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Minnesota Legislature

Office of the Revisor of Statutes

SF 997

3rd Engrossment - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

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

Current Version - 3rd Engrossment

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A bill for an act
relating to energy; modifying or adding provisions relating to energy
conservation improvement programs and funding, electric utility infrastructure
cost recovery, the state energy conservation goal, energy savings goals and
programs, energy conservation improvement costs recovery and incentive
plans, a decoupling rate mechanism for utilities, energy efficiency contracts,
energy audit programs, and residential energy covenants; abolishing rules
relating to residential energy conservation programs and energy audits of rental
buildings; amending Minnesota Statutes 2006, sections 123B.65, subdivision
2; 216B.16, subdivisions 1, 6b; 216B.241; 216C.31; 471.345, subdivision 13;
504B.161, subdivision 1; proposing coding for new law in Minnesota Statutes,
chapters 216B; 216C; repealing Minnesota Statutes 2006, sections 216B.165;
216C.27; 216C.30, subdivision 5; Minnesota Rules, parts 7635.0100; 7635.0110;
7635.0120; 7635.0130; 7635.0140; 7635.0150; 7635.0160; 7635.0170;
7635.0180; 7635.0200; 7635.0210; 7635.0220; 7635.0230; 7635.0240;
7635.0250; 7635.0260; 7635.0300; 7635.0310; 7635.0320; 7635.0330;
7635.0340; 7635.0400; 7635.0410; 7635.0420; 7635.0500; 7635.0510;
7635.0520; 7635.0530; 7635.0600; 7635.0610; 7635.0620; 7635.0630;
7635.0640; 7635.1000; 7635.1010; 7635.1020; 7635.1030; 7655.0100;
7655.0120; 7655.0200; 7655.0210; 7655.0220; 7655.0230; 7655.0240;
7655.0250; 7655.0260; 7655.0270; 7655.0280; 7655.0290; 7655.0300;
7655.0310; 7655.0320; 7655.0330; 7655.0400; 7655.0410; 7655.0420.

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

ARTICLE 1

ENERGY EFFICIENCY AND CONSERVATION

Section 1.

Minnesota Statutes 2006, section 216B.16, subdivision 1, is amended to read:


Subdivision 1.

Notice.

Unless the commission otherwise orders, no public utility
shall change a rate which has been duly established under this chapter, except upon 60
days' notice to the commission. The notice shall include statements of facts, expert
opinions, substantiating documents, and exhibits, supporting the change requested, and
state the change proposed to be made in the rates then in force and the time when the
modified rates will go into effect. If the filing utility does not have an approved new text beginenergy
new text endconservation improvement plan on file with the department, it shall also include in its
notice an energy conservation plan pursuant to section 216B.241. new text beginA filing utility subject to
rate regulation under section 216B.026 shall reference in its notice the energy conservation
improvement plans of the generation and transmission cooperative providing energy
conservation improvement programs to members of the filing utility pursuant to section
216B.241.
new text endThe filing utility shall give written notice, as approved by the commission, of
the proposed change to the governing body of each municipality and county in the area
affected. All proposed changes shall be shown by filing new schedules or shall be plainly
indicated upon schedules on file and in force at the time.

Sec. 2.

Minnesota Statutes 2006, 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 deleted text begin(e)deleted text endnew text begin (i)new text end, 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) deleted text beginAfter December 31, 1999,deleted text end Investments and expenses for energy conservation
improvements shall not be included by the commission in the determination of new text begin(i) new text endjust 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 of the department
pursuant to section 216B.241, subdivision 1a, paragraph (b)new text begin; or (ii) just and reasonable
gas rates for large energy facilities
new text end. deleted text beginHowever, no public utility shall be prevented from
recovering its investment in energy conservation improvements from all customers that
were made on or before December 31, 1999, in compliance with the requirements of
section 216B.241.
deleted 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 deleted text begindiffering minimum spendingdeleted text end requirements of section 216B.241deleted text begin, subdivision 1adeleted text end.
deleted text begin After December 31, 1999,deleted text end 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 of the
department pursuant to section 216B.241, subdivision 1a, paragraph (b), new text beginand to reduce the
gas rate applicable to a large energy facility
new text endby an amount that reflects the elimination
of energy conservation improvement investments or expenditures for those facilities
deleted text begin required on or before December 31, 1999deleted text end. 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, deleted text begin1999deleted text endnew text begin 2007new text end.

Sec. 3.

new text begin [216B.1636] RECOVERY OF ELECTRIC UTILITY INFRASTRUCTURE
COSTS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

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

new text begin (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.
new text end

new text begin (c) "Electric utility infrastructure projects" means projects that:
new text end

new text begin (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
new text end

new text begin (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 (n).
new text end

new text begin Subd. 2. new text end

new text begin Filing. new text end

new text begin (a) The commission may approve an electric utility's petition for
a rate schedule to recover EUIC under this section. An electric utility may petition the
commission to recover a rate of return, income taxes on the rate of return, incremental
property taxes, if any, plus incremental depreciation expense associated with EUIC.
new text end

new text begin (b) The filing is subject to the following:
new text end

new text begin (1) an electric utility may submit a filing under this section no more than once
per year; and
new text end

new text begin (2) an electric utility must file sufficient information to satisfy the commission
regarding the proposed EUIC or be subject to denial by the commission. The information
includes, but is not limited to:
new text end

new text begin (i) the location, description, and costs associated with the project;
new text end

new text begin (ii) evidence that the electric utility infrastructure project will conserve energy or use
energy more efficiently than similar utility facilities currently used by the electric utility;
new text end

new text begin (iii) the proposed schedule for implementation;
new text end

new text begin (iv) a description of the costs, and salvage value, if any, associated with the existing
infrastructure replaced or modified as a result of the project;
new text end

new text begin (v) the proposed rate design and an explanation of why the proposed rate design
is in the public interest;
new text end

new text begin (vi) the magnitude of timing of any known future electric utility projects that the
utility may seek to recover under this section;
new text end

new text begin (vii) the magnitude of EUIC in relation to the electric utility's base revenue as
approved by the commission in the electric utility's most recent general rate case,
exclusive of fuel cost adjustments;
new text end

new text begin (viii) the magnitude of EUIC in relation to the electric utility's capital expenditures
since its most recent general rate case;
new text end

new text begin (ix) the amount of time since the utility last filed a general rate case and the utility's
reasons for seeking recovery outside of a general rate case;
new text end

new text begin (x) documentation supporting the calculation of the EUIC; and
new text end

new text begin (xi) a cost and benefit analysis showing that the electric utility infrastructure project
is in the public interest.
new text end

new text begin Upon approval of the proposed projects and associated EUIC rate schedule, the utility
may implement the electric utility infrastructure projects.
new text end

new text begin Subd. 3. new text end

new text begin Commission authority; orders. new text end

new text begin The commission may issue orders
necessary to implement and administer this section.
new text end

Sec. 4.

new text begin [216B.2401] ENERGY CONSERVATION POLICY GOAL.
new text end

new text begin It is the energy policy of the state of Minnesota to achieve annual energy savings
equal to 1.5 percent of annual retail energy sales of electricity and natural gas directly
through energy conservation improvement programs and rate design, and indirectly
through energy codes and appliance standards, programs designed to transform the market
or change consumer behavior, energy savings resulting from efficiency improvements to
the utility infrastructure and system, and other efforts to promote energy efficiency and
energy conservation.
new text end

Sec. 5.

Minnesota Statutes 2006, section 216B.241, is amended to read:


216B.241 ENERGY CONSERVATION IMPROVEMENT.

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) new text begin"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.
new text end

new text begin (g) new text end"Energy conservation improvement" means a project that results in new text beginenergy
efficiency or
new text endenergy conservation. new text beginEnergy conservation improvement does not include
waste heat recovery converted into electricity or electric utility infrastructure projects
approved by the commission under section 216B.1636.
new text end

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

new text begin (i) new text end "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.

deleted text begin (h)deleted text endnew text begin (j)new text end "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.

deleted text begin (i) deleted text end new text begin (k) "Large energy facility" has the meaning given it in section 216B.2421,
subdivision 2, clause (1).
new text end

new text begin (l)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 deleted text beginthe overalldeleted text endnew text begin peaknew text end demand for
energy or capacity.

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

new text begin (n) "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.
new text end

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 deleted text begincost-effectivedeleted text endnew text begin the
customer is not continuing to make reasonable efforts to identify, evaluate, and implement
new text end
energy conservation improvements deleted text beginare availabledeleted text end at the large electric customer facility.
deleted text begin For the purposes of this paragraph, "cost-effective" means that the projected total cost of
the energy conservation improvement at the large electric customer facility is less than
the projected present value of the energy and demand savings resulting from the energy
conservation improvement.
deleted text end For the purposes of investigations by the commissioner under
this paragraph, the owner of any large electric 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) A public utility or owner of a large electric customer facility may appeal
a decision of the commissioner under paragraph (b) or (c) to the commission under
subdivision 2. In reviewing a decision of the commissioner under paragraph (b) or (c),
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.

deleted text begin (e) Each utility shall determine what portion of the amount it sets aside for
conservation improvement will be used for conservation improvements under subdivision
2 and what portion it will contribute to the energy and conservation account established in
subdivision 2a. A public utility may propose to the commissioner to designate that all
or a portion of funds contributed to the account established in subdivision 2a be used
for research and development projects that can best be implemented on a statewide
basis. Contributions must be remitted to the commissioner by February 1 of each year.
Nothing in this subdivision prohibits a public utility from spending or investing for energy
conservation improvement more than required in this subdivision.
deleted text end

Subd. 1b.

Conservation improvement by cooperative association or
municipality.

(a) This subdivision applies to:

(1) a cooperative electric association that provides retail service to its members;

(2) a municipality that provides electric service to retail customers; and

(3) a municipality with deleted text begingross operating revenues in excess of $5,000,000 from
sales of
deleted text endnew text begin more than 1,000,000,000 cubic feet in annual throughput sales tonew text end natural gas
to retail customers.

(b) Each cooperative electric association and municipality subject to this subdivision
shall spend and invest for energy conservation improvements under this subdivision
the following amounts:

(1) for a municipality, 0.5 percent of its gross operating revenues from the sale of
gas and 1.5 percent of its gross operating revenues from the sale of electricity, excluding
gross operating revenues from electric and gas service provided in the state to large
electric customer facilities; and

(2) for a cooperative electric association, 1.5 percent of its gross operating revenues
from service provided in the state, excluding gross operating revenues from service
provided in the state to large electric customer facilities indirectly through a distribution
cooperative electric association.

(c) Each municipality and cooperative electric association subject to this subdivision
shall identify and implement energy conservation improvement spending and investments
that are appropriate for the municipality or association, except that a municipality
or association may not spend or invest for energy conservation improvements that
directly benefit a new text beginlarge energy facility or a new text endlarge electric customer facility for which the
commissioner has issued an exemption under subdivision 1a, paragraph (b).

(d) Each municipality and cooperative electric association subject to this subdivision
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 subdivision on research
and development projects that meet the definition of energy conservation improvement
in subdivision 1 and that are funded directly by the municipality or cooperative electric
association.

(e) Load-management activities deleted text beginthat do not reduce energy use but that increase the
efficiency of the electric system
deleted text end may be used to meet 50 percent of the conservation
investment and spending requirements of this subdivision.

(f) A generation and transmission cooperative electric association that provides
energy services to cooperative electric associations that provide electric service at retail to
consumers may invest in energy conservation improvements on behalf of the associations
it serves and may fulfill the conservation, spending, reporting, and energy savings goals on
an aggregate basis. A municipal power agency or other not-for-profit entity that provides
energy service to municipal utilities that provide electric service at retail may invest in
energy conservation improvements on behalf of the municipal utilities it serves and may
fulfill the conservation, spending, reporting, and energy savings goals on an aggregate
basis, under an agreement between the municipal power agency or not-for-profit entity
and each municipal utility for funding the investments.

(g) deleted text beginAt least every four years, on a schedule determined by the commissioner, each
municipality or cooperative shall file an overview of its conservation improvement plan
with the commissioner. With this overview,
deleted text end new text beginEach municipality or cooperative shall file
energy conservation improvement plans by June 1 on a schedule determined by order
of the commissioner, but at least every three years. Plans received by June 1 must be
approved or approved as modified by the commissioner by December 1 of the same year.
new text endThe municipality or cooperative shall deleted text beginalsodeleted text end provide an evaluation to the commissioner
detailing its energy conservation improvement spending and investments for the previous
period. The evaluation must briefly describe each conservation program and must specify
the energy savings or increased efficiency in the use of energy within the service territory
of the utility or association that is the result of the spending and investments. The
evaluation must analyze the cost-effectiveness of the utility's or association's conservation
programs, using a list of baseline energy and capacity savings assumptions developed
in consultation with the department. The commissioner shall review each evaluation
and make recommendations, where appropriate, to the municipality or association to
increase the effectiveness of conservation improvement activities. deleted text beginUp to three percent of
a utility's conservation spending obligation under this section may be used for program
pre-evaluation, testing, and monitoring and program evaluation. The overview and
evaluation filed by a municipality with less than 60,000,000 kilowatt-hours in annual
retail sales of electric service may consist of a letter from the governing board of the
municipal utility to the department providing the amount of annual conservation spending
required of that municipality and certifying that the required amount has been spent on
conservation programs pursuant to this subdivision.
deleted text end

deleted text begin (h) The commissioner shall also review each evaluation for whether a portion of the
money spent on residential conservation improvement programs is devoted to programs
that directly address the needs of renters and low-income persons unless an insufficient
number of appropriate programs are available. For the purposes of this subdivision and
subdivision 2, "low-income" means an income at or below 50 percent of the state median
income.
deleted text end

deleted text begin (i) As part of its spending for conservation improvement, a municipality or
association may contribute to the energy and conservation account. A municipality or
association may propose to the commissioner to designate that all or a portion of funds
contributed to the account be used for research and development projects that can best
be implemented on a statewide basis. Any amount contributed must be remitted to the
commissioner by February 1 of each year.
deleted text end

deleted text begin (j)deleted text endnew text begin (h)new text end A municipality may spend up to 50 percent of its required spending under
this section to refurbish an existing district heating or cooling systemdeleted text begin. This paragraph
expires
deleted text end new text beginuntil new text endJuly 1, 2007.new text begin From July 1, 2007, through June 30, 2011, expenditures made
to refurbish a district heating or cooling system are considered to be load-management
activities under paragraph (e). This paragraph expires July 1, 2011.
new text end

new text begin (i) The commissioner shall consider and may require a utility, association, or
other entity providing energy efficiency and conservation services under this section to
undertake a program suggested by an outside source, including a political subdivision,
nonprofit corporation, or community organization.
new text end

Subd. 1c.

Energy-saving goals.

new text begin(a) new text endThe commissioner shall establish energy-saving
goals for energy conservation improvement expenditures and shall evaluate an energy
conservation improvement program on how well it meets the goals set.

new text begin (b) Each individual utility and association shall have an annual energy-savings
goal equivalent to 1.5 percent of gross annual retail energy sales unless modified by the
commissioner under paragraph (d). The savings goals must be calculated based on the
most recent three-year weather normalized average.
new text end

new text begin (c) The commissioner must adopt a filing schedule that is designed to have all
utilities and associations operating under an energy savings plan by calendar year 2010.
new text end

new text begin (d) In its energy conservation improvement plan filing, a utility or association may
request the commissioner to adjust its annual energy savings percentage goal based on
its historical conservation investment experience, customer class makeup, load growth,
a conservation potential study, or other factors the commissioner determines warrants
an adjustment. The commissioner may not approve a plan that provides for an annual
energy savings goal of less than one percent of gross annual retail energy sales from
energy conservation improvements. A utility or association may include in its energy
conservation plan energy savings from an electric utility infrastructure project or waste
heat recovery converted into electricity project approved by the commission under section
216B.1636 that may count as energy savings in addition to the minimum energy savings
goal of at least one percent for energy conservation improvements. Electric utility
infrastructure projects must result in increased energy efficiency greater than that which
would have occurred through normal maintenance activity.
new text end

new text begin (e) An energy savings goal is not satisfied by attaining the revenue expenditure
requirements of subdivisions 1a and 1b, but can only be satisfied by meeting the energy
savings goal established in this subdivision.
new text end

new text begin (f) An association or utility is not required to make energy conservation investments
to attain the energy savings goals of this subdivision that are not cost-effective even
if the investment is necessary to attain the energy savings goals. For the purpose of
this paragraph, in determining cost-effectiveness, the commissioner shall consider the
costs and benefits to ratepayers, the utility, participants, and society. In addition, the
commissioner shall consider the rate at which an association or municipal utility is
increasing its energy savings and its expenditures on energy conservation.
new text end

new text begin (g) On an annual basis, the commissioner shall produce and make publicly available
a report on the annual energy savings and estimated carbon dioxide reductions achieved
by the energy conservation improvement programs for the two most recent years for
which data is available. The commissioner shall report on program performance both in
the aggregate and for each entity filing an energy conservation improvement plan for
approval or review by the commissioner.
new text end

new text begin (h) By January 15, 2010, the commissioner shall report to the legislature whether the
spending requirements under subdivisions 1a and 1b are necessary to achieve the energy
savings goals established in this subdivision.
new text end

Subd. 1d.

deleted text beginCooperative conservation investment increase phase-indeleted text endnew text begin Technical
assistance
new text end.

deleted text begin The increase in required conservation improvement expenditures by a
cooperative electric association that results from the amendments in Laws 2001, chapter
212, article 8, section 6, to subdivision 1b, paragraph (a), clause (1), must be phased
in as follows:
deleted text end

deleted text begin (1) at least 25 percent shall be effective in year 2002;
deleted text end

deleted text begin (2) at least 50 percent shall be effective in year 2003;
deleted text end

deleted text begin (3) at least 75 percent shall be effective in year 2004; and
deleted text end

deleted text begin (4) all of the increase shall be effective in year 2005 and thereafter.
deleted text end

new text begin The commissioner shall evaluate energy conservation improvement programs
on the basis of cost-effectiveness and the reliability of the technologies employed.
The commissioner shall, by order, establish, maintain and update energy savings
assumptions that must be used when filing energy conservation improvement programs.
The commissioner shall establish an inventory of the most effective energy conservation
programs, techniques, and technologies, and encourage all Minnesota utilities to
implement them, where appropriate, in their service territories. The commissioner shall
describe these programs in sufficient detail to provide a utility reasonable guidance
concerning implementation. The commissioner shall prioritize the opportunities in
order of potential energy savings and in order of cost-effectiveness. The commissioner
may contract with a third party to carry out any of the commissioner's duties under
this subdivision, and to obtain technical assistance to evaluate the effectiveness of any
conservation improvement program. The commissioner may assess up to $800,000
annually until June 30, 2009, and $450,000 annually thereafter for the purposes of this
subdivision. The assessments must be deposited in the state treasury and credited to the
energy and conservation account created under subdivision 2a. An assessment made under
this subdivision is not subject to the cap on assessments provided by section 216B.62, or
any other law.
new text end

new text begin Subd. 1e. new text end

new text begin Applied research and development grants. new text end

new text begin The commissioner may, by
order, approve and make grants for applied research and development projects of general
applicability that identify new technologies or strategies to maximize energy savings,
improve the effectiveness of energy conservation programs, or document the carbon
dioxide reductions from energy conservation programs. When approving projects, the
commissioner shall consider proposals and comments from utilities and other interested
parties. The commissioner may assess up to $3,600,000 annually for the purposes of this
subdivision. The assessments must be deposited in the state treasury and credited to the
energy and conservation account created under subdivision 2a. An assessment made under
this subdivision is not subject to the cap on assessments provided by section 216B.62, or
any other law.
new text end

new text begin Subd. 1f. new text end

new text begin Facilities energy efficiency. new text end

new text begin (a) The commissioner of administration and
the commissioner of commerce shall maintain and, as needed, revise the sustainable
building design guidelines developed under section 16B.325.
new text end

new text begin (b) The commissioner of administration and the commissioner of commerce shall
maintain and update the benchmarking tool developed under Laws 2001, chapter 212,
article 1, section 3, so that all public buildings can use the benchmarking tool to maintain
energy use information for the purposes of establishing energy efficiency benchmarks,
tracking building performance and measuring the results of energy efficiency and
conservation improvements.
new text end

new text begin (c) The commissioner shall require that utilities include in their conservation
improvement plans programs that facilitate professional engineering verification to qualify
a building as Energy Star-labeled or as Leadership in Energy and Environmental Design
(LEED) certified. The state goal is to achieve certification of 1,000 commercial buildings
as Energy Star-labeled, and 100 commercial buildings as LEED-certified by December
31, 2010.
new text end

new text begin (d) The commissioner may assess up to $500,000 annually for the purposes of this
subdivision. The assessments must be deposited in the state treasury and credited to the
energy and conservation account created under subdivision 2a. An assessment made under
this subdivision is not subject to the cap on assessments provided by section 216B.62, or
any other law.
new text end

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 deleted text beginfour-yeardeleted text endnew text begin three-yearnew text end
period. Public utilities shall file conservation improvement plans by June 1, on a schedule
determined by order of the commissioner, but at least every deleted text beginfourdeleted text endnew text begin threenew text end 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. deleted text beginThe commissioner shall give special
consideration and encouragement to programs that bring about significant net savings
through the use of energy-efficient lighting.
deleted text end 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 new text beginlarge energy facility or a new text endlarge 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 deleted text beginordeleted text endnew text begin,new text end a nonprofit new text begincorporation, new text endor
community organization.

deleted text begin (e) The commissioner may, by order, establish a list of programs that may be
offered as energy conservation improvements by a public utility, municipal utility,
cooperative electric association, or other entity providing conservation services pursuant
to this section. The list of programs may include rebates for high-efficiency appliances,
rebates or subsidies for high-efficiency lamps, small business energy audits, and building
recommissioning. The commissioner may, by order, change this list to add or subtract
programs as the commissioner determines is necessary to promote efficient and effective
conservation programs.
deleted text end

deleted text begin (f) The commissioner shall ensure that a portion of the money spent on residential
conservation improvement programs is devoted to programs that directly address the
needs of renters and low-income persons, in proportion to the amount the utility has
historically spent on such programs based on the most recent three-year average relative to
the utility's total conservation spending under this section, unless an insufficient number of
appropriate programs are available.
deleted text end

deleted text begin (g)deleted text endnew text begin (e)new text end 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.

deleted text begin (h)deleted text endnew text begin (f)new text end 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.

deleted text begin (i) Up to three percent of a utility's conservation spending obligation under this
section may be used for program pre-evaluation, testing, and monitoring and program
audit and evaluation.
deleted text end

Subd. 2a.

Energy and conservation account.

new text beginThe energy and conservation
account is established in the special revenue fund in the state treasury.
new text end The commissioner
must deposit money deleted text begincontributed under subdivisions 1a and 1bdeleted text endnew text begin assessed or contributed
under subdivisions 1d, 1e, 1f, and 7
new text end in the new text beginstate treasury and credited to thenew text end energy and
conservation account in the deleted text begingeneraldeleted text end new text beginspecial revenuenew text end fund. Money in the account is
appropriated to the deleted text begindepartmentdeleted text end new text begincommissionernew text end for deleted text beginprograms designed to meet the energy
conservation needs of low-income persons and to make energy conservation improvements
in areas not adequately served under subdivision 2, including research and development
projects included in the definition of energy conservation improvement in subdivision 1
deleted text endnew text begin
the purposes of subdivisions 1d, 1e, 1f, and 7
new text end. Interest on money in the account accrues to
the account. deleted text beginUsing information collected under section 216C.02, subdivision 1, paragraph
(b)
, the commissioner must, to the extent possible, allocate enough money to programs
for low-income persons to assure that their needs are being adequately addressed.
The commissioner must request the commissioner of finance to transfer money from
the account to the commissioner of education for an energy conservation program for
low-income persons. In establishing programs, the commissioner must consult political
subdivisions and nonprofit and community organizations, especially organizations
engaged in providing energy and weatherization assistance to low-income persons. At
least one program must address the need for energy conservation improvements in areas
in which a high percentage of residents use fuel oil or propane to fuel their source of
home heating. The commissioner may contract with a political subdivision, a nonprofit
or community organization, a public utility, a municipality, or a cooperative electric
association to implement its programs. The commissioner may provide grants to any
person to conduct research and development projects in accordance with this section.
deleted text end

Subd. 2b.

Recovery of expenses.

The commission shall allow a utility to recover
expenses resulting from a conservation improvement program required by the department
and contributions new text beginand assessmentsnew text end to the energy and conservation account, unless the
recovery would be inconsistent with a financial incentive proposal approved by the
commission. new text beginThe commission shall allow a cooperative electric association subject
to rate regulation under section 216B.026, to recover expenses resulting from energy
conservation improvement programs, load management programs, and assessments
and contributions to the energy and conservation account unless the recovery would be
inconsistent with a financial incentive proposal approved by the commission.
new text endIn addition,
a utility may file annually, or the Public Utilities Commission may require the utility
to file, and the commission may approve, rate schedules containing provisions for the
automatic adjustment of charges for utility service in direct relation to changes in the
expenses of the utility for real and personal property taxes, fees, and permits, the amounts
of which the utility cannot control. A public utility is eligible to file for adjustment for real
and personal property taxes, fees, and permits under this subdivision only if, in the year
previous to the year in which it files for adjustment, it has spent or invested at least 1.75
percent of its gross revenues from provision of electric service, excluding gross operating
revenues from electric service provided in the state to large electric customer facilities for
which the commissioner has issued an exemption under subdivision 1a, paragraph (b), and
0.6 percent of its gross revenues from provision of gas service, excluding gross operating
revenues from gas services provided in the state to large electric customer facilities for
which the commissioner has issued an exemption under subdivision 1a, paragraph (b), for
that year for energy conservation improvements under this section.

new text begin Subd. 2c. new text end

new text begin Performance incentives. new text end

new text begin By December 31, 2008, the commission
shall review any incentive plan for energy conservation improvement it has approved
under section 216B.16, subdivision 6c, and adjust the utility performance incentives to
recognize making progress toward and meeting the energy savings goals established
in subdivision 1c.
new text end

Subd. 3.

Ownership of energy conservation improvement.

An energy
conservation improvement made to or installed in a building in accordance with this
section, except systems owned by the utility and designed to turn off, limit, or vary the
delivery of energy, are the exclusive property of the owner of the building except to the
extent that the improvement is subjected to a security interest in favor of the utility in case
of a loan to the building owner. The utility has no liability for loss, damage or injury
caused directly or indirectly by an energy conservation improvement except for negligence
by the utility in purchase, installation, or modification of the product.

Subd. 4.

Federal law prohibitions.

If investments by public utilities in energy
conservation improvements are in any manner prohibited or restricted by federal law
and there is a provision under which the prohibition or restriction may be waived, then
the commission, the governor, or any other necessary state agency or officer shall take
all necessary and appropriate steps to secure a waiver with respect to those public utility
investments in energy conservation improvements included in this section.

Subd. 5.

Efficient lighting program.

(a) Each public utility, cooperative electric
association, and municipal utility that provides electric service to retail customers shall
include as part of its conservation improvement activities a program to strongly encourage
the use of fluorescent and high-intensity discharge lamps. The program must include at
least a public information campaign to encourage use of the lamps and proper management
of spent lamps by all customer classifications.

(b) A public utility that provides electric service at retail to 200,000 or more
customers shall establish, either directly or through contracts with other persons, including
lamp manufacturers, distributors, wholesalers, and retailers and local government units, a
system to collect for delivery to a reclamation or recycling facility spent fluorescent and
high-intensity discharge lamps from households and from small businesses as defined in
section 645.445 that generate an average of fewer than ten spent lamps per year.

(c) A collection system must include establishing reasonably convenient locations
for collecting spent lamps from households and financial incentives sufficient to encourage
spent lamp generators to take the lamps to the collection locations. Financial incentives
may include coupons for purchase of new fluorescent or high-intensity discharge lamps,
a cash back system, or any other financial incentive or group of incentives designed to
collect the maximum number of spent lamps from households and small businesses that is
reasonably feasible.

(d) A public utility that provides electric service at retail to fewer than 200,000
customers, a cooperative electric association, or a municipal utility that provides electric
service at retail to customers may establish a collection system under paragraphs (b) and
(c) as part of conservation improvement activities required under this section.

(e) The commissioner of the Pollution Control Agency may not, unless clearly
required by federal law, require a public utility, cooperative electric association, or
municipality that establishes a household fluorescent and high-intensity discharge lamp
collection system under this section to manage the lamps as hazardous waste as long as
the lamps are managed to avoid breakage and are delivered to a recycling or reclamation
facility that removes mercury and other toxic materials contained in the lamps prior to
placement of the lamps in solid waste.

(f) If a public utility, cooperative electric association, or municipal utility contracts
with a local government unit to provide a collection system under this subdivision,
the contract must provide for payment to the local government unit of all the unit's
incremental costs of collecting and managing spent lamps.

(g) All the costs incurred by a public utility, cooperative electric association, or
municipal utility for promotion and collection of fluorescent and high-intensity discharge
lamps under this subdivision are conservation improvement spending under this section.

Subd. 6.

Renewable energy research.

(a) A public utility that owns a nuclear
generation facility in the state shall spend five percent of the total amount that utility
is required to spend under this section to support basic and applied research and
demonstration activities at the University of Minnesota Initiative for Renewable Energy
and the Environment for the development of renewable energy sources and technologies.
The utility shall transfer the required amount to the University of Minnesota on or before
July 1 of each year and that annual amount shall be deducted from the amount of money the
utility is required to spend under this section. The University of Minnesota shall transfer
at least ten percent of these funds to at least one rural campus or experiment station.

(b) Research funded under this subdivision shall include:

(1) development of environmentally sound production, distribution, and use of
energy, chemicals, and materials from renewable sources;

(2) processing and utilization of agricultural and forestry plant products and other
bio-based, renewable sources as a substitute for fossil-fuel-based energy, chemicals, and
materials using a variety of means including biocatalysis, biorefining, and fermentation;

(3) conversion of state wind resources to hydrogen for energy storage and
transportation to areas of energy demand;

(4) improvements in scalable hydrogen fuel cell technologies; and

(5) production of hydrogen from bio-based, renewable sources; and sequestration
of carbon.

(c) Notwithstanding other law to the contrary, the utility may, but is not required to,
spend more than two percent of its gross operating revenues from service provided in this
state under this section or section 216B.2411.

(d) This subdivision expires June 30, 2008.

new text begin Subd. 7. new text end

new text begin Low-income programs. new text end

new text begin (a) The commissioner shall ensure that each
utility and association provides low-income programs. When approving spending and
energy savings goals for low-income programs, the commissioner shall consider historic
spending and participation levels, energy savings for low-income programs, and the
number of low-income persons residing in the utility's service territory. A utility that
furnishes gas service must spend at least 0.2 percent of its gross operating revenue from
residential customers in the state on low-income programs. A utility or association that
furnishes electric service must spend at least 0.1 percent of its gross operating revenue
from residential customers in the state on low-income programs. For a generation and
transmission cooperative association, this requirement shall apply to each association's
members' aggregate gross operating revenue from sale of electricity to residential
customers in the state. Beginning in 2010, a utility or association that furnishes electric
service must spend 0.2 percent of its gross operating revenue from residential customers
in the state on low-income programs.
new text end

new text begin (b) To meet the requirements of paragraph (a), a utility or association may contribute
money to the energy and conservation account. An energy conservation improvement plan
must state the amount, if any, of low-income energy conservation improvement money the
utility or association will contribute to the energy and conservation account. Contributions
must be remitted to the commissioner by February 1 of each year.
new text end

new text begin (c) The commissioner shall establish low-income programs to utilize money
contributed to the energy and conservation account under paragraph (b). In establishing
low-income programs, the commissioner shall consult political subdivisions, utilities, and
nonprofit and community organizations, especially organizations engaged in providing
energy and weatherization assistance to low-income persons. Money contributed to
the energy and conservation account under paragraph (b) must provide programs for
low-income persons, including low-income renters, in the service territory of the utility or
association providing the money. The commissioner shall record and report expenditures
and energy savings achieved as a result of low-income programs funded through the
energy and conservation account in the report required under subdivision 1c, paragraph
(g). The commissioner may contract with a political subdivision, nonprofit or community
organization, public utility, municipality, or cooperative electric association to implement
low-income programs funded through the energy and conservation account.
new text end

new text begin (d) A utility or association may petition the commissioner to modify its required
spending under paragraph (a) if the utility or association and the commissioner have been
unable to expend the amount required under paragraph (a) for three consecutive years.
new text end

new text begin Subd. 8. new text end

new text begin Assessment. new text end

new text begin The commission or department may assess utilities subject to
this section in proportion to their respective gross operating revenue from sales of gas or
electric service within the state during the last calendar year to carry out the purposes of
subdivisions 1d, 1e, and 1f. Those assessments are not subject to the cap on assessments
provided by section 216B.62, or any other law.
new text end

Sec. 6.

new text begin [216B.2412] DECOUPLING OF ENERGY SALES FROM REVENUES.
new text end

new text begin Subdivision 1. new text end

new text begin Definition and purpose. new text end

new text begin For the purpose of this section,
"decoupling" means a regulatory tool designed to separate a utility's revenue from changes
in energy sales. The purpose of decoupling is to reduce a utility's disincentive to promote
energy efficiency.
new text end

new text begin Subd. 2. new text end

new text begin Decoupling criteria. new text end

new text begin The commission shall, by order, establish criteria
and standards for decoupling. The commission shall design the criteria and standards to
mitigate the impact on public utilities of the energy savings goals under section 216B.241
without adversely affecting utility ratepayers. In designing the criteria, the commission
shall consider energy efficiency, weather, and cost of capital, among other factors.
new text end

new text begin Subd. 3. new text end

new text begin Pilot programs. new text end

new text begin The commission shall allow one or more rate-regulated
utilities to participate in a pilot program to assess the merits of a rate-decoupling strategy
to promote energy efficiency and conservation. Each pilot program must utilize the
criteria and standards established in subdivision 2 and be designed to determine whether
a rate-decoupling strategy achieves energy savings. On or before a date established by
the commission, the commission shall require electric and gas utilities that intend to
implement a decoupling program to file a decoupling pilot plan, which shall be approved
or approved as modified by the commission. A pilot program may not exceed three years
in length. Any extension beyond three years can only be approved in a general rate case,
unless that decoupling program was previously approved as part of a general rate case.
The commission shall report on the programs annually to the chairs of the house of
representatives and senate committees with primary jurisdiction over energy policy.
new text end

Sec. 7. new text beginEFFECTIVE DATE.
new text end

new text begin This article is effective July 1, 2007.
new text end

ARTICLE 2

MISCELLANEOUS

Section 1.

Minnesota Statutes 2006, section 123B.65, subdivision 2, is amended to read:


Subd. 2.

Energy efficiency contract.

(a) Notwithstanding any law to the contrary,
a school district may enter into a guaranteed energy savings contract with a qualified
provider to significantly reduce energy or operating costs.

(b) Before entering into a contract under this subdivision, the board shall comply
with clauses (1) to (5).

(1) The board must seek proposals from multiple qualified providers by publishing
notice of the proposed guaranteed energy savings contract in the board's official newspaper
and in other publications if the board determines that additional publication is necessary to
notify multiple qualified providers.

(2) The school board must select the qualified provider that best meets the needs of
the board. The board must provide public notice of the meeting at which it will select the
qualified provider.

(3) The contract between the board and the qualified provider must describe the
methods that will be used to calculate the costs of the contract and the operational and
energy savings attributable to the contract.

(4) The qualified provider shall issue a report to the board giving a description of all
costs of installations, modifications, or remodeling, including costs of design, engineering,
installation, maintenance, repairs, or debt service, and giving detailed calculations of the
amounts by which energy or operating costs will be reduced and the projected payback
schedule in years.

(5) The board must provide published notice of the meeting in which it proposes to
award the contract, the names of the parties to the proposed contract, and the contract's
purpose.

new text begin (c) The board must provide a copy of any contract entered into under paragraph (a)
and the report provided under paragraph (b), clause (4), to the commissioner of commerce
within 30 days of the effective date of the contract.
new text end

Sec. 2.

new text begin [216C.03] STATE GOVERNMENT ENERGY SAVINGS PLAN.
new text end

new text begin The commissioner of commerce, in coordination with the commissioners of the
agencies listed in section 15.01, the chancellor of the Minnesota State Colleges and
Universities, and the president of the University of Minnesota, shall identify policy
options, barriers, and economic benefits and costs for state government operations to
achieve the energy savings goals in section 216B.2401 and the resulting carbon emission
reductions. The commissioner of commerce must issue a report to the legislature by
February 1, 2008.
new text end

Sec. 3.

Minnesota Statutes 2006, section 216C.31, is amended to read:


216C.31 ENERGY AUDIT PROGRAMS.

The commissioner shall develop deleted text beginand administerdeleted text end state programs of energy audits of
residential and commercial buildings including deleted text beginthose required by United States Code, title
42, sections 8211 to 8222 and sections 8281 to 8284. The commissioner shall continue
to administer the residential energy audit program as originally established under the
provisions of United States Code, title 42, sections 8211 to 8222; through July 1, 1986
irrespective of any prior expiration date provided in United States Code, title 42, section
8216. The commissioner may approve temporary programs if they are likely to result
in the installation of as many conservation measures as would have been installed had
the utility met the requirements of United States Code, title 42, sections 8211 to 8222.
The Consumer Services Division and the attorney general may release information on
consumer comments about the operation of the program to the commissioner
deleted text endnew text begin the training
and qualifications necessary for the auditing of residential and commercial buildings under
the auspices of a program created under section 216B.2412
new text end.

Sec. 4.

Minnesota Statutes 2006, section 471.345, subdivision 13, is amended to read:


Subd. 13.

Energy efficiency projects.

The following definitions apply to this
subdivision.

(a) "Energy conservation measure" means a training program or facility alteration
designed to reduce energy consumption or operating costs and includes:

(1) insulation of the building structure and systems within the building;

(2) storm windows and doors, caulking or weatherstripping, multiglazed windows
and doors, heat absorbing or heat reflective glazed and coated window and door
systems, additional glazing, reductions in glass area, and other window and door system
modifications that reduce energy consumption;

(3) automatic energy control systems;

(4) heating, ventilating, or air conditioning system modifications or replacements;

(5) replacement or modifications of lighting fixtures to increase the energy efficiency
of the lighting system without increasing the overall illumination of a facility, unless an
increase in illumination is necessary to conform to the applicable state or local building
code for the lighting system after the proposed modifications are made;

(6) energy recovery systems;

(7) cogeneration systems that produce steam or forms of energy such as heat, as well
as electricity, for use primarily within a building or complex of buildings;

(8) energy conservation measures that provide long-term operating cost reductions.

(b) "Guaranteed energy savings contract" means a contract for the evaluation
and recommendations of energy conservation measures, and for one or more energy
conservation measures. The contract must provide that all payments, except obligations
on termination of the contract before its expiration, are to be made over time, but not to
exceed 15 years from the date of final installation, and the savings are guaranteed to the
extent necessary to make payments for the systems.

(c) "Qualified provider" means a person or business experienced in the design,
implementation, and installation of energy conservation measures. A qualified provider
to whom the contract is awarded shall give a sufficient bond to the municipality for its
faithful performance.

Notwithstanding any law to the contrary, a municipality may enter into a guaranteed
energy savings contract with a qualified provider to significantly reduce energy or
operating costs.

Before entering into a contract under this subdivision, the municipality shall provide
published notice of the meeting in which it proposes to award the contract, the names of
the parties to the proposed contract, and the contract's purpose.

Before installation of equipment, modification, or remodeling, the qualified provider
shall first issue a report, summarizing estimates of all costs of installations, modifications,
or remodeling, including costs of design, engineering, installation, maintenance, repairs,
or debt service, and estimates of the amounts by which energy or operating costs will be
reduced.

A guaranteed energy savings contract that includes a written guarantee that savings
will meet or exceed the cost of energy conservation measures is not subject to competitive
bidding requirements of section 471.345 or other law or city charter. The contract is
not subject to section 123B.52.

A municipality may enter into a guaranteed energy savings contract with a qualified
provider if, after review of the report, it finds that the amount it would spend on the energy
conservation measures recommended in the report is not likely to exceed the amount
to be saved in energy and operation costs over 15 years from the date of installation if
the recommendations in the report were followed, and the qualified provider provides a
written guarantee that the energy or operating cost savings will meet or exceed the costs
of the system. The guaranteed energy savings contract may provide for payments over
a period of time, not to exceed 15 years.

A municipality may enter into an installment payment contract for the purchase and
installation of energy conservation measures. The contract must provide for payments
of not less than 1/15 of the price to be paid within two years from the date of the first
operation, and the remaining costs to be paid monthly, not to exceed a 15-year term from
the date of the first operation.

new text begin A municipality entering into a guaranteed energy savings contract shall provide a
copy of the contract and the report from the qualified provider to the commissioner of
commerce within 30 days of the effective date of the contract.
new text end

Guaranteed energy savings contracts may extend beyond the fiscal year in which
they become effective. The municipality shall include in its annual appropriations measure
for each later fiscal year any amounts payable under guaranteed energy savings contracts
during the year. Failure of a municipality to make such an appropriation does not affect
the validity of the guaranteed energy savings contract or the municipality's obligations
under the contracts.

Sec. 5.

Minnesota Statutes 2006, section 504B.161, subdivision 1, is amended to read:


Subdivision 1.

Requirements.

In every lease or license of residential premises, the
landlord or licensor covenants:

(1) that the premises and all common areas are fit for the use intended by the parties;

(2) to keep the premises in reasonable repair during the term of the lease or license,
except when the disrepair has been caused by the willful, malicious, or irresponsible
conduct of the tenant or licensee or a person under the direction or control of the tenant or
licensee; and

(3) to new text beginmake the premises reasonably energy efficient by installing weatherstripping,
caulking, storm windows, and storm doors when the measure will result in energy
procurement cost savings, based on current and projected average residential energy costs
in this state, that will exceed the cost of implementing the measure, including interest,
amortized over the ten-year period following the incurring of the cost; and
new text end

new text begin (4) to new text endmaintain the premises in compliance with the applicable health and safety
laws of the state, deleted text beginincluding the weatherstripping, caulking, storm window, and storm door
energy efficiency standards for renter-occupied residences prescribed by section 216C.27,
subdivisions 1 and 3
,
deleted text end and of the local units of government where the premises are located
during the term of the lease or license, except when violation of the health and safety
laws has been caused by the willful, malicious, or irresponsible conduct of the tenant or
licensee or a person under the direction or control of the tenant or licensee.

The parties to a lease or license of residential premises may not waive or modify the
covenants imposed by this section.

Sec. 6. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2006, sections 216B.165; 216C.27; and 216C.30, subdivision 5, new text end new text begin
and
new text end

new text begin Minnesota Rules, parts 7635.0100; 7635.0110; 7635.0120; 7635.0130; 7635.0140;
7635.0150; 7635.0160; 7635.0170; 7635.0180; 7635.0200; 7635.0210; 7635.0220;
7635.0230; 7635.0240; 7635.0250; 7635.0260; 7635.0300; 7635.0310; 7635.0320;
7635.0330; 7635.0340; 7635.0400; 7635.0410; 7635.0420; 7635.0500; 7635.0510;
7635.0520; 7635.0530; 7635.0600; 7635.0610; 7635.0620; 7635.0630; 7635.0640;
7635.1000; 7635.1010; 7635.1020; 7635.1030; 7655.0100; 7655.0120; 7655.0200;
7655.0210; 7655.0220; 7655.0230; 7655.0240; 7655.0250; 7655.0260; 7655.0270;
7655.0280; 7655.0290; 7655.0300; 7655.0310; 7655.0320; 7655.0330; 7655.0400;
7655.0410; and 7655.0420,
new text end new text begin are repealed, effective July 1, 2007.
new text end

Sec. 7. new text beginEFFECTIVE DATE.
new text end

new text begin This article is effective July 1, 2007.
new text end