SF 1735

as introduced - 89th Legislature (2015 - 2016) Posted on 05/05/2015 04:36pm

A bill for an act
relating to energy; allowing performance-based, multiyear rate plans; amending
Minnesota Statutes 2014, section 216B.16, subdivision 19, by adding a
subdivision.

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

Section 1.

Minnesota Statutes 2014, section 216B.16, subdivision 19, is amended to
read:

Subd. 19.

Multiyear rate plan.

(a) A public utility may propose, and the
commission may approve, approve as modified, or reject, a multiyear rate plan as
provided in this subdivision. new text begin For the purposes of this subdivision, new text end the term "multiyear
rate plan" refers to a plan establishing the rates the utility may charge for each year of the
specified period of years, which cannot exceed three years, to be covered by the plan. The
commission may approve a multiyear rate plan only if it finds that the plan establishes
just and reasonable rates for the utility, applying the factors described in subdivision 6.
Consistent with subdivision 4, the burden of proof to demonstrate that the multiyear rate
plan is just and reasonable is on the public utility proposing the plan.

(b) Rates charged under the multiyear rate plan must be based only upon the utility's
reasonable and prudent costs of service over the term of the plan, as determined by the
commission, provided that the costs are not being recovered elsewhere in rates. Rate
adjustments authorized under subdivisions 6b and 7 may continue outside of a plan
authorized under this subdivision.

(c) The commission may, by order, establish terms, conditions, and procedures for a
multiyear rate plan necessary to implement this section and ensure that rates remain just
and reasonable during the course of the plan, including terms and procedures for rate
adjustment. At any time prior to conclusion of a multiyear rate plan, the commission,
upon its own motion or upon petition of any party, has the discretion to examine the
reasonableness of the utility's rates under the plan, and adjust rates as necessary.

(d) In reviewing a multiyear rate plan proposed in a general rate case under
this section, the commission may extend the time requirements for issuance of a final
determination prescribed in this section by an additional 90 days beyond its existing
authority under subdivision 2, paragraph (f).

deleted text begin (e) A utility may not file a multiyear rate plan that would establish rates under the
terms of the plan until after May 31, 2012.
deleted text end

Sec. 2.

Minnesota Statutes 2014, section 216B.16, is amended by adding a subdivision
to read:

new text begin Subd. 20. new text end

new text begin Performance-based multiyear rate plan. new text end

new text begin (a) A public utility may
propose, and the commission may by order approve, approve as modified, or reject, a
performance-based multiyear rate plan as provided in this subdivision. For the purposes of
this subdivision, the term "performance-based multiyear rate plan" refers to a business
plan establishing the rates the utility may charge or the process for annually adjusting
rates for each year of the specified period of years, which cannot exceed five years,
covered by the plan. Consistent with subdivision 4, the burden of proof to demonstrate
the performance-based multiyear rate plan is just and reasonable is on the public utility
proposing the plan.
new text end

new text begin (b) The performance-based multiyear rate plan replaces a general rate case filing
pursuant to this section. The commission may approve a performance-based multiyear
rate plan if it finds that the plan results in just and reasonable rates and:
new text end

new text begin (1) aligns rate, resource planning, grid planning, and policy decisions during the
plan period;
new text end

new text begin (2) bases a portion of the utility's revenue on the achievement of performance
metrics described in paragraph (c), clause (1), as approved by the commission;
new text end

new text begin (3) is designed to encourage operational efficiency; and
new text end

new text begin (4) reduces a utility's disincentive to promote energy efficiency and other activities
that result in reduced utility sales.
new text end

new text begin (c) As part of its performance-based multiyear rate plan, the utility must:
new text end

new text begin (1) propose a set of performance metrics that are quantifiable, verifiable, within the
utility's ability to control, consistent with state energy policy, and that enhance system
value or customer value;
new text end

new text begin (2) provide a general description of the utility's major planned investments and
expenses over the plan period, including the investments and expenses that support
achievement of the performance metrics and state policy goals; and
new text end

new text begin (3) propose tariffs that expand the products and services available to customers, to
improve energy efficiency, affordability, renewable energy, or grid modernization and
stability, such as a time of day rate, an affordability rate for low-income residential
customers, or a rate for large, energy-intensive customers that demonstrate energy prices
impede their ability to compete in the global market.
new text end

new text begin (d) The commission shall approve by order a set of performance metrics that meet
the criteria in paragraph (c), clause (1), and the associated incentive mechanisms after
receiving recommendations from a stakeholder group that must include the utility and
that shall be convened by a lead commissioner, as provided under section 216A.03,
subdivision 9. The lead commissioner shall ensure that a report on the outcome of the
stakeholder process is presented to the commission within six months of the date the
stakeholder group is initially convened.
new text end

new text begin (e) The performance-based multiyear rate plan shall include:
new text end

new text begin (1) recovery of the utility's forecast rate base including its planned capital
investments and investment-related costs, including income tax impacts, depreciation,
and property taxes, as well as forecasted capacity-related costs from purchased power
agreements that are not recovered under subdivision 7, based on a formula, a budget
forecast, or a fixed escalation rate, individually or in combination;
new text end

new text begin (2) recovery of operations and maintenance expenses, excluding costs recovered
under clauses (4) and (5), and other cost adjustment mechanisms, based on an
electricity-related price index;
new text end

new text begin (3) rate moderation tools to lessen rate impacts and promote rate stability;
new text end

new text begin (4) recovery of energy conservation improvement expenses authorized in
subdivisions 6b and 6c, fuel and purchased energy costs authorized in subdivision 7, and
other costs recovered through cost-recovery riders that the commission determines are
appropriate and necessary for effective implementation of the rate plan;
new text end

new text begin (5) adjustments to the rates under the approved plan for:
new text end

new text begin (i) major capital investments, asset acquisitions, or divestitures exceeding
$50,000,000 that are approved by the commission after approval of a utility's
performance-based multiyear rate plan; or
new text end

new text begin (ii) events that are beyond a utility's control and result in material positive or
negative cost impacts, including but not limited to natural disasters or changes in state
or federal law or regulation; and
new text end

new text begin (6) sharing of a portion of earnings above the authorized return, exclusive of any
incentives allowed under this subdivision and subdivision 6c.
new text end

new text begin (f) A utility may include in its performance-based multiyear rate plan a request for
an annual adjustment mechanism for costs of investments, expenses, and amortization
in nuclear generation beyond the levels established in a utility's most recent rate case,
including a rate of return, income taxes on the rate of return, and incremental property
taxes, if any, plus incremental depreciation expenses associated with a utility's nuclear
assets, provided that costs recovered through the nuclear cost adjustment mechanism
remain subject to an annual review process that ensures costs recovered through the
mechanism were prudently incurred.
new text end

new text begin (g) A utility may file a performance-based multiyear rate plan based on a prior final
rate order from the commission, provided the rate order was issued within 24 months of
submitting a performance-based multiyear rate plan. The commission shall issue a decision
on the plan within the period established under subdivision 2, paragraph (f). A utility
submitting a performance-based multiyear rate plan under this paragraph shall use the same
base return on equity for the first two years of its five-year business plan, as authorized in
the most recent general rate case. The utility may propose and the commission may approve
a different return on equity or a formula to adjust return on equity based on observed
changes in interest rates or other relevant factors for years three through five of the plan.
new text end

new text begin (h) A utility may request to implement interim rates for the first year of the
performance-based multiyear plan and, if needed due to the schedule for processing the
request, the subsequent year of the plan. Interim rates shall be implemented in the same
manner as interim rates under subdivision 3.
new text end

new text begin (i) If the commission issues a final order that modifies the utility's proposed
performance-based multiyear rate plan beyond any modifications agreed to in the
stakeholder process, the utility may opt out of the plan by providing written notice to the
commission within 45 days of the date of the order modifying the plan. A utility opting
out is authorized to collect rates at the commission-ordered revenue levels specified for
the first year of the plan.
new text end

new text begin (j) The utility or commission may request a substantive review with the option to
amend or cancel the plan if the utility's earned return in a given year is 250 basis points
above or below the authorized level.
new text end