SF 1456

1st Engrossment - 91st Legislature (2019 - 2020) Posted on 03/02/2020 04:34pm

A bill for an act
relating to establishing the Clean Energy First Act; requiring electric utilities to
meet resource needs using clean energy resources; amending Minnesota Statutes
2018, sections 216B.03; 216B.16, subdivisions 6, 13, by adding a subdivision;
216B.1645, subdivisions 1, 2; 216B.1691, subdivision 9; 216B.2422, subdivisions
1, 2, 4, 5, by adding subdivisions; proposing coding for new law in Minnesota
Statutes, chapters 216B; 216C.

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

Section 1. new text begin TITLE.
new text end

new text begin Sections 2 to 18 shall be referred to as the "Clean Energy First Act".
new text end

Sec. 2.

Minnesota Statutes 2018, section 216B.03, is amended to read:

216B.03 REASONABLE RATE.

Every rate made, demanded, or received by any public utility, or by any two or more
public utilities jointly, shall be just and reasonable. Rates shall not be unreasonably
preferential, unreasonably prejudicial, or discriminatory, but shall be sufficient, equitable,
and consistent in application to a class of consumers. To the maximum reasonable extent,
the commission shall set rates deleted text begin to encourage deleted text end new text begin based on cost of service, while considering
noncost factors such as economic growth, job retention, new text end energy conservation new text begin , new text end and renewable
energy use and to further the goals of sections 216B.164, new text begin 216B.1696, new text end 216B.241, and 216C.05.
new text begin To calculate cost of service, an investor-owned utility shall use, and the commission shall
approve and base rates upon, a class cost of service study that utilizes: (i) a single coincident
peak methodology, based upon the single peak contribution by class at the time of the public
utility's system peak, to classify and allocate fixed production and transmission costs; (ii)
a minimum system study to classify and allocate distribution costs; and (iii) an E8760
allocator for energy costs. new text end Any doubt as to reasonableness should be resolved in favor of
the consumer. For rate-making purposes a public utility may treat two or more municipalities
served by it as a single class wherever the populations are comparable in size or the conditions
of service are similar.

new text begin EFFECTIVE DATE. new text end

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

Sec. 3.

new text begin [216B.035] COMPETITIVE RATE FOR TRANSMISSION LEVEL
CUSTOMERS.
new text end

new text begin Notwithstanding any other provision of this chapter, for customers that either take service
at a voltage equal to or greater than 69,000 volts or impose a peak demand of greater than
20 megawatts on the utility's system, the average delivered cost of electric energy shall be
at least 20 percent below the national average. For purposes of this section, the national
average shall be as reported by the U.S. Energy Information Administration for industrial
customers of full-service providers.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 4.

Minnesota Statutes 2018, section 216B.16, subdivision 6, is amended to read:

Subd. 6.

Factors considered, generally.

The commission, in the exercise of its powers
under this chapter to determine just and reasonable rates for public utilities, shall give due
consideration to the public need for adequate, efficient, and reasonable service and to the
need of the public utility for revenue sufficient to enable it to meet the cost of furnishing
the service, including adequate provision for depreciation of its utility property used and
useful in rendering service to the public, and to earn a fair and reasonable return upon the
investment in such property. In determining the rate base upon which the utility is to be
allowed to earn a fair rate of return, the commission shall give due consideration to evidence
of the cost of the property when first devoted to public use, to prudent acquisition cost to
the public utility less appropriate depreciation on each, to construction work in progress, to
offsets in the nature of capital provided by sources other than the investors, and to other
expenses of a capital nature. For purposes of determining rate base, the commission shall
consider the original cost of utility property included in the base and shall make no allowance
for its estimated current replacement value. If the commission orders a generating facility
to terminate its operations before the end of the facility's physical life in order to comply
with a specific state or federal energy statute or policy new text begin , or as part of a resource planning
order under section 216B.2422 new text end , the commission deleted text begin may deleted text end new text begin must new text end allow the public utility to recover
any positive net book value of the facility as determined by the commission.

Sec. 5.

Minnesota Statutes 2018, section 216B.16, subdivision 13, is amended to read:

Subd. 13.

Economic and community development.

The commission may allow a
public utility to recover from ratepayers the expenses incurred for new text begin (1) new text end economic and
community development new text begin , and (2) efforts to maximize employment of local workers to
construct and maintain generation facilities that supply power to the utility's customers new text end .

Sec. 6.

Minnesota Statutes 2018, section 216B.16, is amended by adding a subdivision to
read:

new text begin Subd. 20. new text end

new text begin Rate cap for commercial and industrial class. new text end

new text begin In allocating costs and
designing rates for retail customers under this section, the commission shall ensure that the
rates for a utility's commercial and industrial class is at least five percent below the national
average for that customer class, consistent with the goal established in section 216C.05,
subdivision 4, and inclusive of the costs charged to this customer class under rate schedules
providing for the automatic adjustment of charges to recover expenses or costs outside of
a rate case approved under this chapter.
new text end

Sec. 7.

Minnesota Statutes 2018, section 216B.1645, subdivision 1, is amended to read:

Subdivision 1.

Commission authority.

Upon the petition of a public utility, the Public
Utilities Commission shall approve or disapprove power purchase contracts, investments,
or expenditures entered into or made by the utility to satisfy the wind and biomass mandates
contained in sections 216B.169, 216B.2423, and 216B.2424, and to satisfy the renewable
energy objectives and standards set forth in section 216B.1691, including reasonable
investments and expenditures made to:

(1) transmit the electricity generated from sources developed under those sections that
is ultimately used to provide service to the utility's retail customers, including studies
necessary to identify new transmission facilities needed to transmit electricity to Minnesota
retail customers from generating facilities constructed to satisfy the renewable energy
objectives and standards, provided that the costs of the studies have not been recovered
previously under existing tariffs and the utility has filed an application for a certificate of
need or for certification as a priority project under section 216B.2425 for the new
transmission facilities identified in the studies;

(2) provide storage facilities for renewable energy generation facilities that contribute
to the reliability, efficiency, or cost-effectiveness of the renewable facilities; deleted text begin or
deleted text end

(3) develop renewable energy sources from the account required in section 116C.779 deleted text begin . deleted text end new text begin ;
or
new text end

new text begin (4) upgrade or modify existing transmission facilities primarily used to transmit electricity
generated by a clean energy resource, as defined in section 216B.2422, subdivision 1,
paragraph (f), regardless of whether the public utility has satisfied the standards set forth
in section 216B.1691.
new text end

Sec. 8.

Minnesota Statutes 2018, section 216B.1645, subdivision 2, is amended to read:

Subd. 2.

Cost recovery.

The expenses incurred by the utility over the duration of the
approved contract or useful life of the investment deleted text begin and deleted text end new text begin , new text end expenditures made pursuant to section
116C.779 deleted text begin shall be deleted text end new text begin , and efforts to maximize employment of local workers to construct and
maintain generation facilities that supply power to the utility's customers, are new text end recoverable
from the ratepayers of the utility, to the extent they are not offset by utility revenues
attributable to the contracts, investments, or expenditures. Upon petition by a public utility,
the commission shall approve or approve as modified a rate schedule providing for the
automatic adjustment of charges to recover the expenses or costs approved by the commission
under subdivision 1, which, in the case of transmission expenditures, are limited to the
portion of actual transmission costs that are directly allocable to the need to transmit power
from the renewable sources of energy. The commission may not approve recovery of the
costs for that portion of the power generated from sources governed by this section that the
utility sells into the wholesale market.

Sec. 9.

Minnesota Statutes 2018, section 216B.1691, subdivision 9, is amended to read:

Subd. 9.

Local benefits.

The commission shall take all reasonable actions within its
statutory authority to ensure this section is implemented to maximize benefits to Minnesota
citizens new text begin and local workers as defined in section 216B.2422, subdivision 1 new text end , balancing factors
such as local ownership of or participation in energy production, new text begin local job impacts as defined
in section 216B.2422, subdivision 1, new text end development and ownership of eligible energy
technology facilities by independent power producers, Minnesota utility ownership of
eligible energy technology facilities, the costs of energy generation to satisfy the renewable
standard, and the reliability of electric service to Minnesotans.

Sec. 10.

Minnesota Statutes 2018, section 216B.2422, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(a) For purposes of this section, the terms defined in this
subdivision have the meanings given them.

(b) "Utility" means an entity with the capability of generating 100,000 kilowatts or more
of electric power and serving, either directly or indirectly, the needs of 10,000 retail
customers in Minnesota. Utility does not include federal power agencies.

(c) "Renewable energy" means electricity generated through use of any of the following
resources:

(1) wind;

(2) solar;

(3) geothermal;

(4) hydro;

(5) trees or other vegetation;

(6) landfill gas new text begin and mixed municipal solid waste or refuse-derived fuel from mixed
municipal solid waste new text end ; or

(7) predominantly organic components of wastewater effluent, sludge, or related
by-products from publicly owned treatment works, but not including incineration of
wastewater sludge.

(d) "Resource plan" means a set of resource options that a utility could use to meet the
service needs of its customers over a forecast period, including an explanation of the supply
and demand circumstances under which, and the extent to which, each resource option
would be used to meet those service needs. These resource options include using,
refurbishing, and constructing utility plant and equipment, buying power generated by other
entities, controlling customer loads, and implementing customer energy conservation.

(e) "Refurbish" means to rebuild or substantially modify an existing electricity generating
resource of 30 megawatts or greater.

new text begin (f) "Clean energy resource" means renewable energy, an energy storage system, and
energy efficiency and load management, as defined in section 216B.241, subdivision 1, or
a carbon-free resource, as defined under paragraph (g) and determined by the commission
under subdivision 4, paragraph (h).
new text end

new text begin (g) "Carbon-free resource" means a generation technology that, when operating, does
not contribute to statewide greenhouse gas emissions, as defined in section 216H.01,
subdivision 2. Carbon-free resource includes power generation utilizing carbon capture and
storage technology.
new text end

new text begin (h) "Energy storage system" means a commercially available technology that:
new text end

new text begin (1) uses mechanical, chemical, or thermal processes to:
new text end

new text begin (i) store energy and deliver the stored energy for use at a later time; or
new text end

new text begin (ii) store thermal energy for direct use for heating or cooling at a later time in a manner
that reduces the demand for electricity at the later time;
new text end

new text begin (2) if being used for electric grid benefits, is operationally visible and capable of being
controlled by the distribution or transmission entity managing it to enable and optimize the
safe and reliable operation of the electric system; and
new text end

new text begin (3) achieves any of the following:
new text end

new text begin (i) reduces peak electrical demand;
new text end

new text begin (ii) defers the need or substitutes for an investment in electric generation, transmission,
or distribution assets;
new text end

new text begin (iii) improves the reliable operation of the electrical transmission or distribution systems;
or
new text end

new text begin (iv) lowers customer costs by storing energy when the cost of generating or purchasing
energy is low and delivering energy to customers when costs are high.
new text end

new text begin (i) "Nonrenewable energy facility" means a generation facility, other than a nuclear
facility, that does not use a renewable energy or other clean energy resource.
new text end

new text begin (j) "Local job impacts" means the impacts of an integrated resource plan, a certificate
of need, a power purchase agreement, or commission approval of a new or refurbished
energy facility on the availability of construction employment opportunities to local workers.
new text end

new text begin (k) "Local workers" means workers employed to construct and maintain energy
infrastructure that are Minnesota residents, residents of the utility's service territory, or who
permanently reside within 150 miles of a proposed new or refurbished energy facility.
new text end

Sec. 11.

Minnesota Statutes 2018, section 216B.2422, subdivision 2, is amended to read:

Subd. 2.

Resource plan filing and approval.

(a) A utility shall file a resource plan with
the commission periodically in accordance with rules adopted by the commission. The
commission shall approve, reject, or modify the plan of a public utility, as defined in section
216B.02, subdivision 4, consistent with the public interest. new text begin The commission's analysis of a
resource plan filed by an investor-owned utility must consider the economy, job growth,
and job retention.
new text end

(b) In the resource plan proceedings of all other utilities, the commission's order shall
be advisory and the order's findings and conclusions shall constitute prima facie evidence
which may be rebutted by substantial evidence in all other proceedings. With respect to
utilities other than those defined in section 216B.02, subdivision 4, the commission shall
consider the filing requirements and decisions in any comparable proceedings in another
jurisdiction.

(c) As a part of its resource plan filing, a utility shall include the least cost plan for
meeting 50 and 75 percent of all new text begin new new text end energy needs from both new and refurbished generating
facilities through a combination of deleted text begin conservation deleted text end new text begin clean energy new text end and deleted text begin renewable energy deleted text end
new text begin carbon-free new text end resources.

Sec. 12.

Minnesota Statutes 2018, section 216B.2422, subdivision 4, is amended to read:

Subd. 4.

Preference for deleted text begin renewable energy facility deleted text end new text begin clean energy resources new text end .

new text begin (a) new text end The
commission shall not approve a new or refurbished nonrenewable energy facility new text begin in
Minnesota new text end in an integrated resource plan or a certificate of need, pursuant to section
216B.243, nor shall the commission new text begin approve a power purchase agreement for a new or
refurbished asset subject to its jurisdiction or new text end allow rate recovery pursuant to section 216B.16
for such a nonrenewable energy facility, unless the utility has demonstrated that a renewable
energy facility new text begin , alone or in combination with other clean energy resources, new text end is not in the
public interest.

new text begin (b) new text end When making the public interest determination new text begin under paragraph (a) new text end , the commission
must consider:

new text begin (1) whether the record in the resource plan, proposed certificate of need, or proposed
power purchase agreement for the new or refurbished nonrenewable energy facility in
Minnesota demonstrates the utility is unable affordably and reliably to meet the resource
need the facility is proposed for solely through the addition of clean energy resources, after
evaluation by the utility, the department, and other parties to the docket;
new text end

deleted text begin (1) deleted text end new text begin (2) new text end whether the resource plan new text begin , proposed certificate of need, or proposed power
purchase agreement new text end helps the utility achieve the greenhouse gas reduction goals under
section 216H.02, the renewable energy standard under section 216B.1691, or the solar
energy standard under section 216B.1691, subdivision 2f new text begin , as well as the resource plan's
impact on the economy, job growth, and job retention new text end ;

deleted text begin (2) deleted text end new text begin (3) new text end impacts on local and regional grid reliability;

deleted text begin (3) deleted text end new text begin (4) new text end utility and ratepayer impacts resulting from the intermittent nature of renewable
energy facilities, including but not limited to the costs of purchasing wholesale electricity
in the market and the costs of providing ancillary services; deleted text begin and
deleted text end

deleted text begin (4) deleted text end new text begin (5) new text end utility and ratepayer impacts resulting from reduced exposure to fuel price
volatility, changes in transmission costs, portfolio diversification, and environmental
compliance costs new text begin , as well as utility and ratepayer impacts that might result from additional
investment in nonrenewable energy facilities new text end deleted text begin . deleted text end new text begin ; and
new text end

new text begin (6) impacts of resource options on customers' bills and utility rates; any doubt regarding
the various resource options before the commission must be resolved in favor of supporting
the economy, job growth, and job retention.
new text end

new text begin (c) If the commission finds the utility has demonstrated a renewable energy facility,
alone or in combination with other clean energy resources, is not in the public interest under
paragraph (a), the commission may approve a utility's proposal for a new or refurbished
nonrenewable energy facility at the size necessary to ensure reliable and affordable service
to the utility's customers.
new text end

new text begin (d) This subdivision does not apply to an energy facility approved by the legislature
under Laws 2017, chapter 5, or to commission approval of an affiliated interest agreement
for an energy facility in docket number E015/AI-17-568.
new text end

new text begin (e) When evaluating the contribution of proposed resources to local and regional
reliability, the commission must consider the ability of proposed resources to provide (1)
essential reliability services needed by utility customers or the electric system, including,
to the extent feasible, frequency response, balancing services, and voltage control, and (2)
energy and capacity.
new text end

new text begin (f) If the commission approves a resource plan that includes the retirement of a
nonrenewable energy facility owned by a public utility, the public utility shall be entitled
to own the generation, transmission, and other facilities necessary to replace the accredited
capacity of the retiring facility, provided:
new text end

new text begin (1) the resource plan of a public utility with more than 200,000 retail electric customers
in Minnesota results in having at least 85 percent of the public utility's electric supply come
from resources that do not contribute to statewide greenhouse gas emissions, as defined in
section 216H.01, subdivision 2, by the year 2030 and thereafter;
new text end

new text begin (2) the resource plan for any public utility with between 50,000 and 200,000 retail electric
customers in Minnesota results in having at least 65 percent of the public utility's electric
supply attributable to serving Minnesota customers, come from resources that do not
contribute to statewide greenhouse gas emissions, as defined in section 216H.01, subdivision
2, by the year 2035 and thereafter; and
new text end

new text begin (3) each public utility demonstrates its ownership of replacement resources is in the
public interest, considering customer impacts and benefits. The commission must give
special consideration to a public utility's proposal under this paragraph if the proposal
replaces the capacity of a retiring nonrenewable energy facility entirely with clean energy
resources.
new text end

new text begin (g) Nothing in this section impacts a decision to continue operating a nuclear facility
that is generating energy in Minnesota as of June 1, 2019. If a decision is made to retire an
existing nuclear unit, the process in paragraphs (a) to (c) and (e) applies to the identification
of replacement resources.
new text end

new text begin (h) The commission may, by order, add to the list of resources it determines to be clean
energy resources for the purposes of this section upon a determination that the resource is
carbon free and cost competitive when compared with other carbon-free alternatives.
new text end

Sec. 13.

Minnesota Statutes 2018, section 216B.2422, is amended by adding a subdivision
to read:

new text begin Subd. 4a. new text end

new text begin Preference for local job creation. new text end

new text begin As a part of its resource plan filing, a utility
must report, to the extent known, on associated local job impacts and the steps the utility
and its energy suppliers and contractors are taking to maximize the availability of construction
employment opportunities for local workers. The commission must consider local job
impacts and give preference to proposals that maximize the creation of construction
employment opportunities for local workers, consistent with the public interest, when
evaluating any utility proposal that involves the selection or construction of facilities used
to generate or deliver energy to serve the utility's customers, including but not limited to an
integrated resource plan, a certificate of need, a power purchase agreement, or commission
approval of a new or refurbished electric generation facility.
new text end

Sec. 14.

Minnesota Statutes 2018, section 216B.2422, subdivision 5, is amended to read:

Subd. 5.

Bidding; exemption from certificate of need proceeding.

(a) A utility may
select resources to meet its projected energy demand through a bidding process approved
or established by the commission. A utility shall use the environmental cost estimates
determined under subdivision 3 new text begin and consider local job impacts new text end in evaluating bids submitted
in a process established under this subdivision.

(b) Notwithstanding any other provision of this section, if an electric power generating
plant, as described in section 216B.2421, subdivision 2, clause (1), is selected in a bidding
process approved or established by the commission, a certificate of need proceeding under
section 216B.243 is not required.

(c) A certificate of need proceeding is also not required for an electric power generating
plant that has been selected in a bidding process approved or established by the commission,
or such other selection process approved by the commission, to satisfy, in whole or in part,
the wind power mandate of section 216B.2423 or the biomass mandate of section 216B.2424.

Sec. 15.

Minnesota Statutes 2018, section 216B.2422, is amended by adding a subdivision
to read:

new text begin Subd. 7. new text end

new text begin Resource planning conference. new text end

new text begin The commissioner of commerce may, as
circumstances warrant, convene utilities subject to this section and stakeholders interested
in resource planning to (1) facilitate the sharing of best practices and planning innovations
from one utility resource plan to the next, (2) help resolve issues that impact all utilities
during the resource plan development process, (3) and promote coordination across resource
plans. The commissioner must seek input from likely attendees regarding topics the resource
planning conference should cover. In addition, the agenda for the conference should review
key decisions by the Federal Energy Regulatory Commission and the North American
Electric Reliability Corporation that could impact resource planning, as well as recent and
ongoing transmission studies and market innovations from the Midcontinent Independent
System Operator.
new text end

Sec. 16.

Minnesota Statutes 2018, section 216B.2422, is amended by adding a subdivision
to read:

new text begin Subd. 8. new text end

new text begin Ratepayer impact. new text end

new text begin The commission may not approve a resource plan under
this section that it determines will cause costs to increase more than a reasonable forecast
of the rate of inflation over the term of the resource plan.
new text end

Sec. 17.

new text begin [216C.45] POWER PLANT HOST COMMUNITY TRANSITION
PLANNING.
new text end

new text begin The commissioner of commerce must coordinate with the commissioner of labor and
industry and the commissioner of employment and economic development to develop plans,
programs, and other recommendations to mitigate the impacts on host communities in
Minnesota and workers resulting from the eventual retirement of large generation facilities.
The commissioners must coordinate this work with representatives of the local government
units that host large generation facilities; the workers at large generation facilities, including
full-time employees and contractors; and the utilities that own large generation facilities.
new text end

Sec. 18. new text begin COORDINATED ELECTRIC TRANSMISSION STUDY.
new text end

new text begin (a) The commissioner of commerce shall request the Midcontinent Independent System
Operator (MISO) to conduct an engineering study of the impacts on reliability and estimated
costs of operational changes and enhancements to the transmission system necessary to
support increased use of carbon-free electrical generation sources for Minnesota and
throughout the MISO footprint, along with the possible eventual retirement of existing
generation resources serving Minnesota customers.
new text end

new text begin (b) If the request is accepted, MISO is responsible for completing the study work, with
the support of the electric utilities subject to transmission planning under Minnesota Rules,
chapter 7848. Prior to the start of the study, MISO shall appoint a technical review committee
with experience and expertise in electric transmission system engineering, power system
operation, and renewable and carbon-free energy technologies to review the study's proposed
methods, work plan, models, and preliminary and near final results. The technical review
committee shall be chaired by a representative from MISO and include representatives from
Minnesota electric utilities, including one representative from a utility that owns nuclear
generation, one from a generation and transmission cooperative, and one from a municipal
utility. In addition, MISO will work with state utility regulators, as well as stakeholders
from across the electricity industry, nongovernmental organization, consumer advocates,
and labor representatives.
new text end

new text begin (c) To the extent possible, the study shall integrate and optimize the study and resulting
potential transmission projects with previous and current study efforts, coordinate with
neighboring regions to the MISO footprint and adjacent regional transmission organizations,
and identify barriers, challenges, and opportunities.
new text end

new text begin (d) The study shall include, but is not limited to:
new text end

new text begin (1) establishing scenarios for study of increased carbon-free energy resources and energy
storage and retirement of existing generation;
new text end

new text begin (2) identifying new power system operating challenges and possible mitigation strategies
and areas where new strategies will be required but are not yet discernible;
new text end

new text begin (3) developing conceptual level plans of the required new and modified transmission,
including timeframes and indicative cost;
new text end

new text begin (4) identifying when ascertainable, likely new significant transmission projects or
modifications, including timeframes and indicative cost; and
new text end

new text begin (5) identifying functional requirements for and timeframes when nontransmission
technology may be needed to augment the transmission in conceptual plan and the new
projects or modifications.
new text end

new text begin (e) The first meeting of the technical review committee shall be held no later than June
15, 2019, and the study should be complete, with a comprehensive report submitted to the
Public Utilities Commission no later than December 1, 2020.
new text end

Sec. 19. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 to 18 are effective August 1, 2019, and apply only to dockets initiated at the
Public Utilities Commission on or after that date.
new text end