SF 421

as introduced - 92nd Legislature (2021 - 2022) Posted on 03/26/2021 09:39am

A bill for an act
relating to energy; establishing the Natural Gas Innovation Act; encouraging natural
gas utilities to develop innovative resources; proposing coding for new law in
Minnesota Statutes, chapter 216B.

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

Section 1. new text begin TITLE.
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new text begin This bill may be referred to as the "Natural Gas Innovation Act."
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new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
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Sec. 2.

new text begin [216B.2427] NATURAL GAS UTILITY INNOVATION PLANS.
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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 terms defined in this
subdivision have the meanings given.
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new text begin (b) "Biogas" means gas created by the anaerobic digestion of biomass, gasification of
biomass, or other effective conversion processes.
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new text begin (c) "Carbon capture and utilization" means the capture of greenhouse gases that would
otherwise be released into the atmosphere and the use of the captured greenhouse gases to
create industrial or commercial products for sale.
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new text begin (d) "District energy" means a network of hot- and cold-water pipes used to provide
thermal energy to multiple buildings.
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new text begin (e) "Energy efficiency" has the meaning given in section 216B.241, subdivision 1,
paragraph (f). Energy efficiency does not include energy conservation investments the
commission determines could reasonably be included in the natural gas utility's conservation
improvement program under section 216B.241.
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new text begin (f) "Innovative resource" means biogas, renewable natural gas, power-to-hydrogen
power-to-ammonia, carbon capture and utilization, strategic electrification, district energy
systems, and energy efficiency.
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new text begin (g) "Lifecycle greenhouse gas emissions" means the emissions of an energy resource
associated with the production, processing, transmission, and consumption of energy
associated with the energy resource.
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new text begin (h) "Natural gas utility" or "utility" means a public utility, as defined in section 216B.02,
subdivision 4, that provides natural gas sales or transportation services to customers in
Minnesota.
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new text begin (i) "Power-to-ammonia" means the creation of ammonia from hydrogen created via
power-to-hydrogen using a process that has lower lifecycle greenhouse gas intensity than
conventional geologic natural gas.
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new text begin (j) "Power-to-hydrogen" means the use of electricity generated by (1) an eligible energy
technology, as defined in section 216B.1691, subdivision 1, paragraph (a), or (2) renewable
energy, as defined in section 216B.2422, subdivision 1, to create hydrogen.
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new text begin (k) "Renewable natural gas" means biogas that has been processed so that it (1) is
interchangeable with conventional natural gas, and (2) has lower lifecycle greenhouse gas
intensity than conventional geologic natural gas.
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new text begin (l) "Strategic electrification" means the installation of electric end-use equipment,
provided the installation (1) results in a net reduction in statewide greenhouse gas emissions,
as defined in section 216H.241, subdivision 2, over the life of the equipment as compared
to the most efficient commercially available natural gas alternative, and (2) is installed and
operated in a manner that improves the customer's electric utility's load factor.
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new text begin (m) "Total incremental cost" means:
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new text begin (1) the sum of:
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new text begin (i) capital investments in infrastructure for the production, processing, pipeline
interconnection, storage, and distribution of innovative resources included in a utility
innovation plan approved under subdivision 2;
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new text begin (ii) net operating costs associated with capital investments in infrastructure for the
production, processing, pipeline interconnection, storage, and distribution of innovative
resources included in a utility innovation plan approved under subdivision 2;
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new text begin (iii) the incremental cost to procure innovative resources from third parties; and
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new text begin (iv) the incremental costs to administer programs included in a utility innovation plan
approved under subdivision 2;
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new text begin (2) less the sum of:
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new text begin (i) any value received by the natural gas utility upon the resale of the innovative resources
or the innovative resource's by-products, including any environmental credits included with
the resale of the renewable gaseous fuels or value received by the natural gas utility when
innovative resources are used as vehicle fuel; and
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new text begin (ii) any cost savings achieved through avoidance of conventional natural gas purchases,
including but not limited to any avoided commodity purchases or avoided pipeline costs.
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new text begin Subd. 2. new text end

new text begin Innovation plans. new text end

new text begin (a) A natural gas utility may file an innovation plan with
the commission. The utility's recommended plan must describe or include, as applicable,
the following components:
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new text begin (1) the recommended innovative resource or resources the utility plans to implement to
advance the state's goals established in sections 216C.05, subdivision 2, clause (3), and
216H.02, subdivision 1, within the requirements and limitations set forth in this section;
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new text begin (2) the total greenhouse gas emissions the natural gas utility expects to reduce or avoid
pursuant to the plan;
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new text begin (3) the natural gas utility's estimate of how avoided or reduced emissions resulting from
the use of the innovative resource compare to total emissions from natural gas use by the
natural gas utility's customers in 2005;
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new text begin (4) any pilot program proposed by the natural gas utility related to the development or
provision of innovative resources, including an estimate of the total incremental costs to
implement the pilot program;
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new text begin (5) any program previously approved as a pilot program which the utility proposes to
continue as a pilot program or make permanent;
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new text begin (6) the cost effectiveness of the proposed innovative resources from the perspective of
the natural gas utility, society, and participating customers as compared to other innovative
resources that could be deployed to reduce or avoid the same greenhouse gas emissions
targeted by the utility's proposed resource;
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new text begin (7) a third-party analysis of the lifecycle greenhouse gas intensity of any innovative
resources included in the plan;
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new text begin (8) a third-party analysis of the forecasted lifecycle greenhouse gas emissions reductions
achieved or the lifecycle greenhouse gas emissions avoided if the proposed programs are
implemented, including any:
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new text begin (i) avoided emissions attributable to utility operations;
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new text begin (ii) avoided emissions from the production, processing, and transmission of fuels prior
to receipt by the utility; and
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new text begin (iii) avoided emissions at the point of end use;
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new text begin (9) the process used to develop the lifecycle greenhouse gas accounting methodology
used consistently throughout the plan, including descriptions of how the utility engaged
interested stakeholders and ensured the plan reflects consistency with applicable current
scientific knowledge;
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new text begin (10) whether the recommended plan supports the development and use of alternative
agricultural products, waste reduction, reuse, or anaerobic digestion of organic waste, and
the recovery of energy from wastewater, and if so a description of where those benefits are
realized;
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new text begin (11) a description of third-party systems and processes the utility plans to use to:
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new text begin (i) track the proposed innovative resources included in the plan so that environmental
benefits are used only for the natural gas innovation plan and not claimed for any other
program; and
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new text begin (ii) verify the environmental attributes and greenhouse gas intensity of proposed
innovative resources included in the plan;
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new text begin (12) a description of known local job impacts and the steps the utility and the utility's
energy suppliers and contractors are taking to maximize the availability of construction
employment opportunities for local workers; and
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new text begin (13) a report on the utility's progress toward implementing the approved proposals
contained in the utility's previously filed innovation plan, if applicable.
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new text begin (b) Along with the recommended plan, the natural gas utility must provide for commission
consideration:
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new text begin (1) a plan that the utility estimates would provide approximately half of the greenhouse
gas reduction or avoidance benefits of the utility's preferred plan;
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new text begin (2) a plan that the utility estimates would provide approximately 1-1/2 times the
greenhouse gas reduction or avoidance benefits of the utility's preferred plan; and
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new text begin (3) a plan that the utility estimates would provide approximately twice the greenhouse
gas reduction or avoidance benefits of the utility's preferred plan.
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new text begin (c) The commission must approve, modify, or deny the plan within 12 months of the
date the plan is filed.
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new text begin (d) When deciding whether to approve, modify, or deny a plan, the commission is
prohibited from approving an innovation plan unless the commission finds:
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new text begin (1) the plan promotes the use of renewable energy resources and reduces or avoids
greenhouse gas emissions at a cost level consistent with this section;
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new text begin (2) the innovative resources included in the plan have a lower lifecycle greenhouse gas
intensity than conventional geologic natural gas;
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new text begin (3) reasonable systems are used to track and verify the environmental attributes of the
innovative resources included in the plan, taking into account any third-party tracking or
verification systems available;
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new text begin (4) the costs expected to be incurred pursuant to the plan are reasonable compared to
other innovative resources the utility could deploy to address greenhouse gas emissions and
considering other benefits of the innovative resources included in the plan; and
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new text begin (5) the total amount of estimated greenhouse gas reduction or avoidance achieved under
the plan is reasonable considering (i) the state's goals established in sections 216C.05,
subdivision 2, clause (3), and 216H.02, subdivision 1, (ii) customer cost, and (iii) the total
amount of greenhouse gas reduction or avoidance achieved under the natural gas utility's
previously approved plans, if applicable.
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new text begin (e) Commission approval of a plan constitutes prima facie evidence of the reasonableness
of the investments and costs incurred pursuant to the plan. The utility bears the burden to
prove the actual incremental costs incurred to implement the approved innovation plan are
reasonable. The rate of return on investments must be at the level approved by the
commission in the natural gas utility's last general rate case, unless the commission
determines a different rate of return is in the public interest. Prudently incurred costs incurred
pursuant to an approved plan and prudently incurred costs to obtain the third-party analysis
required in paragraph (a), clauses (3) and (4), are recoverable either:
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new text begin (1) under section 216B.16, subdivision 7, clause (2), via the utility's purchased gas
adjustment;
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new text begin (2) in the natural gas utility's next general rate case; or
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new text begin (3) via annual adjustments, provided that after notice and comment the commission
determines the costs included for recovery through the rate schedule are prudently incurred.
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new text begin (f) A natural gas utility with an approved plan must provide annual reports to the
commission regarding the work completed pursuant to the plan, including the costs incurred
under the plan and lifecycle greenhouse gas reduction or avoidance accomplished under
the plan; a description of the processes used to track, verify, and retire the innovative
resources and associated environmental attributes; and an update on the lifecycle greenhouse
gas accounting methodology, consistent with current science. As part of the annual status
report the natural gas utility may propose modifications to pilot programs in the plan. When
evaluating a utility's annual report the commission may:
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new text begin (1) approve the continuation of a pilot or permanent program, with or without
modifications;
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new text begin (2) make a program previously approved as a pilot program permanent;
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new text begin (3) require the utility to file a new or modified plan to account for changed circumstances;
or
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new text begin (4) disapprove the continuation of a pilot or permanent program.
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new text begin (g) Once a natural gas utility has an approved innovation plan, a new innovation plan
must be filed no less frequently than once every five years. The commission may order a
natural gas utility with an approved plan to file a new plan more frequently than every five
years.
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new text begin (h) A utility may file an innovation plan at any time after this section becomes effective.
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new text begin (i) For purposes of this section, whenever an analysis or estimate of lifecycle greenhouse
gas emissions reductions, lifecycle greenhouse gas avoidance, or lifecycle greenhouse gas
intensity is required, the analysis or estimate may rely on emissions factors, default values,
or engineering estimates from a publicly accessible source accepted by a federal or state
government agency if direct measurement is not technically or economically feasible and
if the utility demonstrates the emissions factors, default values, or engineering estimates
are able to produce a reasonable estimate of greenhouse gas emissions reductions, avoidance,
or intensity.
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new text begin Subd. 3. new text end

new text begin Limitations on utility customer costs. new text end

new text begin (a) The commission is prohibited from
approving annual recovery of incremental costs for innovative resources approved under
this section in excess of five percent of the natural gas utility's total annual revenue
requirement, as determined in the natural gas utility's most recent general rate case.
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new text begin (b) Notwithstanding paragraph (a), the commission may approve up to an additional
2-1/2 percent of the natural gas utility's total annual revenue requirement, as determined in
the natural gas utility's most recent general rate case, to recover incremental costs for the
purchase of renewable natural gas produced from (1) food waste diverted from a landfill
by an organics recycling program; (2) community wastewater treatment; or (3) an organic
mixture including at least 15 percent sustainably harvested native prairie grasses, by volume.
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new text begin (c) A transportation customer of a natural gas utility must not bear any costs incurred
to implement an approved innovation plan, except to the extent the transportation customer
elects to participate in an innovation plan program.
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new text begin Subd. 4. new text end

new text begin Innovative resources procured outside of an innovation plan. new text end

new text begin (a) Without
filing an innovation plan, a natural gas utility may propose and the commission may approve
cost recovery for:
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new text begin (1) innovative resources acquired to satisfy a commission-approved green tariff program
that allows customers to choose to meet a portion of the customers' energy needs through
innovative resources; or
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new text begin (2) utility expenditures for innovative resources procured at a cost that is within five
percent of the average of Ventura and Demarc index prices for conventional natural gas,
calculated at the time of the transaction, per unit of fossil natural gas that the innovative
resource displaces.
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new text begin (b) An approved green-tariff program must include provisions to ensure reasonable
systems are used to track and verify the environmental attributes of innovative resources
included in the program, taking into account any third-party tracking or verification systems
available.
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new text begin Subd. 5. new text end

new text begin Thermal energy leadership challenge. new text end

new text begin The first innovation plan filed by a
natural gas utility with more than 800,000 customers must include a pilot thermal energy
leadership challenge for small- and medium-sized businesses. The pilot program must
provide small- and medium-sized business with thermal energy audits to identify
opportunities to reduce or avoid greenhouse gas emissions from use of natural gas, and
provide incentives for businesses to follow through with audit recommendations. The utility
must develop criteria to identify businesses that take meaningful steps to follow through on
audit recommendations and recognize qualifying businesses as thermal energy leaders.
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new text begin Subd. 6. new text end

new text begin Innovative resources for very high-heat industrial processes. new text end

new text begin The first
innovation plan filed by a natural gas utility with more than 800,000 customers must include
a pilot program that provides innovative resources for hard-to-electrify industrial processes.
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new text begin Subd. 7. new text end

new text begin Electric cold climate air-source heat pumps. new text end

new text begin (a) The first innovation plan
filed by a natural gas utility with more than 800,000 customers must include a pilot program
that facilitates deep energy retrofits and the installation of cold climate electric air-source
heat pumps with natural gas backups in existing residential homes that have natural gas
heating systems.
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new text begin (b) For purposes of this subdivision, "deep energy retrofit" means the installation of any
measure or combination of measures, including air sealing and addressing thermal bridges,
that under normal weather and operating conditions can reasonably be expected to reduce
the building's calculated design load to ten or fewer British Thermal Units per hour per
square foot of conditioned floor area. Deep energy retrofit does not include the installation
of photovoltaic electric generation equipment, but may include the installation of a qualifying
solar thermal project, as defined in section 216B.2411.
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new text begin EFFECTIVE DATE. new text end

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