SF 1039

1st Engrossment - 91st Legislature (2019 - 2020) Posted on 03/14/2019 06:06pm

A bill for an act
relating to energy; amending the renewable development account public utility
annual contribution; establishing a net zero emissions project; requiring a report;
establishing a process to compensate businesses for loss of business opportunity
resulting from sale and closure of a biomass energy plant; appropriating money;
amending Minnesota Statutes 2018, section 116C.779, subdivision 1.

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

Section 1.

Minnesota Statutes 2018, section 116C.779, subdivision 1, is amended to read:

Subdivision 1.

Renewable development account.

(a) The renewable development
account is established as a separate account in the special revenue fund in the state treasury.
Appropriations and transfers to the account shall be credited to the account. Earnings, such
as interest, dividends, and any other earnings arising from assets of the account, shall be
credited to the account. Funds remaining in the account at the end of a fiscal year are not
canceled to the general fund but remain in the account until expended. The account shall
be administered by the commissioner of management and budget as provided under this
section.

(b) On July 1, 2017, the public utility that owns the Prairie Island nuclear generating
plant must transfer all funds in the renewable development account previously established
under this subdivision and managed by the public utility to the renewable development
account established in paragraph (a). Funds awarded to grantees in previous grant cycles
that have not yet been expended and unencumbered funds required to be paid in calendar
year 2017 under paragraphs new text begin (e) and new text end (f) deleted text begin and (g) deleted text end , and sections 116C.7792 and 216C.41, are
not subject to transfer under this paragraph.

(c) deleted text begin Except as provided in subdivision 1a, deleted text end Beginning January 15, deleted text begin 2018 deleted text end new text begin 2020 new text end , and
continuing each January 15 thereafter, the public utility that owns the Prairie Island new text begin and
Monticello new text end nuclear generating deleted text begin plant deleted text end new text begin plants new text end must transfer to the renewable development
account deleted text begin $500,000 each year for each dry cask containing spent fuel that is located at the
Prairie Island power plant for deleted text end new text begin the following amounts new text end each year deleted text begin the deleted text end new text begin either new text end plant is in operation deleted text begin ,
and $7,500,000 each year the plant is not in operation deleted text end new text begin : (1) $33,000,000 in 2020; (2)
$31,000,000 in 2021; and (3) $20,000,000 in 2022 and each year thereafter. new text end If ordered by
the commission pursuant to paragraph deleted text begin (i). deleted text end new text begin (h), the public utility must transfer $7,500,000
each year the Prairie Island plant is not in operation and $5,250,000 each year the Monticello
plant is not in operation. new text end The fund transfer must be made if nuclear waste is stored in a dry
cask at the independent spent-fuel storage facility at Prairie Island new text begin or Monticello new text end for any
part of a year.

deleted text begin (d) Except as provided in subdivision 1a, beginning January 15, 2018, and continuing
each January 15 thereafter, the public utility that owns the Monticello nuclear generating
plant must transfer to the renewable development account $350,000 each year for each dry
cask containing spent fuel that is located at the Monticello nuclear power plant for each
year the plant is in operation, and $5,250,000 each year the plant is not in operation if ordered
by the commission pursuant to paragraph (i). The fund transfer must be made if nuclear
waste is stored in a dry cask at the independent spent-fuel storage facility at Monticello for
any part of a year.
deleted text end

deleted text begin (e) deleted text end new text begin (d) new text end Each year, the public utility shall withhold from the funds transferred to the
renewable development account under deleted text begin paragraphs deleted text end new text begin paragraph new text end (c) deleted text begin and (d) deleted text end the amount necessary
to pay its obligations new text begin for that calendar year new text end under paragraphs new text begin (e), new text end (f) deleted text begin and (g) deleted text end , new text begin (j), and (n), new text end
and sections 116C.7792 and 216C.41 deleted text begin , for that calendar year deleted text end .

deleted text begin (f) deleted text end new text begin (e) new text end If the commission approves a new or amended power purchase agreement, the
termination of a power purchase agreement, or the purchase and closure of a facility under
section 216B.2424, subdivision 9, with an entity that uses poultry litter to generate electricity,
the public utility subject to this section shall enter into a contract with the city in which the
poultry litter plant is located to provide grants to the city for the purposes of economic
development on the following schedule: $4,000,000 in fiscal year 2018; $6,500,000 each
fiscal year in 2019 and 2020; and $3,000,000 in fiscal year 2021. The grants shall be paid
by the public utility from funds withheld from the transfer to the renewable development
account, as provided in paragraphs (b) and deleted text begin (e) deleted text end new text begin (d) new text end .

deleted text begin (g) deleted text end new text begin (f) new text end If the commission approves a new or amended power purchase agreement, or the
termination of a power purchase agreement under section 216B.2424, subdivision 9, with
an entity owned or controlled, directly or indirectly, by two municipal utilities located north
of Constitutional Route No. 8, that was previously used to meet the biomass mandate in
section 216B.2424, the public utility that owns a nuclear generating plant shall enter into a
grant contract with such entity to provide $6,800,000 per year for five years, commencing
30 days after the commission approves the new or amended power purchase agreement, or
the termination of the power purchase agreement, and on each June 1 thereafter through
2021, to assist the transition required by the new, amended, or terminated power purchase
agreement. The grant shall be paid by the public utility from funds withheld from the transfer
to the renewable development account as provided in paragraphs (b) and deleted text begin (e) deleted text end new text begin (d) new text end .

deleted text begin (h) deleted text end new text begin (g) new text end The collective amount paid under the grant contracts awarded under paragraphs
new text begin (e) and new text end (f) deleted text begin and (g) deleted text end is limited to the amount deposited into the renewable development account,
and its predecessor, the renewable development account, established under this section, that
was not required to be deposited into the account under Laws 1994, chapter 641, article 1,
section 10.

deleted text begin (i) deleted text end new text begin (h) new text end After discontinuation of operation of the Prairie Island nuclear plant or the
Monticello nuclear plant and each year spent nuclear fuel is stored in dry cask at the
discontinued facility, the commission shall require the public utility to pay $7,500,000 for
the discontinued Prairie Island facility and $5,250,000 for the discontinued Monticello
facility for any year in which the commission finds, by the preponderance of the evidence,
that the public utility did not make a good faith effort to remove the spent nuclear fuel stored
at the facility to a permanent or interim storage site out of the state. This determination shall
be made at least every two years.

new text begin (i) The public utility must annually file with the commission a petition to recover through
a rider mechanism all funds it is required to transfer or withhold under paragraphs (c) to (f)
for the next year. The commission must approve a reasonable cost recovery schedule for
all funds under this paragraph.
new text end

new text begin (j) On or before January 15 of each year, the public utility must file a petition with the
commission identifying the amounts withheld by the public utility the prior year under
paragraph (d) and the amount actually paid the prior year for obligations identified in
paragraph (d). If the amount actually paid is less than the amount withheld, the public utility
must deduct the surplus from the amount withheld for the current year under paragraph (d).
If the amount actually paid is more than the amount withheld, the public utility must add
the deficiency amount to the amount withheld for the current year under paragraph (d). Any
surplus remaining in the account after all programs identified in paragraph (d) are terminated
must be returned to the public utility's customers.
new text end

deleted text begin (j) deleted text end new text begin (k) new text end Funds in the account may be expended only for any of the following purposes:

(1) to stimulate research and development of renewable electric energy technologies;

(2) to encourage grid modernization, including, but not limited to, projects that implement
electricity storage, load control, and smart meter technology; and

(3) to stimulate other innovative energy projects that reduce demand and increase system
efficiency and flexibility.

Expenditures from the fund must benefit Minnesota ratepayers receiving electric service
from the utility that owns a nuclear-powered electric generating plant in this state or the
Prairie Island Indian community or its members.

The utility that owns a nuclear generating plant is eligible to apply for grants under this
subdivision.

deleted text begin (k) deleted text end new text begin (l) new text end For the purposes of paragraph deleted text begin (j) deleted text end new text begin (k) new text end , the following terms have the meanings
given:

(1) "renewable" has the meaning given in section 216B.2422, subdivision 1, paragraph
(c), clauses (1), (2), (4), and (5); and

(2) "grid modernization" means:

(i) enhancing the reliability of the electrical grid;

(ii) improving the security of the electrical grid against cyberthreats and physical threats;
and

(iii) increasing energy conservation opportunities by facilitating communication between
the utility and its customers through the use of two-way meters, control technologies, energy
storage and microgrids, technologies to enable demand response, and other innovative
technologies.

deleted text begin (l) deleted text end new text begin (m) new text end A renewable development account advisory group that includes, among others,
representatives of the public utility and its ratepayers, and includes at least one representative
of the Prairie Island Indian community appointed by that community's tribal council, shall
develop recommendations on account expenditures. new text begin Members of the advisory group must
be chosen by the public utility. new text end The advisory group must design a request for proposal and
evaluate projects submitted in response to a request for proposals. The advisory group must
utilize an independent third-party expert to evaluate proposals submitted in response to a
request for proposal, including all proposals made by the public utility. A request for proposal
for research and development under paragraph deleted text begin (j) deleted text end new text begin (k) new text end , clause (1), may be limited to or include
a request to higher education institutions located in Minnesota for multiple projects authorized
under paragraph deleted text begin (j) deleted text end new text begin (k) new text end , clause (1). The request for multiple projects may include a provision
that exempts the projects from the third-party expert review and instead provides for project
evaluation and selection by a merit peer review grant system. In the process of determining
request for proposal scope and subject and in evaluating responses to request for proposals,
the advisory group must strongly consider, where reasonable, potential benefit to Minnesota
citizens and businesses and the utility's ratepayers.

new text begin (n) The cost to acquire the services of the independent third-party expert described in
paragraph (m), and any other reasonable costs incurred to administer the advisory group
and its actions required by this section, must be paid from funds withheld by the public
utility under paragraph (d). The total amount withheld under this paragraph must not exceed
$125,000 each year.
new text end

deleted text begin (m) deleted text end new text begin (o) new text end The advisory group shall submit funding recommendations to the public utility,
which has full and sole authority to determine which expenditures shall be submitted by
the advisory group to the deleted text begin legislature deleted text end new text begin commission new text end . The commission may approve proposed
expenditures, may disapprove proposed expenditures that it finds not to be in compliance
with this subdivision or otherwise not in the public interest, and may, if agreed to by the
public utility, modify proposed expenditures. The commission shall, by order, submit its
funding recommendations to the legislature as provided under paragraph deleted text begin (n) deleted text end new text begin (p) new text end .

deleted text begin (n) deleted text end new text begin (p) new text end The commission shall present its recommended appropriations from the account
to the senate and house of representatives committees with jurisdiction over energy policy
and finance annually by February 15. Expenditures from the account must be appropriated
by law. In enacting appropriations from the account, the legislature:

(1) may approve or disapprove, but may not modify, the amount of an appropriation for
a project recommended by the commission; and

(2) may not appropriate money for a project the commission has not recommended
funding.

deleted text begin (o) deleted text end new text begin (q) new text end A request for proposal for renewable energy generation projects must, when
feasible and reasonable, give preference to projects that are most cost-effective for a particular
energy source.

deleted text begin (p) deleted text end new text begin (r) new text end The advisory group must annually, by February 15, report to the chairs and ranking
minority members of the legislative committees with jurisdiction over energy policy on
projects funded by the account new text begin under paragraph (k) new text end for the prior year and all previous years.
The report must, to the extent possible and reasonable, itemize the actual and projected
financial benefit to the public utility's ratepayers of each project.

new text begin (s) By June 1, 2019, and each June 1 thereafter, the public utility that owns the Prairie
Island Nuclear Electric Generating Plant must submit to the commissioner of management
and budget an estimate of the amount the public utility will deposit into the account January
15 the next year, based on the provisions of paragraphs (c) to (h) and any appropriations
made from the fund during the most recent legislative session.
new text end

deleted text begin (q) deleted text end new text begin (t) new text end By deleted text begin February 1 , 2018 deleted text end new text begin June 30, 2019 new text end , and each deleted text begin February 1 deleted text end new text begin June 30 new text end thereafter, the
commissioner of management and budget deleted text begin shall deleted text end new text begin must estimate the balance in the account as
of the following January 31, taking into account the balance in the account as of June 30
and the information provided under paragraph (r). By July 15, 2019, and each July 15
thereafter, the commissioner of management and budget must new text end submit a written report
regarding the availability of funds in and obligations of the account to the chairs and ranking
minority members of the senate and house committees with jurisdiction over energy policy
and finance, the public utility, and the advisory group. new text begin If more than $15,000,000 is estimated
to be available in the account as of January 31, the advisory group must, by January 31 the
next year, issue a request for proposals to initiate a grant cycle for the purposes of paragraph
(k).
new text end

deleted text begin (r) deleted text end new text begin (u) new text end A project receiving funds from the account must produce a written final report
that includes sufficient detail for technical readers and a clearly written summary for
nontechnical readers. The report must include an evaluation of the project's financial,
environmental, and other benefits to the state and the public utility's ratepayers.

deleted text begin (s) deleted text end new text begin (v) new text end Final reports, any mid-project status reports, and renewable development account
financial reports must be posted online on a public website designated by the commissioner
of commerce.

deleted text begin (t) deleted text end new text begin (w) new text end All final reports must acknowledge that the project was made possible in whole
or part by the Minnesota renewable development account, noting that the account is financed
by the public utility's ratepayers.

deleted text begin (u) deleted text end new text begin (x) new text end Of the amount in the renewable development account, priority must be given to
making the payments required under section 216C.417.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

new text begin PRAIRIE ISLAND NET ZERO PROJECT.
new text end

new text begin Subdivision 1. new text end

new text begin Program established. new text end

new text begin The Prairie Island Net Zero Project is established
with the goal of the Prairie Island Indian Community developing an energy system that
results in net zero emissions.
new text end

new text begin Subd. 2. new text end

new text begin Grant. new text end

new text begin The commissioner of employment and economic development must
enter into a grant contract with the Prairie Island Indian Community to provide the amount
appropriated under section 5 to stimulate research, development, and implementation of
renewable energy projects benefiting the Prairie Island Indian Community or its members.
Any examination conducted by the commissioner of employment and economic development
to determine the sufficiency of the financial stability and capacity of the Prairie Island Indian
Community to carry out the purposes of this grant is limited to the Community Services
Department of the Prairie Island Indian Community.
new text end

new text begin Subd. 3. new text end

new text begin Plan; report. new text end

new text begin The Prairie Island Indian Community must file a plan with the
commissioner of employment and economic development no later than July 1, 2019,
describing the Prairie Island Net Zero Project elements and implementation strategy. The
Prairie Island Indian Community must file a report on July 1, 2020, and each July 1 thereafter
until the project is complete, describing the progress made in implementing the project and
the uses of expended funds. A final report must be completed within 90 days of the date
the project is complete.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

new text begin BIOMASS BUSINESS COMPENSATION.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of this section, the following terms have
the meanings given.
new text end

new text begin (b) "Biomass plant" means the biomass plant identified under Minnesota Statutes, section
116C.779, subdivision 1, paragraph (f).
new text end

new text begin (c) "Early termination" means the early termination of the power purchase agreement
authorized under Minnesota Statutes, section 216B.2424, subdivision 9, with the biomass
plant.
new text end

new text begin (d) "Operating income" means a business's revenue minus its operating expenses.
new text end

new text begin Subd. 2. new text end

new text begin Office of Administrative Hearings; claims process. new text end

new text begin (a) The chief
administrative law judge of the Office of Administrative Hearings must assign an
administrative law judge to administer a claims award process to compensate businesses
negatively affected by the early termination. The chief administrative law judge may develop
a process, prescribe forms, identify documentation affected businesses must submit with
claims, and issue awards to eligible businesses consistent with this section. The process
must allow, but not require, an authorized representative from each business that applies
for compensation to appear in person before the assigned administrative law judge to provide
evidence in support of the business's claim.
new text end

new text begin (b) The chief administrative law judge may contract with and use the services of financial
or other consultants to examine financial documentation presented by claimants or otherwise
assist in the evaluation and award of claims.
new text end

new text begin (c) Records submitted to the Office of Administrative Hearings as part of the claims
process constitute business data under Minnesota Statutes, section 13.591.
new text end

new text begin (d) An award made under this section is final and is not subject to judicial review.
new text end

new text begin (e) An award made under this section does not constitute an admission of liability by
the state for any damages or other losses suffered by a business affected by the early
termination.
new text end

new text begin Subd. 3. new text end

new text begin Eligibility. new text end

new text begin To be eligible for an award of compensation, an affected business
must meet the following criteria:
new text end

new text begin (1) as of May 1, 2017, the affected business was operating under the terms of a valid
written contract, or an oral contract that is sufficiently supported by business records, with
the company operating the biomass plant or the fertilizer plant integrated with the biomass
plant to supply or manage material for, or receive material from, the biomass plant or the
fertilizer plant integrated with the biomass plant;
new text end

new text begin (2) the affected business is located in the state; and
new text end

new text begin (3) as the result of the early termination, the affected business suffered:
new text end

new text begin (i) decreased operating income; or
new text end

new text begin (ii) the loss of value of investments in real or personal property essential to its business
operations with the biomass plant.
new text end

new text begin Subd. 4. new text end

new text begin Types of claims. new text end

new text begin (a) An eligible business may make claims for a compensation
award based on either or both:
new text end

new text begin (1) decreased operating income; or
new text end

new text begin (2) the loss of value of investments in real or personal property essential to its business
operations with the biomass plant.
new text end

new text begin (b) To establish and quantify a claim for decreased operating income, an eligible business
must:
new text end

new text begin (1) demonstrate its operating income over the past five years derived from supplying or
managing material for, or receiving material from, the biomass plant;
new text end

new text begin (2) present evidence of any alternative business opportunities it has pursued or could
pursue to mitigate the loss of revenue from the termination of its contract with the biomass
plant; and
new text end

new text begin (3) demonstrate the amount that the business's annual operating income, including
operating income from any alternative business opportunities, after the termination of the
business's contract with the biomass plant is less than the five-year average of the business's
annual operating income before the early termination.
new text end

new text begin (c) To establish and quantify a loss of value of investments in real or personal property
claim, an eligible business must provide sufficient evidence of:
new text end

new text begin (1) the essential nature of the investment made in the property to fulfill the contract with
the biomass plant;
new text end

new text begin (2) the extent to which the eligible business is able to repurpose the property for another
productive use after the early termination, including but not limited to the use, sales, salvage,
or scrap value of the property for which the loss is claimed; and
new text end

new text begin (3) the value of the eligible business's nondepreciated investment in the property.
new text end

new text begin Subd. 5. new text end

new text begin Limitations on awards. new text end

new text begin (a) A compensation award for a decreased operating
income claim must not exceed the amount calculated under subdivision 4, paragraph (b),
clause (3), multiplied by two.
new text end

new text begin (b) The use, sales, salvage, or scrap value of the property for which a loss is claimed
must be deducted from a compensation award for a loss of value of investments in real or
personal property claim.
new text end

new text begin (c) A payment received from business interruption insurance policies, settlements, or
other forms of compensation related to the termination of the business's contract with the
biomass plant must be deducted from any compensation award provided under this section.
new text end

new text begin Subd. 6. new text end

new text begin Priority. new text end

new text begin The chief administrative law judge may give priority to claims by
eligible businesses that demonstrate a significant effort to pursue alternative business
opportunities or to conduct other loss mitigation efforts to reduce its claimed losses related
to the termination of its contract with the company operating the biomass plant.
new text end

new text begin Subd. 7. new text end

new text begin Awarding claims. new text end

new text begin If the amount provided for compensation in the biomass
business compensation account established under section 4 is insufficient to fully award all
claims eligible for an award, all awards must be adjusted proportionally based on the value
of the claim.
new text end

new text begin Subd. 8. new text end

new text begin Deadlines. new text end

new text begin The chief administrative law judge must make the application
process for eligible claims available by August 1, 2019. A business seeking an award under
this section must file all claims with the chief administrative law judge within 60 days of
the date the chief administrative law judge makes the application process for eligible claims
available. All preliminary awards on eligible claims must be made within 120 days of the
deadline date to file claims. Any requests to reconsider an award denial must be filed with
the chief administrative law judge within 60 days of the notice date for preliminary awards.
All final awards for eligible claims must be made within 60 days of the deadline date to file
reconsideration requests. The commissioner of management and budget must pay all awarded
claims within 45 days of the date the commissioner of management and budget receives
notice of the final awards from the chief administrative law judge.
new text end

new text begin Subd. 9. new text end

new text begin Expiration. new text end

new text begin This section expires June 30, 2022.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 4.

new text begin BIOMASS BUSINESS COMPENSATION ACCOUNT.
new text end

new text begin Subdivision 1. new text end

new text begin Account established. new text end

new text begin A biomass business compensation account is
established as a separate account in the special revenue fund in the state treasury.
Appropriations and transfers to the account must be credited to the account. Earnings, such
as interest, and any other earnings arising from the assets of the account are credited to the
account. Funds remaining in the account as of December 31, 2021, must be transferred to
the renewable development account established under Minnesota Statutes, section 116C.779.
new text end

new text begin Subd. 2. new text end

new text begin Funding for the special account. new text end

new text begin Notwithstanding Minnesota Statutes, section
116C.779, subdivision 1, paragraph (j), on July 1, 2019, $40,000,000 must be transferred
from the renewable development account under Minnesota Statutes, section 116C.779, to
the biomass business compensation account established under subdivision 3. The transferred
funds are appropriated to pay eligible obligations under the biomass business compensation
program established under section 3.
new text end

new text begin Subd. 3. new text end

new text begin Payment of expenses. new text end

new text begin The chief administrative law judge must certify to the
commissioner of management and budget the total costs incurred to administer the biomass
business compensation claims process. The commissioner of management and budget must
transfer an amount equal to the certified costs incurred for biomass business compensation
claim activities from the renewable development account under Minnesota Statutes, section
116C.779, and deposit it in the administrative hearings account under Minnesota Statutes,
section 14.54. Transfers may occur quarterly throughout the fiscal year and must be based
on quarterly cost and revenue reports, with final certification and reconciliation after each
fiscal year. The total amount transferred under this subdivision must not exceed $200,000.
new text end

new text begin Subd. 4. new text end

new text begin Expiration. new text end

new text begin This section expires June 30, 2022.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 5. new text begin APPROPRIATION; PRAIRIE ISLAND NET ZERO PROJECT.
new text end

new text begin Notwithstanding Minnesota Statutes, section 116C.779, subdivision 1, paragraph (j),
$20,000,000 in fiscal year 2020; $7,500,000 in fiscal years 2021, 2022, and 2023; and
$3,700,000 in fiscal year 2024 are appropriated from the renewable development account
under Minnesota Statutes, section 116C.779, subdivision 1, to the commissioner of
employment and economic development for a grant to the Prairie Island Indian Community
to establish the Net Zero Project under section 2.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end