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HF 3641

1st Engrossment - 86th Legislature (2009 - 2010) Posted on 03/23/2010 12:53pm

KEY: stricken = removed, old language.
underscored = added, new language.

Bill Text Versions

Engrossments
Introduction Posted on 03/11/2010
1st Engrossment Posted on 03/23/2010

Current Version - 1st Engrossment

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A bill for an act
relating to energy; modifying community-based energy development program;
amending Minnesota Statutes 2008, section 216B.1612, subdivisions 3, 5, 7, by
adding a subdivision; Minnesota Statutes 2009 Supplement, section 216B.1612,
subdivision 2.

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

Section 1.

Minnesota Statutes 2009 Supplement, section 216B.1612, subdivision 2,
is amended to read:


Subd. 2.

Definitions.

(a) The terms used in this section have the meanings given
them in this subdivision.

(b) "C-BED tariff" or "tariff" means a community-based energy development tariff.

(c) "Qualifying deleted text beginownerdeleted text endnew text begin beneficiarynew text end" means:

(1) a Minnesota resident;

deleted text begin (2) a limited liability company that is organized under chapter 322B and that is made
up of members who are Minnesota residents;
deleted text end

deleted text begin (3)deleted text endnew text begin (2)new text end a Minnesota nonprofit organization organized under chapter 317A;

deleted text begin (4)deleted text endnew text begin (3)new text end a Minnesota cooperative association organized under chapter 308A or
308B, including a rural electric cooperative association or a generation and transmission
cooperative on behalf of and at the request of a member distribution utility;

deleted text begin (5)deleted text endnew text begin (4)new text end a Minnesota political subdivision or local government including, but not
limited to, a municipal electric utility, or a municipal power agency on behalf of and at
the request of a member distribution utility; the office of the commissioner of Iron Range
resources and rehabilitation; a county, statutory or home rule charter city, town, school
district, or public or private higher education institution; or any other local or regional
governmental organization such as a board, commission, or association; deleted text beginor
deleted text end

deleted text begin (6)deleted text endnew text begin (5)new text end a tribal councildeleted text begin.deleted text endnew text begin; or
new text end

new text begin (6) a legal entity (i) formed for a purpose other than to participate in C-BED
projects; (ii) whose principal place of business or principal executive office is located in
Minnesota; and (iii) that provides labor, services, equipment, components, or financing
to a C-BED project.
new text end

new text begin A public utility, as defined in section 216B.02, subdivision 4, is not a qualifying
beneficiary.
new text end

(d) deleted text begin"Net present value rate" means a rate equal to the net present value of the
nominal payments to a project divided by the total expected energy production of the
project over the life of its power purchase agreement.
deleted text endnew text begin "Qualifying revenue" includes,
but is not limited to:
new text end

new text begin (1) royalties, distributions, dividends, and other payments flowing to individuals
who are qualifying beneficiaries;
new text end

new text begin (2) fees for consulting, development, professional, construction, and operations and
maintenance services paid to qualifying beneficiaries;
new text end

new text begin (3) interest and fees paid to financial institutions that are qualifying beneficiaries;
new text end

new text begin (4) the value-added portion of payments for goods manufactured in Minnesota; and
new text end

new text begin (5) production taxes.
new text end

(e) new text begin"Discount rate" means the ten-year United States Treasury Yield as quoted in
the Wall Street Journal as of the date of application for determination under subdivision
10, plus five percent; except that the discount rate applicable to any qualifying revenues
contingent upon an equity investor earning a specified internal rate of return is the ten-year
United States Treasury Yield, plus eight percent.
new text end

new text begin (f) new text end"Standard reliability criteria" means:

(1) can be safely integrated into and operated within the utility's grid without causing
any adverse or unsafe consequences; and

(2) is consistent with the utility's resource needs as identified in its most recent
resource plan submitted under section 216B.2422.

deleted text begin (f)deleted text end new text begin(g) new text end"Renewable" refers to a technology listed in section 216B.1691, subdivision
1
, paragraph (a).

deleted text begin (g)deleted text end new text begin(h) new text end"Community-based energy development project" or "C-BED project" means
a new renewable energy project that either as a stand-alone project or part of a partnership
under subdivision 8:

(1) has no single qualifying deleted text beginownerdeleted text endnew text begin beneficiary, including any parent company or
subsidiary of the qualifying beneficiary,
new text end owning more than 15 percent of a C-BED wind
energy project unless: (i) the C-BED wind energy project consists of only one or two
turbines; or (ii) the qualifying deleted text beginownerdeleted text endnew text begin beneficiarynew text end is a public entity listed under paragraph
(c), clause deleted text begin(5)deleted text endnew text begin (4)new text end, that is not a municipal utility;

(2) demonstrates that at least 51 percent new text beginof the net present value new text endof the gross
revenues from a power purchase agreement over the life of the project deleted text beginwill flow todeleted text end new text beginare
new text endqualifying deleted text beginowners and other local entitiesdeleted text endnew text begin revenuesnew text end; and

(3) has a resolution of support adopted by the county board of each county in which
the project is to be located, or in the case of a project located within the boundaries of a
reservation, the tribal council for that reservation.

new text begin (i) "Value-added portion" means the difference between the total sales price and the
total cost of components, materials, and services purchased from or provided outside
of Minnesota.
new text end

Sec. 2.

Minnesota Statutes 2008, section 216B.1612, subdivision 3, is amended to read:


Subd. 3.

Tariff rate.

(a) The tariff described in subdivision 4 must deleted text beginhave a rate
schedule that allows for a net present value rate over the 20-year life of the power
purchase agreement. The tariff must
deleted text end provide for a rate that is higher in the first ten years
of the power purchase agreement than in the last ten years. deleted text beginThe discount rate required
to calculate the net present value must be the utility's normal discount rate used for its
other business purposes.
deleted text end

(b) The commission shall consider mechanisms to encourage the aggregation
of C-BED projects.

(c) The commission shall require that deleted text beginqualifying and nonqualifying ownersdeleted text end new text beginC-BED
projects
new text endprovide sufficient security to secure performance under the power purchase
agreementdeleted text begin, and shall prohibit the transfer of the C-BED project to a nonqualifying owner
during the initial 20 years of the contract
deleted text end.

Sec. 3.

Minnesota Statutes 2008, section 216B.1612, subdivision 5, is amended to read:


Subd. 5.

Priority for C-BED projects.

(a) A utility subject to section 216B.1691that
needs to construct new generation, or purchase the output from new generation, as part
of its plan to satisfy its good faith objective and standard under that section must take
reasonable steps to determine if one or more C-BED projects are available that meet the
utility's cost and reliability requirements, applying standard reliability criteria, to fulfill
some or all of the identified need at minimal impact to customer rates.

Nothing in this section shall be construed to obligate a utility to enter into a power
purchase agreement under a C-BED tariff developed under this section.

(b) Each utility shall include in its resource plan submitted under section 216B.2422
a description of its efforts to purchase energy from C-BED projects, including a list of the
projects under contract and the amount of C-BED energy purchased.

(c) The commission shall consider the efforts and activities of a utility to purchase
energy from C-BED projects when evaluating its good faith effort towards meeting the
renewable energy objective under section 216B.1691.

(d) A municipal power agency or generation and transmission cooperative shall,
when issuing a request for proposals for C-BED projects to satisfy its standard obligation
under section 216B.1691, provide notice to its member distribution utilities that they may
propose, in partnership with other qualifying deleted text beginownersdeleted text endnew text begin beneficiariesnew text end, a C-BED project for the
consideration of the municipal power agency or generation and transmission cooperative.

Sec. 4.

Minnesota Statutes 2008, section 216B.1612, subdivision 7, is amended to read:


Subd. 7.

Other C-BED tariff issues.

(a) A community-based project developer
and a utility shall negotiate the rate and power purchase agreement terms consistent with
the tariff established under subdivision 4.

(b) At the discretion of the developer, a community-based project developer and
a utility may negotiate a power purchase agreement with terms different from the tariff
established under subdivision 4.

(c) A deleted text beginqualifying owner, or any combination of qualifying owners, may develop a
joint venture project with a nonqualifying renewable energy project developer
deleted text endnew text begin C-BED
project may be jointly developed with a non-C-BED project
new text end. However, the terms of the
C-BED tariff may only apply to the portion of the energy production of the total project
that is directly proportional to the deleted text beginequity share of the project owned by the qualifying
owners
deleted text endnew text begin energy produced by the C-BED projectnew text end.

deleted text begin (d)deleted text end A project that is operating under a power purchase agreement under a C-BED
tariff is not eligible for net energy billing under section 216B.164, subdivision 3, or for
production incentives under section 216C.41.

deleted text begin (e)deleted text end new text begin(d) new text endA public utility must receive commission approval of a power purchase
agreement for a C-BED tariffed project. The commission shall provide the utility's
ratepayers an opportunity to address the reasonableness of the proposed power purchase
agreement. Unless a party objects to a contract within 30 days of submission of the
contract to the commission the contract is deemed approved.

Sec. 5.

Minnesota Statutes 2008, section 216B.1612, is amended by adding a
subdivision to read:


new text begin Subd. 10. new text end

new text begin C-BED eligibility determination. new text end

new text begin A developer of a C-BED project may
seek a predetermination of C-BED eligibility from the commissioner of commerce at any
time, and must obtain a determination of C-BED eligibility from the commissioner of
commerce, based on the project's final financing terms, before construction may begin.
In seeking a determination of eligibility under this subdivision, a developer of a C-BED
project must submit to the commissioner of commerce detailed financial projections
demonstrating that, based on a net present value analysis, and applying the discount rate to
qualifying revenues and gross revenues from a power purchase agreement, the project
meets the requirements of subdivision 2, paragraph (h), clause (1).
new text end