SF 1846

2nd Engrossment - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to state government; establishing an energy
savings program; authorizing the Department of
Administration to use energy forward pricing
mechanisms for budget risk reduction; amending
Minnesota Statutes 2004, section 16C.144; proposing
coding for new law in Minnesota Statutes, chapter 16C.

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

Section 1.

new text begin [16C.143] ENERGY FORWARD PRICING MECHANISMS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin The following definitions
apply in this section:
new text end

new text begin (1) "energy" means natural gas, heating oil, propane, and
any other energy source except electricity used in state
facilities; and
new text end

new text begin (2) "forward pricing mechanism" means a contract or
financial instrument that obligates a state agency to buy or
sell a specified quantity of energy at a future date at a set
price.
new text end

new text begin Subd. 2. new text end

new text begin Authority. new text end

new text begin Notwithstanding any other law to the
contrary, the commissioner may use forward pricing mechanisms
for budget risk reduction.
new text end

new text begin Subd. 3. new text end

new text begin Conditions. new text end

new text begin Forward pricing mechanism
transactions must be made only under the following conditions:
new text end

new text begin (1) the quantity of energy affected by the forward pricing
mechanism must not exceed the estimated energy use for the state
agency for the same period; and
new text end

new text begin (2) a separate account must be established for each state
agency using a forward pricing mechanism.
new text end

new text begin Subd. 4. new text end

new text begin Written policies and procedures. new text end

new text begin Before
exercising the authority under this section, the commissioner
must develop written policies and procedures governing the use
of forward pricing mechanisms.
new text end

Sec. 2.

Minnesota Statutes 2004, section 16C.144, is
amended to read:

16C.144 GUARANTEED new text begin ENERGY new text end SAVINGS deleted text begin CONTRACTS deleted text end new text begin PROGRAM new text end .

Subdivision 1.

Definitions.

The following definitions
apply to this section.

(a) "Utility" means electricity, natural gas, or other
energy resource, water, and wastewater.

(b) "Utility cost savings" means the difference between deleted text begin the
utility costs under the precontract conditions and deleted text end the utility
costs after deleted text begin the changes have been made under the contract. Such
savings shall be calculated in comparison to an established
baseline of utility costs deleted text end new text begin installation of the utility
cost-savings measures pursuant to the guaranteed energy savings
agreement and the baseline utility costs after baseline
adjustments have been made new text end .

(c) deleted text begin "Established baseline" means the precontract utilities,
operations, and maintenance costs. deleted text end new text begin "Baseline" means the
preagreement utilities, operations, and maintenance costs.
new text end

(d) "Utility cost-savings measure" means a measure that
produces utility cost savings and/or operation and maintenance
cost savings.

(e) "Operation and maintenance cost savings" means a
measurable deleted text begin decrease in deleted text end new text begin difference between operation and
maintenance costs after the installation of the utility
cost-savings measures pursuant to the guaranteed energy savings
agreement and the baseline new text end operation and maintenance costs deleted text begin that
is a direct result of the implementation of one or more utility
cost-savings measures but does deleted text end new text begin after inflation adjustments have
been made. Operation and maintenance costs savings shall new text end not
include savings from in-house staff labor. deleted text begin Such savings shall
be calculated in comparison to an established baseline of
operation and maintenance costs.
deleted text end

(f) "Guaranteed new text begin energy new text end savings deleted text begin contract deleted text end new text begin agreement new text end " means deleted text begin a
contract deleted text end new text begin an agreement new text end for the deleted text begin evaluation, recommendation, and
deleted text end installation of one or more utility cost-savings measures new text begin that
includes the qualified provider's guarantee as required under
subdivision 2 new text end . deleted text begin The contract must provide that all payments are
to be made over time but not to exceed ten years from the date
of final installation, and the savings are guaranteed to the
extent necessary to make payments for the utility cost-savings
measures.
deleted text end

(g) "Baseline adjustments" means adjusting the deleted text begin established
deleted text end new text begin utility cost-savings new text end baselines deleted text begin in paragraphs (b) and
(d) deleted text end new text begin annually new text end for changes in the following variables:

(1) utility rates;

(2) number of days in the utility billing cycle;

(3) square footage of the facility;

(4) operational schedule of the facility;

(5) facility temperature set points;

(6) weather; and

(7) amount of equipment or lighting utilized in the
facility.

new text begin (h) "Inflation adjustment" means adjusting the operation
and maintenance cost-savings baseline annually for inflation.
new text end

deleted text begin (h) deleted text end new text begin (i) new text end "Lease purchase deleted text begin contract deleted text end new text begin agreement new text end " means deleted text begin a
contract deleted text end new text begin an agreement new text end obligating the state to make regular lease
payments to satisfy the lease costs of the utility cost-savings
measures until the final payment, after which time the utility
cost-savings measures become the sole property of the state of
Minnesota.

deleted text begin (i) deleted text end new text begin (j) new text end "Qualified provider" means a person or business
experienced in the design, implementation, and installation of
utility cost-savings measures.

deleted text begin (j) deleted text end new text begin (k) new text end "Engineering report" means a report prepared by a
professional engineer licensed by the state of Minnesota
summarizing estimates of all costs of installations,
modifications, or remodeling, including costs of design,
engineering, installation, maintenance, repairs, and estimates
of the amounts by which utility and operation and maintenance
costs will be reduced.

deleted text begin (k) deleted text end new text begin (l) new text end "Capital cost avoidance" means money expended by a
state agency to pay for utility cost-savings measures with a
guaranteed savings deleted text begin contract deleted text end new text begin agreement new text end so long as the measures
that are being implemented to achieve the new text begin utility, operation,
and maintenance new text end cost savings are a significant portion of an
overall project new text begin as determined by the commissioner new text end .

deleted text begin (l) deleted text end new text begin (m) new text end "Guaranteed new text begin energy new text end savings deleted text begin contracting deleted text end new text begin program
new text end guidelines" means policies, procedures, and requirements of
guaranteed savings deleted text begin contracts deleted text end new text begin agreements new text end established by the
Department of Administration deleted text begin upon enacting this legislation deleted text end .

Subd. 2.

Guaranteed new text begin energy new text end savings deleted text begin contract deleted text end new text begin agreement new text end .

The commissioner may enter into a guaranteed new text begin energy new text end savings
deleted text begin contract deleted text end new text begin agreement new text end with a qualified provider if:

(1) the qualified provider is selected through a
competitive process in accordance with the guaranteed new text begin energy
new text end savings deleted text begin contracting deleted text end new text begin program new text end guidelines within the Department of
Administration;

(2) the qualified provider agrees to submit an engineering
report prior to the execution of the guaranteed new text begin energy new text end savings
deleted text begin contract deleted text end new text begin agreement. The cost of the engineering report may be
considered as part of the implementation costs if the
commissioner enters into a guaranteed energy savings agreement
with the provider new text end ;

(3) new text begin the term of the guaranteed energy savings agreement
shall not exceed 15 years from the date of final installation;
new text end

new text begin (4) new text end the commissioner finds that the amount it would spend
on the utility cost-savings measures recommended in the
engineering report will not exceed the amount to be saved in
utility operation and maintenance costs over deleted text begin ten deleted text end new text begin 15 new text end years from
the date of implementation of utility cost-savings measures;

deleted text begin (4) deleted text end new text begin (5) new text end the qualified provider provides a written guarantee
that the new text begin annual new text end utility, operation, and maintenance cost savings
new text begin during the term of the guaranteed energy savings agreement new text end will
meet or exceed the deleted text begin costs of the guaranteed savings contract
deleted text end new text begin annual payments due under a lease purchase agreement new text end . The
qualified provider shall reimburse the state for any shortfall
of guaranteed utility new text begin , operation, and maintenance new text end cost savings;
and

deleted text begin (5) deleted text end new text begin (6) new text end the qualified provider gives a sufficient bond in
accordance with section 574.26 to the commissioner for the
faithful implementation and installation of the utility
cost-savings measures.

Subd. 3.

Lease purchase deleted text begin contract deleted text end new text begin agreement new text end .

The
commissioner may enter into a lease purchase agreement with any
party for the implementation of utility cost-savings measures in
accordance with deleted text begin an engineering report deleted text end new text begin the guaranteed energy
savings agreement new text end . The implementation costs of the utility
cost-savings measures recommended in the engineering report
shall not exceed the amount to be saved in utility and operation
and maintenance costs over the term of the lease purchase
agreement. The term of the lease purchase agreement shall not
exceed deleted text begin ten deleted text end new text begin 15 new text end years new text begin from the date of final installation new text end . The
lease is assignable in accordance with terms approved by the
commissioner of finance.

Subd. 4.

Use of capital cost avoidance.

The affected
state agency may contribute funds for capital cost avoidance for
guaranteed new text begin energy new text end savings deleted text begin contracts deleted text end new text begin agreements new text end . Use of capital
cost avoidance is subject to the guaranteed new text begin energy new text end savings
deleted text begin contracting deleted text end new text begin program new text end guidelines within the Department of
Administration.

Subd. 5.

Report.

By January 15 deleted text begin of 2005 and deleted text end new text begin , new text end 2007, the
commissioner of administration shall submit to the commissioner
of finance and the chairs of the senate and house of
representatives capital investment committees a list of projects
in the agency that have been funded using guaranteed energy
savings, as outlined in this section, during the preceding
biennium. For each guaranteed new text begin energy new text end savings deleted text begin contract deleted text end new text begin agreement
new text end entered into, the commissioner of administration shall contract
with an independent third party to evaluate the
cost-effectiveness of each utility cost-savings measure
implemented to ensure that such measures were the least-cost
measures available. For the purposes of this section,
"independent third party" means an entity not affiliated with
the qualified provider, that is not involved in creating or
providing conservation project services to that provider, and
that has expertise (or access to expertise) in energy savings
practices.

deleted text begin Subd. 6. deleted text end

deleted text begin Contract limits. deleted text end

deleted text begin Contracts may not be entered
into after June 30, 2007.
deleted text end

Sec. 3. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 and 2 are effective the day following final
enactment.
new text end