SF 1098

as introduced - 89th Legislature (2015 - 2016) Posted on 09/02/2015 03:51pm

A bill for an act
relating to energy; establishing an energy optimization goal for energy
optimization projects; allowing cogeneration projects to be included in energy
conservation plan programs; amending Minnesota Statutes 2014, sections
216B.1636; 216B.2401; 216B.241, subdivisions 1, 1c, by adding a subdivision.

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

Section 1.

Minnesota Statutes 2014, section 216B.1636, is amended to read:

216B.1636 deleted text begin RECOVERY OF ELECTRIC UTILITY INFRASTRUCTURE
COSTS deleted text end new text begin ENERGY OPTIMIZATION new text end .

Subdivision 1.

Definitions.

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

(b) "Electric utility infrastructure costs" or "EUIC" means costs for deleted text begin electric utility
infrastructure deleted text end new text begin energy optimization new text end projects that were not included in the electric utility's
rate base in its most recent general rate case.

(c) deleted text begin "Electric utility infrastructure deleted text end new text begin "Energy optimization new text end projects" means projects
owned by an electric utility that:

(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 deleted text begin , consistent with section 216B.241, subdivision 1c deleted text end ; deleted text begin or
deleted text end

(2) conserve energy or use energy more efficiently by using new text begin (i) new text end waste heat recovery
converted into electricity as defined in section 216B.241, subdivision 1, paragraph (n) deleted text begin . deleted text end new text begin ,
or (ii) cogeneration as defined in section 216B.164, subdivision 2a, and are found by the
commission to be cost-effective and further the state's greenhouse gas emissions goals in
section 216H.02, subdivision 1; or
new text end

new text begin (3) may include, but are not limited to, energy storage, voltage control, and other
infrastructure improvements that increase the overall efficiency of the utility's system.
new text end

new text begin Subd. 1a. new text end

new text begin Energy optimization goal. new text end

new text begin A public utility providing electric service
must include in its energy conservation improvement plan, as described in section
216B.241, subdivision 1c, annual energy savings from energy optimization projects
approved by the commission under this section. These savings must be equivalent to or
greater than 0.5 percent of gross annual retail energy sales, based on the most recent
five-year weather-normalized average, but may not be used to satisfy the minimum energy
savings goal in section 216B.241, subdivision 1c. Electric utility infrastructure costs
to achieve these savings must be approved by the commission based on the criteria in
subdivision 2 and may only be recovered through a filing under subdivision 2.
new text end

Subd. 2.

Filing.

(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 deleted text begin a deleted text end new text begin an enhanced new text end rate of return, income taxes on the rate of return,
incremental property taxes, if any, plus incremental depreciation expense associated with
EUIC.

(b) The filing is subject to the following:

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

(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:

(i) the location, description, and costs associated with the project;

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

(iii) the proposed schedule for implementation;

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

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

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

deleted 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;
deleted text end

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

deleted 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;
deleted text end

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

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

(c) Upon approval of the proposed projects and associated EUIC rate schedule, the
utility may implement the deleted text begin electric utility infrastructure deleted text end new text begin energy optimization new text end projects.

Subd. 3.

Commission authority; orders.

The commission may issue orders
necessary to implement and administer this section.

Sec. 2.

Minnesota Statutes 2014, section 216B.2401, is amended to read:

216B.2401 ENERGY SAVINGS POLICY GOAL.

The legislature finds that energy savings are an energy resource, and that
cost-effective energy savings are preferred over all other energy resources. The legislature
further finds that cost-effective energy savings should be procured systematically and
aggressively in order to reduce utility costs for businesses and residents, improve the
competitiveness and profitability of businesses, create more energy-related jobs, reduce
the economic burden of fuel imports, and reduce pollution and emissions that cause
climate change. Therefore, it is the energy policy of the state of Minnesota to achieve
annual energy savings equal to at least deleted text begin 1.5 deleted text end new text begin 2.0 new text end percent of annual retail energy sales of
electricity and natural gas through cost-effective energy conservation improvement
programs and rate design, energy efficiency achieved by energy consumers without
direct utility involvement, 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.

Sec. 3.

Minnesota Statutes 2014, section 216B.241, subdivision 1, is amended to read:

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) "Department" means the Department of Commerce.

(d) "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.

(e) "Energy conservation improvement" means a project that results in energy
efficiency or energy conservation. Energy conservation improvement may include waste
heat that is recovered and converted into electricity, but does not include deleted text begin electric utility
infrastructure deleted text end new text begin energy optimization new text end projects approved by the commission under section
216B.1636. Energy conservation improvement also includes waste heat recovered and
used as thermal energy.

(f) "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.

(g) "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:

(1) gas sales to:

(i) a large energy facility;

(ii) a large customer facility whose natural gas utility has been exempted by the
commissioner under subdivision 1a, paragraph (b), with respect to natural gas sales made
to the large customer facility; and

(iii) a commercial gas customer facility whose natural gas utility has been exempted
by the commissioner under subdivision 1a, paragraph (c), with respect to natural gas sales
made to the commercial gas customer facility; and

(2) electric sales to a large customer facility whose electric utility has been exempted
by the commissioner under subdivision 1a, paragraph (b), with respect to electric sales
made to the large customer facility.

(h) "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.

(i) "Large customer facility" means all buildings, structures, equipment, and
installations at a single site that collectively (1) impose 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 or
(2) consume not less than 500 million cubic feet of natural gas annually. In calculating
peak electrical demand, a large customer facility may include demand offset by on-site
cogeneration facilities and, if engaged in mineral extraction, may aggregate peak energy
demand from the large customer facility's mining and processing operations.

(j) "Large energy facility" has the meaning given it in section 216B.2421,
subdivision 2, clause (1).

(k) "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 peak demand for energy or capacity.

(l) "Low-income programs" means energy conservation improvement programs that
directly serve the needs of low-income persons, including low-income renters.

(m) "Qualifying utility" means a utility that supplies the energy to a customer that
enables the customer to qualify as a large customer facility.

(n) "Waste heat recovered and used as thermal energy" means capturing heat energy
that would otherwise be exhausted or dissipated to the environment from machinery,
buildings, or industrial processes and productively using such recovered thermal energy
where it was captured or distributing it as thermal energy to other locations where it is
used to reduce demand-side consumption of natural gas, electric energy, or both.

(o) "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.

Sec. 4.

Minnesota Statutes 2014, section 216B.241, subdivision 1c, is amended to read:

Subd. 1c.

Energy-saving goals.

(a) The 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.

(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. A utility or association may elect to
carry forward energy savings in excess of 1.5 percent for a year to the succeeding three
calendar years, except that savings from deleted text begin electric utility infrastructure deleted text end new text begin energy optimization
new text end projects allowed under paragraph (d) may be carried forward for five years. A particular
energy savings can be used only for one year's goal.

(c) The commissioner must adopt a filing schedule that is designed to have all
utilities and associations operating under an energy-savings plan new text begin consistent with the goals
indicated in this subdivision new text end by calendar year deleted text begin 2010 deleted text end new text begin 2017 new text end .

(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 of a public utility new text begin providing
electric service new text end that provides for an annual energy-savings goal of less than deleted text begin one deleted text end new text begin one
and one-half new text end percent of gross annual retail energy sales from energy conservation
improvements new text begin and less than one percent of gross annual retail energy sales for a public
utility that provides natural gas service new text end .

A utility or association may include in its energy conservation plan energy savings
from deleted text begin electric utility infrastructure projects deleted text end new text begin energy optimization projects based on the
commissioner of commerce's recommendation and new text end approved by the commission under
section 216B.1636 or waste heat recovery converted into electricity projects that may
count as energy savings in addition to a minimum energy-savings goal of at least one
percent for energy conservation improvements. deleted text begin Electric utility infrastructure deleted text end new text begin Energy
optimization new text end projects must new text begin be cost-effective and new text end result in increased energy efficiency
greater than that which would have occurred through normal maintenance activity.

(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.

(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.

(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.

deleted 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.
deleted text end

Sec. 5.

Minnesota Statutes 2014, section 216B.241, is amended by adding a
subdivision to read:

new text begin Subd. 5e. new text end

new text begin Cogeneration projects. new text end

new text begin (a) For the purposes of this subdivision, a
cogeneration project has the meaning given in section 216B.164, subdivision 2a, and that
is found by the commission to be cost-effective and further the state's greenhouse gas
emissions goals in section 216H.02, subdivision 1.
new text end

new text begin (b) A utility or association may include in its energy conservation plan programs for
the installation of cost-effective cogeneration projects. Energy savings from cogeneration
projects under this subdivision may not be counted toward the minimum energy-savings
goal in subdivision 1c, but may, if the conservation plan is approved:
new text end

new text begin (1) be counted toward energy savings above the minimum percentage; and
new text end

new text begin (2) be eligible for a performance incentive under subdivision 2c or section 216B.16,
subdivision 6c, that is distinct from the incentive for energy conservation as approved
by the commission.
new text end

new text begin (c) By June 1, 2016, the commissioner shall, by order, establish:
new text end

new text begin (1) methodology for attributing savings from a cogeneration project to the
energy-savings goals of participating electric and gas utilities. In developing this
methodology, the commissioner shall solicit feedback from interested parties in a manner
determined by the commissioner, and shall consider the efficiency of cogeneration projects
compared to purchased electricity from the participating electric utility; and
new text end

new text begin (2) criteria for determining the cost-effectiveness of a proposed cogeneration project,
including minimum standards for overall efficiency.
new text end

new text begin (d) The commissioner shall encourage participating electric and gas utilities to file
combined energy conservation programs that promote the installation of cost-effective
cogeneration projects and to encourage collaboration between utilities when it furthers
the public interest.
new text end