduced from 125 megawatts to 110 megawatts.

(b) The Public Utilities Commission shall approve a request pending before the
commission as of May 15, 2003, for amendments to and assignment of a power purchase
agreement with the owner of a facility that uses short-rotation, woody crops as its primary
fuel previously approved to satisfy a portion of the biomass mandate if the owner of
the project agrees to reduce the size of its project from 50 megawatts to 35 megawatts,
while maintaining an average price for energy in nominal dollars measured over the term
of the power purchase agreement at or below $104 per megawatt-hour, exclusive of any
price adjustments that may take effect subsequent to commission approval of the power
purchase agreement, as amended. The commission shall also approve, as necessary, any
subsequent assignment or sale of the power purchase agreement or ownership of the
project to an entity owned or controlled, directly or indirectly, by two municipal utilities
located north of Constitutional Route No. 8, as described in section 161.114, which
currently own electric and steam generation facilities using coal as a fuel and which
propose to retrofit their existing municipal electrical generating facilities to utilize biomass
fuels in order to perform the power purchase agreement.

(c) If the power purchase agreement described in paragraph (b) is assigned to an
entity that is, or becomes, owned or controlled, directly or indirectly, by two municipal
entities as described in paragraph (b), and the power purchase agreement meets the
price requirements of paragraph (b), the commission shall approve any amendments to
the power purchase agreement necessary to reflect the changes in project location and
ownership and any other amendments made necessary by those changes. The commission
shall also specifically find that:

(1) the power purchase agreement complies with and fully satisfies the provisions of
this section to the full extent of its 35-megawatt capacity;

(2) all costs incurred by the public utility and all amounts to be paid by the public
utility to the project owner under the terms of the power purchase agreement are fully
recoverable pursuant to section 216B.1645;

(3) subject to prudency review by the commission, the public utility may recover
from its Minnesota retail customers the amounts that may be incurred and paid by the
public utility during the full term of the power purchase agreement; and

(4) if the purchase power agreement meets the requirements of this subdivision,
it is reasonable and in the public interest.

(d) The commission shall specifically approve recovery by the public utility of
any and all Minnesota jurisdictional costs incurred by the public utility to improve,
construct, install, or upgrade transmission, distribution, or other electrical facilities owned
by the public utility or other persons in order to permit interconnection of the retrofitted
biomass-fueled generating facilities or to obtain transmission service for the energy
provided by the facilities to the public utility pursuant to section 216B.1645, and shall
disapprove any provision in the power purchase agreement that requires the developer
or owner of the project to pay the jurisdictional costs or that permit the public utility to
terminate the power purchase agreement as a result of the existence of those costs or the
public utility's obligation to pay any or all of those costs.

(e) Upon request by the project owner, the public utility shall agree to amend the
power purchase agreement described in paragraph (b) and approved by the commission
as required by paragraph (c). The amendment must be negotiated and executed within
45 days of May 14, 2013, and must apply to prices paid after January 1, 2014. The
average price for energy in nominal dollars measured over the term of the power purchase
agreement must not exceed $109.20 per megawatt hour. The public utility shall request
approval of the amendment by the commission within 30 days of execution of the
amended power purchase agreement. The amendment is not effective until approval
by the commission. The commission shall act on the amendment within 90 days of
submission of the request by the public utility. Upon approval of the amended power
purchase agreement, the commission shall allow the public utility to recover the costs of
the amended power purchase agreement, as provided in section 216B.1645.

(f) With respect to the power purchase agreement described in paragraph (b), and
amended and approved by the commission pursuant to paragraphs (c) and (e), upon
request by the project owner, the public utility shall agree to amend the power purchase
agreement to include a fuel cost adjustment clause which requires the public utility to
reimburse the project owner monthly for all costs incurred by the project owner during
the applicable month to procure and transport all fuel used to produce energy for delivery
to the public utility pursuant to the power purchase agreement to the extent such costs
exceeded $3.40 per million metric British thermal unit (MMBTU), in addition to the price
to be paid for the energy produced and delivered by the project owner. new text begin Reimbursable
costs include but are not limited to: (1) all costs incurred to load fuel at its source; (2)
costs to transport fuel (i) to the biomass-fueled generating facilities or to an intermediate
woodyard, storage facility, or handling facility, or (ii) from a facility to the biomass-fueled
generating facilities; (3) depreciation of any depreciable loading, woodyard, storage,
handling, or transportation equipment whether the vehicle or equipment is located at the
fuel source, a woodyard, storage facility, handling facility, or at the generating facilities;
and (4) costs to unload fuel at the generating facilities. new text end Beginning with 2014, at the end of
each calendar year of the term of the power purchase agreement, the project owner shall
calculate the amount by which actual fuel costs for the year exceeded $3.40 per MMBTU,
and prior monthly payment for such fuel costs shall be reconciled against actual fuel costs
for the applicable calendar year. If such prior monthly fuel payments for the year in the
aggregate exceed the amount due based on the annual calculation, the project owner shall
credit the public utility for the excess paid. If the annual calculation of fuel costs due
exceeds the prior monthly fuel payments for the year in the aggregate, the project owner
shall be entitled to be paid for the deficiency with the next invoice to the public utility.
The amendment shall be negotiated and executed within 45 days of May 13, 2013, and
shall be effective for fuel costs incurred and prices after January 1, 2014. The public
utility shall request approval of the amendment by the commission, and the commission
shall approve the amendment as reasonable and in the public interest and allow the public
utility to recover from its Minnesota retail customers the amounts paid by the public utility
to the project owner pursuant to the power purchase agreement during the full term of
the power purchase agreement, including the reimbursement of fuel costs pursuant to the
power purchase agreement amendment, new text begin reimbursable costs as provided in this paragraph,
new text end pursuant to section 216B.1645, or otherwise.

(g) With respect to the power purchase agreement described in paragraph (b) and
approved by the commission pursuant to paragraphs (c) and (e), the public utility is
prohibited from recovering from the project owner any costs which were not actually and
reasonably incurred by the utility, notwithstanding any provision in the power purchase
agreement to the contrary. In addition, beginning with 2012, the public utility shall pay for
all energy delivered by the project owner pursuant to the power purchase agreement at
the full price for such energy in the power purchase agreement approved and amended
pursuant to paragraph (e), provided that the project owner does not deliver more than
110 percent of the amount scheduled for delivery in any year of the power purchase
agreement, and does not deliver, on average over any five consecutive years of the power
purchase agreement, an amount greater than 105 percent of the amount scheduled for
delivery over the five-year period.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively from January 1, 2014.
new text end