SF 145

2nd Unofficial Engrossment - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

1.1A bill for an act

1.2relating to energy; enacting the Next Generation Energy Act of 2007, the Global
1.3Warming Mitigation Act of 2007, and the Community-Based Development
1.4Act of 2007; modifying or adding provisions related to state energy policy
1.5goals for fossil fuel-use reduction and renewable energy use, energy efficiency,
1.6energy conservation improvement, recovery of energy-related utility costs,
1.7energy savings, information from the Manitoba Hydro-Electric Board, energy
1.8audits, electric utility renewable energy obligations of 25 percent by 2025,
1.9community-based energy development, the transition to an energy savings
1.10requirement for electric and natural gas utilities, addressing climate change,
1.11the reliability administrator, the delegation to counties for permitting wind
1.12projects under 25 megawatts, reducing greenhouse gas emissions, and allocation
1.13of financial penalties against utilities; requiring studies and reports; making
1.14technical and clarifying changes;amending Minnesota Statutes 2006, sections
1.15123B.65, subdivision 2; 216B.16, subdivisions 1, 6b; 216B.1612; 216B.1645,
1.16by adding subdivisions; 216B.169; 216B.1691, subdivisions 5, as amended, 7,
1.17as added; 216B.241; 216C.05; 216C.052; 216C.31; 471.345, subdivision 13;
1.18500.30, subdivision 2; 504B.161, subdivision 1; proposing coding for new law
1.19in Minnesota Statutes, chapters 216B; 216C; 216F; proposing coding for new
1.20law as Minnesota Statutes, chapter 216H; repealing Minnesota Statutes 2006,
1.21sections 216B.165; 216C.27; 216C.30, subdivision 5; Laws 2007, chapter 3,
1.22section 3; Minnesota Rules, parts 7635.0100; 7635.0110; 7635.0120; 7635.0130;
1.237635.0140; 7635.0150; 7635.0160; 7635.0170; 7635.0180; 7635.0200;
1.247635.0210; 7635.0220; 7635.0230; 7635.0240; 7635.0250; 7635.0260;
1.257635.0300; 7635.0310; 7635.0320; 7635.0330; 7635.0340; 7635.0400;
1.267635.0410; 7635.0420; 7635.0500; 7635.0510; 7635.0520; 7635.0530;
1.277635.0600; 7635.0610; 7635.0620; 7635.0630; 7635.0640; 7635.1000;
1.287635.1010; 7635.1020; 7635.1030; 7655.0100; 7655.0120; 7655.0200;
1.297655.0210; 7655.0220; 7655.0230; 7655.0240; 7655.0250; 7655.0260;
1.307655.0270; 7655.0280; 7655.0290; 7655.0300; 7655.0310; 7655.0320;
1.317655.0330; 7655.0400; 7655.0410; 7655.0420.
1.32BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

2.1ARTICLE 1

2.2GENERAL PROVISIONS

2.3    Section 1. TITLE.
2.4    This act may be cited as the Next Generation Energy Act of 2007.

2.5    Sec. 2. Minnesota Statutes 2006, section 216C.05, is amended to read:
2.6216C.05 FINDINGS AND PURPOSE.
2.7    Subdivision 1. Energy planning. The legislature finds and declares that continued
2.8growth in demand for energy will cause severe social and economic dislocations, and that
2.9the state has a vital interest in providing for: increased efficiency in energy consumption,
2.10the development and use of renewable energy resources wherever possible, and the
2.11creation of an effective energy forecasting, planning, and education program.
2.12    The legislature further finds and declares that the protection of life, safety, and
2.13financial security for citizens during an energy crisis is of paramount importance.
2.14    Therefore, the legislature finds that it is in the public interest to review, analyze, and
2.15encourage those energy programs that will minimize the need for annual increases in
2.16fossil fuel consumption by 1990 and the need for additional electrical generating plants,
2.17and provide for an optimum combination of energy sources consistent with environmental
2.18protection and the protection of citizens.
2.19    The legislature intends to monitor, through energy policy planning and
2.20implementation, the transition from historic growth in energy demand to a period when
2.21demand for traditional fuels becomes stable and the supply of renewable energy resources
2.22is readily available and adequately utilized.
2.23    Subd. 2. Energy policy goals. It is the energy policy of the state of Minnesota that:
2.24    (1) the per capita use of fossil fuel as an energy input be reduced by 15 percent by
2.25the year 2015, through increased reliance on energy efficiency and renewable energy
2.26alternatives; and
2.27    (2) 25 percent of the total energy used in the state be derived from renewable energy
2.28resources by the year 2025.

2.29ARTICLE 2

2.30ENERGY EFFICIENCY AND CONSERVATION

2.31    Section 1. Minnesota Statutes 2006, section 216B.16, subdivision 1, is amended to read:
3.1    Subdivision 1. Notice. Unless the commission otherwise orders, no public utility
3.2shall change a rate which has been duly established under this chapter, except upon 60
3.3days' notice to the commission. The notice shall include statements of facts, expert
3.4opinions, substantiating documents, and exhibits, supporting the change requested, and
3.5state the change proposed to be made in the rates then in force and the time when the
3.6modified rates will go into effect. If the filing utility does not have an approved energy
3.7conservation improvement plan on file with the department, it shall also include in its
3.8notice an energy conservation plan pursuant to section 216B.241. A filing utility subject to
3.9rate regulation under section 216B.026 shall reference in its notice the energy conservation
3.10improvement plans of the generation and transmission cooperative providing energy
3.11conservation improvement programs to members of the filing utility pursuant to section
3.12216B.241. The filing utility shall give written notice, as approved by the commission, of
3.13the proposed change to the governing body of each municipality and county in the area
3.14affected. All proposed changes shall be shown by filing new schedules or shall be plainly
3.15indicated upon schedules on file and in force at the time.

3.16    Sec. 2. Minnesota Statutes 2006, section 216B.16, subdivision 6b, is amended to read:
3.17    Subd. 6b. Energy conservation improvement. (a) Except as otherwise provided
3.18in this subdivision, all investments and expenses of a public utility as defined in
3.19section 216B.241, subdivision 1, paragraph (e) (i), incurred in connection with energy
3.20conservation improvements shall be recognized and included by the commission in the
3.21determination of just and reasonable rates as if the investments and expenses were directly
3.22made or incurred by the utility in furnishing utility service.
3.23    (b) After December 31, 1999, Investments and expenses for energy conservation
3.24improvements shall not be included by the commission in the determination of (i) just and
3.25reasonable electric and gas rates for retail electric and gas service provided to large electric
3.26customer facilities that have been exempted by the commissioner of the department
3.27pursuant to section 216B.241, subdivision 1a, paragraph (b); or (ii) just and reasonable
3.28gas rates for large energy facilities. However, no public utility shall be prevented from
3.29recovering its investment in energy conservation improvements from all customers that
3.30were made on or before December 31, 1999, in compliance with the requirements of
3.31section 216B.241.
3.32    (c) The commission may permit a public utility to file rate schedules providing for
3.33annual recovery of the costs of energy conservation improvements. These rate schedules
3.34may be applicable to less than all the customers in a class of retail customers if necessary to
3.35reflect the differing minimum spending requirements of section 216B.241, subdivision 1a.
4.1After December 31, 1999,. The commission shall allow a public utility, without requiring
4.2a general rate filing under this section, to reduce the electric and gas rates applicable to
4.3large electric customer facilities that have been exempted by the commissioner of the
4.4department pursuant to section 216B.241, subdivision 1a, paragraph (b), and to reduce the
4.5gas rate applicable to a large energy facility by an amount that reflects the elimination
4.6of energy conservation improvement investments or expenditures for those facilities
4.7required on or before December 31, 1999. In the event that the commission has set
4.8electric or gas rates based on the use of an accounting methodology that results in the cost
4.9of conservation improvements being recovered from utility customers over a period of
4.10years, the rate reduction may occur in a series of steps to coincide with the recovery of
4.11balances due to the utility for conservation improvements made by the utility on or before
4.12December 31, 1999 2007.
4.13    (d) Investments and expenses of a public utility shall not include electric utility
4.14infrastructure costs as defined in section 216B.1636, subdivision 1, paragraph (b).

4.15    Sec. 3. [216B.1636] RECOVERY OF ELECTRIC UTILITY INFRASTRUCTURE
4.16COSTS.
4.17    Subdivision 1. Definitions. (a) "Electric utility" means a public utility as defined in
4.18section 216B.02, subdivision 4, that furnishes electric service to retail customers.
4.19    (b) "Electric utility infrastructure costs" or "EUIC" means costs for electric utility
4.20infrastructure projects that were not included in the electric utility's rate base in its most
4.21recent general rate case.
4.22    (c) "Electric utility infrastructure projects" means projects owned by an electric
4.23utility that:
4.24    (1) replace or modify existing electric utility infrastructure, including utility-owned
4.25buildings, if the replacement or modification is shown to conserve energy or use energy
4.26more efficiently, consistent with section 216B.241, subdivision 1c; or
4.27    (2) conserve energy or use energy more efficiently by using waste heat recovery
4.28converted into electricity as defined in section 216B.241, subdivision 1, paragraph (n).
4.29    Subd. 2. Filing. (a) The commission may approve an electric utility's petition for
4.30a rate schedule to recover EUIC under this section. An electric utility may petition the
4.31commission to recover a rate of return, income taxes on the rate of return, incremental
4.32property taxes, if any, plus incremental depreciation expense associated with EUIC.
4.33    (b) The filing is subject to the following:
4.34    (1) an electric utility may submit a filing under this section no more than once
4.35per year; and
5.1    (2) an electric utility must file sufficient information to satisfy the commission
5.2regarding the proposed EUIC or be subject to denial by the commission, which
5.3information includes, but is not limited to:
5.4    (i) the location, description, and costs associated with the project;
5.5    (ii) evidence that the electric utility infrastructure project will conserve energy or use
5.6energy more efficiently than similar utility facilities currently used by the electric utility;
5.7    (iii) the proposed schedule for implementation;
5.8    (iv) a description of the costs, and salvage value, if any, associated with the existing
5.9infrastructure replaced or modified as a result of the project;
5.10    (v) the proposed rate design and an explanation of why the proposed rate design
5.11is in the public interest;
5.12    (vi) the magnitude and timing of any known future electric utility projects that the
5.13utility may seek to recover under this section;
5.14    (vii) the magnitude of EUIC in relation to the electric utility's base revenue as
5.15approved by the commission in the electric utility's most recent general rate case,
5.16exclusive of fuel cost adjustments;
5.17    (viii) the magnitude of EUIC in relation to the electric utility's capital expenditures
5.18since its most recent general rate case;
5.19    (ix) the amount of time since the utility last filed a general rate case and the utility's
5.20reasons for seeking recovery outside of a general rate case;
5.21    (x) documentation supporting the calculation of the EUIC; and
5.22    (xi) a cost and benefit analysis showing that the electric utility infrastructure project
5.23is in the public interest.
5.24    (c) Upon approval of the proposed projects and associated EUIC rate schedule, the
5.25utility may implement the electric utility infrastructure projects.
5.26    Subd. 3. Commission authority; orders. The commission may issue orders
5.27necessary to implement and administer this section.

5.28    Sec. 4. [216B.2401] ENERGY CONSERVATION POLICY GOAL.
5.29    It is the energy policy of the state of Minnesota to achieve annual energy savings
5.30equal to 1.5 percent of annual retail energy sales of electricity and natural gas directly
5.31through energy conservation improvement programs and rate design, and indirectly
5.32through energy codes and appliance standards, programs designed to transform the market
5.33or change consumer behavior, energy savings resulting from efficiency improvements to
5.34the utility infrastructure and system, and other efforts to promote energy efficiency and
5.35energy conservation.

6.1    Sec. 5. Minnesota Statutes 2006, section 216B.241, is amended to read:
6.2216B.241 ENERGY CONSERVATION IMPROVEMENT.
6.3    Subdivision 1. Definitions. For purposes of this section and section 216B.16,
6.4subdivision 6b , the terms defined in this subdivision have the meanings given them.
6.5    (a) "Commission" means the Public Utilities Commission.
6.6    (b) "Commissioner" means the commissioner of commerce.
6.7    (c) "Customer facility" means all buildings, structures, equipment, and installations
6.8at a single site.
6.9    (d) "Department" means the Department of Commerce.
6.10    (e) "Energy conservation" means demand-side management of energy supplies
6.11resulting in a net reduction in energy use. Load management that reduces overall energy
6.12use is energy conservation.
6.13    (f) "Energy conservation improvement" means a project that results in energy
6.14efficiency or energy conservation. Energy conservation improvement may include waste
6.15heat recovery converted into electricity but does not include electric utility infrastructure
6.16projects approved by the commission under section 216B.1636.
6.17    (g) "Energy efficiency" refers to measures or programs, including energy
6.18conservation measures or programs, that target consumer behavior, equipment, processes,
6.19or devices designed to produce either an absolute decrease in consumption of electric
6.20energy or natural gas or a decrease in consumption of electric energy or natural gas on a
6.21per unit of production basis without a reduction in the quality or level of service provided
6.22to the energy consumer.
6.23    (g) (h) "Gross annual retail energy sales" means annual electric sales to all retail
6.24customers in a utility's or association's Minnesota service territory or natural gas
6.25throughput to all retail customers, including natural gas transportation customers, on a
6.26utility's distribution system in Minnesota. For purposes of this section, gross annual
6.27retail energy sales exclude gas sales to a large energy facility and gas and electric sales
6.28to a large electric customer facility exempted by the commissioner under subdivision
6.291a, paragraph (b).
6.30    (i) "Investments and expenses of a public utility" includes the investments and
6.31expenses incurred by a public utility in connection with an energy conservation
6.32improvement, including but not limited to:
6.33    (1) the differential in interest cost between the market rate and the rate charged on a
6.34no-interest or below-market interest loan made by a public utility to a customer for the
6.35purchase or installation of an energy conservation improvement;
7.1    (2) the difference between the utility's cost of purchase or installation of energy
7.2conservation improvements and any price charged by a public utility to a customer for
7.3such improvements.
7.4    (h) (j) "Large electric customer facility" means a customer facility that imposes a
7.5peak electrical demand on an electric utility's system of not less than 20,000 kilowatts,
7.6measured in the same way as the utility that serves the customer facility measures
7.7electrical demand for billing purposes, and for which electric services are provided at
7.8retail on a single bill by a utility operating in the state.
7.9    (i) (k) "Large energy facility" has the meaning given it in section 216B.2421,
7.10subdivision 2, clause (1).
7.11    (l) "Load management" means an activity, service, or technology to change the
7.12timing or the efficiency of a customer's use of energy that allows a utility or a customer
7.13to respond to wholesale market fluctuations or to reduce the overall peak demand for
7.14energy or capacity.
7.15    (m) "Low-income programs" means energy conservation improvement programs
7.16that directly serve the needs of low-income persons, including low-income renters.
7.17    (n) "Waste heat recovery converted into electricity" means an energy recovery
7.18process that converts otherwise lost energy from the heat of exhaust stacks or pipes used
7.19for engines or manufacturing or industrial processes, or the reduction of high pressure
7.20in water or gas pipelines.
7.21    Subd. 1a. Investment, expenditure, and contribution; public utility. (a) For
7.22purposes of this subdivision and subdivision 2, "public utility" has the meaning given it
7.23in section 216B.02, subdivision 4. Each public utility shall spend and invest for energy
7.24conservation improvements under this subdivision and subdivision 2 the following
7.25amounts:
7.26    (1) for a utility that furnishes gas service, 0.5 percent of its gross operating revenues
7.27from service provided in the state;
7.28    (2) for a utility that furnishes electric service, 1.5 percent of its gross operating
7.29revenues from service provided in the state; and
7.30    (3) for a utility that furnishes electric service and that operates a nuclear-powered
7.31electric generating plant within the state, two percent of its gross operating revenues
7.32from service provided in the state.
7.33    For purposes of this paragraph (a), "gross operating revenues" do not include
7.34revenues from large electric customer facilities exempted by the commissioner under
7.35paragraph (b).
8.1    (b) The owner of a large electric customer facility may petition the commissioner
8.2to exempt both electric and gas utilities serving the large energy customer facility from
8.3the investment and expenditure requirements of paragraph (a) with respect to retail
8.4revenues attributable to the facility. At a minimum, the petition must be supported by
8.5evidence relating to competitive or economic pressures on the customer and a showing
8.6by the customer of reasonable efforts to identify, evaluate, and implement cost-effective
8.7conservation improvements at the facility. If a petition is filed on or before October 1 of
8.8any year, the order of the commissioner to exempt revenues attributable to the facility can
8.9be effective no earlier than January 1 of the following year. The commissioner shall
8.10not grant an exemption if the commissioner determines that granting the exemption is
8.11contrary to the public interest. The commissioner may, after investigation, rescind any
8.12exemption granted under this paragraph upon a determination that cost-effective the
8.13customer is not continuing to make reasonable efforts to identify, evaluate, and implement
8.14energy conservation improvements are available at the large electric customer facility.
8.15For the purposes of this paragraph, "cost-effective" means that the projected total cost of
8.16the energy conservation improvement at the large electric customer facility is less than
8.17the projected present value of the energy and demand savings resulting from the energy
8.18conservation improvement. For the purposes of investigations by the commissioner under
8.19this paragraph, the owner of any large electric customer facility shall, upon request,
8.20provide the commissioner with updated information comparable to that originally supplied
8.21in or with the owner's original petition under this paragraph.
8.22    (c) The commissioner may require investments or spending greater than the amounts
8.23required under this subdivision for a public utility whose most recent advance forecast
8.24required under section 216B.2422 or 216C.17 projects a peak demand deficit of 100
8.25megawatts or greater within five years under midrange forecast assumptions.
8.26    (d) A public utility or owner of a large electric customer facility may appeal
8.27a decision of the commissioner under paragraph (b) or (c) to the commission under
8.28subdivision 2. In reviewing a decision of the commissioner under paragraph (b) or (c),
8.29the commission shall rescind the decision if it finds that the required investments or
8.30spending will:
8.31    (1) not result in cost-effective energy conservation improvements; or
8.32    (2) otherwise not be in the public interest.
8.33    (e) Each utility shall determine what portion of the amount it sets aside for
8.34conservation improvement will be used for conservation improvements under subdivision
8.352 and what portion it will contribute to the energy and conservation account established in
8.36subdivision 2a. A public utility may propose to the commissioner to designate that all
9.1or a portion of funds contributed to the account established in subdivision 2a be used
9.2for research and development projects that can best be implemented on a statewide
9.3basis. Contributions must be remitted to the commissioner by February 1 of each year.
9.4Nothing in this subdivision prohibits a public utility from spending or investing for energy
9.5conservation improvement more than required in this subdivision.
9.6    Subd. 1b. Conservation improvement by cooperative association or
9.7municipality. (a) This subdivision applies to:
9.8    (1) a cooperative electric association that provides retail service to its members;
9.9    (2) a municipality that provides electric service to retail customers; and
9.10    (3) a municipality with gross operating revenues in excess of $5,000,000 from
9.11sales of more than 1,000,000,000 cubic feet in annual throughput sales to natural gas
9.12to retail customers.
9.13    (b) Each cooperative electric association and municipality subject to this subdivision
9.14shall spend and invest for energy conservation improvements under this subdivision
9.15the following amounts:
9.16    (1) for a municipality, 0.5 percent of its gross operating revenues from the sale of
9.17gas and 1.5 percent of its gross operating revenues from the sale of electricity, excluding
9.18gross operating revenues from electric and gas service provided in the state to large
9.19electric customer facilities; and
9.20    (2) for a cooperative electric association, 1.5 percent of its gross operating revenues
9.21from service provided in the state, excluding gross operating revenues from service
9.22provided in the state to large electric customer facilities indirectly through a distribution
9.23cooperative electric association.
9.24    (c) Each municipality and cooperative electric association subject to this subdivision
9.25shall identify and implement energy conservation improvement spending and investments
9.26that are appropriate for the municipality or association, except that a municipality
9.27or association may not spend or invest for energy conservation improvements that
9.28directly benefit a large energy facility or a large electric customer facility for which the
9.29commissioner has issued an exemption under subdivision 1a, paragraph (b).
9.30    (d) Each municipality and cooperative electric association subject to this subdivision
9.31may spend and invest annually up to ten percent of the total amount required to be spent
9.32and invested on energy conservation improvements under this subdivision on research
9.33and development projects that meet the definition of energy conservation improvement
9.34in subdivision 1 and that are funded directly by the municipality or cooperative electric
9.35association.
10.1    (e) Load-management activities that do not reduce energy use but that increase the
10.2efficiency of the electric system may be used to meet 50 percent of the conservation
10.3investment and spending requirements of this subdivision.
10.4    (f) A generation and transmission cooperative electric association that provides
10.5energy services to cooperative electric associations that provide electric service at retail to
10.6consumers may invest in energy conservation improvements on behalf of the associations
10.7it serves and may fulfill the conservation, spending, reporting, and energy savings goals on
10.8an aggregate basis. A municipal power agency or other not-for-profit entity that provides
10.9energy service to municipal utilities that provide electric service at retail may invest in
10.10energy conservation improvements on behalf of the municipal utilities it serves and may
10.11fulfill the conservation, spending, reporting, and energy savings goals on an aggregate
10.12basis, under an agreement between the municipal power agency or not-for-profit entity
10.13and each municipal utility for funding the investments.
10.14    (g) At least every four years, on a schedule determined by the commissioner, each
10.15municipality or cooperative shall file an overview of its conservation improvement plan
10.16with the commissioner. With this overview, Each municipality or cooperative shall file
10.17energy conservation improvement plans by June 1 on a schedule determined by order
10.18of the commissioner, but at least every three years. Plans received by June 1 must be
10.19approved or approved as modified by the commissioner by December 1 of the same year.
10.20The municipality or cooperative shall also provide an evaluation to the commissioner
10.21detailing its energy conservation improvement spending and investments for the previous
10.22period. The evaluation must briefly describe each conservation program and must specify
10.23the energy savings or increased efficiency in the use of energy within the service territory
10.24of the utility or association that is the result of the spending and investments. The
10.25evaluation must analyze the cost-effectiveness of the utility's or association's conservation
10.26programs, using a list of baseline energy and capacity savings assumptions developed
10.27in consultation with the department. The commissioner shall review each evaluation
10.28and make recommendations, where appropriate, to the municipality or association to
10.29increase the effectiveness of conservation improvement activities. Up to three percent of
10.30a utility's conservation spending obligation under this section may be used for program
10.31pre-evaluation, testing, and monitoring and program evaluation. The overview and
10.32evaluation filed by a municipality with less than 60,000,000 kilowatt-hours in annual
10.33retail sales of electric service may consist of a letter from the governing board of the
10.34municipal utility to the department providing the amount of annual conservation spending
10.35required of that municipality and certifying that the required amount has been spent on
10.36conservation programs pursuant to this subdivision.
11.1    (h) The commissioner shall also review each evaluation for whether a portion of the
11.2money spent on residential conservation improvement programs is devoted to programs
11.3that directly address the needs of renters and low-income persons unless an insufficient
11.4number of appropriate programs are available. For the purposes of this subdivision and
11.5subdivision 2, "low-income" means an income at or below 50 percent of the state median
11.6income.
11.7    (i) As part of its spending for conservation improvement, a municipality or
11.8association may contribute to the energy and conservation account. A municipality or
11.9association may propose to the commissioner to designate that all or a portion of funds
11.10contributed to the account be used for research and development projects that can best
11.11be implemented on a statewide basis. Any amount contributed must be remitted to the
11.12commissioner by February 1 of each year.
11.13    (j) (h) A municipality may spend up to 50 percent of its required spending under
11.14this section to refurbish an existing district heating or cooling system. This paragraph
11.15expires until July 1, 2007. From July 1, 2007, through June 30, 2011, expenditures made
11.16to refurbish a district heating or cooling system are considered to be load-management
11.17activities under paragraph (e). This paragraph expires July 1, 2011.
11.18    (i) The commissioner shall consider and may require a utility, association, or
11.19other entity providing energy efficiency and conservation services under this section to
11.20undertake a program suggested by an outside source, including a political subdivision,
11.21nonprofit corporation, or community organization.
11.22    Subd. 1c. Energy-saving goals. (a) The commissioner shall establish energy-saving
11.23goals for energy conservation improvement expenditures and shall evaluate an energy
11.24conservation improvement program on how well it meets the goals set.
11.25    (b) Each individual utility and association shall have an annual energy-savings
11.26goal equivalent to 1.5 percent of gross annual retail energy sales unless modified by the
11.27commissioner under paragraph (d). The savings goals must be calculated based on the
11.28most recent three-year weather normalized average.
11.29    (c) The commissioner must adopt a filing schedule that is designed to have all
11.30utilities and associations operating under an energy savings plan by calendar year 2010.
11.31    (d) In its energy conservation improvement plan filing, a utility or association may
11.32request the commissioner to adjust its annual energy savings percentage goal based on
11.33its historical conservation investment experience, customer class makeup, load growth,
11.34a conservation potential study, or other factors the commissioner determines warrants
11.35an adjustment. The commissioner may not approve a plan that provides for an annual
11.36energy savings goal of less than one percent of gross annual retail energy sales from
12.1energy conservation improvements. A utility or association may include in its energy
12.2conservation plan energy savings from electric utility infrastructure projects approved
12.3by the commission under section 216B.1636 or waste heat recovery converted into
12.4electricity projects that may count as energy savings in addition to the minimum energy
12.5savings goal of at least one percent for energy conservation improvements. Electric utility
12.6infrastructure projects must result in increased energy conservation or energy efficiency
12.7greater than that which would have occurred through normal maintenance activity.
12.8    (e) An energy savings goal is not satisfied by attaining the revenue expenditure
12.9requirements of subdivisions 1a and 1b, but can only be satisfied by meeting the energy
12.10savings goal established in this subdivision.
12.11    (f) An association or utility is not required to make energy conservation investments
12.12to attain the energy savings goals of this subdivision that are not cost-effective even
12.13if the investment is necessary to attain the energy savings goals. For the purpose of
12.14this paragraph, in determining cost-effectiveness, the commissioner shall consider the
12.15costs and benefits to ratepayers, the utility, participants, and society. In addition, the
12.16commissioner shall consider the rate at which an association or municipal utility is
12.17increasing its energy savings and its expenditures on energy conservation.
12.18    (g) On an annual basis, the commissioner shall produce and make publicly available
12.19a report on the annual energy savings and estimated carbon dioxide reductions achieved
12.20by the energy conservation improvement programs for the two most recent years for
12.21which data is available. The commissioner shall report on program performance both in
12.22the aggregate and for each entity filing an energy conservation improvement plan for
12.23approval or review by the commissioner.
12.24    (h) By January 15, 2010, the commissioner shall report to the legislature whether the
12.25spending requirements under subdivisions 1a and 1b are necessary to achieve the energy
12.26savings goals established in this subdivision.
12.27    Subd. 1d. Cooperative conservation investment increase phase-in Technical
12.28assistance. The increase in required conservation improvement expenditures by a
12.29cooperative electric association that results from the amendments in Laws 2001, chapter
12.30212, article 8, section 6, to subdivision 1b, paragraph (a), clause (1), must be phased
12.31in as follows:
12.32    (1) at least 25 percent shall be effective in year 2002;
12.33    (2) at least 50 percent shall be effective in year 2003;
12.34    (3) at least 75 percent shall be effective in year 2004; and
12.35    (4) all of the increase shall be effective in year 2005 and thereafter.
13.1    The commissioner shall evaluate energy conservation improvement programs
13.2on the basis of cost-effectiveness and the reliability of the technologies employed.
13.3The commissioner shall, by order, establish, maintain, and update energy savings
13.4assumptions that must be used when filing energy conservation improvement programs.
13.5The commissioner shall establish an inventory of the most effective energy conservation
13.6programs, techniques, and technologies, and encourage all Minnesota utilities to
13.7implement them, where appropriate, in their service territories. The commissioner shall
13.8describe these programs in sufficient detail to provide a utility reasonable guidance
13.9concerning implementation. The commissioner shall prioritize the opportunities in
13.10order of potential energy savings and in order of cost-effectiveness. The commissioner
13.11may contract with a third party to carry out any of the commissioner's duties under
13.12this subdivision, and to obtain technical assistance to evaluate the effectiveness of any
13.13conservation improvement program. The commissioner may assess up to $800,000
13.14annually until June 30, 2009, and $450,000 annually thereafter for the purposes of this
13.15subdivision. The assessments must be deposited in the state treasury and credited to the
13.16energy and conservation account created under subdivision 2a. An assessment made under
13.17this subdivision is not subject to the cap on assessments provided by section 216B.62, or
13.18any other law.
13.19    Subd. 1e. Applied research and development grants. The commissioner may, by
13.20order, approve and make grants for applied research and development projects of general
13.21applicability that identify new technologies or strategies to maximize energy savings,
13.22improve the effectiveness of energy conservation programs, or document the carbon
13.23dioxide reductions from energy conservation programs. When approving projects, the
13.24commissioner shall consider proposals and comments from utilities and other interested
13.25parties. The commissioner may assess up to $3,600,000 annually for the purposes of this
13.26subdivision. The assessments must be deposited in the state treasury and credited to the
13.27energy and conservation account created under subdivision 2a. An assessment made under
13.28this subdivision is not subject to the cap on assessments provided by section 216B.62, or
13.29any other law.
13.30    Subd. 1f. Facilities energy efficiency. (a) The commissioner of administration and
13.31the commissioner of commerce shall maintain and, as needed, revise the sustainable
13.32building design guidelines developed under section 16B.325.
13.33    (b) The commissioner of administration and the commissioner of commerce shall
13.34maintain and update the benchmarking tool developed under Laws 2001, chapter 212,
13.35article 1, section 3, so that all public buildings can use the benchmarking tool to maintain
13.36energy use information for the purposes of establishing energy efficiency benchmarks,
14.1tracking building performance, and measuring the results of energy efficiency and
14.2conservation improvements.
14.3    (c) The commissioner shall require that utilities include in their conservation
14.4improvement plans programs that facilitate professional engineering verification to qualify
14.5a building as Energy Star-labeled or as Leadership in Energy and Environmental Design
14.6(LEED) certified. The state goal is to achieve certification of 1,000 commercial buildings
14.7as Energy Star-labeled, and 100 commercial buildings as LEED-certified by December
14.831, 2010.
14.9    (d) The commissioner may assess up to $500,000 annually for the purposes of this
14.10subdivision. The assessments must be deposited in the state treasury and credited to the
14.11energy and conservation account created under subdivision 2a. An assessment made under
14.12this subdivision is not subject to the cap on assessments provided by section 216B.62, or
14.13any other law.
14.14    Subd. 2. Programs. (a) The commissioner may require public utilities to make
14.15investments and expenditures in energy conservation improvements, explicitly setting
14.16forth the interest rates, prices, and terms under which the improvements must be offered to
14.17the customers. The required programs must cover no more than a four-year three-year
14.18period. Public utilities shall file conservation improvement plans by June 1, on a schedule
14.19determined by order of the commissioner, but at least every four three years. Plans
14.20received by a public utility by June 1 must be approved or approved as modified by the
14.21commissioner by December 1 of that same year. The commissioner shall give special
14.22consideration and encouragement to programs that bring about significant net savings
14.23through the use of energy-efficient lighting. The commissioner shall evaluate the program
14.24on the basis of cost-effectiveness and the reliability of technologies employed. The
14.25commissioner's order must provide to the extent practicable for a free choice, by consumers
14.26participating in the program, of the device, method, material, or project constituting the
14.27energy conservation improvement and for a free choice of the seller, installer, or contractor
14.28of the energy conservation improvement, provided that the device, method, material, or
14.29project seller, installer, or contractor is duly licensed, certified, approved, or qualified,
14.30including under the residential conservation services program, where applicable.
14.31    (b) The commissioner may require a utility to make an energy conservation
14.32improvement investment or expenditure whenever the commissioner finds that the
14.33improvement will result in energy savings at a total cost to the utility less than the cost
14.34to the utility to produce or purchase an equivalent amount of new supply of energy. The
14.35commissioner shall nevertheless ensure that every public utility operate one or more
14.36programs under periodic review by the department.
15.1    (c) Each public utility subject to subdivision 1a may spend and invest annually up to
15.2ten percent of the total amount required to be spent and invested on energy conservation
15.3improvements under this section by the utility on research and development projects
15.4that meet the definition of energy conservation improvement in subdivision 1 and that
15.5are funded directly by the public utility.
15.6    (d) A public utility may not spend for or invest in energy conservation improvements
15.7that directly benefit a large energy facility or a large electric customer facility for which
15.8the commissioner has issued an exemption pursuant to subdivision 1a, paragraph (b). The
15.9commissioner shall consider and may require a utility to undertake a program suggested
15.10by an outside source, including a political subdivision or, a nonprofit corporation, or
15.11community organization.
15.12    (e) The commissioner may, by order, establish a list of programs that may be
15.13offered as energy conservation improvements by a public utility, municipal utility,
15.14cooperative electric association, or other entity providing conservation services pursuant
15.15to this section. The list of programs may include rebates for high-efficiency appliances,
15.16rebates or subsidies for high-efficiency lamps, small business energy audits, and building
15.17recommissioning. The commissioner may, by order, change this list to add or subtract
15.18programs as the commissioner determines is necessary to promote efficient and effective
15.19conservation programs.
15.20    (f) The commissioner shall ensure that a portion of the money spent on residential
15.21conservation improvement programs is devoted to programs that directly address the
15.22needs of renters and low-income persons, in proportion to the amount the utility has
15.23historically spent on such programs based on the most recent three-year average relative to
15.24the utility's total conservation spending under this section, unless an insufficient number of
15.25appropriate programs are available.
15.26    (g) (e) A utility, a political subdivision, or a nonprofit or community organization
15.27that has suggested a program, the attorney general acting on behalf of consumers and
15.28small business interests, or a utility customer that has suggested a program and is not
15.29represented by the attorney general under section 8.33 may petition the commission to
15.30modify or revoke a department decision under this section, and the commission may do
15.31so if it determines that the program is not cost-effective, does not adequately address the
15.32residential conservation improvement needs of low-income persons, has a long-range
15.33negative effect on one or more classes of customers, or is otherwise not in the public
15.34interest. The commission shall reject a petition that, on its face, fails to make a reasonable
15.35argument that a program is not in the public interest.
16.1    (h) (f) The commissioner may order a public utility to include, with the filing of the
16.2utility's proposed conservation improvement plan under paragraph (a), the results of an
16.3independent audit of the utility's conservation improvement programs and expenditures
16.4performed by the department or an auditor with experience in the provision of energy
16.5conservation and energy efficiency services approved by the commissioner and chosen by
16.6the utility. The audit must specify the energy savings or increased efficiency in the use
16.7of energy within the service territory of the utility that is the result of the spending and
16.8investments. The audit must evaluate the cost-effectiveness of the utility's conservation
16.9programs.
16.10    (i) Up to three percent of a utility's conservation spending obligation under this
16.11section may be used for program pre-evaluation, testing, and monitoring and program
16.12audit and evaluation.
16.13    Subd. 2a. Energy and conservation account. The energy and conservation
16.14account is established in the special revenue fund in the state treasury. The commissioner
16.15must deposit money contributed under subdivisions 1a and 1b assessed or contributed
16.16under subdivisions 1d, 1e, 1f, and 7 in the state treasury and credit it to the energy and
16.17conservation account in the general special revenue fund. Money in the account is
16.18appropriated to the department commissioner for programs designed to meet the energy
16.19conservation needs of low-income persons and to make energy conservation improvements
16.20in areas not adequately served under subdivision 2, including research and development
16.21projects included in the definition of energy conservation improvement in subdivision 1
16.22the purposes of subdivisions 1d, 1e, 1f, and 7. Interest on money in the account accrues to
16.23the account. Using information collected under section 216C.02, subdivision 1, paragraph
16.24(b) , the commissioner must, to the extent possible, allocate enough money to programs
16.25for low-income persons to assure that their needs are being adequately addressed.
16.26The commissioner must request the commissioner of finance to transfer money from
16.27the account to the commissioner of education for an energy conservation program for
16.28low-income persons. In establishing programs, the commissioner must consult political
16.29subdivisions and nonprofit and community organizations, especially organizations
16.30engaged in providing energy and weatherization assistance to low-income persons. At
16.31least one program must address the need for energy conservation improvements in areas
16.32in which a high percentage of residents use fuel oil or propane to fuel their source of
16.33home heating. The commissioner may contract with a political subdivision, a nonprofit
16.34or community organization, a public utility, a municipality, or a cooperative electric
16.35association to implement its programs. The commissioner may provide grants to any
16.36person to conduct research and development projects in accordance with this section.
17.1    Subd. 2b. Recovery of expenses. The commission shall allow a utility to recover
17.2expenses resulting from a conservation improvement program required by the department
17.3and contributions and assessments to the energy and conservation account, unless the
17.4recovery would be inconsistent with a financial incentive proposal approved by the
17.5commission. The commission shall allow a cooperative electric association subject
17.6to rate regulation under section 216B.026, to recover expenses resulting from energy
17.7conservation improvement programs, load management programs, and assessments
17.8and contributions to the energy and conservation account unless the recovery would be
17.9inconsistent with a financial incentive proposal approved by the commission. In addition,
17.10a utility may file annually, or the Public Utilities Commission may require the utility
17.11to file, and the commission may approve, rate schedules containing provisions for the
17.12automatic adjustment of charges for utility service in direct relation to changes in the
17.13expenses of the utility for real and personal property taxes, fees, and permits, the amounts
17.14of which the utility cannot control. A public utility is eligible to file for adjustment for real
17.15and personal property taxes, fees, and permits under this subdivision only if, in the year
17.16previous to the year in which it files for adjustment, it has spent or invested at least 1.75
17.17percent of its gross revenues from provision of electric service, excluding gross operating
17.18revenues from electric service provided in the state to large electric customer facilities for
17.19which the commissioner has issued an exemption under subdivision 1a, paragraph (b), and
17.200.6 percent of its gross revenues from provision of gas service, excluding gross operating
17.21revenues from gas services provided in the state to large electric customer facilities for
17.22which the commissioner has issued an exemption under subdivision 1a, paragraph (b), for
17.23that year for energy conservation improvements under this section.
17.24    Subd. 2c. Performance incentives. By December 31, 2008, the commission
17.25shall review any incentive plan for energy conservation improvement it has approved
17.26under section 216B.16, subdivision 6c, and adjust the utility performance incentives to
17.27recognize making progress toward and meeting the energy savings goals established
17.28in subdivision 1c.
17.29    Subd. 3. Ownership of energy conservation improvement. An energy
17.30conservation improvement made to or installed in a building in accordance with this
17.31section, except systems owned by the utility and designed to turn off, limit, or vary the
17.32delivery of energy, are the exclusive property of the owner of the building except to the
17.33extent that the improvement is subjected to a security interest in favor of the utility in case
17.34of a loan to the building owner. The utility has no liability for loss, damage or injury
17.35caused directly or indirectly by an energy conservation improvement except for negligence
17.36by the utility in purchase, installation, or modification of the product.
18.1    Subd. 4. Federal law prohibitions. If investments by public utilities in energy
18.2conservation improvements are in any manner prohibited or restricted by federal law
18.3and there is a provision under which the prohibition or restriction may be waived, then
18.4the commission, the governor, or any other necessary state agency or officer shall take
18.5all necessary and appropriate steps to secure a waiver with respect to those public utility
18.6investments in energy conservation improvements included in this section.
18.7    Subd. 5. Efficient lighting program. (a) Each public utility, cooperative electric
18.8association, and municipal utility that provides electric service to retail customers shall
18.9include as part of its conservation improvement activities a program to strongly encourage
18.10the use of fluorescent and high-intensity discharge lamps. The program must include at
18.11least a public information campaign to encourage use of the lamps and proper management
18.12of spent lamps by all customer classifications.
18.13    (b) A public utility that provides electric service at retail to 200,000 or more
18.14customers shall establish, either directly or through contracts with other persons, including
18.15lamp manufacturers, distributors, wholesalers, and retailers and local government units, a
18.16system to collect for delivery to a reclamation or recycling facility spent fluorescent and
18.17high-intensity discharge lamps from households and from small businesses as defined in
18.18section 645.445 that generate an average of fewer than ten spent lamps per year.
18.19    (c) A collection system must include establishing reasonably convenient locations
18.20for collecting spent lamps from households and financial incentives sufficient to encourage
18.21spent lamp generators to take the lamps to the collection locations. Financial incentives
18.22may include coupons for purchase of new fluorescent or high-intensity discharge lamps,
18.23a cash back system, or any other financial incentive or group of incentives designed to
18.24collect the maximum number of spent lamps from households and small businesses that is
18.25reasonably feasible.
18.26    (d) A public utility that provides electric service at retail to fewer than 200,000
18.27customers, a cooperative electric association, or a municipal utility that provides electric
18.28service at retail to customers may establish a collection system under paragraphs (b) and
18.29(c) as part of conservation improvement activities required under this section.
18.30    (e) The commissioner of the Pollution Control Agency may not, unless clearly
18.31required by federal law, require a public utility, cooperative electric association, or
18.32municipality that establishes a household fluorescent and high-intensity discharge lamp
18.33collection system under this section to manage the lamps as hazardous waste as long as
18.34the lamps are managed to avoid breakage and are delivered to a recycling or reclamation
18.35facility that removes mercury and other toxic materials contained in the lamps prior to
18.36placement of the lamps in solid waste.
19.1    (f) If a public utility, cooperative electric association, or municipal utility contracts
19.2with a local government unit to provide a collection system under this subdivision,
19.3the contract must provide for payment to the local government unit of all the unit's
19.4incremental costs of collecting and managing spent lamps.
19.5    (g) All the costs incurred by a public utility, cooperative electric association, or
19.6municipal utility for promotion and collection of fluorescent and high-intensity discharge
19.7lamps under this subdivision are conservation improvement spending under this section.
19.8    Subd. 6. Renewable energy research. (a) A public utility that owns a nuclear
19.9generation facility in the state shall spend five percent of the total amount that utility
19.10is required to spend under this section to support basic and applied research and
19.11demonstration activities at the University of Minnesota Initiative for Renewable Energy
19.12and the Environment for the development of renewable energy sources and technologies.
19.13The utility shall transfer the required amount to the University of Minnesota on or before
19.14July 1 of each year and that annual amount shall be deducted from the amount of money the
19.15utility is required to spend under this section. The University of Minnesota shall transfer
19.16at least ten percent of these funds to at least one rural campus or experiment station.
19.17    (b) Research funded under this subdivision shall include:
19.18    (1) development of environmentally sound production, distribution, and use of
19.19energy, chemicals, and materials from renewable sources;
19.20    (2) processing and utilization of agricultural and forestry plant products and other
19.21bio-based, renewable sources as a substitute for fossil-fuel-based energy, chemicals, and
19.22materials using a variety of means including biocatalysis, biorefining, and fermentation;
19.23    (3) conversion of state wind resources to hydrogen for energy storage and
19.24transportation to areas of energy demand;
19.25    (4) improvements in scalable hydrogen fuel cell technologies; and
19.26    (5) production of hydrogen from bio-based, renewable sources; and sequestration
19.27of carbon.
19.28    (c) Notwithstanding other law to the contrary, the utility may, but is not required to,
19.29spend more than two percent of its gross operating revenues from service provided in this
19.30state under this section or section 216B.2411.
19.31    (d) This subdivision expires June 30, 2008.
19.32    Subd. 7. Low-income programs. (a) The commissioner shall ensure that each
19.33utility and association provides low-income programs. When approving spending and
19.34energy savings goals for low-income programs, the commissioner shall consider historic
19.35spending and participation levels, energy savings for low-income programs, and the
19.36number of low-income persons residing in the utility's service territory. A utility that
20.1furnishes gas service must spend at least 0.2 percent of its gross operating revenue from
20.2residential customers in the state on low-income programs. A utility or association that
20.3furnishes electric service must spend at least 0.1 percent of its gross operating revenue
20.4from residential customers in the state on low-income programs. For a generation and
20.5transmission cooperative association, this requirement shall apply to each association's
20.6members' aggregate gross operating revenue from sale of electricity to residential
20.7customers in the state. Beginning in 2010, a utility or association that furnishes electric
20.8service must spend 0.2 percent of its gross operating revenue from residential customers
20.9in the state on low-income programs.
20.10    (b) To meet the requirements of paragraph (a), a utility or association may contribute
20.11money to the energy and conservation account. An energy conservation improvement plan
20.12must state the amount, if any, of low-income energy conservation improvement funds the
20.13utility or association will contribute to the energy and conservation account. Contributions
20.14must be remitted to the commissioner by February 1 of each year.
20.15    (c) The commissioner shall establish low-income programs to utilize money
20.16contributed to the energy and conservation account under paragraph (b). In establishing
20.17low-income programs, the commissioner shall consult political subdivisions, utilities, and
20.18nonprofit and community organizations, especially organizations engaged in providing
20.19energy and weatherization assistance to low-income persons. Money contributed to
20.20the energy and conservation account under paragraph (b) must provide programs for
20.21low-income persons, including low-income renters, in the service territory of the utility or
20.22association providing the money. The commissioner shall record and report expenditures
20.23and energy savings achieved as a result of low-income programs funded through the
20.24energy and conservation account in the report required under subdivision 1c, paragraph
20.25(g). The commissioner may contract with a political subdivision, nonprofit or community
20.26organization, public utility, municipality, or cooperative electric association to implement
20.27low-income programs funded through the energy and conservation account.
20.28    (d) A utility or association may petition the commissioner to modify its required
20.29spending under paragraph (a) if the utility or association and the commissioner have been
20.30unable to expend the amount required under paragraph (a) for three consecutive years.
20.31    Subd. 8. Assessment. The commission or department may assess utilities subject to
20.32this section in proportion to their respective gross operating revenue from sales of gas or
20.33electric service within the state during the last calendar year to carry out the purposes of
20.34subdivisions 1d, 1e, and 1f. Those assessments are not subject to the cap on assessments
20.35provided by section 216B.62, or any other law.

21.1    Sec. 6. [216B.2412] DECOUPLING OF ENERGY SALES FROM REVENUES.
21.2    Subdivision 1. Definition and purpose. For the purpose of this section,
21.3"decoupling" means a regulatory tool designed to separate a utility's revenue from changes
21.4in energy sales. The purpose of decoupling is to reduce a utility's disincentive to promote
21.5energy efficiency.
21.6    Subd. 2. Decoupling criteria. The commission shall, by order, establish criteria
21.7and standards for decoupling. The commission shall design the criteria and standards to
21.8mitigate the impact on public utilities of the energy savings goals under section 216B.241
21.9without adversely affecting utility ratepayers. In designing the criteria, the commission
21.10shall consider energy efficiency, weather, and cost of capital, among other factors.
21.11    Subd. 3. Pilot programs. The commission shall allow one or more rate-regulated
21.12utilities to participate in a pilot program to assess the merits of a rate-decoupling strategy
21.13to promote energy efficiency and conservation. Each pilot program must utilize the
21.14criteria and standards established in subdivision 2 and be designed to determine whether
21.15a rate-decoupling strategy achieves energy savings. On or before a date established by
21.16the commission, the commission shall require electric and gas utilities that intend to
21.17implement a decoupling program to file a decoupling pilot plan which shall be approved
21.18or approved as modified by the commission. A pilot program may not exceed three years
21.19in length. Any extension beyond three years can only be approved in a general rate case,
21.20unless that decoupling program was previously approved as part of a general rate case.
21.21The commission shall report on the programs annually to the chairs of the house of
21.22representatives and senate committees with primary jurisdiction over energy policy.

21.23    Sec. 7. [216C.03] STATE GOVERNMENT ENERGY SAVINGS PLAN.
21.24    The commissioner of commerce, in coordination with the commissioners of the
21.25agencies listed in section 15.01, the chancellor of the Minnesota State Colleges and
21.26Universities, and the president of the University of Minnesota, shall identify policy
21.27options, barriers, and economic benefits and costs for state government operations to
21.28achieve the energy savings goals in section 216B.2401 and the resulting carbon emission
21.29reductions. The commissioner of commerce must issue a report to the legislature by
21.30February 1, 2008.

21.31    Sec. 8. REVISOR'S INSTRUCTION.
21.32    The revisor of statutes shall change the reference to "section 216B.241, subdivision
21.331, paragraph (i)" found in section 216B.2411, subdivision 1, to read "section 216B.241,
21.34subdivision 1."

22.1    Sec. 9. EFFECTIVE DATE.
22.2    This article is effective July 1, 2007.

22.3ARTICLE 3

22.4MISCELLANEOUS

22.5    Section 1. Minnesota Statutes 2006, section 123B.65, subdivision 2, is amended to read:
22.6    Subd. 2. Energy efficiency contract. (a) Notwithstanding any law to the contrary,
22.7a school district may enter into a guaranteed energy savings contract with a qualified
22.8provider to significantly reduce energy or operating costs.
22.9    (b) Before entering into a contract under this subdivision, the board shall comply
22.10with clauses (1) to (5).
22.11    (1) The board must seek proposals from multiple qualified providers by publishing
22.12notice of the proposed guaranteed energy savings contract in the board's official newspaper
22.13and in other publications if the board determines that additional publication is necessary to
22.14notify multiple qualified providers.
22.15    (2) The school board must select the qualified provider that best meets the needs of
22.16the board. The board must provide public notice of the meeting at which it will select the
22.17qualified provider.
22.18    (3) The contract between the board and the qualified provider must describe the
22.19methods that will be used to calculate the costs of the contract and the operational and
22.20energy savings attributable to the contract.
22.21    (4) The qualified provider shall issue a report to the board giving a description of all
22.22costs of installations, modifications, or remodeling, including costs of design, engineering,
22.23installation, maintenance, repairs, or debt service, and giving detailed calculations of the
22.24amounts by which energy or operating costs will be reduced and the projected payback
22.25schedule in years.
22.26    (5) The board must provide published notice of the meeting in which it proposes to
22.27award the contract, the names of the parties to the proposed contract, and the contract's
22.28purpose.
22.29    (c) The board must provide a copy of any contract entered into under paragraph (a)
22.30and the report provided under paragraph (b), clause (4), to the commissioner of commerce
22.31within 30 days of the effective date of the contract.

22.32    Sec. 2. Minnesota Statutes 2006, section 216C.052, subdivision 8a, as added by Laws
22.332007, chapter 57, article 2, section 26, is amended to read:
23.1    Subd. 8a. Manitoba Hydro information. By January 1, 2008, and each year
23.2thereafter, the task force shall request the Manitoba Hydro-Electric Board to provide
23.3the following information for each community that is a signatory to the Northern Flood
23.4Agreement, including South Indian Lake:
23.5    (1) median household income and number of residents employed full time and
23.6part time;
23.7    (2) the number of outstanding claims filed against Manitoba Hydro by individuals
23.8and communities and the number of claims settled by Manitoba Hydro; and
23.9    (3) the amount of shoreline damaged by flooding and erosion and the amount of
23.10shoreline restored and cleaned.
23.11    Nothing in this section shall be construed as a directive to the government of Canada
23.12or the province of Manitoba.
23.13    For the purposes of this subdivision, "Northern Flood Agreement" means the
23.14agreement entered into by the Northern Flood Committee, Incorporated, the Manitoba
23.15Hydro-Electric Board, the province of Manitoba, and the government of Canada on
23.16December 16, 1977.

23.17    Sec. 3. Minnesota Statutes 2006, section 216C.31, is amended to read:
23.18216C.31 ENERGY AUDIT PROGRAMS.
23.19    The commissioner shall develop and administer state programs of energy audits of
23.20residential and commercial buildings including those required by United States Code, title
23.2142, sections 8211 to 8222 and sections 8281 to 8284. The commissioner shall continue
23.22to administer the residential energy audit program as originally established under the
23.23provisions of United States Code, title 42, sections 8211 to 8222; through July 1, 1986
23.24irrespective of any prior expiration date provided in United States Code, title 42, section
23.258216. The commissioner may approve temporary programs if they are likely to result
23.26in the installation of as many conservation measures as would have been installed had
23.27the utility met the requirements of United States Code, title 42, sections 8211 to 8222.
23.28The Consumer Services Division and the attorney general may release information on
23.29consumer comments about the operation of the program to the commissioner the training
23.30and qualifications necessary for the auditing of residential and commercial buildings under
23.31the auspices of a program created under section 216B.241.

23.32    Sec. 4. Minnesota Statutes 2006, section 471.345, subdivision 13, is amended to read:
23.33    Subd. 13. Energy efficiency projects. The following definitions apply to this
23.34subdivision.
24.1    (a) "Energy conservation measure" means a training program or facility alteration
24.2designed to reduce energy consumption or operating costs and includes:
24.3    (1) insulation of the building structure and systems within the building;
24.4    (2) storm windows and doors, caulking or weatherstripping, multiglazed windows
24.5and doors, heat absorbing or heat reflective glazed and coated window and door
24.6systems, additional glazing, reductions in glass area, and other window and door system
24.7modifications that reduce energy consumption;
24.8    (3) automatic energy control systems;
24.9    (4) heating, ventilating, or air conditioning system modifications or replacements;
24.10    (5) replacement or modifications of lighting fixtures to increase the energy efficiency
24.11of the lighting system without increasing the overall illumination of a facility, unless an
24.12increase in illumination is necessary to conform to the applicable state or local building
24.13code for the lighting system after the proposed modifications are made;
24.14    (6) energy recovery systems;
24.15    (7) cogeneration systems that produce steam or forms of energy such as heat, as well
24.16as electricity, for use primarily within a building or complex of buildings;
24.17    (8) energy conservation measures that provide long-term operating cost reductions.
24.18    (b) "Guaranteed energy savings contract" means a contract for the evaluation
24.19and recommendations of energy conservation measures, and for one or more energy
24.20conservation measures. The contract must provide that all payments, except obligations
24.21on termination of the contract before its expiration, are to be made over time, but not to
24.22exceed 15 years from the date of final installation, and the savings are guaranteed to the
24.23extent necessary to make payments for the systems.
24.24    (c) "Qualified provider" means a person or business experienced in the design,
24.25implementation, and installation of energy conservation measures. A qualified provider
24.26to whom the contract is awarded shall give a sufficient bond to the municipality for its
24.27faithful performance.
24.28    Notwithstanding any law to the contrary, a municipality may enter into a guaranteed
24.29energy savings contract with a qualified provider to significantly reduce energy or
24.30operating costs.
24.31    Before entering into a contract under this subdivision, the municipality shall provide
24.32published notice of the meeting in which it proposes to award the contract, the names of
24.33the parties to the proposed contract, and the contract's purpose.
24.34    Before installation of equipment, modification, or remodeling, the qualified provider
24.35shall first issue a report, summarizing estimates of all costs of installations, modifications,
24.36or remodeling, including costs of design, engineering, installation, maintenance, repairs,
25.1or debt service, and estimates of the amounts by which energy or operating costs will be
25.2reduced.
25.3    A guaranteed energy savings contract that includes a written guarantee that savings
25.4will meet or exceed the cost of energy conservation measures is not subject to competitive
25.5bidding requirements of section 471.345 or other law or city charter. The contract is
25.6not subject to section 123B.52.
25.7    A municipality may enter into a guaranteed energy savings contract with a qualified
25.8provider if, after review of the report, it finds that the amount it would spend on the energy
25.9conservation measures recommended in the report is not likely to exceed the amount
25.10to be saved in energy and operation costs over 15 years from the date of installation if
25.11the recommendations in the report were followed, and the qualified provider provides a
25.12written guarantee that the energy or operating cost savings will meet or exceed the costs
25.13of the system. The guaranteed energy savings contract may provide for payments over
25.14a period of time, not to exceed 15 years.
25.15    A municipality may enter into an installment payment contract for the purchase and
25.16installation of energy conservation measures. The contract must provide for payments
25.17of not less than 1/15 of the price to be paid within two years from the date of the first
25.18operation, and the remaining costs to be paid monthly, not to exceed a 15-year term from
25.19the date of the first operation.
25.20    A municipality entering into a guaranteed energy savings contract shall provide a
25.21copy of the contract and the report from the qualified provider to the commissioner of
25.22commerce within 30 days of the effective date of the contract.
25.23    Guaranteed energy savings contracts may extend beyond the fiscal year in which
25.24they become effective. The municipality shall include in its annual appropriations measure
25.25for each later fiscal year any amounts payable under guaranteed energy savings contracts
25.26during the year. Failure of a municipality to make such an appropriation does not affect
25.27the validity of the guaranteed energy savings contract or the municipality's obligations
25.28under the contracts.

25.29    Sec. 5. Minnesota Statutes 2006, section 504B.161, subdivision 1, is amended to read:
25.30    Subdivision 1. Requirements. (a) In every lease or license of residential premises,
25.31the landlord or licensor covenants:
25.32    (1) that the premises and all common areas are fit for the use intended by the parties;
25.33    (2) to keep the premises in reasonable repair during the term of the lease or license,
25.34except when the disrepair has been caused by the willful, malicious, or irresponsible
26.1conduct of the tenant or licensee or a person under the direction or control of the tenant or
26.2licensee; and
26.3    (3) to make the premises reasonably energy efficient by installing weatherstripping,
26.4caulking, storm windows, and storm doors when any such measure will result in energy
26.5procurement cost savings, based on current and projected average residential energy costs
26.6in Minnesota, that will exceed the cost of implementing that measure, including interest,
26.7amortized over the ten-year period following the incurring of the cost; and
26.8    (4) to maintain the premises in compliance with the applicable health and safety
26.9laws of the state, including the weatherstripping, caulking, storm window, and storm door
26.10energy efficiency standards for renter-occupied residences prescribed by section 216C.27,
26.11subdivisions 1 and 3 , and of the local units of government where the premises are located
26.12during the term of the lease or license, except when violation of the health and safety
26.13laws has been caused by the willful, malicious, or irresponsible conduct of the tenant or
26.14licensee or a person under the direction or control of the tenant or licensee.
26.15    (b) The parties to a lease or license of residential premises may not waive or modify
26.16the covenants imposed by this section.

26.17    Sec. 6. REPEALER.
26.18Minnesota Statutes 2006, sections 216B.165; 216C.27; and 216C.30, subdivision 5,
26.19and Minnesota Rules, parts 7635.0100; 7635.0110; 7635.0120; 7635.0130; 7635.0140;
26.207635.0150; 7635.0160; 7635.0170; 7635.0180; 7635.0200; 7635.0210; 7635.0220;
26.217635.0230; 7635.0240; 7635.0250; 7635.0260; 7635.0300; 7635.0310; 7635.0320;
26.227635.0330; 7635.0340; 7635.0400; 7635.0410; 7635.0420; 7635.0500; 7635.0510;
26.237635.0520; 7635.0530; 7635.0600; 7635.0610; 7635.0620; 7635.0630; 7635.0640;
26.247635.1000; 7635.1010; 7635.1020; 7635.1030; 7655.0100; 7655.0120; 7655.0200;
26.257655.0210; 7655.0220; 7655.0230; 7655.0240; 7655.0250; 7655.0260; 7655.0270;
26.267655.0280; 7655.0290; 7655.0300; 7655.0310; 7655.0320; 7655.0330; 7655.0400;
26.277655.0410; and 7655.0420, are repealed, effective July 1, 2007.

26.28    Sec. 7. NUCLEAR ENERGY STUDY.
26.29    Subdivision 1. Scope of study. The Legislative Electric Energy Task Force
26.30shall contract with an entity to conduct a comprehensive study of the economic and
26.31environmental costs and benefits of constructing a new nuclear-powered electric
26.32generating plant in Minnesota. The study must investigate, at a minimum:
26.33    (1) advances in technology that would be reflected in the plant's design and
26.34operation, compared with the technology embodied in nuclear-powered electric generating
27.1plants currently operating in Minnesota, and their impact on the plant's useful life, its
27.2operation and maintenance costs, and its health and safety risks;
27.3    (2) predesign, design, and construction costs of constructing a 600-megawatt
27.4nuclear-powered generating plant in Minnesota, and comparable costs of delivering an
27.5equivalent amount of energy by:
27.6    (i) constructing a conventional coal plant;
27.7    (ii) constructing a coal plant using "clean-coal" technology;
27.8    (iii) constructing a coal gasification plant; and
27.9    (iv) a combination of cost-effective energy conservation investments, including the
27.10implementation of statewide efficiency standards for a range of electric appliances, and
27.11energy generated from renewable sources including wind, solar, biomass, and geothermal;
27.12    (3) estimated costs of storing the plant's nuclear waste on site and security issues
27.13associated with nuclear waste transportation;
27.14    (4) the projected retail rate per kilowatt hour from the plant, compared with the
27.15projected rate from the alternatives listed in clause (2), items (i) through (iv). These
27.16projected rates must include, as applicable, different estimates of a regulatory tax imposed
27.17on electric generation plants based on the amount of carbon emitted;
27.18    (5) environmental impacts of the plant's operation, compared with those associated
27.19with each alternative listed in clause (2), items (i) through (iv), to water, to land, and to
27.20air, including greenhouse gas emissions and particulates;
27.21    (6) the health effects associated with human exposure to the plant's emissions; and
27.22(7) costs and benefits associated with a phase-out and decommissioning of nuclear
27.23energy in Minnesota.
27.24    Subd. 2. Report. The study's findings must be submitted in a report to the
27.25Legislative Electric Energy Task Force no later than March 1, 2008.

27.26    Sec. 8. EFFECTIVE DATE.
27.27    This article is effective July 1, 2007.

27.28ARTICLE 4

27.29COMMUNITY-BASED ENERGY DEVELOPMENT

27.30    Section 1. CITATION.
27.31    This article may be cited as the Community-Based Energy Development Act of 2007.

27.32    Sec. 2. Minnesota Statutes 2006, section 216B.1612, is amended to read:
27.33216B.1612 COMMUNITY-BASED ENERGY DEVELOPMENT; TARIFF.
28.1    Subdivision 1. Tariff establishment. A tariff shall be established to optimize local,
28.2regional, and state benefits from wind renewable energy development and to facilitate
28.3widespread development of community-based wind renewable energy projects throughout
28.4Minnesota.
28.5    Subd. 2. Definitions. (a) The terms used in this section have the meanings given
28.6them in this subdivision.
28.7    (b) "C-BED tariff" or "tariff" means a community-based energy development tariff.
28.8    (c) "Qualifying owner" means:
28.9    (1) a Minnesota resident;
28.10    (2) a limited liability company that is organized under the laws of this state chapter
28.11322B and that is made up of members who are Minnesota residents;
28.12    (3) a Minnesota nonprofit organization organized under chapter 317A;
28.13    (4) a Minnesota cooperative association organized under chapter 308A or 308B,
28.14other than including a rural electric cooperative association or a generation and
28.15transmission cooperative on behalf of and at the request of a member distribution utility;
28.16    (5) a Minnesota political subdivision or local government other than including,
28.17but not limited to, a municipal electric utility or a municipal power agency on behalf
28.18of and at the request of a member distribution utility, including, but not limited to, a
28.19county, statutory or home rule charter city, town, school district, or public or private
28.20higher education institution or any other local or regional governmental organization such
28.21as a board, commission, or association; or
28.22    (6) a tribal council.
28.23    (d) "Net present value rate" means a rate equal to the net present value of the
28.24nominal payments to a project divided by the total expected energy production of the
28.25project over the life of its power purchase agreement.
28.26    (e) "Standard reliability criteria" means:
28.27    (1) can be safely integrated into and operated within the utility's grid without causing
28.28any adverse or unsafe consequences; and
28.29    (2) is consistent with the utility's resource needs as identified in its most recent
28.30resource plan submitted under section 216B.2422.
28.31    (f) "Renewable" means a technology listed in section 216B.1691, subdivision 1,
28.32paragraph (a).
28.33    (g) "Community-based energy project" or "C-BED project" means a new wind
28.34renewable energy project that:
28.35    (1) has no single qualifying owner owning more than 15 percent of a C-BED project
28.36that consists of more than two turbines; or
29.1    (2) for C-BED projects of one or two turbines, is owned entirely by one or more
29.2qualifying owners, with at least 51 percent of the total financial benefits over the life of the
29.3project flowing to qualifying owners; and
29.4    (1) provides that at least 51 percent of the total payments made as a direct result of a
29.5power purchase agreement or similar agreement with a utility accrue to:
29.6    (i) qualifying owners, in the form of net cash payments under the power purchase
29.7agreement that amount to no less than 35 percent made over the term of the power
29.8purchase agreement;
29.9    (ii) owners of land upon which a project is sited, in the form of easement or lease
29.10payments;
29.11    (iii) local units of government, in the form of taxes paid under section 272.029; and
29.12    (iv) lenders chartered under section 46.044, in the form of interest paid on C-BED
29.13project debt financed by a lender;
29.14    (2) allows, if the project is a wind energy project consisting of more than two
29.15turbines, no single qualifying owner to own more than 15 percent of the project;
29.16    (3) allows, if the project is a wind energy project, a public entity listed in paragraph
29.17(b), clause (5), except for a municipal utility, to own more than 15 percent of the project;
29.18and
29.19    (3) (4) has a resolution of support adopted by the county board of each county in
29.20which the project is to be located, or in the case of a project located within the boundaries
29.21of a reservation, the tribal council for that reservation.
29.22    Subd. 3. Tariff rate. (a) The tariff described in subdivision 4 must have a rate
29.23schedule that allows for a rate up to a 2.7 cents per kilowatt-hour net present value rate
29.24over the 20-year life of the power purchase agreement. The tariff must provide for a rate
29.25that is higher in the first ten years of the power purchase agreement than in the last ten
29.26years. The discount rate required to calculate the net present value must be the utility's
29.27normal discount rate used for its other business purposes.
29.28    (b) The commission shall consider mechanisms to encourage the aggregation
29.29of C-BED projects.
29.30    (c) The commission shall require that qualifying and nonqualifying owners provide
29.31sufficient security to secure performance under the power purchase agreement, and shall
29.32prohibit the transfer of the C-BED project to a nonqualifying owner during the initial
29.3320 years of the contract.
29.34    Subd. 4. Utilities to offer tariff. By December 1, 2005 2007, each public utility
29.35providing electric service at retail shall file for commission approval a community-based
29.36energy development tariff consistent with subdivision 3. Within 90 days of the
30.1first commission approval order under this subdivision, each municipal power
30.2agency and generation and transmission cooperative electric association shall adopt a
30.3community-based energy development tariff as consistent as possible with subdivision 3.
30.4    Subd. 5. Priority for C-BED projects. (a) A utility subject to section 216B.1691
30.5that needs to construct new generation, or purchase the output from new generation, as
30.6part of its plan to satisfy its good faith objective and standard under that section should
30.7must take reasonable steps to determine if one or more C-BED projects are available that
30.8meet the utility's cost and reliability requirements, applying standard reliability criteria, to
30.9fulfill some or all of the identified need at minimal impact to customer rates.
30.10    Nothing in this section shall be construed to obligate a utility to enter into a power
30.11purchase agreement under a C-BED tariff developed under this section. A utility whose
30.12renewable energy plan has been approved by the commission under section 216B.1645,
30.13subdivision 2a, must negotiate in good faith with developers of C-BED projects that meet
30.14the specifications of this paragraph and whose aggregated capacity is equal to the capacity
30.15of C-BED projects identified in the plan from which the utility intends to purchase energy.
30.16    (b) Each utility shall include in its resource plan submitted under section 216B.2422
30.17a description of its efforts to purchase energy from C-BED projects, including a list of the
30.18projects under contract and the amount of C-BED energy purchased.
30.19    (c) The commission shall consider the efforts and activities of a utility to purchase
30.20energy from C-BED projects when evaluating its good faith effort towards meeting the
30.21renewable energy objective under section 216B.1691.
30.22    (d) A municipal power agency or generation and transmission cooperative shall,
30.23when issuing a request for proposals for C-BED projects to satisfy its standard obligation
30.24under section 216B.1691, provide notice to its member distribution utilities that they
30.25may propose, in partnership with other qualifying owners, a C-BED project for the
30.26consideration of the municipal power agency or generation and transmission cooperative.
30.27    Subd. 6. Property owner participation. To the extent feasible, a developer of a
30.28C-BED project must provide, in writing, an opportunity to invest in the C-BED project to
30.29each property owner on whose property a high-voltage transmission line is constructed
30.30that will transmit the energy generated by the C-BED project to market. This subdivision
30.31applies if the property is located and the owner resides in the county where the C-BED
30.32project is located.
30.33    Subd. 7. Other C-BED tariff issues. (a) A community-based project developer
30.34and a utility shall negotiate the rate and power purchase agreement terms consistent with
30.35the tariff established under subdivision 4.
31.1    (b) At the discretion of the developer, a community-based project developer and
31.2a utility may negotiate a power purchase agreement with terms different from the tariff
31.3established under subdivision 4.
31.4    (c) A qualifying owner, or any combination of qualifying owners, may develop a
31.5joint venture project with a nonqualifying wind renewable energy project developer.
31.6However, the terms of the C-BED tariff may only apply to the portion of the energy
31.7production of the total project that is directly proportional to the equity share of the project
31.8owned by the qualifying owners.
31.9    (d) A project that is operating under a power purchase agreement under a C-BED
31.10tariff is not eligible for net energy billing under section 216B.164, subdivision 3, or for
31.11production incentives under section 216C.41.
31.12    (e) A public utility must receive commission approval of a power purchase
31.13agreement for a C-BED tariffed project. The commission shall provide the utility's
31.14ratepayers an opportunity to address the reasonableness of the proposed power purchase
31.15agreement. Unless a party objects to a contract within 30 days of submission of the
31.16contract to the commission the contract is deemed approved.
31.17    Subd. 8. Community energy partnerships. A utility providing electric service
31.18to retail or wholesale customers in Minnesota and an independent power producer may
31.19participate, and are encouraged to participate, in a community-based energy project, as
31.20owner, equity partner, or provider of technical or financial assistance, subject to the limits
31.21specified in this section.
31.22    Subd. 9. C-BED advisory determination. A developer of a proposed project may
31.23request the commissioner of commerce to issue an advisory determination as to whether
31.24the proposed project qualifies as a C-BED project under this section. The request must
31.25be made on a form and under a procedure approved by the commissioner. A positive
31.26advisory determination of the commissioner under this subdivision establishes a rebuttable
31.27presumption that the project qualifies as a C-BED project.

31.28    Sec. 3. Minnesota Statutes 2006, section 216B.1645, is amended by adding a
31.29subdivision to read:
31.30    Subd. 2a. Utility ownership of renewable resources. (a) A utility may construct,
31.31own, and operate generation facilities used to satisfy the requirements of section
31.32216B.1691, notwithstanding any competitive resource acquisition process established
31.33under section 216B.2422, subdivision 5.
31.34    (b) In lieu of any competitive resource acquisition process, a utility that owns a
31.35nuclear generation facility and intends to construct, own, or operate facilities under this
32.1section shall file with the commission on or before March 1, 2008, a renewable energy
32.2plan setting forth the manner in which the utility proposes to meet the requirements of
32.3section 216B.1691, including a proposed schedule for purchasing renewable energy from
32.4C-BED and non-C-BED projects, a proposed schedule of acquisition and construction
32.5of generation facilities and their expected in-service dates, and proposed transmission
32.6resources associated with the facilities, including a proposed construction schedule and
32.7expected in-service date for any transmission sources that need to be constructed to
32.8deliver the electricity generated by the facilities. The plan must also contain alternative
32.9means of providing the energy generated by the facilities described in the plan, and
32.10must compare the costs of delivering energy from these alternative means and from the
32.11facilities identified in the plan. The utility shall update the plan as necessary in its filing
32.12under section 216B.2422.
32.13    (c) The commission shall approve the plan unless it determines, after public hearing
32.14and comment, that the plan:
32.15    (1) imposes excessive costs on ratepayers;
32.16    (2) does not reasonably allocate resources among utility-owned generation facilities,
32.17energy purchased from C-BED and non-C-BED projects, and generation facilities selected
32.18in a competitive selection process under section 216B.2422, subdivision 5; or
32.19    (3) does not maximize benefits to Minnesota citizens, as required by section
32.20216B.1691, subdivision 9.
32.21Nothing in this section prohibits a utility from seeking and securing approval from the
32.22commission to implement projects prior to submission of the plan required under this
32.23section.

32.24    Sec. 4. Minnesota Statutes 2006, section 216B.1645, is amended by adding a
32.25subdivision to read:
32.26    Subd. 2b. Cost recovery for owned renewable facilities. (a) A utility may petition
32.27the commission to approve a rate schedule that provides for the automatic adjustment of
32.28charges to recover prudently incurred investments, expenses, or costs associated with
32.29facilities constructed, owned, or operated by a utility to satisfy the requirements of section
32.30216B.1691, provided those facilities were previously approved by the commission under
32.31section 216B.2422 or 216B.243. The commission may approve, or approve as modified, a
32.32rate schedule that:
32.33    (1) allows a utility to recover directly from customers on a timely basis the costs of
32.34qualifying renewable energy projects, including:
32.35    (i) return on investment;
33.1    (ii) depreciation;
33.2    (iii) ongoing operation and maintenance costs;
33.3    (iv) taxes; and
33.4    (v) costs of transmission and other ancillary expenses directly allocable to
33.5transmitting electricity generated from a project meeting the specifications of this
33.6paragraph;
33.7    (2) provides a current return on construction work in progress, provided that recovery
33.8of these costs from Minnesota ratepayers is not sought through any other mechanism;
33.9    (3) allows recovery of other expenses incurred that are directly related to a renewable
33.10energy project, provided that the utility demonstrates to the commission's satisfaction that
33.11the expenses improve project economics, ensure project implementation, or facilitate
33.12coordination with the development of transmission necessary to transport energy produced
33.13by the project to market;
33.14    (4) allocates recoverable costs appropriately between wholesale and retail customers;
33.15    (5) terminates recovery when costs have been fully recovered or have otherwise
33.16been reflected in a utility's rates.
33.17    (b) A petition filed under this subdivision must include:
33.18    (1) a description of the facilities for which costs are to be recovered;
33.19    (2) an implementation schedule for the facilities;
33.20    (3) the utility's costs for the facilities;
33.21    (4) a description of the utility's efforts to ensure that costs of the facilities are
33.22reasonable and were prudently incurred; and
33.23    (5) a description of the benefits of the project in promoting the development of
33.24renewable energy in a manner consistent with this chapter.

33.25    Sec. 5. [216B.1681] CURTAILMENT PAYMENTS.
33.26    The commission shall, by September 1, 2007, initiate a review of curtailment
33.27payments for wind energy projects to assess whether utilities are unduly discriminating
33.28among project ownership structures in regard to the contractual availability of curtailment
33.29payments.

33.30    Sec. 6. Minnesota Statutes 2006, section 216B.169, is amended to read:
33.31216B.169 RENEWABLE AND HIGH-EFFICIENCY ENERGY RATE
33.32OPTIONS COMMUNITY-BASED ENERGY DEVELOPMENT GREEN PRICING
33.33OPTION.
34.1    Subdivision 1. Definitions. For the purposes of this section, the following terms
34.2have the meanings given them.
34.3    (a) "Utility" means a public utility, municipal utility, or cooperative electric
34.4association providing electric service at retail to Minnesota consumers.
34.5    (b) "Renewable energy" has the meaning given in section 216B.2422, subdivision 1,
34.6paragraph (c) "Eligible energy technology" has the meaning given in section 216B.1691,
34.7subdivision 1.
34.8    (c) "High-efficiency, low-emissions, distributed generation" means a distributed
34.9generation facility of no more than ten megawatts of interconnected capacity that is
34.10certified by the commissioner under subdivision 3 as a high-efficiency, low-emissions
34.11facility "Community-based energy development project" or "C-BED project" has the
34.12meaning given in section 216B.1612, subdivision 2, paragraph (g).
34.13    Subd. 2. Renewable and high-efficiency energy rate options C-BED green
34.14pricing programs. (a) Each utility shall offer its customers, and shall advertise
34.15the offer at least annually quarterly, one or more options that allow a customer to
34.16determine that a certain amount of the electricity generated or purchased on behalf of the
34.17customer is renewable energy or energy generated by high-efficiency, low-emissions,
34.18distributed generation such as fuel cells and microturbines fueled by a renewable fuel a
34.19community-based energy development project or is provided through the purchase of
34.20renewable energy credits from a C-BED project.
34.21    (b) Each public utility shall file an implementation plan within 90 days of July 1,
34.222001 2007, to implement paragraph (a).
34.23    (c) Rates charged to customers must be calculated using the utility's cost of acquiring
34.24the energy for the customer and must:
34.25    (1) reflect the difference between the cost of generating or purchasing the renewable
34.26C-BED energy or credits and the cost of generating or purchasing the same amount of
34.27nonrenewable energy or credits from non-C-BED sources; and
34.28    (2) be distributed on a per kilowatt-hour basis among all customers who choose to
34.29participate in the program.
34.30    (d) Implementation of these rate options may reflect a reasonable amount of lead
34.31time necessary to arrange acquisition of the energy. The utility may must acquire the
34.32energy demanded by customers, in whole or in part, through procuring or generating
34.33the renewable C-BED energy directly, or through the purchase of credits from a provider
34.34that has received certification of eligible power supply pursuant to subdivision 3 issued
34.35under the program established by the commission under section 216B.1691, subdivision
34.364, if available. If a utility is not able to arrange an adequate supply of renewable or
35.1high-efficiency C-BED energy or credits to meet its customers' demand under this section,
35.2the utility must file a report with the commission detailing its efforts and reasons for
35.3its failure.
35.4    Subd. 3. Certification and tradeable credits. (a) The commissioner shall certify a
35.5power supply or supplies as eligible to satisfy customer requirements under this section
35.6upon finding:
35.7    (1) the power supply is renewable energy or energy generated by high-efficiency,
35.8low-emissions, distributed generation meets the requirements of section 216B.1612; and
35.9    (2) the sales arrangements of energy from the supplies are such that the power
35.10supply is only sold once to retail consumers.
35.11    (b) To facilitate compliance with this section, the commission may, by order,
35.12establish a program for tradeable credits for eligible power supplies.
35.13    Subd. 4. C-BED logo. (a) The commissioner of commerce shall design or
35.14contract for the design of a logo that qualifying entities may affix to their products and
35.15to advertising for their products that contains the words "100% Minnesota Renewable
35.16Energy." The logo may also contain a standardized pictorial representation or design.
35.17    (b) The commissioner of commerce shall certify in writing that an entity is
35.18authorized to use the logo if the commissioner determines that all the electricity consumed
35.19by an applicant is purchased directly, or by purchasing credits from a C-BED project.
35.20The commissioner of commerce shall develop forms and procedures to govern the
35.21application and certification processes and the use of the logo by an entity that receives
35.22certification. No person may use the logo without certification from the commissioner.
35.23For the purposes of this subdivision, "qualifying entity" means a person or entity that has
35.24received certification from the commissioner of commerce granting the entity authority to
35.25use the C-BED logo in the manner prescribed by the commissioner.

35.26    Sec. 7. Minnesota Statutes 2006, section 216C.052, is amended to read:
35.27216C.052 RELIABILITY ADMINISTRATOR.
35.28    Subdivision 1. Responsibilities. (a) There is established the position of reliability
35.29administrator in the Public Utilities Commission Department of Commerce. The
35.30administrator shall act as a source of independent expertise and a technical advisor to
35.31the commissioner, the commission and the public on issues related to the reliability of
35.32the electric system. In conducting its work, the administrator shall provide assistance
35.33to the commission commissioner in administering and implementing the commission's
35.34department's duties under sections 216B.1612, 216B.1691, 216B.2422, 216B.2425, and
36.1216B.243 ; chapters 216E, 216F, and 216G; and rules associated with those provisions.
36.2Subject to resource constraints, the reliability administrator may also and shall also:
36.3    (1) model and monitor the use and operation of the energy infrastructure in the
36.4state, including generation facilities, transmission lines, natural gas pipelines, and other
36.5energy infrastructure;
36.6    (2) develop and present to the commission and parties technical analyses of proposed
36.7infrastructure projects, and provide technical advice to the commission;
36.8    (3) present independent, factual, expert, and technical information on infrastructure
36.9proposals and reliability issues at public meetings hosted by the task force, the
36.10Environmental Quality Board, the department, or the commission.
36.11    (b) Upon request and subject to resource constraints, the administrator shall
36.12provide technical assistance regarding matters unrelated to applications for infrastructure
36.13improvements to the task force, the department, or the commission.
36.14    (c) The administrator may not advocate for any particular outcome in a commission
36.15proceeding, but may give technical advice to the commission as to the impact on the
36.16reliability of the energy system of a particular project or projects.
36.17    Subd. 2. Administrative issues. (a) The commission commissioner may select the
36.18administrator who shall serve for a four-year term. The administrator must demonstrate
36.19technical training, expertise, or experience in energy reliability issues, and may not have
36.20been a party or a participant in a commission energy proceeding for at least one year
36.21prior to selection by the commission commissioner. The commission commissioner
36.22shall oversee and direct the work of the administrator, annually review the expenses of
36.23the administrator, and annually approve the budget of the administrator. Pursuant to
36.24commission approval, The administrator may hire staff and may contract for technical
36.25expertise in performing duties when existing state resources are required for other state
36.26responsibilities or when special expertise is required. The salary of the administrator is
36.27governed by section 15A.0815, subdivision 2.
36.28    (b) Costs relating to a specific proceeding, analysis, or project are not general
36.29administrative costs. For purposes of this section, "energy utility" means public utilities,
36.30generation and transmission cooperative electric associations, and municipal power
36.31agencies providing natural gas or electric service in the state.
36.32    (c) The commission Department of Commerce shall pay:
36.33    (1) the general administrative costs of the administrator, not to exceed $1,000,000 in
36.34a fiscal year, and shall assess energy utilities for those administrative costs. These costs
36.35must be consistent with the budget approved by the commission commissioner under
36.36paragraph (a). The commission department shall apportion the costs among all energy
37.1utilities in proportion to their respective gross operating revenues from sales of gas or
37.2electric service within the state during the last calendar year, and shall then render a
37.3bill to each utility on a regular basis; and
37.4    (2) costs relating to a specific proceeding analysis or project and shall render a bill to
37.5the specific energy utility or utilities participating in the proceeding, analysis, or project
37.6directly, either at the conclusion of a particular proceeding, analysis, or project, or from
37.7time to time during the course of the proceeding, analysis, or project.
37.8    (d) For purposes of administrative efficiency, the commission department shall
37.9assess energy utilities and issue bills in accordance with the billing and assessment
37.10procedures provided in section 216B.62, to the extent that these procedures do not
37.11conflict with this subdivision. The amount of the bills rendered by the commission
37.12department under paragraph (c) must be paid by the energy utility into an account in the
37.13special revenue fund in the state treasury within 30 days from the date of billing and is
37.14appropriated to the commission department for the purposes provided in this section.
37.15The commission shall approve or approve as modified a rate schedule providing for the
37.16automatic adjustment of charges to recover amounts paid by utilities under this section.
37.17All amounts assessed under this section are in addition to amounts appropriated to the
37.18commission and the department by other law.
37.19    Subd. 3. Assessment and appropriation. In addition to the amount noted in
37.20subdivision 2, the commission commissioner may assess utilities, using the mechanism
37.21specified in that subdivision, up to an additional $500,000 annually through June 30,
37.222008. The amounts assessed under this subdivision are appropriated to the commission
37.23commissioner, and some or all of the amounts assessed may be transferred to the
37.24commissioner of administration, for the purposes specified in section 16B.325 and Laws
37.252001, chapter 212, article 1, section 3, as needed to implement those sections.
37.26    Subd. 4. Expiration. Subdivisions 1 and 2 expire June 30, 2007 2012. Subdivision
37.273 expires June 30, 2008.

37.28    Sec. 8. [216F.011] SIZE DETERMINATION.
37.29    (a) The total size of a combination of wind energy conversion systems for the
37.30purpose of determining jurisdictional siting authority under sections 216F.01 to 216F.07
37.31must be determined according to this section. The nameplate capacity of one wind energy
37.32conversion system must be combined with the nameplate capacity of any other wind
37.33energy conversion system that:
37.34    (1) is located within five miles of the wind energy conversion system;
38.1    (2) is constructed within the same 12-month period as the wind energy conversion
38.2system; and
38.3    (3) exhibits characteristics of being a single development, including but not limited
38.4to ownership structure, an umbrella sales arrangement, shared interconnection, revenue
38.5sharing arrangements, and common debt or equity financing.
38.6    (b) The commissioner shall prepare and make available the necessary forms and
38.7guidance for project developers to make a request for determination. Upon written
38.8request of a project developer, the commissioner of commerce shall provide a written
38.9determination under this section within 30 days of receipt of the request and information
38.10necessary to make a determination. In the case of a dispute, the chair of the Public Utilities
38.11Commission shall determine the total size of the system and shall draw all reasonable
38.12inferences in favor of combining the systems.
38.13    (c) An application to a county for a permit for a wind energy conversion system is
38.14not complete without a jurisdictional determination made under this section.

38.15    Sec. 9. [216F.08] PERMIT AUTHORITY; ASSUMPTION BY COUNTIES.
38.16    Subdivision 1. Definition. For the purposes of this subdivision, the term
38.17"processing" means:
38.18    (1) the distribution to applicants of application and determination forms provided
38.19by the commission;
38.20    (2) the receipt and examination of completed application forms, and the certification,
38.21in writing, to the commission either that the LWECS for which a permit was issued by the
38.22county will comply with applicable rules and standards or, if the facility will not comply,
38.23the respects in which a variance is required for the issuance of a permit; and
38.24    (3) rendering to applicants, upon request, assistance for the proper completion of
38.25an application.
38.26    Subd. 2. Counties; processing applications for LWECS site permits. (a) Any
38.27Minnesota county board may, by resolution and upon written notice to the Public Utilities
38.28Commission, assume responsibility for processing applications for permits required
38.29under this chapter for LWECS with a combined nameplate capacity of less than 25,000
38.30kilowatts. The responsibility for permit application processing, if assumed by a county,
38.31may be delegated by the county board to an appropriate county officer or employee.
38.32Processing by a county must be done in accordance with procedures and processes
38.33established under chapter 394.
38.34    (b) A county board that exercises its option under paragraph (a) and assumes
38.35responsibility for processing applications for permits for LWECS within its borders
39.1is responsible for issuing, denying, modifying, imposing conditions upon, or revoking
39.2permits under this section or rules adopted pursuant to it. The action of the county board
39.3with regard to a permit application is final, subject to appeal as provided in section 394.27.
39.4    (c) In adopting and enforcing rules or standards under this subdivision, the
39.5commission shall cooperate closely with counties and other governmental agencies.
39.6    (d) The commission shall work with counties and wind developers to notify and
39.7educate stakeholders with regard to rules or standards under this section at the time the
39.8rules or standards are being developed and adopted and at least every two years thereafter.
39.9    (e) The commission shall, by order, establish general permit standards governing site
39.10permits for LWECS under this section. These general permit standards must apply both to
39.11permits issued by counties and to permits issued by the commission directly for LWECS
39.12with a combined nameplate capacity of less than 25,000 kilowatts. The order must contain
39.13minimum standards necessary to ensure the protection of human health and safety and
39.14wind resources on adjacent land and must be consistent with the general provisions of wind
39.15permits issued by the commission in the five years prior to enactment of this provision.
39.16    (f) The commission and the commissioner of commerce shall provide technical
39.17assistance to a county with respect to the processing of LWECS site permit applications
39.18by the county.
39.19    (g) A county may adopt by ordinance standards for LWECS that are more stringent
39.20than standards in commission rules or in the commission's permit standards. The
39.21commission, in considering a permit for LWECS in a county that has adopted more
39.22stringent standards, shall incorporate and apply those more stringent standards, unless the
39.23commission finds there is good cause not to do so.

39.24    Sec. 10. Minnesota Statutes 2006, section 500.30, subdivision 2, is amended to read:
39.25    Subd. 2. Like any conveyance. Any property owner may grant a solar or wind
39.26easement in the same manner and with the same effect as a conveyance of an interest in
39.27real property. The easements shall be created in writing and shall be filed, duly recorded,
39.28and indexed in the office of the recorder of the county in which the easement is granted.
39.29No duly recorded easement shall be unenforceable on account of lack of privity of estate or
39.30privity of contract; such easements shall run with the land or lands benefited and burdened
39.31and shall constitute a perpetual easement, except that an easement may terminate upon the
39.32conditions stated therein or pursuant to the provisions of section 500.20. A wind easement
39.33or lease of wind rights shall also terminate after five years from the date the easement is
39.34created or lease is entered into, if a wind energy project on the property to which the
39.35easement or lease applies does not begin commercial operation within the five-year period.
40.1EFFECTIVE DATE.This section is effective the day following final enactment,
40.2and applies to wind easements created and wind rights leases entered into on and after
40.3the effective date of this section.

40.4    Sec. 11. STATEWIDE STUDY OF DISPERSED GENERATION POTENTIAL.
40.5    Subdivision 1. Definition. "Dispersed generation" means an electric generation
40.6project with a generating capacity between ten and 40 megawatts that utilizes an eligible
40.7energy technology, as defined in Minnesota Statutes, section 216B.1691, subdivision 1,
40.8paragraph (a).
40.9    Subd. 2. Study participants. Each electric utility subject to Minnesota Statutes,
40.10section 216B.1691, must participate collaboratively in conducting a two-phase study of
40.11the potential for dispersed generation projects that can be developed in Minnesota.
40.12    Subd. 3. First phase study content; report. In the first phase of the study,
40.13participants must analyze the impacts of the addition of a total of 600 megawatts of
40.14new dispersed generation projects distributed among the following Minnesota electric
40.15transmission planning zones: the Northeast zone, the Northwest zone, the Southeast
40.16zone, the Southwest zone, and the West-Central zone. Study participants must use a
40.17generally accepted 2010 year transmission system model including all transmission
40.18facilities expected to be operating in 2010. The study must take into consideration
40.19regional projected load growth, planned changes in the bulk transmission network, and the
40.20long-range transmission conceptual plan being developed under Laws 2007, chapter 3,
40.21section 2. In determining locations for the installation of dispersed generation projects
40.22that consist of wind energy conversion systems, the study should consider, at a minimum,
40.23wind resource availability, existing and contracted wind projects, and current dispersed
40.24generation projects in the Midwest Independent System Operator interconnection queue.
40.25The study must analyze the impacts of individual projects and all projects in aggregate on
40.26the transmission system, and identify specific modifications to the transmission system
40.27necessary to remedy any problems caused by the installation of dispersed generation
40.28projects, including cost estimates for the modifications. The study must analyze the
40.29additional dispersed generation projects connected at the lowest voltage level transmission
40.30that exists in the vicinity of the projected generation sites. A preliminary analysis to
40.31identify transmission system problems must be conducted with the projects installed
40.32at initially selected locations. The technical review committee may, after reviewing
40.33the locations selected for installation, recommend moving the installation sites to new
40.34locations to reduce undesirable transmission system impacts. The commissioner of
41.1commerce must submit a report containing the findings and recommendations of the first
41.2phase of the study to the commission no later than June 15, 2008.
41.3    Subd. 4. Second phase study content; report. In the second phase of the study,
41.4participants must analyze the impacts of an additional total of 600 megawatts of dispersed
41.5generation projects installed among the five transmission planning zones, or a higher total
41.6capacity amount if agreed to by both the utilities and the technical review committee. The
41.7utilities must employ an analysis method similar to that used in the first phase of the study,
41.8and must use the most recent information available, including information developed in
41.9the first phase. The second phase of the study must use a generally accepted 2013 year
41.10transmission system model including all transmission facilities that are expected to be
41.11in service at that time. The commissioner of commerce must submit a report containing
41.12the findings and recommendations of the second phase of the study to the commission no
41.13later than September 15, 2009.
41.14    Subd. 5. Technical review committee. Prior to the start of the first phase of
41.15the study, the commissioner of commerce shall appoint a technical review committee
41.16consisting of between ten and 15 individuals with experience and expertise in electric
41.17transmission system engineering, renewable energy generation technology, and dispersed
41.18generation project development, including representatives from the federal Department
41.19of Energy, the Midwest Independent System Operator, and stakeholder interests. The
41.20technical review committee must oversee both phases of the study, and must:
41.21    (1) make recommendations to the utilities regarding the proposed methods and
41.22assumptions to be used in the technical study;
41.23    (2) in conjunction with the appropriate utilities, hold public meetings on each phase
41.24of the study in each electricity transmission planning zone prior to the beginning of each
41.25phase of study, after the impact analysis is completed, and when a draft final report is
41.26available; and
41.27    (3) review the initial and final drafts of the study and make recommendations for
41.28improvement, including with respect to problems associated with the interconnections
41.29among utility systems that may be amenable to solution through cooperation between the
41.30utilities in each zone. During each phase of the study, the technical review committee
41.31may recommend that the installation of dispersed generation projects be moved to new
41.32locations that cause fewer undesirable transmission system impacts.

41.33    Sec. 12. TRANSFERRING RELIABILITY ADMINISTRATOR
41.34RESPONSIBILITIES.
42.1    All responsibilities, as defined in Minnesota Statutes, section 15.039, subdivision
42.21, held by the Public Utilities Commission relating to the reliability administrator under
42.3Minnesota Statutes, section 216C.052, are transferred to the Minnesota Department of
42.4Commerce under Minnesota Statutes, section 15.039.

42.5    Sec. 13. TRANSMISSION AUTHORITY AND INTERCONNECTION
42.6EVALUATIONS.
42.7    The reliability administrator shall, in consultation with interested stakeholders:
42.8    (1) review the structures, powers, and duties for constructing, owning, maintaining,
42.9and operating transmission facilities of state transmission authorities established in
42.10Kansas, North Dakota, South Dakota, and Wyoming, and evaluate whether the existence
42.11of a similar organization in Minnesota would have the potential to increase the reliability
42.12and efficiency of the electrical grid in the state; hasten the development of needed
42.13transmission lines; accelerate the development of renewable energy projects, especially in
42.14rural areas of the state; and reduce delivered energy costs to Minnesota ratepayers; and
42.15    (2) assess the potential for and barriers to interconnecting dispersed generation
42.16projects to locations on the electric grid where a generator interconnection would not be
42.17subject to the interconnection rules of the Federal Energy Regulatory Commission or the
42.18Midwest Independent System Operator.
42.19No technical or engineering analyses are necessary in order to complete these duties. The
42.20reliability administrator must report its findings and any recommendations to the chairs of
42.21the senate and house of representatives committees with jurisdiction over energy policy by
42.22February 15, 2008.

42.23    Sec. 14. REPEALER.
42.24Laws 2007, chapter 3, section 3, is repealed.

42.25ARTICLE 5

42.26GLOBAL WARMING MITIGATION

42.27    Section 1. [216H.001] FINDINGS; CITATION.
42.28    (a) The legislature finds that the state has a vital interest in preventing or mitigating
42.29harms associated with global warming and in reducing Minnesota's greenhouse gas
42.30emissions. The legislature recognizes that substantial reductions in emissions of
42.31greenhouse gases are necessary to avoid dangerous climate changes in the future. The
42.32legislature finds that taking steps to reduce Minnesota's greenhouse gas emissions today
42.33and planning for long-term reductions will reduce the need for more disruptive emission
43.1reductions later, and that to achieve the purposes of this act, all emissions associated
43.2with electricity generated or consumed within the state must be subject to the state's
43.3emissions-reduction goals. The legislature further finds that Minnesota's economy will
43.4benefit by showing leadership in the transition away from climate-damaging technologies
43.5and toward renewable power, biofuels, and energy efficiency. The legislature recognizes
43.6that achieving these ends will only occur by close cooperation with other states and may
43.7require the state to enter into binding agreements with other units of government.
43.8    (b) This chapter may be referred to as the Global Warming Mitigation Act of 2007.

43.9    Sec. 2. [216H.01] DEFINITIONS.
43.10    Subdivision 1. Scope. For the purposes of this chapter, the terms defined in this
43.11section have the meanings given them.
43.12    Subd. 2. Allowance. "Allowance" means limited authorization from a state
43.13regulatory agency to emit up to one ton of carbon dioxide or carbon dioxide equivalent
43.14into the atmosphere. This limited authorization does not constitute a property right.
43.15    Subd. 3. Cap and trade system. "Cap and trade system" means a regulatory system
43.16that imposes a limit on the aggregate air pollutant emissions of a group of sources, requires
43.17those subject to the cap to own an allowance for each ton of the air pollutant emitted, and
43.18allows for market-based trading of those allowances.
43.19    Subd. 4. Carbon dioxide equivalent. "Carbon dioxide equivalent" means the
43.20quantity of a given greenhouse gas multiplied by its global warming potential.
43.21    Subd. 5. Global warming potential. "Global warming potential" means a measure
43.22of the radiative efficiency or heat-absorbing ability of a particular gas relative to that of
43.23carbon dioxide after taking into account the decay rate of each gas, that is, the amount
43.24removed from the atmosphere over a given number of years, relative to that of carbon
43.25dioxide.
43.26    Subd. 6. Greenhouse gas emissions source. "Greenhouse gas emissions source"
43.27means any anthropogenic physical unit or process that releases greenhouse gases into
43.28the atmosphere.
43.29    Subd. 7. Greenhouse gases. "Greenhouse gases" include carbon dioxide, methane,
43.30nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride or any other
43.31chemical that is determined by the Pollution Control Agency to contribute comparably to
43.32global climate change and that is emitted by anthropogenic sources.
43.33    Subd. 8. New large energy facility. "New large energy facility" means a large
43.34energy facility, as defined in section 216B.2421, subdivision 2, clauses (1) to (8), that is
43.35not in operation as of January 1, 2007, but does not include a facility that (1) uses natural
44.1gas as a primary fuel, (2) is designed to provide peaking, intermediate, emergency backup,
44.2or contingency services, (3) uses a simple cycle or combined cycle turbine technology,
44.3(4) is capable of achieving full load operations within 45 minutes of startup for a simple
44.4cycle facility, or is capable of achieving minimum load operations within 185 minutes
44.5of startup for a combined cycle facility, and (5) has received a certificate of need under
44.6section 216B.243.
44.7    Subd. 9. Person. "Person" has the meaning given in section 216E.01.
44.8    Subd. 10. Statewide greenhouse gas emissions. "Statewide greenhouse gas
44.9emissions" means the total annual emissions of greenhouse gases within the state and all
44.10emissions of greenhouse gases from the generation of electricity imported from outside the
44.11state and consumed in Minnesota. Emissions associated with transmission and distribution
44.12line losses are included in this definition. Statewide emissions are expressed in tons of
44.13carbon dioxide equivalent. Carbon dioxide that is injected into geological formations to
44.14prevent its release to the atmosphere in compliance with applicable laws, and emissions
44.15associated with the combustion of fuels other than coal, petroleum, and natural gas are not
44.16counted as contributing to statewide greenhouse gas emissions.
44.17    Subd. 11. Statewide power sector carbon dioxide emissions. "Statewide power
44.18sector carbon dioxide emissions" means the total annual emissions of carbon dioxide from
44.19the generation of electricity within the state and all emissions of carbon dioxide from the
44.20generation of electricity imported from outside the state and consumed in Minnesota.
44.21Emissions associated with transmission and distribution line losses are included in this
44.22definition. Carbon dioxide that is injected into geological formations to prevent its release
44.23to the atmosphere in compliance with applicable laws, and emissions associated with
44.24the combustion of fuels other than coal, petroleum, and natural gas are not counted as
44.25contributing to statewide power sector carbon dioxide emissions.

44.26    Sec. 3. [216H.02] GREENHOUSE GAS EMISSIONS-REDUCTION GOALS.
44.27    It is the state's goal to reduce statewide greenhouse gas emissions to a level at least
44.2815 percent below 2005 emission levels by 2015, to a level at least 30 percent below 2005
44.29emission levels by 2025, and to a level at least 80 percent below 2005 emission levels
44.30by 2050.

44.31    Sec. 4. [216H.04] GREENHOUSE GAS EMISSIONS-REDUCTION PLAN.
44.32    Subdivision 1. Plan for achieving reductions. (a) By February 1, 2008, the
44.33commissioners of the Pollution Control Agency and the Department of Commerce shall
44.34submit a plan to the chairs of the senate and house of representatives committees with
45.1jurisdiction over energy and environmental policy that contains recommendations on how
45.2best to achieve the statewide greenhouse gas emissions-reduction goals established under
45.3section 216H.02. The plan must also identify how best to reduce statewide greenhouse gas
45.4emissions to a level at least 45 percent below 2005 levels by 2025. The plan must identify,
45.5develop, and integrate a full range of greenhouse gas emissions-reduction activities across
45.6all economic sectors, regions, and energy uses in the state, and estimate the costs and
45.7benefits of each action. The plan must:
45.8    (1) estimate statewide greenhouse gas emissions for 2005 and make projections of
45.9statewide greenhouse gas emissions for 2015, 2025, and 2050;
45.10    (2) estimate the statewide greenhouse gas emissions reductions anticipated from
45.11implementation of existing state policies;
45.12    (3) include a cap and trade system as described in subdivision 3;
45.13    (4) recommend additional policies to achieve statewide greenhouse gas
45.14emissions-reduction goals;
45.15    (5) include provisions that will ensure that existing policies are evaluated, and that at
45.16least every five years any policy changes needed to achieve the statewide greenhouse gas
45.17emissions-reduction goals are developed and recommended for legislative action;
45.18    (6) recommend a system to require the reporting of statewide greenhouse gas
45.19emissions, identifying which facilities must report, how emission estimates should be
45.20made, and other reporting requirements that will ensure the collection of emissions
45.21information needed to reliably document statewide greenhouse gas emission levels and
45.22implement the plan; and
45.23    (7) evaluate the option of exempting a project from the prohibitions contained in
45.24section 216H.05, subdivision 1, if the project contributes a specified fee per ton of carbon
45.25dioxide emissions emitted annually by the project, the proceeds of which would be used to
45.26fund permanent, quantifiable, verifiable, and enforceable reductions in greenhouse gas
45.27emissions that would not otherwise have occurred.
45.28    (b) In formulating the plan, the commissioners shall consider the broadest possible
45.29set of mechanisms to reduce emissions, including, but not limited to, expanding the
45.30electric sector cap and trade system established under subdivision 3 to include emissions
45.31sources other than electricity generation and greenhouse gases other than carbon dioxide;
45.32scheduling reductions of the emissions cap; imposing greenhouse gas taxes, fines, and
45.33other penalties; adopting emissions-reduction performance standards for sources of
45.34greenhouse gases; establishing financial or other incentives to promote activities that will
45.35reduce greenhouse gases; and enhancing existing policies that have the effect of lowering
45.36greenhouse gas emissions.
46.1    Subd. 2. Planning process. The plan required under subdivision 1 must be
46.2developed through a structured, broadly inclusive stakeholder-based review of potential
46.3policies and initiatives that can be implemented in Minnesota to reduce greenhouse gas
46.4emissions. The stakeholder-based review process must be conducted by a nationally
46.5recognized independent expert entity. The commissioner of commerce shall coordinate
46.6executive branch participation with this stakeholder process.
46.7    Subd. 3. Cap and trade system. (a) The plan must include a cap and trade system
46.8incorporating, at a minimum, statewide power sector carbon dioxide emissions. The
46.9cap and trade plan must:
46.10    (1) set an emissions cap at an initial level to prevent significant increases in statewide
46.11greenhouse gas emissions above current levels, with a schedule for lowering the cap
46.12periodically to help meet the state's emissions-reduction targets;
46.13    (2) maximize Minnesota's ability to enter into allowance trading relationships with
46.14other states that have established or are in the process of establishing a cap and trade
46.15system regulating greenhouse gas emissions;
46.16    (3) evaluate the feasibility of implementing a cap and trade system that does not
46.17encompass the entire United States, and identify the impacts on the efficiency and
46.18effectiveness of the cap and trade system if restricted to Minnesota alone, if expanded
46.19to include surrounding midwestern states, and if Minnesota were to join other emerging
46.20regional systems with states that are planning to implement a cap and trade system;
46.21    (4) evaluate whether and to what extent a party subject to the cap should receive
46.22credit for offsetting emissions by implementing projects that reduce greenhouse gas
46.23emissions from sources not subject to the cap or absorb and sequester greenhouse gases
46.24from the atmosphere;
46.25    (5) include methods to ensure that all emissions reductions associated with projects
46.26listed in clause (4) are permanent, quantifiable, verifiable, enforceable, and would not
46.27have otherwise occurred;
46.28    (6) be designed to ensure that the proceeds from auctioning allowances are used to
46.29benefit the public, including to help meet the state's emissions-reduction goals in the most
46.30efficient and least disruptive way;
46.31    (7) estimate likely allowance prices under various scenarios, including the impact
46.32on allowance prices of constructing additional power plants subject to the cap and trade
46.33system;
46.34    (8) recommend ways to minimize any rate impacts on energy consumers;
47.1    (9) suggest procedures to award appropriate credit to entities that have voluntarily
47.2reduced their greenhouse gas emissions prior to implementation of the cap and trade
47.3system;
47.4    (10) ensure to the extent practicable that emissions reductions made in this state do
47.5not cause emissions increases outside the state;
47.6    (11) identify technologies and industries likely to thrive in a carbon-constrained
47.7future;
47.8    (12) maximize economic development in rural areas from the development of
47.9renewable energy sources and proven terrestrial sequestration practices; and
47.10    (13) suggest methods to calculate carbon dioxide emissions associated with
47.11electricity imported from outside the state.
47.12    Subd. 4. Regional activities. It shall be an executive branch responsibility to work
47.13with other states in the midwest region to develop and implement a regional approach to
47.14reducing greenhouse gas emissions from activities in the region, including consulting
47.15on expanding the cap and trade system described in subdivision 3. The commissioner
47.16of commerce shall coordinate Minnesota's regional activities under this subdivision
47.17and report to the legislative committees in the senate and house of representatives with
47.18jurisdiction over energy and environmental policy by February 1, 2008, and February 1,
47.192009, on the progress made and recommendations for further action.

47.20    Sec. 5. [216H.05] NO LONG-TERM INCREASE FROM POWER PLANTS.
47.21    Subdivision 1. Long-term increased emissions from power plants prohibited.
47.22    Until the cap and trade system described in section 216H.04, subdivision 3, is fully
47.23implemented, and except as allowed in subdivision 2, no person shall:
47.24    (1) construct within the state a new large energy facility that would contribute to
47.25statewide power sector carbon dioxide emissions;
47.26    (2) import or commit to import from outside the state power from a new large energy
47.27facility that would contribute to statewide power sector carbon dioxide emissions; or
47.28    (3) enter into a new long-term power purchase agreement that would increase
47.29statewide power sector carbon dioxide emissions. For purposes of this section, a long-term
47.30power purchase agreement means an agreement to purchase 50 megawatts of capacity or
47.31more for a term exceeding five years. This prohibition does not apply to an agreement in
47.32effect as of January 1, 2007, nor to the renewal of such an agreement.
47.33    Subd. 2. Exception for facilities that offset emissions. (a) The prohibitions in
47.34subdivision 1 do not apply if the project proponent demonstrates to the Public Utilities
47.35Commission's satisfaction that it will offset the new contribution to statewide power sector
48.1carbon dioxide emissions with a carbon dioxide reduction project identified in paragraph
48.2(b) and in compliance with paragraph (c).
48.3    (b) A project proponent may offset the new contribution to statewide power sector
48.4carbon dioxide emissions in either, or a combination of both, of the following ways:
48.5    (1) by reducing an existing facility's contribution to statewide power sector carbon
48.6dioxide emissions in an amount equal to or greater than the proposed new contribution to
48.7statewide power sector carbon dioxide emissions; or
48.8    (2) by purchasing carbon dioxide allowances from a state or group of states that
48.9has a mandatory carbon dioxide cap and trade system in place that produces verifiable
48.10emissions reductions.
48.11    (c) The Public Utilities Commission shall not find that a proposed carbon dioxide
48.12reduction project identified in paragraph (b) acceptably offsets a new contribution
48.13to statewide power sector carbon dioxide emissions unless the proposed offsets are
48.14permanent, quantifiable, verifiable, enforceable, and would not have otherwise occurred.
48.15Emissions that have been offset under this subdivision and emissions exempted under
48.16subdivision 3 continue to be subject to the requirements of the cap and trade system
48.17described in section 216H.04, subdivision 3, when implemented.
48.18    Subd. 3. Exception for new steel production facility. The prohibitions in
48.19subdivision 1 do not apply to increases in statewide power sector carbon dioxide
48.20emissions from a new steel production project located in a taconite relief area that has
48.21filed an application for an air quality permit from the Pollution Control Agency prior
48.22to January 1, 2007.
48.23    Subd. 4. Pending proceedings. The prohibitions in subdivision 1 do not apply to a
48.24new large energy facility or a power purchase agreement under consideration by the Public
48.25Utilities Commission pursuant to proposals or applications filed with the Public Utilities
48.26Commission before April 1, 2007. The exclusion of pending proposals and applications
48.27from the prohibitions in subdivision 1 does not limit the applicability of any other law
48.28and is not an expression of legislative intent regarding whether any pending proposal or
48.29application should be approved or denied.
48.30    Subd. 5. Enforcement. Whenever the commission or department determines that
48.31any person is violating or about to violate this section, it shall refer the matter to the
48.32attorney general who shall take appropriate legal action. This section may be enforced by
48.33the attorney general on the same basis as a law listed in section 8.31, subdivision 1.

48.34    Sec. 6. [216H.06] GREENHOUSE GAS EMISSIONS CONSIDERATION IN
48.35RESOURCE PLANNING.
49.1    By January 1, 2008, the Public Utilities Commission shall establish an estimate of
49.2the likely range of costs of future carbon dioxide regulation on electricity generation.
49.3The estimate, which may be made in a commission order, must be used in all electricity
49.4generation resource acquisition proceedings. The estimates, and annual updates, must be
49.5made following informal proceedings that allow interested parties to submit comments.

49.6    Sec. 7. [216H.07] ENFORCEABILITY.
49.7    In addition to any other remedies provided by law, the failure to carry out any
49.8requirement established by or pursuant to this chapter shall be treated as a violation of an
49.9environmental standard and is enforceable under chapter 116B.

49.10ARTICLE 6

49.11RENEWABLE ENERGY STANDARDS

49.12    Section 1. Minnesota Statutes 2006, section 216B.1691, subdivision 5, as amended by
49.13Laws 2007, chapter 3, section 1, subdivision 5, is amended to read:
49.14    Subd. 5. Technology based on fuel combustion. (a) Electricity produced by fuel
49.15combustion through fuel blending or co-firing under paragraph (b) may only count toward
49.16a utility's objectives or standards if the generation facility:
49.17    (1) was constructed in compliance with new source performance standards
49.18promulgated under the federal Clean Air Act for a generation facility of that type; or
49.19    (2) employs the maximum achievable or best available control technology available
49.20for a generation facility of that type.
49.21    (b) An eligible energy technology may blend or co-fire a fuel listed in subdivision
49.221, paragraph (a), clause (1) (5), with other fuels in the generation facility, but only the
49.23percentage of electricity that is attributable to a fuel listed in that clause can be counted
49.24toward an electric utility's renewable energy objectives.

49.25    Sec. 2. Minnesota Statutes 2006, section 216B.1691, subdivision 7, as added by Laws
49.262007, chapter 3, section 1, subdivision 7, is amended to read:
49.27    Subd. 7. Compliance. The commission must regularly investigate whether an
49.28electric utility is in compliance with its good-faith objective under subdivision 2 and
49.29standard obligation under subdivision 2a. If the commission finds noncompliance, it may
49.30order the electric utility to construct facilities, purchase energy generated by eligible
49.31energy technology, purchase renewable energy credits, or engage in other activities
49.32to achieve compliance. If an electric utility fails to comply with an order under this
49.33subdivision, the commission may impose a financial penalty on the electric utility in an
50.1amount not to exceed the estimated cost of the electric utility to achieve compliance. The
50.2penalty may not exceed the lesser of the cost of constructing facilities or purchasing
50.3credits. The commission must deposit financial penalties imposed under this subdivision
50.4in the energy and conservation account established in the special revenue fund under
50.5section 216B.241, subdivision 2a. This subdivision is in addition to and does not limit any
50.6other authority of the commission to enforce this section.