HF 1956

as introduced - 91st Legislature (2019 - 2020) Posted on 04/08/2019 05:57pm

A bill for an act
relating to energy; establishing the Clean Energy First Act; requiring electric
utilities to meet resource needs using clean energy resources; modifying the
definition of biomass as an eligible energy technology; increasing the proportion
of energy that electricity-generating utilities must supply from renewable sources
and setting target dates by which those goals must be achieved; updating the state's
energy savings policy goal and establishing the Conservation Improvement Program
Modernization Act of 2019; amending Minnesota Statutes 2018, sections 216B.16,
subdivisions 6, 13; 216B.1645, subdivisions 1, 2; 216B.1691, subdivisions 1, 2b,
9, by adding a subdivision; 216B.2401; 216B.241, subdivisions 1a, 1c, 1d, 1f, 2,
2b, 7, by adding a subdivision; 216B.2422, subdivisions 1, 2, 4, 5, by adding a
subdivision; 216F.04; 216F.08; proposing coding for new law in Minnesota
Statutes, chapter 216B; repealing Minnesota Statutes 2018, section 216B.241,
subdivisions 1, 2c, 4, 5.

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

ARTICLE 1

CLEAN ENERGY FIRST ACT

Section 1. new text begin TITLE.
new text end

new text begin This article may be referred to as the "Clean Energy First Act."
new text end

Sec. 2.

Minnesota Statutes 2018, 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. 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 deleted text begin statute or deleted text end policy, the commission may allow the public
utility to recover any positive net book value of the facility as determined by the commission.

Sec. 3.

Minnesota Statutes 2018, section 216B.16, subdivision 13, is amended to read:

Subd. 13.

Economic and community development.

The commission may allow a
public utility to recover from ratepayers the expenses incurred new text begin (1) new text end for economic and
community development new text begin , and (2) to employ local workers to construct and maintain
generation facilities that supply power to the utility's customers new text end .

Sec. 4.

Minnesota Statutes 2018, section 216B.1645, subdivision 1, is amended to read:

Subdivision 1.

Commission authority.

Upon the petition of a public utility, the Public
Utilities Commission shall approve or disapprove power purchase contracts, investments,
or expenditures entered into or made by the utility to satisfy the wind and biomass mandates
contained in sections 216B.169, 216B.2423, and 216B.2424, and to satisfy the renewable
energy objectives and standards set forth in section 216B.1691, including reasonable
investments and expenditures new text begin , net of revenues, new text end made to:

(1) transmit the electricity generated from sources developed under those sections that
is ultimately used to provide service to the utility's retail customers, including studies
necessary to identify new transmission facilities needed to transmit electricity to Minnesota
retail customers from generating facilities constructed to satisfy the renewable energy
objectives and standards, provided that the costs of the studies have not been recovered
previously under existing tariffs and the utility has filed an application for a certificate of
need or for certification as a priority project under section 216B.2425 for the new
transmission facilities identified in the studies;

(2) provide storage facilities for renewable energy generation facilities that contribute
to the reliability, efficiency, or cost-effectiveness of the renewable facilities; or

(3) develop renewable energy sources from the account required in section 116C.779.

Sec. 5.

Minnesota Statutes 2018, section 216B.1645, subdivision 2, is amended to read:

Subd. 2.

Cost recovery.

The expenses incurred by the utility over the duration of the
approved contract or useful life of the investment deleted text begin and deleted text end new text begin , new text end expenditures made pursuant to section
116C.779 deleted text begin shall be deleted text end new text begin , and employment of local workers to construct and maintain generation
facilities that supply power to the utility's customers are new text end recoverable from the ratepayers of
the utility, to the extent they are not offset by utility revenues attributable to the contracts,
investments, or expenditures. Upon petition by a public utility, the commission shall approve
or approve as modified a rate schedule providing for the automatic adjustment of charges
to recover the expenses or costs approved by the commission under subdivision 1, which,
in the case of transmission expenditures, are limited to the portion of actual transmission
costs that are directly allocable to the need to transmit power from the renewable sources
of energy. The commission may not approve recovery of the costs for that portion of the
power generated from sources governed by this section that the utility sells into the wholesale
market.

Sec. 6.

Minnesota Statutes 2018, section 216B.1691, subdivision 9, is amended to read:

Subd. 9.

Local benefits.

The commission shall take all reasonable actions within its
statutory authority to ensure this section is implemented to maximize benefits to Minnesota
citizens new text begin and local workers as defined in section 216B.2422, subdivision 1 new text end , balancing factors
such as local ownership of or participation in energy production, new text begin local job impacts as defined
in section 216B.2422, subdivision 1, new text end development and ownership of eligible energy
technology facilities by independent power producers, Minnesota utility ownership of
eligible energy technology facilities, the costs of energy generation to satisfy the renewable
standard, and the reliability of electric service to Minnesotans.

Sec. 7.

Minnesota Statutes 2018, section 216B.2422, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(a) For purposes of this section, the terms defined in this
subdivision have the meanings given them.

(b) "Utility" means an entity with the capability of generating 100,000 kilowatts or more
of electric power and serving, either directly or indirectly, the needs of 10,000 retail
customers in Minnesota. Utility does not include federal power agencies.

(c) "Renewable energy" means electricity generated through use of any of the following
resources:

(1) wind;

(2) solar;

(3) geothermal;

(4) hydro;

(5) trees or other vegetation;

(6) landfill gas; or

(7) predominantly organic components of wastewater effluent, sludge, or related
by-products from publicly owned treatment works, but not including incineration of
wastewater sludge.

(d) "Resource plan" means a set of resource options that a utility could use to meet the
service needs of its customers over a forecast period, including an explanation of the supply
and demand circumstances under which, and the extent to which, each resource option
would be used to meet those service needs. These resource options include using,
refurbishing, and constructing utility plant and equipment, buying power generated by other
entities, controlling customer loads, and implementing customer energy conservation.

(e) "Refurbish" means to rebuild or substantially modify an existing electricity generating
resource of 30 megawatts or greater.

new text begin (f) "Clean energy resource" means (1) renewable energy, an energy storage system, and
energy efficiency and load management, as defined in section 216B.241, subdivision 1, or
(2) a carbon-free resource, as defined under paragraph (g) and determined by the commission
under subdivision 4, paragraph (g).
new text end

new text begin (g) "Carbon-free resource" means a generation technology that, when operating, does
not contribute to statewide greenhouse gas emissions, as defined in section 216H.01,
subdivision 2. Carbon-free resource does not include a nuclear generation facility that
currently exists in Minnesota.
new text end

new text begin (h) "Energy storage system" means a commercially available technology that:
new text end

new text begin (1) uses mechanical, chemical, or thermal processes to:
new text end

new text begin (i) store energy and deliver the stored energy for use at a later time; or
new text end

new text begin (ii) store thermal energy for direct use for heating or cooling at a later time in a manner
that reduces the demand for energy at the later time;
new text end

new text begin (2) if being used for electric grid benefits, is (i) operationally visible to the distribution
or transmission entity managing it, and (ii) capable of being controlled by the distribution
or transmission entity to enable and optimize the safe and reliable operation of the electric
system; and
new text end

new text begin (3) achieves the following:
new text end

new text begin (i) reduces peak electrical demand;
new text end

new text begin (ii) defers the need or substitutes for an investment in electric generation, transmission,
or distribution assets;
new text end

new text begin (iii) improves the reliable operation of the electrical transmission or distribution systems;
and
new text end

new text begin (iv) lowers customer costs by storing energy when the cost of generating or purchasing
energy is low and delivering energy to customers when costs are high.
new text end

new text begin (i) "Nonrenewable energy facility" means a generation facility, other than a nuclear
facility, that does not use a renewable energy or other clean energy resource.
new text end

new text begin (j) "Local job impacts" means the impacts of a certificate of need, a power purchase
agreement, or commission approval of a new or refurbished energy facility on the availability
of construction employment opportunities to local workers.
new text end

new text begin (k) "Local workers" means workers employed to construct and maintain energy
infrastructure that are Minnesota residents, residents of the utility's service territory, or who
permanently reside within 150 miles of a proposed new or refurbished energy facility.
new text end

Sec. 8.

Minnesota Statutes 2018, section 216B.2422, subdivision 2, is amended to read:

Subd. 2.

Resource plan filing and approval.

(a) A utility shall file a resource plan with
the commission periodically in accordance with rules adopted by the commission. The
commission shall approve, reject, or modify the plan of a public utility, as defined in section
216B.02, subdivision 4, consistent with the public interest.

(b) In the resource plan proceedings of all other utilities, the commission's order shall
be advisory and the order's findings and conclusions shall constitute prima facie evidence
which may be rebutted by substantial evidence in all other proceedings. With respect to
utilities other than those defined in section 216B.02, subdivision 4, the commission shall
consider the filing requirements and decisions in any comparable proceedings in another
jurisdiction.

(c) As a part of its resource plan filing, a utility shall include the least cost plan for
meeting 50 and 75 percent of all energy needs from both new and refurbished generating
facilities through a combination of deleted text begin conservation deleted text end new text begin clean energy new text end and deleted text begin renewable energy deleted text end
new text begin carbon-free new text end resources.

Sec. 9.

Minnesota Statutes 2018, section 216B.2422, subdivision 4, is amended to read:

Subd. 4.

Preference for deleted text begin renewable energy facility deleted text end new text begin clean energy resources new text end .

new text begin (a) new text end The
commission shall not approve a new or refurbished nonrenewable energy facility new text begin located
in Minnesota new text end in deleted text begin an integrated resource plan or deleted text end a certificate of need, pursuant to section
216B.243, nor shall the commission new text begin approve a power purchase agreement for power from
in-state generation or new text end allow rate recovery pursuant to section 216B.16 for such a
nonrenewable energy facility, unless the utility has demonstrated that a renewable energy
facility new text begin , alone or in combination with other clean energy resources, new text end is not in the public
interest.

new text begin (b) new text end When making the public interest determination new text begin under paragraph (a) new text end , the commission
must consider:

new text begin (1) whether the record in the proposed certificate of need or proposed power purchase
agreement for the new or refurbished nonrenewable energy facility in Minnesota demonstrates
the utility is unable affordably and reliably to meet the resource need the facility is proposed
for solely through the addition of clean energy resources, after evaluation by the utility, the
department, and other parties to the docket;
new text end

deleted text begin (1) deleted text end new text begin (2) new text end whether the deleted text begin resource plan deleted text end new text begin proposed certificate of need or proposed power purchase
agreement new text end helps the utility achieve the greenhouse gas reduction goals under section 216H.02,
the renewable energy standard under section 216B.1691, or the solar energy standard under
section 216B.1691, subdivision 2f;

deleted text begin (2) deleted text end new text begin (3) new text end impacts on local and regional grid reliability;

deleted text begin (3) deleted text end new text begin (4) new text end utility and ratepayer impacts resulting from the intermittent nature of renewable
energy facilities, including but not limited to the costs of purchasing wholesale electricity
in the market and the costs of providing ancillary services; and

deleted text begin (4) deleted text end new text begin (5) new text end utility and ratepayer impacts resulting from reduced exposure to fuel price
volatility, changes in transmission costs, portfolio diversification, and environmental
compliance costs new text begin , as well as utility and ratepayer impacts that might result from additional
investment in nonrenewable energy facilities new text end .

new text begin (c) If the commission finds the utility has made the demonstration required under
paragraph (a), the commission may approve a utility's proposal for a new or refurbished
nonrenewable energy facility located in Minnesota, as necessary to ensure reliable and
affordable service to the utility's customers.
new text end

new text begin (d) This subdivision does not apply to an energy facility approved by the legislature
under Laws 2017, chapter 5.
new text end

new text begin (e) When evaluating the reliability of proposed resources, the commission must consider
the ability of proposed resources to provide (1) essential reliability services needed by utility
customers or the electric system, including frequency response, balancing services, and
voltage control, and (2) energy and capacity.
new text end

new text begin (f) Nothing in this section impacts a decision to continue operating a nuclear facility
that is generating energy in Minnesota as of June 1, 2019. If a decision is made to retire an
existing nuclear unit, the process in paragraphs (a) to (c) applies to the identification of
replacement resources.
new text end

new text begin (g) The commission may, by order, add to the list of resources it determines are clean
energy resources for the purposes of this section upon a determination that the resource is
carbon free and cost competitive when compared with other carbon-free alternatives.
new text end

Sec. 10.

Minnesota Statutes 2018, section 216B.2422, is amended by adding a subdivision
to read:

new text begin Subd. 4a. new text end

new text begin Preference for local job creation. new text end

new text begin As a part of its resource plan filing, a utility
must report on associated local job impacts and the steps the utility and its energy suppliers
and contractors are taking to maximize the availability of construction employment
opportunities for local workers. The commission must consider local job impacts and give
preference to proposals that maximize the creation of construction employment opportunities
for local workers, consistent with the public interest, when evaluating any utility proposal
that involves the selection or construction of facilities used to generate or deliver energy to
serve the utility's customers, including but not limited to a certificate of need, a power
purchase agreement, or commission approval of a new or refurbished electric generation
facility.
new text end

Sec. 11.

Minnesota Statutes 2018, section 216B.2422, subdivision 5, is amended to read:

Subd. 5.

Bidding; exemption from certificate of need proceeding.

(a) A utility may
select resources to meet its projected energy demand through a bidding process approved
or established by the commission. A utility shall use the environmental cost estimates
determined under subdivision 3 new text begin and consider local job impacts new text end in evaluating bids submitted
in a process established under this subdivision.

(b) Notwithstanding any other provision of this section, if an electric power generating
plant, as described in section 216B.2421, subdivision 2, clause (1), is selected in a bidding
process approved or established by the commission, a certificate of need proceeding under
section 216B.243 is not required.

(c) A certificate of need proceeding is also not required for an electric power generating
plant that has been selected in a bidding process approved or established by the commission,
or such other selection process approved by the commission, to satisfy, in whole or in part,
the wind power mandate of section 216B.2423 or the biomass mandate of section 216B.2424.

Sec. 12. new text begin COORDINATED ELECTRIC TRANSMISSION STUDY.
new text end

new text begin (a) Each entity subject to Minnesota Statutes, section 216B.2425, must participate in a
coordinated engineering study to identify transmission network enhancements necessary to
maintain system reliability in the event large generation resources are retired. Specifically,
the study must evaluate what enhancements are necessary in the event large generation
resources that reach the end of the large generation resource's depreciation term or operating
license term within 20 years of the effective date of this section are retired. The study must
also evaluate what transmission enhancements may be necessary to interconnect replacement
generation and renewable resource additions, including generation tie lines, anticipated by
2035 in any utility's integrated resource plan filed with or approved by the Public Utilities
Commission.
new text end

new text begin (b) When setting the scope for the study and as needed while the study is being conducted,
utilities must consult with the commissioner of commerce, technical representatives of
renewable energy resource developers, and other interested entities to discuss and identify
needed generation tie lines to support the continued orderly development of renewable
resources in Minnesota. The study must include any analysis performed by the Midcontinent
Independent System Operator.
new text end

new text begin (c) A report on the study must be completed and submitted to the Public Utilities
Commission by November 1, 2020, and include a preliminary plan to build the needed
transmission network enhancements. Reasonable and prudent costs for the study are
recoverable through the mechanism provided under Minnesota Statutes, section 216B.1645,
subdivision 2.
new text end

Sec. 13. new text begin EFFECTIVE DATE.
new text end

new text begin This article is effective August 1, 2019, and applies only to dockets initiated at the Public
Utilities Commission on or after that date.
new text end

ARTICLE 2

CARBON-FREE ENERGY STANDARD

Section 1.

Minnesota Statutes 2018, section 216B.1691, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(a) Unless otherwise specified in law, "eligible energy
technology" means an energy technology that generates electricity from the following
renewable energy sources:

(1) solar;

(2) wind;

(3) hydroelectric with a capacity of less than 100 megawatts;

(4) hydrogen, provided that after January 1, 2010, the hydrogen must be generated from
the resources listed in this paragraph; or

(5) biomass, which includes, without limitation, landfill gas; an anaerobic digester
system; the predominantly organic components of wastewater effluent, sludge, or related
by-products from publicly owned treatment works, but not including incineration of
wastewater sludge to produce electricity; and an energy recovery facility used to capture
the heat value of mixed municipal solid waste or refuse-derived fuel from mixed municipal
solid waste as a primary fuel.

(b) "Electric utility" means a public utility providing electric service, a generation and
transmission cooperative electric association, a municipal power agency, or a power district.

(c) "Total retail electric sales" means the kilowatt-hours of electricity sold in a year by
an electric utility to retail customers of the electric utility or to a distribution utility for
distribution to the retail customers of the distribution utility. "Total retail electric sales"
does not include the sale of hydroelectricity supplied by a federal power marketing
administration or other federal agency, regardless of whether the sales are directly to a
distribution utility or are made to a generation and transmission utility and pooled for further
allocation to a distribution utility.

new text begin (d) "Carbon-free" means a technology that generates electricity without emitting carbon
dioxide.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 2.

Minnesota Statutes 2018, section 216B.1691, subdivision 2b, is amended to read:

Subd. 2b.

Modification or delay of standard.

(a) The commission shall modify or delay
the implementation of a standard obligation, in whole or in part, if the commission determines
it is in the public interest to do so. The commission, when requested to modify or delay
implementation of a standard, must consider:

(1) the impact of implementing the standard on its customers' utility costs, including the
economic and competitive pressure on the utility's customers;

(2) new text begin the environmental costs that would be incurred as a result of a delay or modification,
based on the environmental cost values established in section 216B.2422, subdivision 3;
new text end

new text begin (3) new text end the effects of implementing the standard on the reliability of the electric system;

deleted text begin (3) deleted text end new text begin (4) new text end technical advances or technical concerns;

deleted text begin (4) deleted text end new text begin (5) new text end delays in acquiring sites or routes due to rejection or delays of necessary siting
or other permitting approvals;

deleted text begin (5) deleted text end new text begin (6) new text end delays, cancellations, or nondelivery of necessary equipment for construction or
commercial operation of an eligible energy technology facility;

deleted text begin (6) deleted text end new text begin (7) new text end transmission constraints preventing delivery of service; and

deleted text begin (7) deleted text end new text begin (8) new text end other statutory obligations imposed on the commission or a utility.

new text begin (b) new text end The commission may modify or delay implementation of a standard obligation under
new text begin paragraph (a), new text end clauses (1) to deleted text begin (3) deleted text end new text begin (4) new text end only if it finds implementation would cause significant
rate impact, requires significant measures to address reliability, new text begin would cause significant
environmental costs, new text end or raises significant technical issues. The commission may modify or
delay implementation of a standard obligation under new text begin paragraph (a), new text end clauses deleted text begin (4) deleted text end new text begin (5) new text end to deleted text begin (6) deleted text end new text begin
(7) new text end only if it finds that the circumstances described in those clauses were due to circumstances
beyond an electric utility's control and make compliance not feasible.

new text begin (c) When evaluating transmission capacity constraints under paragraph (a), clause (7),
the commission must consider:
new text end

new text begin (1) whether the utility has, in a timely fashion, undertaken reasonable measures under
its control and consistent with its obligations under local, state, and federal laws and
regulations, and its obligations as a member of the Midcontinent Independent System
Operator, to acquire sites, necessary permit approvals, and necessary equipment to develop
and construct new transmission lines or upgrade existing transmission lines to transmit
electricity generated by eligible energy technologies; and
new text end

new text begin (2) whether the utility has taken all reasonable operational measures to maximize
cost-effective electricity delivery from eligible energy technologies in advance of
transmission availability.
new text end

deleted text begin (b) deleted text end new text begin (d) new text end When considering whether to delay or modify implementation of a standard
obligation, the commission must give due consideration to a preference for electric generation
through use of eligible energy technology and to the achievement of the standards set by
this section.

deleted text begin (c) deleted text end new text begin (e) new text end An electric utility requesting a modification or delay in the implementation of a
standard must file a plan to comply with its standard obligation in the same proceeding that
it is requesting the delay.

new text begin EFFECTIVE DATE. new text end

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

Sec. 3.

Minnesota Statutes 2018, section 216B.1691, is amended by adding a subdivision
to read:

new text begin Subd. 2g. new text end

new text begin Carbon-free standard. new text end

new text begin (a) By 2050, 100 percent of the electricity each electric
utility subject to subdivision 2a, paragraph (a), provides directly to Minnesota retail
customers, or indirectly through wholesale sales to a distribution utility serving Minnesota
retail customers, must be generated by a technology that is carbon-free.
new text end

new text begin (b) By 2050, 100 percent of the electricity each electric utility subject to subdivision 2a,
paragraph (b), provides directly to Minnesota retail customers, or indirectly through wholesale
sales to a distribution utility serving Minnesota retail customers, must be generated by a
technology that is carbon-free.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 4.

Minnesota Statutes 2018, section 216B.1691, subdivision 9, is amended to read:

Subd. 9.

Local benefits.

new text begin (a) new text end The commission shall take all reasonable actions within its
statutory authority to ensure this section is implemented deleted text begin to maximize deleted text end new text begin in a manner that
maximizes new text end benefits to new text begin all new text end Minnesota citizens deleted text begin , balancing deleted text end new text begin and local workers throughout the
state. Benefits under this subdivision include but are not limited to:
new text end

new text begin (1) the creation of high-quality jobs in Minnesota that pay wages that support families;
new text end

new text begin (2) recognition of the rights of workers to organize and unionize;
new text end

new text begin (3) ensuring that workers have the necessary tools, opportunities, and economic assistance
to adapt successfully during the energy transition, particularly in communities that host
retiring power plants or that contain historically marginalized and underrepresented
populations;
new text end

new text begin (4) ensuring that all Minnesotans share (i) the benefits of clean and renewable energy,
and (ii) the opportunity to participate fully in the clean energy economy;
new text end

new text begin (5) ensuring that air emissions are reduced in communities historically burdened by
pollution and the impacts of climate change; and
new text end

new text begin (6) the provision of affordable electric service to Minnesotans, particularly to low-income
consumers.
new text end

new text begin (b) The commission must also implement this section in a manner that balances new text end factors
such as local ownership of or participation in energy production, new text begin local job impacts, new text end
development and ownership of eligible energy technology facilities by independent power
producers, Minnesota utility ownership of eligible energy technology facilities, the costs
of energy generation to satisfy the renewable deleted text begin standard deleted text end new text begin and carbon-free standards new text end , and the
reliability of electric service to Minnesotans.

new text begin EFFECTIVE DATE. new text end

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

Sec. 5.

Minnesota Statutes 2018, section 216B.2422, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(a) For purposes of this section, the terms defined in this
subdivision have the meanings given them.

(b) "Utility" means an entity with the capability of generating 100,000 kilowatts or more
of electric power and serving, either directly or indirectly, the needs of 10,000 retail
customers in Minnesota. Utility does not include federal power agencies.

(c) "Renewable energy" means electricity generated through use of any of the following
resources:

(1) wind;

(2) solar;

(3) geothermal;

(4) hydro;

(5) trees or other vegetation;

(6) landfill gas; or

(7) predominantly organic components of wastewater effluent, sludge, or related
by-products from publicly owned treatment works, but not including incineration of
wastewater sludge.

(d) "Resource plan" means a set of resource options that a utility could use to meet the
service needs of its customers over a forecast period, including an explanation of the supply
and demand circumstances under which, and the extent to which, each resource option
would be used to meet those service needs. These resource options include using,
refurbishing, and constructing utility plant and equipment, buying power generated by other
entities, controlling customer loads, and implementing customer energy conservation.

(e) "Refurbish" means to rebuild or substantially modify an existing electricity generating
resource of 30 megawatts or greater.

new text begin (f) "Local job impacts" means the impacts of an integrated resource plan, a certificate
of need, a power purchase agreement, or commission approval of a new or refurbished
electric generation facility on the availability of high-quality construction employment
opportunities for local workers.
new text end

new text begin (g) "Local workers" means workers employed in the construction and maintenance of
energy infrastructure that are Minnesota residents, residents of the utility's service territory,
or permanently reside within 150 miles of an electric generation facility.
new text end

Sec. 6.

Minnesota Statutes 2018, section 216F.04, is amended to read:

216F.04 SITE PERMIT.

(a) No person may construct an LWECS without a site permit issued by the Public
Utilities Commission.

(b) Any person seeking to construct an LWECS shall submit an application to the
commission for a site permit in accordance with this chapter and any rules adopted by the
commission. The permitted site need not be contiguous land.

(c) The commission shall make a final decision on an application for a site permit for
an LWECS within 180 days after acceptance of a complete application by the commission.
The commission may extend this deadline for cause.

(d) The commission may place conditions in a permit and may deny, modify, suspend,
or revoke a permit.

new text begin (e) The commission may require, as a condition of permit issuance, that the recipient of
a site permit to construct an LWECS with a nameplate capacity above 25,000 kilowatts and
all of the permit recipient's construction contractors and subcontractors on the project pay
the prevailing wage rate, as defined in section 177.42. The commission may also require,
as a condition of modifying a site permit for an LWECS repowering project as defined in
section 216B.243, subdivision 8, paragraph (b), that the recipient of the site permit and all
of the recipient's construction contractors and subcontractors on the repowering project pay
the prevailing wage rate as defined in section 177.42.
new text end

Sec. 7.

Minnesota Statutes 2018, section 216F.08, is amended to read:

216F.08 PERMIT AUTHORITY; ASSUMPTION BY COUNTIES.

(a) A county board may, by resolution and upon written notice to the Public Utilities
Commission, assume responsibility for processing applications for permits required under
this chapter for LWECS with a combined nameplate capacity of less than 25,000 kilowatts.
The responsibility for permit application processing, if assumed by a county, may be
delegated by the county board to an appropriate county officer or employee. Processing by
a county shall be done in accordance with procedures and processes established under
chapter 394.

(b) A county board that exercises its option under paragraph (a) may issue, deny, modify,
impose conditions upon, or revoke permits pursuant to this section. The action of the county
board about a permit application is final, subject to appeal as provided in section 394.27.

(c) The commission shall, by order, establish general permit standards, including
appropriate property line set-backs, governing site permits for LWECS under this section.
The order must consider existing and historic commission standards for wind permits issued
by the commission. The general permit standards shall apply to permits issued by counties
and to permits issued by the commission for LWECS with a combined nameplate capacity
of less than 25,000 kilowatts. The commission or a county may grant a variance from a
general permit standard if the variance is found to be in the public interest new text begin , provided all
LWECS site permits issued by the commission or a county and all modifications of site
permits issued by the commission or a county for repowering projects comply with the
prevailing wage rate requirements under section 216F.04, paragraph (e) new text end .

(d) The commission and the commissioner of commerce shall provide technical assistance
to a county with respect to the processing of LWECS site permit applications.

ARTICLE 3

ENERGY OPTIMIZATION ACT

Section 1. new text begin CITATION; CONSERVATION IMPROVEMENT PROGRAM
MODERNIZATION ACT.
new text end

new text begin This article may be referred to as the "Energy Optimization Act of 2019."
new text end

Sec. 2.

new text begin [216B.1697] INNOVATIVE CLEAN TECHNOLOGIES.
new text end

new text begin (a) For purposes of this section, "innovative clean technology" means advanced energy
technology that is (1) environmentally superior to technologies currently in use, (2) expected
to offer energy-related, environmental, or economic benefits, and (3) not widely deployed
by the utility industry.
new text end

new text begin (b) A public utility may petition the commission for authorization to invest in a project
or projects to deploy one or more innovative clean technologies to further the development,
commercialization, and deployment of those technologies for the benefit of utility customers.
new text end

new text begin (c) The commission may approve a petition under paragraph (b) if it finds:
new text end

new text begin (1) the technologies to be deployed are innovative clean technologies;
new text end

new text begin (2) the utility is meeting its energy conservation goals under section 216B.241; and
new text end

new text begin (3) the petition would not result in utility spending greater than $5,000,000 per year on
innovative clean technologies under this section.
new text end

new text begin (d) The commission may also permit a public utility to file rate schedules containing
provisions to automatically adjust charges for public utility service in direct relation to
changes in prudent costs incurred by a utility under this section, up to $5,000,000 each year.
To the extent the utility investment under this section is for a capital asset, the utility may
request the asset be included in the utility's rate base.
new text end

Sec. 3.

Minnesota Statutes 2018, section 216B.2401, is amended to read:

216B.2401 ENERGY SAVINGS new text begin AND OPTIMIZATION new text end POLICY GOAL.

new text begin (a) new text end The legislature finds that energy savings are an energy resource, and that cost-effective
energy savings are preferred over all other energy resources. new text begin In addition, the legislature
finds that optimizing when and how energy consumers manage energy use can provide
significant benefits to the consumers and to the utility system as a whole. new text end The legislature
further finds that cost-effective energy savings new text begin and load management programs new text end should be
procured systematically and aggressively in order to reduce utility costs for businesses and
residents, improve the competitiveness and profitability of businesses, create more
energy-related jobs, reduce the economic burden of fuel imports, and reduce pollution and
emissions that cause climate change. Therefore, it is the energy policy of the state of
Minnesota to achieve annual energy savings deleted text begin equal deleted text end new text begin equivalent new text end to at least deleted text begin 1.5 deleted text end new text begin 2.5 new text end percent of
annual retail energy sales of electricity and natural gas through deleted text begin cost-effective energy
conservation improvement programs and rate design, energy efficiency achieved by energy
consumers without direct utility involvement, energy codes and appliance standards, programs
designed to transform the market or change consumer behavior, energy savings resulting
from efficiency improvements to the utility infrastructure and system, and other efforts to
promote energy efficiency and energy conservation. deleted text end new text begin multiple means, including but not
limited to:
new text end

new text begin (1) cost-effective energy conservation improvement programs, and efficient fuel-switching
utility programs, under sections 216B.2402 to 216B.241;
new text end

new text begin (2) rate design;
new text end

new text begin (3) energy efficiency achieved by energy consumers without direct utility involvement;
new text end

new text begin (4) advancements in statewide energy codes and cost-effective appliance and equipment
standards;
new text end

new text begin (5) programs designed to transform the market or change consumer behavior;
new text end

new text begin (6) energy savings resulting from efficiency improvements to the utility infrastructure
and system; and
new text end

new text begin (7) other efforts to promote energy efficiency and energy conservation.
new text end

new text begin (b) A utility should design and offer to their customers load management programs that
enable: (1) customers to maximize the economic value gained from the energy purchased
from their utility service providers; and (2) utilities to optimize the infrastructure and
generation capacity needed to effectively serve customers and to facilitate the integration
of renewable energy into the energy system. The commissioner must provide a reasonable
estimate for progress toward this statewide energy savings goal in the annual report required
under section 216B.241, subdivision 1c, along with recommendations for administrative or
legislative initiatives to increase energy savings toward that goal. The commissioner must
also report annually the energy productivity of the state's economy by providing an estimate
of the ratio of economic output produced in a previous year to the primary energy inputs
used in that year.
new text end

Sec. 4.

new text begin [216B.2402] DEFINITIONS.
new text end

new text begin (a) For the purposes of section 216B.16, subdivision 6b, and sections 216B.2401 to
216B.241, the terms defined in this section have the meanings given them.
new text end

new text begin (b) "Consumer-owned utility" means a municipal utility or a cooperative electric
association.
new text end

new text begin (c) "Cumulative lifetime savings" means the total electric energy or natural gas savings
in a given year from energy conservation improvements installed that year or in previous
years that are still operational and providing savings in that year because the measures have
not reached the end of the measure's useful life.
new text end

new text begin (d) "Efficient fuel-switching improvement" means a project that (1) results in converting
a customer from use of a fuel to the use of electric energy or natural gas delivered at retail
by a utility subject to this section, resulting in a net increase in the use of electric energy or
natural gas and a net decrease in source energy consumption on a fuel-neutral basis, and
(2) otherwise meets the criteria established in section 216B.2403, subdivision 8. An efficient
fuel-switching improvement requires the installation of equipment that utilizes electric
energy or natural gas, resulting in a reduction or elimination of use of the previous fuel.
new text end

new text begin (e) "Energy conservation" means an action that results in a net reduction in electric
energy or natural gas consumption.
new text end

new text begin (f) "Energy conservation improvement" means a project that results in energy efficiency
or energy conservation. Energy conservation improvement may include waste heat that is
recovered and converted into electricity, but does not include electric utility infrastructure
projects approved by the commission under section 216B.1636. Energy conservation
improvement includes waste heat recovered and used as thermal energy.
new text end

new text begin (g) "Energy efficiency" means measures or programs, including energy conservation
measures or programs, that target consumer behavior, equipment, processes, or devices
designed to produce either an absolute decrease in consumption of electric energy or natural
gas or a decrease in consumption of electric energy or natural gas on a per unit of production
basis, without reducing the quality or level of service provided to the energy consumer.
new text end

new text begin (h) "Fuel" means energy consumed by a retail utility customer. Fuel includes electricity,
propane, natural gas, heating oil, gasoline, diesel fuel, or steam.
new text end

new text begin (i) "Fuel neutral" means an approach that compares the use of various fuels for a given
end use, using a common metric.
new text end

new text begin (j) "Gross annual retail energy sales" means the annual electric sales to all retail customers
in a utility's or association's Minnesota service territory or natural gas throughput to all retail
customers, including natural gas transportation customers, on a utility's distribution system
in Minnesota. Gross annual retail energy sales does not include:
new text end

new text begin (1) gas sales to:
new text end

new text begin (i) a large energy facility;
new text end

new text begin (ii) a large customer facility whose natural gas utility has been exempted by the
commissioner under section 216B.241, subdivision 1a, paragraph (b), with respect to natural
gas sales made to the large customer facility; and
new text end

new text begin (iii) a commercial gas customer facility whose natural gas utility has been exempted by
the commissioner under section 216B.241, subdivision 1a, paragraph (c), with respect to
natural gas sales made to the commercial gas customer facility; or
new text end

new text begin (2) electric sales to a large customer facility whose electric utility has been exempted
by the commissioner under section 216B.241, subdivision 1a, paragraph (b), with respect
to electric sales made to the large facility.
new text end

new text begin (k) "Investments and expenses of a public utility" means the investments and expenses
incurred by a public utility in connection with an energy conservation improvement.
new text end

new text begin (l) "Large customer facility" means all buildings, structures, equipment, and installations
at a single site that collectively (1) impose a peak electrical demand on an electric utility's
system of at least 20,000 kilowatts, measured in the same way as the utility that serves the
customer facility measures electric demand for billing purpose, or (2) consume at least
500,000,000 cubic feet of natural gas annually. When calculating peak electrical demand,
a large customer facility may include demand offset by on-site cogeneration facilities and,
if engaged in mineral extraction, may aggregate peak energy demand from the large customer
facility's mining processing operations.
new text end

new text begin (m) "Large energy facility" has the meaning given it in section 216B.2421, subdivision
2, clause (1).
new text end

new text begin (n) "Lifetime energy savings" means the amount of savings a particular energy
conservation improvement produces over the improvement's effective useful lifetime.
new text end

new text begin (o) "Load management" means an activity, service, or technology to change the timing
or the efficiency of a customer's use of energy that allows a utility or a customer to respond
to local and regional energy system conditions, or to reduce peak demand for electric energy
or natural gas. Load management that reduces the customer's net annual energy consumption
is also energy conservation.
new text end

new text begin (p) "Low-income programs" means energy conservation improvement programs that
directly serve the needs of low-income persons, including low-income renters.
new text end

new text begin (q) "Member" has the meaning given to it in section 308B.005, subdivision 15.
new text end

new text begin (r) "Qualifying utility" means a utility that supplies energy to a customer that enables
the customer to qualify as a large customer facility.
new text end

new text begin (s) "Source energy" means the total amount of fuel required for a given purpose,
considering energy losses in the production, transmission, and delivery of the energy.
new text end

new text begin (t) "Waste heat recovered and used as thermal energy" means capturing heat energy that
would be exhausted or dissipated to the environment from machinery, buildings, or industrial
processes, and productively using the recovered thermal energy where it was captured or
distributing it as thermal energy to other locations where it is used to reduce demand-side
consumption of natural gas, electric energy, or both.
new text end

new text begin (u) "Waste heat recovery converted into electricity" means an energy recovery process
that converts otherwise lost energy from the heat of exhaust stacks or pipes used for engines
or manufacturing or industrial processes, or the reduction of high pressure in water or gas
pipelines.
new text end

Sec. 5.

new text begin [216B.2403] CUSTOMER-OWNED UTILITIES; ENERGY CONSERVATION
AND OPTIMIZATION.
new text end

new text begin Subdivision 1. new text end

new text begin Applicability. new text end

new text begin This section applies to:
new text end

new text begin (1) a cooperative electric association that provides retail service to more than 5,000
members;
new text end

new text begin (2) a municipality that provides electric service to more than 1,000 retail customers; and
new text end

new text begin (3) a municipality with more than 1,000,000,000 cubic feet in annual throughput sales
to natural gas retail customers.
new text end

new text begin Subd. 2. new text end

new text begin Consumer-owned utility; energy savings goal. new text end

new text begin (a) Each individual
consumer-owned utility subject to this section has an annual energy savings goal equivalent
to 1.5 percent of gross annual retail energy sales. The annual energy savings goal must be
met with a minimum of energy savings from energy conservation improvements equivalent
to at least one percent of the consumer-owned utility's gross annual retail energy sales. The
balance of energy savings toward the annual energy savings goal must be achieved by the
following utility activities:
new text end

new text begin (1) energy savings from additional energy conservation improvements;
new text end

new text begin (2) electric utility infrastructure projects, as defined in section 216B.1636, subdivision
1; or
new text end

new text begin (3) net energy savings from efficient fuel-switching improvements that meet the criteria
under subdivision 7.
new text end

new text begin (b) Nothing in this section limits a utility's ability to report and recognize savings from
activities under paragraph (a), clauses (2) and (3), in excess of the utility's annual energy
savings provided the utility has met the minimum energy savings goal from energy
conservation improvements.
new text end

new text begin (c) The energy savings goals specified in this section must be calculated based on the
most recent three-year, weather-normalized average. A consumer-owned utility that elects
to file annual plans may carry forward for up to three years any energy savings in excess
of its 1.5 percent energy savings goal in a single year.
new text end

new text begin (d) A consumer-owned utility subject to this section is not required to make energy
conservation improvements that are not cost-effective, even if the improvement is necessary
to attain the energy savings goal. A consumer-owned utility subject to this section must
make reasonable efforts to implement energy conservation improvements above the minimum
level set under this subdivision, if cost-effective opportunities and utility funding are
available, considering other potential investments the utility plans to make for the benefit
of customers during the term of the plan filed under subdivision 3.
new text end

new text begin (e) A consumer-owned utility may request that the commissioner adjust its minimum
goal for energy savings from energy conservation improvements specified under paragraph
(a) for the period of the plan filed under subdivision 3. The request must be made by January
1 of any year when the utility must file a plan under subdivision 4. The request must be
based on:
new text end

new text begin (1) historical energy conservation improvement program achievements;
new text end

new text begin (2) customer class makeup;
new text end

new text begin (3) projected load growth;
new text end

new text begin (4) an energy conservation potential study that estimates the amount of cost-effective
energy conservation potential that exists in the utility's service territory;
new text end

new text begin (5) the cost-effectiveness and quality of the energy conservation programs offered by
the utility; and
new text end

new text begin (6) other factors the commissioner and consumer-owned utility determine warrants an
adjustment.
new text end

new text begin The commissioner must adjust the savings goal to a level the commissioner determines is
supported by the record, but must not approve a minimum energy savings goal from energy
conservation improvements that is less than one percent of gross annual retail energy sales.
new text end

new text begin Subd. 3. new text end

new text begin Consumer-owned utility; energy savings investments. new text end

new text begin (a) Each cooperative
electric association and municipality subject to subdivision 2 must spend and invest in the
following amounts for energy conservation improvements under this subdivision:
new text end

new text begin (1) for a municipality, 0.5 percent of its gross operating revenues from the sale of gas
and 1.5 percent of its gross operating revenues from the sale of electricity, excluding gross
operating revenues from electric and gas service provided in Minnesota to large electric
customer facilities; and
new text end

new text begin (2) for a cooperative electric association, 1.5 percent of its gross operating revenues
from service provided in the state, excluding gross operating revenues from service provided
in the state to large electric customer facilities indirectly through a distribution cooperative
electric association.
new text end

new text begin (b) Each municipality and cooperative electric association subject to this subdivision
must identify and implement energy conservation improvement spending and investments
that are appropriate for the municipality or association, except that a municipality or
association must not spend or invest for energy conservation improvements that directly
benefit a large energy facility or a large electric customer facility that the commissioner has
issued an exemption to under section 216B.241, subdivision 1a, paragraph (b).
new text end

new text begin Subd. 4. new text end

new text begin Consumer-owned utility; energy conservation and optimization plans. new text end

new text begin (a)
By June 1, 2021, each consumer-owned utility must file with the commissioner an energy
conservation and optimization plan that describes the programs for energy conservation,
efficient fuel-switching improvements and load management programs, and other processes
and programs the utility plans to use to achieve its energy-savings goal. The plan may cover
a period not to exceed two years. The plan must provide an analysis of the cost-effectiveness
of the consumer-owned utility's programs offered under the plan, using a list of baseline
energy and capacity savings assumptions developed in consultation with the department.
An individual utility program may combine elements of energy conservation, load
management, or efficient fuel-switching. Plans received by June 1 must be evaluated by the
commissioner based on how well the plan meets the goals set under subdivision 2 by
December 1 of the same year, including the commissioner's assessment of whether the plan
will likely achieve those goals. Beginning June 1, 2022, and each subsequent June 1, each
consumer-owned utility must file: (1) an annual update identifying the status of its annual
plan filed under this subdivision, including total expenditures and investments made to date,
and any intended changes to the plan; and (2) a summary of the annual energy-savings
achievements under a completed plan, and a new plan that complies with this section.
new text end

new text begin (b) In the filings required under paragraph (a), the consumer-owned utility must provide
a description and evaluation of the programs offered by the utility under the plan, including:
new text end

new text begin (1) energy conservation improvements in the previous period, and its progress toward
the minimum energy savings goal from energy conservation improvements described in
subdivision 2, including accounting for lifetime savings and cumulative lifetime energy
savings under the plan. The evaluation must briefly describe each conservation program
the utility offers or plans to offer, and must specify the energy savings or increased efficiency
in the use of energy within the service territory of the utility that is the result of the program.
The commissioner must review each evaluation and make recommendations, where
appropriate, to the consumer-owned utility to increase the effectiveness of conservation
improvement activities. The commissioner must consider and may require a consumer-owned
utility to undertake a cost-effective program suggested by an outside source, including a
political subdivision, nonprofit corporation, or community organization;
new text end

new text begin (2) load management activities, including an analysis of the reduction in peak load that
is the result of the program, and an assessment of the cost-effectiveness of each program;
and
new text end

new text begin (3) efficient fuel-switching improvement activities, including an analysis regarding how
each program meets the criteria specified in subdivision 8, and an assessment of the
cost-effectiveness of each program. For improvements requiring the deployment of electric
technologies, the plan must also provide an analysis regarding how the fuel-switching
improvement will be operated in order to facilitate the integration of variable renewable
energy into the electric system.
new text end

new text begin (c) When evaluating the cost-effectiveness of utility programs, the consumer-owned
utility and the commissioner must consider the costs and benefits to ratepayers, the utility,
participants, and society. In addition, the commissioner must consider the rate at which the
consumer-owned utility is increasing its energy savings and expenditures on energy
conservation, as well as the lifetime energy savings and cumulative energy savings of the
consumer-owned utility.
new text end

new text begin (d) Each consumer-owned utility subject to this subdivision may annually spend and
invest up to ten percent of the total amount spent and invested on energy conservation
improvements under this subdivision on research and development projects that meet the
definition of energy conservation improvement and that are funded directly by the
consumer-owned utility.
new text end

new text begin (e) A generation and transmission cooperative electric association or municipal power
agency that provides energy services to consumer-owned utilities may invest in energy
conservation improvements on behalf of consumer-owned utilities it serves and may fulfill
the conservation, reporting, and energy-savings goals for any of those consumer-owned
utilities on an aggregate basis. For consumer-owned utilities electing to aggregate services
under this paragraph, multiyear plans up to three years may be filed with the department
under subdivision 3 activities with continued annual performance reporting.
new text end

new text begin (f) A consumer-owned utility must not spend for or invest in energy conservation
improvements that directly benefit a large energy facility or a large electric customer facility
for which the commissioner has issued an exemption under section 216B.241, subdivision
1a.
new text end

new text begin (g) The energy conservation and optimization plan of each consumer-owned utility
subject to this section must have a component focused on improving the energy efficiency
in the public schools served by the utility. At a minimum, the efficiency in schools component
must consist of programs to update lighting in the school, update the heating and cooling
systems of the school, provide for building recommissioning, provide building operator
training, and provide opportunities to educate students, teachers, and staff regarding energy
efficiency measures implemented at that school, including associated benefits for improved
learning resulting from the measures.
new text end

new text begin Subd. 5. new text end

new text begin Low-income programs. new text end

new text begin (a) Each consumer-owned utility subject to this section
must provide low-income energy conservation programs. The commissioner must provide
an evaluation of a utility's plans under this section, considering the utility's historic spending
and participation levels, energy savings for low-income programs, and the number of
low-income persons residing in the utility's service territory. A municipal utility that furnishes
gas service must spend at least 0.4 percent of its most recent three-year average gross
operating revenue from residential customers in Minnesota on low-income programs. A
consumer-owned utility that furnishes electric service must spend at least 0.4 percent of its
gross operating revenue from residential customers in Minnesota on low-income programs.
This requirement applies to each generation and transmission cooperative association's
members' aggregate gross operating revenue from the sale of electricity to residential
customers in Minnesota.
new text end

new text begin (b) To meet the requirements of paragraph (a), a consumer-owned utility may contribute
money to the energy and conservation account in section 216B.241, subdivision 2a. An
energy conservation improvement plan must state the amount, if any, of low-income energy
conservation improvement funds the utility plans to contribute to the energy and conservation
account. Contributions must be remitted to the commissioner by February 1 each year.
new text end

new text begin (c) The commissioner must establish low-income programs to use money contributed
to the energy and conservation account under paragraph (b). When establishing low-income
programs, the commissioner must consult political subdivisions, utilities, and nonprofit and
community organizations, including organizations engaged in providing energy and
weatherization assistance to low-income persons. Money contributed to the energy and
conservation account under paragraph (b) must provide programs for low-income persons,
including low-income renters, located in the service territory of the utility or association
providing the money. The commissioner must record and report expenditures and energy
savings achieved as a result of low-income programs funded through the energy and
conservation account in the report required under section 216B.241, subdivision 1c, paragraph
(g). The commissioner may contract with a political subdivision, nonprofit or community
organization, public utility, municipality, or cooperative electric association to implement
low-income programs funded through the energy and conservation account.
new text end

new text begin (d) A consumer-owned utility may petition the commissioner to modify its required
spending under this subdivision if the utility and the commissioner were unable to expend
the amount required for three consecutive years.
new text end

new text begin Subd. 6. new text end

new text begin Recovery of expenses. new text end

new text begin The commission must allow a cooperative electric
association subject to rate regulation under section 216B.026 to recover expenses resulting
from (1) a plan under this subdivision, and (2) assessments and contributions to the energy
and conservation account under section 216B.241, subdivision 2a.
new text end

new text begin Subd. 7. new text end

new text begin Ownership of energy conservation improvement. new text end

new text begin An energy conservation
improvement to or installed in a building under this section, except systems owned by the
consumer-owned utility and designed to turn off, limit, or vary the delivery of energy, is
the exclusive property of the building owner, except to the extent that the improvement is
subject to a security interest in favor of the utility in case of a loan to the building owner.
The utility has no liability for loss, damage, or injury caused directly or indirectly by an
energy conservation improvement, except for negligence by the utility in purchase,
installation, or modification of the product.
new text end

new text begin Subd. 8. new text end

new text begin Criteria for efficient fuel-switching improvements. new text end

new text begin A fuel-switching
improvement is deemed efficient if the improvement, relative to the fuel that is being
displaced:
new text end

new text begin (1) results in a net reduction in the cost and amount of source energy consumed for a
particular use, measured on a fuel-neutral basis;
new text end

new text begin (2) results in a net reduction of statewide greenhouse gas emissions, as defined in section
216H.01, subdivision 2, over the lifetime of the improvement. For an efficient electrification
or conversion improvement installed by an electric utility, the reduction in emissions must
be measured based on the emissions profile of the utility or the utility's wholesale provider.
Where applicable, the emissions profile used must be the most recent resource plan accepted
by the commission under section 216B.2422;
new text end

new text begin (3) is cost-effective from a societal perspective, considering the costs associated with
both the fuel used in the past and the fuel used in the future; and
new text end

new text begin (4) is planned to be installed and operated in a manner that does not unduly increase the
utility's system peak demand or require significant new investment in utility infrastructure.
new text end

new text begin Subd. 9. new text end

new text begin Manner of filing and service. new text end

new text begin (a) A consumer-owned utility must submit the
filings required by this section to the department using the department's electronic filing
system.
new text end

new text begin (b) The submission of a document to the department's electronic filing system constitutes
service on the department. If a department rule requires service of a notice, order, or other
document by the department, utility, or interested party upon persons on a service list
maintained by the department, service may be made by personal delivery, mail, or electronic
service, except that electronic service may only be made to persons on the service list that
have previously agreed in writing to accept electronic service at an electronic address
provided to the department for electronic service purposes.
new text end

new text begin Subd. 10. new text end

new text begin Assessment. new text end

new text begin The commission or department may assess utilities subject to
this section to carry out the purposes of section 216B.241, subdivisions 1d, 1e, and 1f. An
assessment under this paragraph must be proportionate to the utility's respective gross
operating revenue from sales of gas or electric service in Minnesota during the previous
calendar year. Assessments under this subdivision are not subject to the cap on assessments
under section 216B.62 or any other law.
new text end

new text begin Subd. 11. new text end

new text begin Waste heat recovery; thermal energy distribution. new text end

new text begin Subject to department
approval, demand-side natural gas or electric energy displaced by use of waste heat recovered
and used as thermal energy, including the recovered thermal energy from a cogeneration
or combined heat and power facility, is eligible to be counted toward a consumer-owned
utility's natural gas or electric savings goals.
new text end

Sec. 6.

Minnesota Statutes 2018, section 216B.241, subdivision 1a, is amended to read:

Subd. 1a.

deleted text begin Investment, expenditure, and contribution; public utility deleted text end new text begin Large customer
facility new text end .

deleted text begin (a) For purposes of this subdivision and subdivision 2, "public utility" has the
meaning given it in section 216B.02, subdivision 4. Each public utility shall spend and
invest for energy conservation improvements under this subdivision and subdivision 2 the
following amounts:
deleted text end

deleted text begin (1) for a utility that furnishes gas service, 0.5 percent of its gross operating revenues
from service provided in the state;
deleted text end

deleted text begin (2) for a utility that furnishes electric service, 1.5 percent of its gross operating revenues
from service provided in the state; and
deleted text end

deleted text begin (3) for a utility that furnishes electric service and that operates a nuclear-powered electric
generating plant within the state, two percent of its gross operating revenues from service
provided in the state.
deleted text end

deleted text begin For purposes of this paragraph (a), "gross operating revenues" do not include revenues
from large customer facilities exempted under paragraph (b), or from commercial gas
customers that are exempted under paragraph (c) or (e).
deleted text end

deleted text begin (b) deleted text end new text begin (a) new text end The owner of a large customer facility may petition the commissioner to exempt
both electric and gas utilities serving the large customer facility from the investment and
expenditure requirements of deleted text begin paragraph (a) deleted text end new text begin a utility's plan under this section or section
216B.2403 new text end with respect to retail revenues attributable to the large customer facility. The
filing must include a discussion of the competitive or economic pressures facing the owner
of the facility and the efforts taken by the owner to identify, evaluate, and implement energy
conservation and efficiency improvements. A filing submitted on or before October 1 of
any year must be approved within 90 days and become effective January 1 of the year
following the filing, unless the commissioner finds that the owner of the large customer
facility has failed to take reasonable measures to identify, evaluate, and implement energy
conservation and efficiency improvements. If a facility qualifies as a large customer facility
solely due to its peak electrical demand or annual natural gas usage, the exemption may be
limited to the qualifying utility if the commissioner finds that the owner of the large customer
facility has failed to take reasonable measures to identify, evaluate, and implement energy
conservation and efficiency improvements with respect to the nonqualifying utility. Once
an exemption is approved, the commissioner may request the owner of a large customer
facility to submit, not more often than once every five years, a report demonstrating the
large customer facility's ongoing commitment to energy conservation and efficiency
improvement after the exemption filing. The commissioner may request such reports for
up to ten years after the effective date of the exemption, unless the majority ownership of
the large customer facility changes, in which case the commissioner may request additional
reports for up to ten years after the change in ownership occurs. The commissioner may,
within 180 days of receiving a report submitted under this paragraph, rescind any exemption
granted under this paragraph upon a determination that the large customer facility is not
continuing to make reasonable efforts to identify, evaluate, and implement energy
conservation improvements. A large customer facility that is, under an order from the
commissioner, exempt from the investment and expenditure requirements of paragraph (a)
as of December 31, 2010, is not required to submit a report to retain its exempt status, except
as otherwise provided in this paragraph with respect to ownership changes. No exempt large
customer facility may participate in a utility conservation improvement program unless the
owner of the facility submits a filing with the commissioner to withdraw its exemption.

deleted text begin (c) deleted text end new text begin (b) new text end A commercial gas customer that is not a large customer facility and that purchases
or acquires natural gas from a public utility having fewer than 600,000 natural gas customers
in Minnesota may petition the commissioner to exempt gas utilities serving the commercial
gas customer from the investment and expenditure requirements of deleted text begin paragraph (a) deleted text end new text begin new text end new text begin a utility's
plan under this section or section 216B.2403 new text end with respect to retail revenues attributable to
the commercial gas customer. The petition must be supported by evidence demonstrating
that the commercial gas customer has acquired or can reasonably acquire the capability to
bypass use of the utility's gas distribution system by obtaining natural gas directly from a
supplier not regulated by the commission. The commissioner shall grant the exemption if
the commissioner finds that the petitioner has made the demonstration required by this
paragraph.

deleted text begin (d) deleted text end new text begin (c) new text end The commissioner may require investments or spending greater than the amounts
required under this subdivision for a public utility whose most recent advance forecast
required under section 216B.2422 or 216C.17 projects a peak demand deficit of 100
megawatts or greater within five years under midrange forecast assumptions.

deleted text begin (e) deleted text end new text begin (d) new text end A public utility or owner of a large customer facility may appeal a decision of
the commissioner under paragraph new text begin (a) or new text end (b) deleted text begin , (c), or (d) deleted text end to the commission under subdivision
2. In reviewing a decision of the commissioner under paragraph new text begin (a) or new text end (b), deleted text begin (c), or (d), deleted text end the
commission shall rescind the decision if it finds deleted text begin that the required investments or spending
will:
deleted text end

deleted text begin (1) not result in cost-effective energy conservation improvements; or
deleted text end

deleted text begin (2) otherwise deleted text end new text begin the decision is new text end not deleted text begin be deleted text end in the public interest.

new text begin (e) A public utility is prohibited from spending for or investing in energy conservation
improvements that directly benefit a large energy facility or a large electric customer facility
for which the commissioner has issued an exemption under this section.
new text end

Sec. 7.

Minnesota Statutes 2018, section 216B.241, subdivision 1c, is amended to read:

Subd. 1c.

new text begin Public utility; new text end energy-saving goals.

(a) The commissioner shall establish
energy-saving goals for energy conservation improvement expenditures and shall evaluate
an energy conservation improvement program on how well it meets the goals set.

(b) Each individual new text begin public new text end utility deleted text begin and association shall have deleted text end new text begin providing electric service
has new text end an annual energy-savings goal equivalent to deleted text begin 1.5 deleted text end new text begin 1.75 new text end percent of gross annual retail
energy sales deleted text begin unless deleted text end new text begin Each individual public utility providing natural gas service has an annual
energy savings goal equivalent to one percent of gross annual retail energy sales. The level
of the savings goal may be new text end modified by the commissioner under paragraph deleted text begin (d) deleted text end new text begin (c) new text end . The
savings goals must be calculated based on the most recent three-year weather-normalized
average. A new text begin public new text end utility deleted text begin or association deleted text end new text begin providing electric service new text end may elect to carry forward
energy savings in excess of deleted text begin 1.5 deleted text end new text begin 1.75 new text end percent for a year to the succeeding three calendar
years deleted text begin , except that savings from electric utility infrastructure projects allowed under deleted text end deleted text begin paragraph
(d) may be carried forward for five years deleted text end . new text begin A public utility providing natural gas service may
elect to carry forward energy savings in excess of one percent for a year to the succeeding
three calendar years. new text end A particular energy savings can be used only for one year's goal.

deleted text begin (c) The commissioner must adopt a filing schedule that is designed to have all utilities
and associations operating under an energy-savings plan by calendar year 2010.
deleted text end

deleted text begin (d) deleted text end new text begin (c) new text end In its energy conservation deleted text begin improvement deleted text end new text begin and optimization new text end plan filing, a new text begin public
new text end utility deleted text begin or association deleted text end may request the commissioner to adjust its annual energy-savings
percentage goal based on its historical conservation investment experience, customer class
makeup, load growth, a conservation potential study, or other factors the commissioner
determines warrants an adjustment. The commissioner may not approve a plan of a public
utility that provides for an annual energy-savings goal of less than one percent of gross
annual retail energy sales from energy conservation improvements.

new text begin (d) new text end A new text begin public new text end utility deleted text begin or association deleted text end may include in its energy conservation new text begin and optimization new text end
plan energy savings from electric utility infrastructure projects approved by the commission
under section 216B.1636 or waste heat recovery converted into electricity projects that may
count as energy savings in addition to a minimum energy-savings goal of at least one percent
for energy conservation improvements. deleted text begin Energy savings from electric utility infrastructure
projects, as defined in section 216B.1636, may be included in the energy conservation plan
of a municipal utility or cooperative electric association. deleted text end Electric utility infrastructure projects
must result in increased energy efficiency greater than that which would have occurred
through normal maintenance activity.

deleted text begin (e) An energy-savings goal is not satisfied by attaining the revenue expenditure
requirements of subdivisions 1a and 1b, but can only be satisfied by meeting the
energy-savings goal established in this subdivision.
deleted text end

deleted text begin (f) An association or deleted text end new text begin (e) A public new text end utility is not required to make energy conservation
investments to attain the energy-savings goals of this subdivision that are not cost-effective
even if the investment is necessary to attain the energy-savings goals. For the purpose of
this paragraph, in determining cost-effectiveness, the commissioner shall consider the costs
and benefits to ratepayers, the utility, participants, and society. In addition, the commissioner
shall consider the rate at which deleted text begin an association or deleted text end municipal utility is increasing its energy
savings and its expenditures on energy conservation new text begin , as well as the lifetime energy savings
and cumulative energy savings of the public utility new text end .

deleted text begin (g) deleted text end new text begin (f) new text end On an annual basis, the commissioner shall produce and make publicly available
a report on the annual energy new text begin and capacity new text end savings and estimated carbon dioxide reductions
achieved by the deleted text begin energy conservation improvement deleted text end programs new text begin under this section and section
216B.2403 new text end for the two most recent years for which data is available. new text begin The report must also
include information regarding any annual energy sales or generation capacity increases
resulting from any efficient fuel-switching improvements. new text end The commissioner shall report
on program performance both in the aggregate and for each entity filing an energy
conservation improvement plan for approval or review by the commissioner new text begin , and must
provide an estimate for progress toward the statewide energy savings goal under section
216B.2401 new text end .

deleted text begin (h) By January 15, 2010, the commissioner shall report to the legislature whether the
spending requirements under subdivisions 1a and 1b are necessary to achieve the
energy-savings goals established in this subdivision.
deleted text end

deleted text begin (i) This subdivision does not apply to:
deleted text end

deleted text begin (1) a cooperative electric association with fewer than 5,000 members;
deleted text end

deleted text begin (2) a municipal utility with fewer than 1,000 retail electric customers; or
deleted text end

deleted text begin (3) a municipal utility with less than 1,000,000,000 cubic feet in annual throughput sales
to retail natural gas customers.
deleted text end

Sec. 8.

Minnesota Statutes 2018, section 216B.241, subdivision 1d, is amended to read:

Subd. 1d.

Technical assistance.

(a) The commissioner shall evaluate energy conservation
improvement programs new text begin under this section and section 216B.2403 new text end on the basis of
cost-effectiveness and the reliability of the technologies employed. The commissioner shall,
by order, establish, maintain, and update energy-savings assumptions that must be used
when filing energy conservation improvement programs. new text begin The department must track a public
utility's or consumer-owned utility's lifetime energy savings and cumulative lifetime energy
savings provided to the commissioner in plans submitted under this section. new text end The
commissioner shall establish an inventory of the most effective energy conservation
programs, techniques, and technologies, and encourage all Minnesota utilities to implement
them, where appropriate, in their service territories. The commissioner shall describe these
programs in sufficient detail to provide a utility reasonable guidance concerning
implementation. The commissioner shall prioritize the opportunities in order of potential
energy savings and in order of cost-effectiveness. The commissioner may contract with a
third party to carry out any of the commissioner's duties under this subdivision, and to obtain
technical assistance to evaluate the effectiveness of any conservation improvement program.
The commissioner may assess up to $850,000 annually for the purposes of this subdivision.
The assessments must be deposited in the state treasury and credited to the energy and
conservation account created under subdivision 2a. An assessment made under this
subdivision is not subject to the cap on assessments provided by section 216B.62, or any
other law.

(b) deleted text begin Of the assessment authorized under paragraph (a), the commissioner may expend
up to $400,000 annually for the purpose of developing, operating, maintaining, and providing
technical support for a uniform electronic data reporting and tracking system available to
all utilities subject to this section, in order to enable accurate measurement of the cost and
deleted text end deleted text begin energy savings of the energy conservation improvements required by this section. This
paragraph expires June 30, 2018. deleted text end new text begin By March 15 of the year following the enactment of this
section, the commissioner must, by order, develop and publish technical information
necessary to evaluate whether deployment of a fuel-switching improvement meets the
criteria established under subdivision 11, paragraph (c), and section 216B.2403, subdivision
8, including the formula to account for the energy saved by a fuel-switching improvement
on a fuel-neutral basis. The commissioner must update the technical information as necessary.
new text end

Sec. 9.

Minnesota Statutes 2018, section 216B.241, subdivision 1f, is amended to read:

Subd. 1f.

Facilities energy efficiency.

(a) The commissioner of administration and the
commissioner of commerce shall maintain and, as needed, revise the sustainable building
design guidelines developed under section 16B.325.

(b) The commissioner of administration and the commissioner of commerce shall maintain
and update the benchmarking tool developed under Laws 2001, chapter 212, article 1, section
3, so that all public buildings can use the benchmarking tool to maintain energy use
information for the purposes of establishing energy efficiency benchmarks, tracking building
performance, and measuring the results of energy efficiency and conservation improvements.

deleted text begin (c) The commissioner shall require that utilities include in their conservation improvement
plans programs that facilitate professional engineering verification to qualify a building as
Energy Star-labeled, Leadership in Energy and Environmental Design (LEED) certified, or
Green Globes-certified. The state goal is to achieve certification of 1,000 commercial
buildings as Energy Star-labeled, and 100 commercial buildings as LEED-certified or Green
Globes-certified by December 31, 2010.
deleted text end

deleted text begin (d) deleted text end new text begin (c) new text end The commissioner may assess up to $500,000 annually for the purposes of this
subdivision. The assessments must be deposited in the state treasury and credited to the
energy and conservation account created under subdivision 2a. An assessment made under
this subdivision is not subject to the cap on assessments provided by section 216B.62, or
any other law.

Sec. 10.

Minnesota Statutes 2018, section 216B.241, subdivision 2, is amended to read:

Subd. 2.

deleted text begin Programs deleted text end new text begin Public utility; energy conservation and optimization plans new text end .

(a)
The commissioner may require public utilities to make investments and expenditures in
energy conservation improvements, explicitly setting forth the interest rates, prices, and
terms under which the improvements must be offered to the customers. The required
programs must cover no more than a three-year period. Public utilities shall file new text begin energy new text end
conservation deleted text begin improvement deleted text end new text begin and optimization new text end plans by June 1, on a schedule determined by
order of the commissioner, but at least every three years. new text begin As provided in subdivision 11,
plans may include programs for efficient fuel-switching improvements and load management.
An individual utility program may combine elements of energy conservation, load
management, or efficient fuel-switching. new text end Plans received by a public utility by June 1 must
be approved or approved as modified by the commissioner by December 1 of that same
year. new text begin The plan must account for the lifetime energy savings and cumulative lifetime savings
under the plan. new text end The commissioner shall evaluate the program on the basis of
cost-effectiveness and the reliability of technologies employed. The commissioner's order
must provide to the extent practicable for a free choice, by consumers participating in the
program, of the device, method, material, or project constituting the energy conservation
improvement and for a free choice of the seller, installer, or contractor of the energy
conservation improvement, provided that the device, method, material, or project seller,
installer, or contractor is duly licensed, certified, approved, or qualified, including under
the residential conservation services program, where applicable.

(b) The commissioner may require a utility subject to subdivision 1c to make an energy
conservation improvement investment or expenditure whenever the commissioner finds
that the improvement will result in energy savings at a total cost to the utility less than the
cost to the utility to produce or purchase an equivalent amount of new supply of energy.
deleted text begin The commissioner shall nevertheless ensure that every public utility operate one or more
programs under periodic review by the department.
deleted text end

(c) Each public utility subject to new text begin this new text end subdivision deleted text begin 1a deleted text end may spend and invest annually up
to ten percent of the total amount deleted text begin required to be deleted text end spent and invested on energy conservation
improvements under this section by the utility on research and development projects that
meet the definition of energy conservation improvement in subdivision 1 and that are funded
directly by the public utility.

(d) deleted text begin A public utility may not spend for or invest in energy conservation improvements
that directly benefit a large energy facility or a large electric customer facility for which the
commissioner has issued an exemption pursuant to subdivision 1a, paragraph (b). deleted text end The
commissioner shall consider and may require a new text begin public new text end utility to undertake a program
suggested by an outside source, including a political subdivision, a nonprofit corporation,
or community organization.

(e) A utility, a political subdivision, or a nonprofit or community organization that has
suggested a program, the attorney general acting on behalf of consumers and small business
interests, or a utility customer that has suggested a program and is not represented by the
attorney general under section 8.33 may petition the commission to modify or revoke a
department decision under this section, and the commission may do so if it determines that
the program is not cost-effective, does not adequately address the residential conservation
improvement needs of low-income persons, has a long-range negative effect on one or more
classes of customers, or is otherwise not in the public interest. The commission shall reject
a petition that, on its face, fails to make a reasonable argument that a program is not in the
public interest.

(f) The commissioner may order a public utility to include, with the filing of the utility's
annual status report, the results of an independent audit of the utility's conservation
improvement programs and expenditures performed by the department or an auditor with
experience in the provision of energy conservation and energy efficiency services approved
by the commissioner and chosen by the utility. The audit must specify the energy savings
or increased efficiency in the use of energy within the service territory of the utility that is
the result of the spending and investments. The audit must evaluate the cost-effectiveness
of the utility's conservation programs.

deleted text begin (g) A gas utility may not spend for or invest in energy conservation improvements that
directly benefit a large customer facility or commercial gas customer facility for which the
commissioner has issued an exemption pursuant to subdivision 1a, paragraph (b), (c), or
(e). The commissioner shall consider and may require a utility to undertake a program
suggested by an outside source, including a political subdivision, a nonprofit corporation,
or a community organization.
deleted text end

new text begin (g) The energy conservation and optimization plan for each public utility subject to this
section must include a component focused on improving energy efficiency in public schools
served by the utility. At a minimum, the efficiency in schools component must consist of
programs to update lighting in schools, update heating and cooling systems in schools,
provide for building recommissioning, provide building operator training, and provide
opportunities to educate students, teachers, and staff regarding energy efficiency measures
implemented at the school, including the associated benefits for improved learning resulting
from the measures.
new text end

Sec. 11.

Minnesota Statutes 2018, section 216B.241, subdivision 2b, is amended to read:

Subd. 2b.

Recovery of expenses.

The commission shall allow a new text begin public new text end utility to recover
expenses resulting from deleted text begin a deleted text end new text begin an energy new text end conservation deleted text begin improvement program required deleted text end new text begin and
optimization plan approved new text end by the department new text begin under this section new text end and contributions and
assessments to the energy and conservation account, unless the recovery would be
inconsistent with a financial incentive proposal approved by the commission. deleted text begin The commission
shall allow a cooperative electric association subject to rate regulation under section
216B.026, to recover expenses resulting from energy conservation improvement programs,
load management programs, and assessments and contributions to deleted text end deleted text begin the energy and
conservation account unless the recovery would be inconsistent with a financial incentive
proposal approved by the commission. deleted text end In addition, a new text begin public new text end utility may file annually, or the
Public Utilities Commission may require the utility to file, and the commission may approve,
rate schedules containing provisions for the automatic adjustment of charges for utility
service in direct relation to changes in the expenses of the utility for real and personal
property taxes, fees, and permits, the amounts of which the utility cannot control. A public
utility is eligible to file for adjustment for real and personal property taxes, fees, and permits
under this subdivision only if, in the year previous to the year in which it files for adjustment,
it has spent or invested at least 1.75 percent of its gross revenues from provision of electric
service, excluding gross operating revenues from electric service provided in the state to
large electric customer facilities for which the commissioner has issued an exemption under
subdivision 1a, paragraph (b), and 0.6 percent of its gross revenues from provision of gas
service, excluding gross operating revenues from gas services provided in the state to large
electric customer facilities for which the commissioner has issued an exemption under
subdivision 1a, paragraph (b), for that year for energy conservation improvements under
this section.

Sec. 12.

Minnesota Statutes 2018, section 216B.241, subdivision 7, is amended to read:

Subd. 7.

Low-income programs.

(a) The commissioner shall ensure that each new text begin public
new text end utility deleted text begin and association deleted text end subject to subdivision 1c provides low-income programs. When
approving spending and energy-savings goals for low-income programs, the commissioner
shall consider historic spending and participation levels, energy savings for low-income
programs, and the number of low-income persons residing in the utility's service territory.
A deleted text begin municipal utility that furnishes gas service must spend at least 0.2 percent, and a deleted text end public
utility furnishing gas service must spend at least deleted text begin 0.4 deleted text end new text begin 0.8 new text end percent, of its most recent three-year
average gross operating revenue from residential customers in the state on low-income
programs. A utility or association that furnishes electric service must spend at least deleted text begin 0.1 deleted text end new text begin 0.4 new text end
percent of its gross operating revenue from residential customers in the state on low-income
programs. deleted text begin For a generation and transmission cooperative association, this requirement shall
apply to each association's members' aggregate gross operating revenue from sale of
electricity to residential customers in the state. Beginning in 2010, A utility or association
that furnishes electric service must spend 0.2 percent of its gross operating revenue from
residential customers in the state on low-income programs.
deleted text end

(b) To meet the requirements of paragraph (a), a new text begin public new text end utility deleted text begin or association deleted text end may
contribute money to the energy and conservation account. An energy conservation
improvement plan must state the amount, if any, of low-income energy conservation
improvement funds the new text begin public new text end utility deleted text begin or association deleted text end will contribute to the energy and
conservation account. Contributions must be remitted to the commissioner by February 1
of each year.

(c) The commissioner shall establish low-income programs to utilize money contributed
to the energy and conservation account under paragraph (b). In establishing low-income
programs, the commissioner shall consult political subdivisions, utilities, and nonprofit and
community organizations, especially organizations engaged in providing energy and
weatherization assistance to low-income persons. Money contributed to the energy and
conservation account under paragraph (b) must provide programs for low-income persons,
including low-income renters, in the service territory of the new text begin public new text end utility deleted text begin or association deleted text end
providing the money. The commissioner shall record and report expenditures and energy
savings achieved as a result of low-income programs funded through the energy and
conservation account in the report required under subdivision 1c, paragraph (g). The
commissioner may contract with a political subdivision, nonprofit or community organization,
public utility, municipality, or cooperative electric association to implement low-income
programs funded through the energy and conservation account.

(d) A new text begin public new text end utility deleted text begin or association deleted text end may petition the commissioner to modify its required
spending under paragraph (a) if the utility or association and the commissioner have been
unable to expend the amount required under paragraph (a) for three consecutive years.

(e) The costs and benefits associated with any approved low-income gas or electric
conservation improvement program that is not cost-effective when considering the costs
and benefits to the utility may, at the discretion of the utility, be excluded from the calculation
of net economic benefits for purposes of calculating the financial incentive to the utility.
The energy and demand savings may, at the discretion of the utility, be applied toward the
calculation of overall portfolio energy and demand savings for purposes of determining
progress toward annual goals and in the financial incentive mechanism.

Sec. 13.

Minnesota Statutes 2018, section 216B.241, is amended by adding a subdivision
to read:

new text begin Subd. 11. new text end

new text begin Programs for efficient fuel-switching improvements and load
management. new text end

new text begin (a) A public utility subject to this section may include in its plan required
under subdivision 2 programs for efficient fuel-switching improvements and load
management, or combinations of energy conservation improvements, fuel-switching
improvements, and load management. For each program, the utility must provide proposed
budgets, cost-effectiveness analyses, and estimated net energy and demand savings.
new text end

new text begin (b) The department may approve proposed programs for efficient fuel-switching
improvements if it finds the improvements meet the requirements of paragraph (c). For
improvements requiring the deployment of electric technologies, the department must also
consider whether the fuel-switching improvement can be operated in a manner that facilitates
the integration of variable renewable energy into the electric system. The net benefits from
an efficient fuel-switching improvement that is integrated with an energy efficiency program
approved under this section may be counted toward the net benefits of the energy efficiency
program, provided the department finds the primary purpose and effect of the program is
energy efficiency.
new text end

new text begin (c) The department may approve a proposed program in load management if it finds the
program investment is cost-effective after considering the costs and benefits of the proposed
investment to ratepayers, the utility, participants, and society. The net benefits from a load
management activity that is integrated with an energy efficiency program approved under
this section may be counted toward the net benefits of the energy efficiency program,
provided the department finds the primary purpose and effect of the program is energy
efficiency.
new text end

new text begin (d) The commission may permit a public utility to file rate schedules that provide for
annual cost recovery for efficient fuel-switching improvements and cost-effective load
management programs approved by the department, including reasonable and prudent costs
of implementing and promoting programs approved under this subdivision. The commission
may approve, modify, or reject a proposal made by the department or a utility for an incentive
plan to encourage investments in load management programs, applying the considerations
established under section 216B.16, subdivision 6c, paragraphs (b) and (c). An incentive
plan to encourage cost-effective load management programs may be structured as a regulatory
asset on which a public utility could earn a rate of return. A utility is not eligible for a
financial incentive under this subdivision in any year the utility or association did not achieve
its minimum energy savings goal.
new text end

new text begin (e) A fuel-switching improvement is deemed efficient if the commissioner finds the
improvement, relative to the fuel that is being displaced, meets the following criteria:
new text end

new text begin (1) results in a net reduction in the cost and amount of source energy consumed for a
particular use, measured on a fuel-neutral basis;
new text end

new text begin (2) results in a net reduction of statewide greenhouse gas emissions as defined in section
216H.01, subdivision 2. For an efficient fuel-switching improvement affecting a customer's
use of electricity, the change in emissions must be measured based on the hourly emission
profile of the electric utility that controls the system where the electric technology is installed,
using the most recent resource plan approved by the commission under section 216B.2422;
new text end

new text begin (3) is cost-effective from a societal perspective, considering the costs associated with
both the fuel that was used and the fuel that will be used; and
new text end

new text begin (4) is installed and operated in a manner that does not unduly increase the utility's system
peak demand or require significant new investment in utility infrastructure.
new text end

Sec. 14. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2018, section 216B.241, subdivisions 1, 2c, 4, and 5, new text end new text begin are repealed.
new text end

APPENDIX

Repealed Minnesota Statutes: 19-3563

216B.241 ENERGY CONSERVATION IMPROVEMENT.

Subdivision 1.

Definitions.

For purposes of this section and section 216B.16, subdivision 6b, the terms defined in this subdivision have the meanings given them.

(a) "Commission" means the Public Utilities Commission.

(b) "Commissioner" means the commissioner of commerce.

(c) "Department" means the Department of Commerce.

(d) "Energy conservation" means demand-side management of energy supplies resulting in a net reduction in energy use. Load management that reduces overall energy use is energy conservation.

(e) "Energy conservation improvement" means a project that results in energy efficiency or energy conservation. Energy conservation improvement may include waste heat that is recovered and converted into electricity, but does not include electric utility infrastructure projects approved by the commission under section 216B.1636. Energy conservation improvement also includes waste heat recovered and used as thermal energy.

(f) "Energy efficiency" means measures or programs, including energy conservation measures or programs, that target consumer behavior, equipment, processes, or devices designed to produce either an absolute decrease in consumption of electric energy or natural gas or a decrease in consumption of electric energy or natural gas on a per unit of production basis without a reduction in the quality or level of service provided to the energy consumer.

(g) "Gross annual retail energy sales" means annual electric sales to all retail customers in a utility's or association's Minnesota service territory or natural gas throughput to all retail customers, including natural gas transportation customers, on a utility's distribution system in Minnesota. For purposes of this section, gross annual retail energy sales exclude:

(1) gas sales to:

(i) a large energy facility;

(ii) a large customer facility whose natural gas utility has been exempted by the commissioner under subdivision 1a, paragraph (b), with respect to natural gas sales made to the large customer facility; and

(iii) a commercial gas customer facility whose natural gas utility has been exempted by the commissioner under subdivision 1a, paragraph (c), with respect to natural gas sales made to the commercial gas customer facility; and

(2) electric sales to a large customer facility whose electric utility has been exempted by the commissioner under subdivision 1a, paragraph (b), with respect to electric sales made to the large customer facility.

(h) "Investments and expenses of a public utility" includes the investments and expenses incurred by a public utility in connection with an energy conservation improvement, including but not limited to:

(1) the differential in interest cost between the market rate and the rate charged on a no-interest or below-market interest loan made by a public utility to a customer for the purchase or installation of an energy conservation improvement;

(2) the difference between the utility's cost of purchase or installation of energy conservation improvements and any price charged by a public utility to a customer for such improvements.

(i) "Large customer facility" means all buildings, structures, equipment, and installations at a single site that collectively (1) impose a peak electrical demand on an electric utility's system of not less than 20,000 kilowatts, measured in the same way as the utility that serves the customer facility measures electrical demand for billing purposes or (2) consume not less than 500 million cubic feet of natural gas annually. In calculating peak electrical demand, a large customer facility may include demand offset by on-site cogeneration facilities and, if engaged in mineral extraction, may aggregate peak energy demand from the large customer facility's mining and processing operations.

(j) "Large energy facility" has the meaning given it in section 216B.2421, subdivision 2, clause (1).

(k) "Load management" means an activity, service, or technology to change the timing or the efficiency of a customer's use of energy that allows a utility or a customer to respond to wholesale market fluctuations or to reduce peak demand for energy or capacity.

(l) "Low-income programs" means energy conservation improvement programs that directly serve the needs of low-income persons, including low-income renters.

(m) "Qualifying utility" means a utility that supplies the energy to a customer that enables the customer to qualify as a large customer facility.

(n) "Waste heat recovered and used as thermal energy" means capturing heat energy that would otherwise be exhausted or dissipated to the environment from machinery, buildings, or industrial processes and productively using such recovered thermal energy where it was captured or distributing it as thermal energy to other locations where it is used to reduce demand-side consumption of natural gas, electric energy, or both.

(o) "Waste heat recovery converted into electricity" means an energy recovery process that converts otherwise lost energy from the heat of exhaust stacks or pipes used for engines or manufacturing or industrial processes, or the reduction of high pressure in water or gas pipelines.

Subd. 2c.

Performance incentives.

By December 31, 2008, the commission shall review any incentive plan for energy conservation improvement it has approved under section 216B.16, subdivision 6c, and adjust the utility performance incentives to recognize making progress toward and meeting the energy-savings goals established in subdivision 1c.

Subd. 4.

Federal law prohibitions.

If investments by public utilities in energy conservation improvements are in any manner prohibited or restricted by federal law and there is a provision under which the prohibition or restriction may be waived, then the commission, the governor, or any other necessary state agency or officer shall take all necessary and appropriate steps to secure a waiver with respect to those public utility investments in energy conservation improvements included in this section.

Subd. 5.

Efficient lighting program.

(a) Each public utility, cooperative electric association, and municipal utility that provides electric service to retail customers and is subject to subdivision 1c shall include as part of its conservation improvement activities a program to strongly encourage the use of fluorescent and high-intensity discharge lamps. The program must include at least a public information campaign to encourage use of the lamps and proper management of spent lamps by all customer classifications.

(b) A public utility that provides electric service at retail to 200,000 or more customers shall establish, either directly or through contracts with other persons, including lamp manufacturers, distributors, wholesalers, and retailers and local government units, a system to collect for delivery to a reclamation or recycling facility spent fluorescent and high-intensity discharge lamps from households and from small businesses as defined in section 645.445 that generate an average of fewer than ten spent lamps per year.

(c) A collection system must include establishing reasonably convenient locations for collecting spent lamps from households and financial incentives sufficient to encourage spent lamp generators to take the lamps to the collection locations. Financial incentives may include coupons for purchase of new fluorescent or high-intensity discharge lamps, a cash back system, or any other financial incentive or group of incentives designed to collect the maximum number of spent lamps from households and small businesses that is reasonably feasible.

(d) A public utility that provides electric service at retail to fewer than 200,000 customers, a cooperative electric association, or a municipal utility that provides electric service at retail to customers may establish a collection system under paragraphs (b) and (c) as part of conservation improvement activities required under this section.

(e) The commissioner of the Pollution Control Agency may not, unless clearly required by federal law, require a public utility, cooperative electric association, or municipality that establishes a household fluorescent and high-intensity discharge lamp collection system under this section to manage the lamps as hazardous waste as long as the lamps are managed to avoid breakage and are delivered to a recycling or reclamation facility that removes mercury and other toxic materials contained in the lamps prior to placement of the lamps in solid waste.

(f) If a public utility, cooperative electric association, or municipal utility contracts with a local government unit to provide a collection system under this subdivision, the contract must provide for payment to the local government unit of all the unit's incremental costs of collecting and managing spent lamps.

(g) All the costs incurred by a public utility, cooperative electric association, or municipal utility for promotion and collection of fluorescent and high-intensity discharge lamps under this subdivision are conservation improvement spending under this section.