SF 1735

1st Engrossment - 89th Legislature (2015 - 2016) Posted on 05/07/2015 01:13pm

A bill for an act
relating to energy; allowing performance-based, multiyear rate plans; providing
for competitive rate schedules for energy-intensive trade-exposed electric utility
customers; amending Minnesota Statutes 2014, sections 216B.16, subdivisions
6, 7b, 19; 216B.2425.

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

Section 1.

Minnesota Statutes 2014, 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. new text begin 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,
the commission may allow the public utility to recover any positive net book value of the
facility as determined by the commission.
new text end

Sec. 2.

Minnesota Statutes 2014, section 216B.16, subdivision 7b, is amended to read:

Subd. 7b.

Transmission cost adjustment.

(a) Notwithstanding any other provision
of this chapter, the commission may approve a tariff mechanism for the automatic annual
adjustment of charges for the Minnesota jurisdictional costs net of associated revenues of:

(i) new transmission facilities that have been separately filed and reviewed and
approved by the commission under section 216B.243 or new text begin new transmission or distribution
facilities that new text end are certified as a priority project or deemed to be a priority transmission
project under section 216B.2425;

(ii) new transmission facilities approved by the regulatory commission of the state
in which the new transmission facilities are to be constructed, to the extent approval
is required by the laws of that state, and determined by the Midcontinent Independent
System Operator to benefit the utility or integrated transmission system; and

(iii) charges incurred by a utility under a federally approved tariff that accrue
from other transmission owners' regionally planned transmission projects that have been
determined by the Midcontinent Independent System Operator to benefit the utility or
integrated transmission system.

(b) Upon filing by a public utility or utilities providing transmission service, the
commission may approve, reject, or modify, after notice and comment, a tariff that:

(1) allows the utility to recover on a timely basis the costs net of revenues of
facilities approved under section 216B.243 or certified or deemed to be certified under
section 216B.2425 or exempt from the requirements of section 216B.243;

(2) allows the utility to recover charges incurred under a federally approved tariff that
accrue from other transmission owners' regionally planned transmission projects that have
been determined by the Midcontinent Independent System Operator to benefit the utility
or integrated transmission system. These charges must be reduced or offset by revenues
received by the utility and by amounts the utility charges to other regional transmission
owners, to the extent those revenues and charges have not been otherwise offset;

(3) allows the utility to recover on a timely basis the costs net of revenues of facilities
approved by the regulatory commission of the state in which the new transmission
facilities are to be constructed and determined by the Midcontinent Independent System
Operator to benefit the utility or integrated transmission system;

(4) new text begin allows the utility to recover costs associated with distribution planning required
under section 216B.2425;
new text end

new text begin (5) allows the utility to recover costs associated with investments in distribution
facilities to modernize the utility's grid that have been certified by the commission under
section 216B.2425;
new text end

new text begin (6) new text end allows a return on investment at the level approved in the utility's last general
rate case, unless a different return is found to be consistent with the public interest;

deleted text begin (5) deleted text end new text begin (7) new text end provides a current return on construction work in progress, provided that
recovery from Minnesota retail customers for the allowance for funds used during
construction is not sought through any other mechanism;

deleted text begin (6) deleted text end new text begin (8) new text end allows for recovery of other expenses if shown to promote a least-cost project
option or is otherwise in the public interest;

deleted text begin (7) deleted text end new text begin (9) new text end allocates project costs appropriately between wholesale and retail customers;

deleted text begin (8) deleted text end new text begin (10) new text end provides a mechanism for recovery above cost, if necessary to improve the
overall economics of the project or projects or is otherwise in the public interest; and

deleted text begin (9) deleted text end new text begin (11) new text end terminates recovery once costs have been fully recovered or have otherwise
been reflected in the utility's general rates.

(c) A public utility may file annual rate adjustments to be applied to customer bills
paid under the tariff approved in paragraph (b). In its filing, the public utility shall provide:

(1) a description of and context for the facilities included for recovery;

(2) a schedule for implementation of applicable projects;

(3) the utility's costs for these projects;

(4) a description of the utility's efforts to ensure the lowest costs to ratepayers for
the project; and

(5) calculations to establish that the rate adjustment is consistent with the terms
of the tariff established in paragraph (b).

(d) Upon receiving a filing for a rate adjustment pursuant to the tariff established in
paragraph (b), the commission shall approve the annual rate adjustments provided that,
after notice and comment, the costs included for recovery through the tariff were or are
expected to be prudently incurred and achieve transmission system improvements at the
lowest feasible and prudent cost to ratepayers.

Sec. 3.

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. 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 deleted text begin three
deleted text end new text begin five new text end years, to be covered by the plan. new text begin A utility proposing a multiyear rate plan shall provide
a general description of the utility's major planned investments over the plan period.
The commission may also require the utility to provide a set of reasonable performance
measures and incentives that are quantifiable, verifiable, and consistent with state energy
policies. The commission may allow the utility to adjust recovery of its cost of capital or
other costs in a reasonable manner within the plan period. The utility may propose:
new text end

new text begin (1) recovery of the utility's forecasted rate base, based on a formula, a budget forecast,
or a fixed escalation rate, individually or in combination. The forecasted rate base must
include the utility's 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 through subdivision 7;
new text end

new text begin (2) recovery of operations and maintenance expenses, based on an electricity-related
price index or other formula;
new text end

new text begin (3) tariffs that expand the products and services available to customers, including,
but not limited to, an affordability rate for low-income residential customers; and
new text end

new text begin (4) adjustments to the rates approved under the multiyear plan for rate changes
that the commission determines to be just and reasonable, including, but not limited
to, changes in the utility's cost of operating its nuclear facilities, or other significant
investments not addressed in the plan.
new text end

new text begin (b) A utility that has filed a petition with the commission to approve a multiyear
rate plan may request to be allowed to implement interim rates for the first and second
years of the multiyear plan. If the commission approves the request, interim rates shall be
implemented in the same manner as allowed under subdivision 3.
new text end

new text begin (c) new text end 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.

deleted text begin (b) deleted text end new text begin (d) new text end 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.

deleted text begin (c) deleted text end new text begin (e) new text end 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.

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

new text begin (h) The commission may initiate a proceeding to determine a set of performance
measures that can be used to assess a utility operating under a multiyear rate plan.
new text end

Sec. 4.

Minnesota Statutes 2014, section 216B.2425, is amended to read:

216B.2425 STATE TRANSMISSION new text begin AND DISTRIBUTION new text end PLAN.

Subdivision 1.

List.

The commission shall maintain a list of certified high-voltage
transmission line projects.

Subd. 2.

List development; transmission projects report.

(a) By November
1 of each odd-numbered year, a transmission projects report must be submitted to the
commission by each utility, organization, or company that:

(1) is a public utility, a municipal utility, a cooperative electric association, the
generation and transmission organization that serves each utility or association, or a
transmission company; and

(2) owns or operates electric transmission lines in Minnesota, except a company or
organization that owns a transmission line that serves a single customer or interconnects a
single generating facility.

(b) The report may be submitted jointly or individually to the commission.

(c) The report must:

(1) list specific present and reasonably foreseeable future inadequacies in the
transmission system in Minnesota;

(2) identify alternative means of addressing each inadequacy listed;

(3) identify general economic, environmental, and social issues associated with
each alternative; and

(4) provide a summary of public input related to the list of inadequacies and the role
of local government officials and other interested persons in assisting to develop the list
and analyze alternatives.

(d) To meet the requirements of this subdivision, reporting parties may rely on
available information and analysis developed by a regional transmission organization
or any subgroup of a regional transmission organization and may develop and include
additional information as necessary.

new text begin (e) In addition to providing the information required under this subdivision, a utility
operating under a multiyear rate plan approved by the commission under section 216B.16,
subdivision 19, shall identify in its report investments that it considers necessary to
modernize the transmission and distribution system by enhancing reliability, improving
security against cyber and physical threats, and by increasing energy conservation
opportunities by facilitating communication between the utility and its customers
through the use of two-way meters, control technologies, energy storage and microgrids,
technologies to enable demand response, and other innovative technologies.
new text end

Subd. 3.

Commission approval.

By June 1 of each even-numbered year, the
commission shall adopt a state transmission project list and shall certify, certify as
modified, or deny certification of the new text begin transmission and distribution new text end projects proposed
under subdivision 2. The commission may only certify a project that is a high-voltage
transmission line as defined in section 216B.2421, subdivision 2, that the commission
finds is:

(1) necessary to maintain or enhance the reliability of electric service to Minnesota
consumers;

(2) needed, applying the criteria in section 216B.243, subdivision 3; and

(3) in the public interest, taking into account electric energy system needs and
economic, environmental, and social interests affected by the project.

Subd. 4.

List; effect.

Certification of a project as a priority electric transmission
project satisfies section 216B.243. A certified project on which construction has not begun
more than six years after being placed on the list, must be reapproved by the commission.

Subd. 5.

Transmission inventory.

The Department of Commerce shall create,
maintain, and update annually an inventory of transmission lines in the state.

Subd. 6.

Exclusion.

This section does not apply to any transmission line proposal
that has been approved by, or was pending before, a local unit of government, the
Environmental Quality Board, or the Public Utilities Commission on August 1, 2001.

Subd. 7.

Transmission needed to support renewable resources.

(a) Each entity
subject to this section shall determine necessary transmission upgrades to support
development of renewable energy resources required to meet objectives under section
216B.1691 and shall include those upgrades in its report under subdivision 2.

(b) MS 2008 [Expired]

new text begin Subd. 8. new text end

new text begin Distribution study for distributed generation. new text end

new text begin Each entity subject to
this section that is operating under a multiyear rate plan approved under section 216B.16,
subdivision 19, shall conduct a distribution study to identify interconnection points on
its distribution system for small-scale distributed generation resources and shall identify
necessary distribution upgrades to support the continued development of distributed
generation resources, and shall include the study in its report required under subdivision 2.
new text end

Sec. 5. new text begin COMPETITIVE RATE FOR ENERGY-INTENSIVE, TRADE-EXPOSED
ELECTRIC UTILITY CUSTOMER.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

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

new text begin (b) "Energy-intensive, trade-exposed (EITE) customer" means a customer of an
investor-owned utility that has at least 40 percent of its load from 15 or fewer customers
and is:
new text end

new text begin (1) an iron mining extraction and processing facility, including a "scram mining
operation," as that term is defined in Minnesota Rules, part 6130.0100, subpart 16;
new text end

new text begin (2) a paper mill, wood products manufacturer, sawmill, or oriented strand board
manufacturer;
new text end

new text begin (3) a steel mill and related facility; or
new text end

new text begin (4) any other globally competitive electric customer who can demonstrate that: (i)
energy costs are at least 15 percent of the customer's overall cost of production; (ii) their
energy rates are significantly higher than their competitors; and (iii) those higher rates
impede the customer's ability to compete in the global market.
new text end

new text begin (c) "EITE rate schedule" means a rate schedule that establishes the terms of service
for an individual or group of energy-intensive, trade-exposed customers.
new text end

new text begin (d) "EITE rate" means the rate or rates offered by the utility under an EITE rate
schedule.
new text end

new text begin Subd. 2. new text end

new text begin Rates and terms of EITE rate schedule. new text end

new text begin (a) An investor-owned electric
utility that has at least 40 percent of its load from 15 or fewer customers may propose an
EITE rate schedule for commission approval that includes various EITE rate options
such as fixed rates or market-based rates.
new text end

new text begin (b) The minimum rate for the EITE schedule must recover at least the incremental
cost of providing the service, including the cost of additional capacity that is to be added
while the rate is in effect and any applicable on-peak or off-peak differential.
new text end

new text begin (c) Notwithstanding Minnesota Statutes, section 216B.03, 216B.05, 216B.06,
216B.07, or 216B.16, the commission shall approve a proposed EITE rate schedule if
it finds the schedule provides net benefits to the utility and its customers, considering
among other things:
new text end

new text begin (1) potential cost impacts to the utility's customers;
new text end

new text begin (2) the net benefit to the local or state economy through the retention or increase of
jobs;
new text end

new text begin (3) a net increase in economic development in the utility's service territory; and
new text end

new text begin (4) the extent to which a significant rate increase for all other customers might
otherwise be avoided by preventing a reduction of EITE customer load.
new text end

new text begin Subd. 3. new text end

new text begin Eligibility for EITE rate. new text end

new text begin A customer is eligible for an EITE rate under
the EITE rate schedule if the customer can demonstrate to the commission that it meets
the defined criteria under subdivision 1, paragraph (b).
new text end

new text begin Subd. 4. new text end

new text begin Commission process. new text end

new text begin (a) The commission shall review the EITE rate
schedule proposed by an investor-owned electric utility and make a final determination in
any proceeding begun under this section within 120 days of a miscellaneous rate filing by
the electric utility.
new text end

new text begin (b) An EITE rate offered by an electric utility under an approved EITE rate schedule
must be filed with the commission.
new text end

new text begin Subd. 5. new text end

new text begin Cost recovery. new text end

new text begin (a) Upon approval of an EITE rate, the utility shall create
a separate account to track the difference in revenue between what would have been
collected under the electric utility's applicable standard tariff and the EITE rate schedule.
In its next general rate case or other methodology the commission shall determine, the
commission shall allow the utility to recover the incremental costs if it determines that
recovery is in the public interest, or refund the incremental revenues, associated with
providing service to a customer under the EITE rate from the utility's nonenergy-intensive,
trade-exposed customers.
new text end

new text begin (b) The commission shall take steps as necessary to mitigate the impacts of
cost recovery of the implementation of the EITE rate on other ratepayers, unless the
commission finds that the cost impacts are minimal.
new text end