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HF 850

as introduced - 87th Legislature (2011 - 2012) Posted on 03/03/2011 11:34am

KEY: stricken = removed, old language. underscored = added, new language.


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Introduction Pdf Posted on 03/03/2011

Current Version - as introduced

1.1A bill for an act
1.2relating to utilities; clarifying authority of Public Utilities Commission to
1.3approve multiyear rate plan that meets specified criteria; consolidating multiple
1.4rate riders into single large energy project; amending Minnesota Statutes 2010,
1.5sections 216B.16, subdivisions 6b, 7, 7d, by adding a subdivision; 216B.241,
1.6subdivisions 1, 1c; proposing coding for new law in Minnesota Statutes, chapter
1.7216B; repealing Minnesota Statutes 2010, sections 216B.16, subdivision 7b;
1.8216B.1636; 216B.1637; 216B.1645, subdivisions 2, 2a.

1.10    Section 1. Minnesota Statutes 2010, section 216B.16, subdivision 6b, is amended to
1.12    Subd. 6b. Energy conservation improvement. (a) Except as otherwise provided
1.13in this subdivision, all investments and expenses of a public utility as defined in section
1.14216B.241, subdivision 1 , paragraph (i), incurred in connection with energy conservation
1.15improvements shall be recognized and included by the commission in the determination of
1.16just and reasonable rates as if the investments and expenses were directly made or incurred
1.17by the utility in furnishing utility service.
1.18    (b) Investments and expenses for energy conservation improvements shall not be
1.19included by the commission in the determination of (i) just and reasonable electric and
1.20gas rates for retail electric and gas service provided to large electric customer facilities
1.21that have been exempted by the commissioner of the department pursuant to section
1.22216B.241, subdivision 1a , paragraph (b); or (ii) just and reasonable gas rates for large
1.23energy facilities.
1.24    (c) The commission may permit a public utility to file rate schedules providing for
1.25annual recovery of the costs of energy conservation improvements. These rate schedules
1.26may be applicable to less than all the customers in a class of retail customers if necessary
2.1to reflect the requirements of section 216B.241. The commission shall allow a public
2.2utility, without requiring a general rate filing under this section, to reduce the electric and
2.3gas rates applicable to large electric customer facilities that have been exempted by the
2.4commissioner of the department pursuant to section 216B.241, subdivision 1a, paragraph
2.5(b), and to reduce the gas rate applicable to a large energy facility by an amount that reflects
2.6the elimination of energy conservation improvement investments or expenditures for those
2.7facilities. In the event that the commission has set electric or gas rates based on the use of
2.8an accounting methodology that results in the cost of conservation improvements being
2.9recovered from utility customers over a period of years, the rate reduction may occur in a
2.10series of steps to coincide with the recovery of balances due to the utility for conservation
2.11improvements made by the utility on or before December 31, 2007.
2.12    (d) Investments and expenses of a public utility shall not include electric utility
2.13infrastructure costs as defined in section 216B.1636, subdivision 1, paragraph (b) for
2.14electric utility infrastructure projects that were not included in the electric utility's rate
2.15base in its most recent general rate case.

2.16    Sec. 2. Minnesota Statutes 2010, section 216B.16, subdivision 7, is amended to read:
2.17    Subd. 7. Energy cost adjustment. Notwithstanding any other provision of this
2.18chapter, the commission may permit a public utility to file rate schedules containing
2.19provisions for the automatic adjustment of charges for public utility service in direct
2.20relation to changes in:
2.21(1) federally regulated wholesale rates for energy delivered through interstate
2.23(2) direct costs for natural gas delivered; or
2.24(3) costs for fuel used in generation of electricity or the manufacture of gas; or
2.25(4) prudent costs incurred by a public utility for sorbents, reagents, or chemicals
2.26used to control emissions from an electric generation facility, provided that these costs are
2.27not recovered elsewhere in rates. The utility must track and report annually the volumes
2.28and costs of sorbents, reagents, or chemicals using separate accounts by generating plant.

2.29    Sec. 3. Minnesota Statutes 2010, section 216B.16, subdivision 7d, is amended to read:
2.30    Subd. 7d. Central Corridor utility zone cost adjustment. (a) The Central
2.31Corridor utility zone is the area extending from the Union Depot Station in St. Paul to the
2.32proposed multimodal station in Minneapolis along the route of the light rail transit project
2.33connecting those two points, and an area extending approximately one-quarter mile from
2.34that route and including the entire University of Minnesota, Minneapolis campus.
3.1(b) A public utility that provides retail electric service within the Central Corridor
3.2utility zone and that is required to replace, relocate, construct, or install new facilities,
3.3may apply to the commission for approval of new facilities in the Central Corridor
3.4utility zone and facilities outside the zone that the utility demonstrates must be changed
3.5as a direct result of changes within the zone. Facilities proposed under this subdivision
3.6may include transmission facilities, distribution facilities, generation facilities, advanced
3.7technology-assisted efficiency devices, and energy storage facilities not otherwise subject
3.8to section 216B.243, or chapter 216E, 216F, or 216G. Upon approval under paragraph (c),
3.9the utility may construct and install the facilities.
3.10(c) The commission may approve the construction and installation of facilities in
3.11the Central Corridor mass transit utility zone proposed by a utility under paragraph (b)
3.12upon a finding:
3.13(1) that the facilities:
3.14(i) are necessary to provide electric service;
3.15(ii) assist future development of renewable energy, conservation, electric vehicles,
3.16and advanced technology-assisted efficiency programs and devices; or
3.17(iii) are exploratory, experimental, or research facilities to advance the use of
3.18renewable energy, conservation, electric vehicles, and advanced technology-assisted
3.19efficiency programs and devices;
3.20(2) that the utility has engaged in a cooperative process with affected local and state
3.21government agencies in the design, planning, or construction of the Central Corridor
3.22utility zone project and changes to utility facilities;
3.23(3) that the utility and local units of government have made reasonable efforts to seek
3.24federal, state, or private funds that may be available to mass transit and energy projects;
3.25(4) that the utility has made reasonable efforts to minimize the project costs and
3.26maximize the value of the facilities to customers;
3.27(5) that the utility has a plan to offer a comprehensive array of programs for
3.28residential, commercial, and industrial customers located within the mass transit zone;
3.29(6) that the utility directs existing and planned solar energy programs to develop
3.30solar energy along the mass transit utility zone; and
3.31(7) that the utility has made reasonable efforts to apply for federal funds to develop
3.32technology-assisted efficiency programs and devices within the mass transit utility zone.
3.33(d) Upon request of the commission, the utility shall submit periodic reports to
3.34the commission reviewing the cost and benefits of the facilities constructed within the
3.35Central Corridor utility zone and their potential applicability to other areas outside the
3.36Central Corridor utility zone.
4.1(e) Notwithstanding any other provision of this chapter, the commission may approve
4.2a tariff mechanism for automatic adjustment of charges for new, replaced, or relocated
4.3facilities installed under this subdivision in a manner consistent with this subdivision and
4.4the standards and procedures contained in subdivision 7b, except that no approval under
4.5section 216B.243 or certification under section 216B.2425 is required unless otherwise
4.6required by law. This section does not authorize a city-requested facilities surcharge.
4.7(f) (e) For the purpose of this subdivision, "technology-assisted efficiency programs
4.8and devices" includes, but is not limited to, infrastructure that integrates digital
4.9information and controls technology to improve the reliability, security, and efficiency
4.10of the electric grid.

4.11    Sec. 4. Minnesota Statutes 2010, section 216B.16, is amended by adding a subdivision
4.12to read:
4.13    Subd. 19. Multiyear rate plan. (a) A public utility may propose, and the
4.14commission may approve, approve as modified, or reject a multiyear rate plan as provided
4.15in this subdivision. The term "multiyear rate plan" refers to a plan establishing the rates the
4.16utility may charge for each year of the specified period of years to be covered by the plan.
4.17The commission may approve a multiyear rate plan only if it finds that the plan establishes
4.18just and reasonable rates for the utility, applying the factors described in subdivision 6.
4.19(b) Rates charged under a multiyear rate plan must be based only upon the utility's
4.20reasonable and prudent costs of service over the term of the plan, as determined by the
4.21commission. The commission may require that a utility operating under a rate plan
4.22approved under this subdivision may only adjust rates as specified in the plan, provided
4.23the plan provides opportunities for the timely recovery of costs incurred by the utility
4.24equivalent to those provided in rate rider mechanisms authorized in this chapter. Rate
4.25adjustments authorized under subdivisions 6b and 7 may continue outside of a plan
4.26authorized under this subdivision.
4.27(c) The commission may, by order, establish terms, conditions, and procedures
4.28necessary to implement this section. A utility must notify the commission within 30 days
4.29of issuance of a commission order approving a plan filed under this subdivision if the
4.30utility elects to be regulated under the approved plan. A utility that elects to be regulated
4.31under this subdivision may not request a rate adjustment rider under section 216B.1614
4.32until the term of an approved plan expires.

5.1    Subdivision 1. Authority. The commission may approve a rider mechanism for
5.2the annual adjustment of charges for utility costs as specified under this section. To be
5.3considered eligible for recovery, a public utility must demonstrate that these costs are
5.4reasonable and prudent expenditures, are net of associated revenues, were incurred for
5.5the Minnesota jurisdiction by the utility but not yet included in the utility's base rates, fit
5.6into one of the authorized categories under subdivisions 2 and 3, and otherwise meet the
5.7criteria established in this section.
5.8    Subd. 2. Categories. The following categories of utility costs may be included in a
5.9rider mechanism described in subdivision 1:
5.10(1) the expenditures for construction of a large energy facility, as defined under
5.11section 216B.2421, subdivision 2, which the commission has reviewed and approved
5.12under section 216B.2422, subdivision 5, or 216B.243;
5.13(2) the costs of a power purchase contract, investment, or expenditure, which the
5.14commission has reviewed and approved under section 116C.779, subdivision 1, paragraph
5.15(c), or 216B.1645, subdivision 1;
5.16(3) a capital investment that the commission finds significant, nonrecurring, and
5.17necessary for the implementation of an operating license renewal or extended power uprate
5.18application approved by the United States Nuclear Regulatory Commission for a nuclear
5.19generation plant in the state; and the incremental operating costs for a nuclear generation
5.20plant in the state above the amounts included in the utility's most recent rate case;
5.21(4) the costs of an environmental project for which the commission has issued an
5.22advanced determination of prudence under section 216B.1695, or which the commission
5.23has approved under section 216B.1692 or 216B.683. Notwithstanding other law to the
5.24contrary, rider cost recovery approved under section 216B.1692 or 216B.683 may only be
5.25recovered in a rider approved under this section; or
5.26(5) charges related to regionally planned transmission infrastructure that have been
5.27allocated to a utility by a Federal Energy Regulatory Commission-approved regional
5.28transmission organization under a federally approved tariff. These charges must be offset
5.29or reduced by revenues received by the utility and by amounts the utility charges to other
5.30regional transmission owners, to the extent these revenues have not been otherwise offset.
5.31    Subd. 3. Commission discretion. In addition to the categories listed in subdivision
5.322, a public utility may petition the commission to include costs in the rider mechanism
5.33authorized under this section for an electric utility project of the type contemplated under
5.34section 216B.243, but not subject to review by the commission under that section due to
5.35the project's size, location, or other attribute, or reasonable and prudent operations and
5.36maintenance costs incurred by the utility that significantly exceed amounts authorized
6.1in the utility's most recent rate case. The commission may approve a petition if the
6.2commission finds approval to be in the public interest.
6.3    Subd. 4. Tariff approval. (a) Upon filing by a public utility under this section, the
6.4commission may approve, reject, or modify, after notice and comment, a tariff that:
6.5(1) allows the utility to recover on a timely basis the reasonable capital and operation
6.6and maintenance costs, net of any associated revenues, of the expenditures, investments,
6.7costs or charges identified in subdivision 2, or costs authorized by the commission under
6.8subdivision 3;
6.9(2) allows a return on investment at the level approved in the utility's last general
6.10rate case;
6.11(3) provides a reasonable current return on construction work in progress, provided
6.12that recovery from Minnesota retail customers for the allowance for funds used during
6.13construction is not sought through any other mechanism;
6.14(4) allows for recovery of other reasonable expenses, net of any associated revenues,
6.15if shown to promote a least-cost project option or is otherwise in the public interest;
6.16(5) allocates costs and revenues appropriately between wholesale and retail
6.17customers, and recovers costs from retail customer classes using the same method
6.18employed to allocate capital costs in the utility's most recent electric rate case; and
6.19(6) terminates recovery once costs have been fully recovered or have otherwise
6.20been reflected in the utility's general rates.
6.21(b) The commission may require a tariff filed under this section to include incentives
6.22to promote efficiency and cost control, such as competitive bidding and cost-savings
6.23sharing mechanisms.
6.24    Subd. 5. Approval. (a) Once a tariff has been approved under subdivision 4, a
6.25public utility may file rate adjustments to be applied to customer bills paid under that
6.26tariff. The commission may establish a schedule specifying when a utility may file under
6.27this subdivision, at least once per year. In its filing, the public utility shall provide:
6.28(1) a description of and context for costs included for recovery;
6.29(2) a schedule for implementation of applicable capital investments;
6.30(3) the utility's costs and associated revenues for the expenditures, investments,
6.31and costs or charges identified in subdivision 1, or authorized by the commission under
6.32subdivision 2, along with adequate supporting information identifying how the costs
6.33and associated revenues are reasonable;
6.34(4) a description of the utility's efforts to ensure the lowest costs to ratepayers; and
6.35(5) calculations to establish that the rate adjustment is consistent with the terms
6.36of the tariff established in subdivision 4.
7.1(b) Upon receiving a filing for a rate adjustment under the tariff established in
7.2subdivision 4, the commission may approve the rate adjustments provided that, after
7.3notice and comment, the costs included for recovery through the tariff were or are
7.4expected to be prudently incurred.
7.5    Subd. 6. General rate case. (a) The commission may establish, and amend as
7.6necessary, a schedule for the filing of general rate cases for a utility that has an approved
7.7tariff under this section, after notice and comment from interested parties. A utility subject
7.8to a rate case schedule under this subdivision may file an application for a general rate case
7.9earlier than the schedule established by the commission upon providing written notice
7.10describing the reasons for the earlier filing 60 days in advance of the application.
7.11(b) The commission may require the utility to include costs approved for recovery
7.12under this section in the utility's base rates in the utility's next general rate case, or upon a
7.13schedule determined by the commission to provide the optimum benefits for the utility's
7.15(c) The commission may, by order, establish terms, conditions, and procedures
7.16necessary to implement this section. A utility may not implement a rate adjustment
7.17rider under this section concurrently with a multiyear rate plan under section 216B.16,
7.18subdivision 19.

7.19    Sec. 6. Minnesota Statutes 2010, section 216B.241, subdivision 1, is amended to read:
7.20    Subdivision 1. Definitions. For purposes of this section and section 216B.16,
7.21subdivision 6b
, the terms defined in this subdivision have the meanings given them.
7.22    (a) "Commission" means the Public Utilities Commission.
7.23    (b) "Commissioner" means the commissioner of commerce.
7.24    (c) "Customer facility" means all buildings, structures, equipment, and installations
7.25at a single site.
7.26    (d) "Department" means the Department of Commerce.
7.27    (e) "Energy conservation" means demand-side management of energy supplies
7.28resulting in a net reduction in energy use. Load management that reduces overall energy
7.29use is energy conservation.
7.30    (f) "Energy conservation improvement" means a project that results in energy
7.31efficiency or energy conservation. Energy conservation improvement may include waste
7.32heat recovery converted into electricity but does not include electric utility infrastructure
7.33projects approved by the commission under section 216B.1636 owned by an electric utility
7.34that (1) replace or modify existing electric utility infrastructure, including utility-owned
7.35buildings, in order to conserve energy or use energy more efficiently, consistent with
8.1subdivision 1c, or (2) conserve energy or use energy more efficiently by using waste heat
8.2recovery converted into electricity as defined in paragraph (n).
8.3    (g) "Energy efficiency" means measures or programs, including energy conservation
8.4measures or programs, that target consumer behavior, equipment, processes, or devices
8.5designed to produce either an absolute decrease in consumption of electric energy or
8.6natural gas or a decrease in consumption of electric energy or natural gas on a per unit
8.7of production basis without a reduction in the quality or level of service provided to
8.8the energy consumer.
8.9    (h) "Gross annual retail energy sales" means annual electric sales to all retail
8.10customers in a utility's or association's Minnesota service territory or natural gas
8.11throughput to all retail customers, including natural gas transportation customers, on a
8.12utility's distribution system in Minnesota. For purposes of this section, gross annual
8.13retail energy sales exclude gas sales to a large energy facility and gas and electric sales
8.14to a large electric customer facility exempted by the commissioner under subdivision
8.151a, paragraph (b).
8.16    (i) "Investments and expenses of a public utility" includes the investments and
8.17expenses incurred by a public utility in connection with an energy conservation
8.18improvement, including but not limited to:
8.19    (1) the differential in interest cost between the market rate and the rate charged on a
8.20no-interest or below-market interest loan made by a public utility to a customer for the
8.21purchase or installation of an energy conservation improvement;
8.22    (2) the difference between the utility's cost of purchase or installation of energy
8.23conservation improvements and any price charged by a public utility to a customer for
8.24such improvements.
8.25    (j) "Large electric customer facility" means a customer facility that imposes a
8.26peak electrical demand on an electric utility's system of not less than 20,000 kilowatts,
8.27measured in the same way as the utility that serves the customer facility measures
8.28electrical demand for billing purposes, and for which electric services are provided at
8.29retail on a single bill by a utility operating in the state.
8.30    (k) "Large energy facility" has the meaning given it in section 216B.2421,
8.31subdivision 2, clause (1).
8.32    (l) "Load management" means an activity, service, or technology to change the
8.33timing or the efficiency of a customer's use of energy that allows a utility or a customer to
8.34respond to wholesale market fluctuations or to reduce peak demand for energy or capacity.
8.35    (m) "Low-income programs" means energy conservation improvement programs
8.36that directly serve the needs of low-income persons, including low-income renters.
9.1    (n) "Waste heat recovery converted into electricity" means an energy recovery
9.2process that converts otherwise lost energy from the heat of exhaust stacks or pipes used
9.3for engines or manufacturing or industrial processes, or the reduction of high pressure
9.4in water or gas pipelines.

9.5    Sec. 7. Minnesota Statutes 2010, section 216B.241, subdivision 1c, is amended to read:
9.6    Subd. 1c. Energy-saving goals. (a) The commissioner shall establish energy-saving
9.7goals for energy conservation improvement expenditures and shall evaluate an energy
9.8conservation improvement program on how well it meets the goals set.
9.9    (b) Each individual utility and association shall have an annual energy-savings
9.10goal equivalent to 1.5 percent of gross annual retail energy sales unless modified by the
9.11commissioner under paragraph (d). The savings goals must be calculated based on the
9.12most recent three-year weather normalized average. A utility or association may elect to
9.13carry forward energy savings in excess of 1.5 percent for a year to the succeeding three
9.14calendar years, except that savings from electric utility infrastructure projects allowed
9.15under paragraph (d) may be carried forward for five years. A particular energy savings can
9.16be used only for one year's goal.
9.17    (c) The commissioner must adopt a filing schedule that is designed to have all
9.18utilities and associations operating under an energy-savings plan by calendar year 2010.
9.19    (d) In its energy conservation improvement plan filing, a utility or association may
9.20request the commissioner to adjust its annual energy-savings percentage goal based on
9.21its historical conservation investment experience, customer class makeup, load growth,
9.22a conservation potential study, or other factors the commissioner determines warrants
9.23an adjustment. The commissioner may not approve a plan that provides for an annual
9.24energy-savings goal of less than one percent of gross annual retail energy sales from
9.25energy conservation improvements.
9.26A utility or association may include in its energy conservation plan energy savings
9.27from (1) electric utility infrastructure projects approved by the commission under
9.28section 216B.1636 owned by the utility or association that replace or modify existing
9.29infrastructure, including buildings owned by the utility or association, and the replacement
9.30or modification is shown to conserve energy or use energy more efficiently, consistent
9.31with this subdivision, or (2) waste heat recovery converted into electricity projects that
9.32may count as energy savings in addition to the minimum energy-savings goal of at least
9.33one percent for energy conservation improvements. Electric utility infrastructure projects
9.34must result in increased energy efficiency greater than that which would have occurred
9.35through normal maintenance activity.
10.1    (e) An energy-savings goal is not satisfied by attaining the revenue expenditure
10.2requirements of subdivisions 1a and 1b, but can only be satisfied by meeting the
10.3energy-savings goal established in this subdivision.
10.4    (f) An association or utility is not required to make energy conservation investments
10.5to attain the energy-savings goals of this subdivision that are not cost-effective even
10.6if the investment is necessary to attain the energy-savings goals. For the purpose of
10.7this paragraph, in determining cost-effectiveness, the commissioner shall consider the
10.8costs and benefits to ratepayers, the utility, participants, and society. In addition, the
10.9commissioner shall consider the rate at which an association or municipal utility is
10.10increasing its energy savings and its expenditures on energy conservation.
10.11    (g) On an annual basis, the commissioner shall produce and make publicly available
10.12a report on the annual energy savings and estimated carbon dioxide reductions achieved
10.13by the energy conservation improvement programs for the two most recent years for
10.14which data is available. The commissioner shall report on program performance both in
10.15the aggregate and for each entity filing an energy conservation improvement plan for
10.16approval or review by the commissioner.
10.17    (h) By January 15, 2010, the commissioner shall report to the legislature whether
10.18the spending requirements under subdivisions 1a and 1b are necessary to achieve the
10.19energy-savings goals established in this subdivision.

10.21A public utility may continue to implement a rate rider approved as of August 1,
10.222010, under a statute referenced in Minnesota Statutes, section 216B.1614, subdivision
10.232, until either:
10.24(1) the utility files its next general rate case under Minnesota Statutes, section
10.25216B.16, at which time all uncollected costs approved for recovery under Minnesota
10.26Statutes, section 216B.16, subdivision 19, are to be included in the utility's base rates; or
10.27(2) the utility files its first filing under Minnesota Statutes, section 216B.1614, at
10.28which time all uncollected costs approved for recovery under Minnesota Statutes, section
10.29216B.1614, subdivision 2, are to be recovered under the rate rider established in that

10.31    Sec. 9. REPEALER.
10.32Minnesota Statutes 2010, sections 216B.16, subdivision 7b; 216B.1636; 216B.1637;
10.33and 216B.1645, subdivisions 2 and 2a, are repealed.

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