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SF 901

2nd Engrossment - 88th Legislature (2013 - 2014) Posted on 05/10/2013 08:30am

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

Current Version - 2nd Engrossment

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A bill for an act
relating to energy; promoting renewable energy; regulating the distributed
generation of electric energy; establishing a requirement for utilities to generate
solar energy; providing various incentives for the production of solar energy;
requiring several studies related to electric energy; regulating utility cost
recovery for certain transmission, emission reduction, and gas infrastructure
investments; providing state energy policies; appropriating money; amending
Minnesota Statutes 2012, sections 16C.144, subdivision 2; 216B.02, subdivision
4; 216B.16, subdivision 7b; 216B.1635; 216B.164, subdivisions 2, 3, 4, 6, by
adding subdivisions; 216B.1692, subdivisions 1, 8, by adding a subdivision;
216B.1695, subdivision 5, by adding a subdivision; 216B.2401; 216B.241,
subdivisions 1, 1e, by adding a subdivision; 216B.2422, subdivision 4; 216C.05;
216C.435, subdivision 8, by adding a subdivision; 216C.436, subdivisions
2, 7, 8; 429.101, subdivision 2; Laws 2005, chapter 97, article 10, section 3;
proposing coding for new law in Minnesota Statutes, chapters 3; 116C; 216B;
216C; repealing Minnesota Statutes 2012, section 216B.1637.

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

ARTICLE 1

STATE ENERGY POLICY

Section 1.

new text begin [3.8852] PLANNING STRATEGY FOR SUSTAINABLE ENERGY
FUTURE.
new text end

new text begin (a) The Legislative Energy Commission, in consultation with the commissioner
of commerce, shall develop a framework for the state of Minnesota to transition to a
renewable energy economy that ends Minnesota's contribution to greenhouse gases from
burning fossil fuels within the next few decades. The framework and strategy should aim
to make Minnesota the first state in the nation to use only renewable energy.
new text end

new text begin (b) In developing the framework for this transition, the commission must consult
with stakeholders, including, but not limited to, representatives from cooperative,
municipal, and investor-owned utilities, natural resources and environmental advocacy
groups, labor and industry, and technical and scientific experts to examine the challenges
and opportunities involved to develop a strategy and timeline to protect the environment
and create jobs. The timeline must establish goals and strategies to reach the state's
renewable energy standards and prepare for the steps beyond reaching those standards. The
Department of Commerce, Division of Energy Resources shall provide technical support.
new text end

new text begin (c) The commission and its stakeholders must consider the following in creating
the framework:
new text end

new text begin (1) the economic and environmental costs of continued reliance on fossil fuels;
new text end

new text begin (2) the creation of jobs and industry in the state that result from moving ahead of
other states in transitioning to a sustainable energy economy;
new text end

new text begin (3) the appropriate energy efficiency and renewable energy investments in
Minnesota to reduce the economic losses to the Minnesota economy from importation
of fossil fuels; and
new text end

new text begin (4) the new technologies for energy efficiency, storage, transmission, and renewable
generation needed to reliably meet the demand for energy.
new text end

new text begin (d) The framework shall be modified as needed to take advantage of new
technological developments to facilitate ending fossil fuel use in power generation,
heating and cooling, industry, and transportation.
new text end

new text begin (e) The commission shall report to the legislative committees and divisions with
jurisdiction over energy policy by January 15, 2014, and annually thereafter, on progress
towards achieving the framework goals.
new text end

Sec. 2. new text beginSCOPING FOR RENEWABLE ENERGY STUDY.
new text end

new text begin The commissioner of commerce, in consultation with the Legislative Energy
Commission, shall develop the scope for a Minnesota energy future study on how
Minnesota can achieve a sustainable energy system that does not rely on the burning
of fossil fuels.
new text end

new text begin The study must include energy use in the electrical, transportation, thermal and
industrial sectors of the state economy. The study shall evaluate options for different
mixes of renewable energy, efficiency, energy storage, and new technologies that can
best transform each sector of energy use to become fully sustainable and no longer rely
on fossil fuels in a cost-effective manner.
new text end

new text begin The study must analyze both costs and benefits. The study must include at least the
following considerations: system reliability, utility rates, energy prices, jobs, economic
development, public health, and environmental quality. Calculation of costs and benefits
must be based on full cost, life-cycle accounting methods that include the benefits of
avoided externalities. The study must be designed to develop appropriate timelines and
accommodate modifications that will occur as new technologies and efficiencies develop.
new text end

new text begin In developing the scope, the commissioner shall engage stakeholders concerning
the study's parameters and assumptions. The commissioner must report the results of
the scoping process to the Legislative Energy Commission by January 1, 2014. The
commissioner may assess up to $100,000 under Minnesota Statutes, section 216B.62, to
scope and develop this energy study proposal.
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

ARTICLE 2

DISTRIBUTED GENERATION; SOLAR STANDARD

Section 1.

Minnesota Statutes 2012, section 216B.02, subdivision 4, is amended to read:


Subd. 4.

Public utility.

"Public utility" means persons, corporations, or other legal
entities, their lessees, trustees, and receivers, now or hereafter operating, maintaining,
or controlling in this state equipment or facilities for furnishing at retail natural,
manufactured, or mixed gas or electric service to or for the public or engaged in the
production and retail sale thereof but does not include (1) a municipality or a cooperative
electric association, organized under the provisions of chapter 308A, producing or
furnishing natural, manufactured, or mixed gas or electric service; (2) a retail seller of
compressed natural gas used as a vehicular fuel which purchases the gas from a public
utility; or (3) a retail seller of electricity used to recharge a battery that powers an electric
vehicle, as defined in section 169.011, subdivision 26a, and that is not otherwise a public
utility under this chapter. Except as otherwise provided, the provisions of this chapter shall
not be applicable to any sale of natural, manufactured, or mixed gas or electricity by a
public utility to another public utility for resale. In addition, the provisions of this chapter
shall not apply to a public utility whose total natural gas business consists of supplying
natural, manufactured, or mixed gas to not more than 650 customers within a city pursuant
to a franchise granted by the city, provided a resolution of the city council requesting
exemption from regulation is filed with the commission. The city council may rescind
the resolution requesting exemption at any time, and, upon the filing of the rescinding
resolution with the commission, the provisions of this chapter shall apply to the public
utility. No person shall be deemed to be a public utility if it furnishes its services only to
tenants or cooperative or condominium owners in buildings owned, leased, or operated
by such person. No person shall be deemed to be a public utility if it furnishes service
to occupants of a manufactured home or trailer park owned, leased, or operated by such
person. No person shall be deemed to be a public utility if it produces or furnishes service
to less than 25 persons.new text begin No persons shall be deemed to be a public utility solely as a result
of financing or ownership of distributed generation equipment located on a customer's
property, provided all of the output of the generating equipment is delivered or sold to the
utility that serves the customers.
new text end

Sec. 2.

Minnesota Statutes 2012, section 216B.164, subdivision 2, is amended to read:


Subd. 2.

Applicability.

This section as well as any rules promulgated by the
commission to implement this section or the Public Utility Regulatory Policies Act
of 1978, Public Law 95-617, Statutes at Large, volume 92, page 3117, and the Federal
Energy Regulatory Commission regulations thereunder, Code of Federal Regulations,
title 18, part 292, shallnew text begin, unless otherwise provided in this section, new text end apply to all Minnesota
electric utilities, including cooperative electric associations and municipal electric utilities.

Sec. 3.

Minnesota Statutes 2012, section 216B.164, is amended by adding a
subdivision to read:


new text begin Subd. 2a. new text end

new text begin Definitions. new text end

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

new text begin (b) "Aggregated meter" means a meter located on the premises of a customer's
owned or leased property that is contiguous with property containing the customer's
designated meter.
new text end

new text begin (c) "Capacity" means the number of megawatts AC (alternating current) at the point
of interconnection between a distributed generation facility and a utility's electric system.
new text end

new text begin (d) "Cogeneration" means a combined process whereby electrical and useful thermal
energy are produced simultaneously.
new text end

new text begin (e) "Contiguous property" means property owned or leased by the customer sharing
a common border, without regard to interruptions in contiguity caused by easements,
public thoroughfares, transportation rights-of-way, or utility rights-of-way.
new text end

new text begin (f) "Customer" means the person who is named on the utility electric bill for the
premises.
new text end

new text begin (g) "Designated meter" means a meter that is physically attached to the customer's
facility that the customer-generator designates as the first meter to which net metered
credits are to be applied as the primary meter for billing purposes when the customer is
serviced by more than one meter.
new text end

new text begin (h) "Distributed generation" means a facility that:
new text end

new text begin (1) has a capacity of ten megawatts or less;
new text end

new text begin (2) is interconnected with a utility's distribution system, over which the commission
has jurisdiction; and
new text end

new text begin (3) generates electricity from natural gas, renewable fuel, or a similarly clean fuel,
and may include waste heat, cogeneration, or fuel cell technology.
new text end

new text begin (i) "High-efficiency, distributed generation" means a distributed energy facility that
has a minimum efficiency of 40 percent, as calculated under section 272.0211.
new text end

new text begin (j) "Net metered facility" means an electric generation facility with the purpose of
offsetting energy use through the use of renewable energy or high-efficiency distributed
generation sources.
new text end

new text begin (k) "Renewable energy" has the meaning given in section 216B.2411, subdivision 2.
new text end

Sec. 4.

Minnesota Statutes 2012, section 216B.164, subdivision 3, is amended to read:


Subd. 3.

Purchases; small facilities.

(a) new text beginThis paragraph applies to cooperative
electric associations and municipal utilities.
new text endFor a qualifying facility having less than
40-kilowatt capacity, the customer shall be billed for the net energy supplied by the utility
according to the applicable rate schedule for sales to that class of customer. In the case
of net input into the utility system by a qualifying facility having less than 40-kilowatt
capacity, compensation to the customer shall be at a per kilowatt-hour rate determined
under paragraph deleted text begin(b) ordeleted text end (c)new text begin or (d)new text end.

(b) new text begin This paragraph applies to public utilities. For a qualifying facility having less
than 1,000-kilowatt capacity, the customer shall be billed for the net energy supplied by
the utility according to the applicable rate schedule for sales to that class of customer. In
the case of net input into the utility system by a qualifying facility having: (1) more than
40-kilowatt but less than 1,000-kilowatt capacity, compensation to the customer shall be
at a per kilowatt-hour rate determined under paragraph (c); or (2) less than 40-kilowatt
capacity, compensation to the customer shall be at a per-kilowatt rate determined under
paragraph (d). Compensation for net input into the utility system shall be applied as a
credit to the customer's energy bill, carried forward and applied to subsequent energy bills
for a period of up to 12 months. If any credit remains after a calendar year, the value of the
remaining credit must be paid to the customer within 15 days of the next billing date.
new text end

new text begin (c) new text endIn setting rates, the commission shall consider the fixed distribution costs to the
utility not otherwise accounted for in the basic monthly charge and shall ensure that the
costs charged to the qualifying facility are not discriminatory in relation to the costs
charged to other customers of the utility. The commission shall set the rates for net
input into the utility system based on avoided costs as defined in the Code of Federal
Regulations, title 18, section 292.101, paragraph (b)(6), the factors listed in Code of
Federal Regulations, title 18, section 292.304, and all other relevant factors.

deleted text begin (c)deleted text endnew text begin (d) new text end Notwithstanding any provision in this chapter to the contrary, a qualifying
facility new text beginthat began generating electricity before January 1, 2015, new text endhaving less than
40-kilowatt capacity may elect that the compensation for net input by the qualifying
facility into the utility system shall be at the average retail utility energy rate. "Average
retail utility energy rate" is defined as the average of the retail energy rates, exclusive of
special rates based on income, age, or energy conservation, according to the applicable
rate schedule of the utility for sales to that class of customer.

deleted text begin (d)deleted text endnew text begin (e) new text end If the qualifying facility new text beginor net metered facility new text endis interconnected with a
nongenerating utility which has a sole source contract with a municipal power agency or a
generation and transmission utility, the nongenerating utility may elect to treat its purchase
of any net input under this subdivision as being made on behalf of its supplier and shall
be reimbursed by its supplier for any additional costs incurred in making the purchase.
Qualifying facilitiesnew text begin or net metered facilitiesnew text end having less than deleted text begin40-kilowattdeleted text endnew text begin 1,000-kilowatt
new text end capacity new text beginif interconnected to a public utility, or 40-kilowatt capacity if interconnected to a
cooperative electric association or municipal utility
new text end may, at the customer's option, elect to
be governed by the provisions of subdivision 4.

Sec. 5.

Minnesota Statutes 2012, section 216B.164, subdivision 4, is amended to read:


Subd. 4.

Purchases; wheeling; costs.

(a) Except as otherwise provided in paragraph
(c), this subdivision shall apply to all qualifying facilities having 40-kilowatt capacity or
more as well as qualifying facilities as defined in subdivision 3 new text beginand net metered systems
under subdivision 4a, if interconnected to a cooperative electric association or municipal
utility, or 1,000-kilowatt capacity or more if interconnected to a public utility,
new text endwhich elect
to be governed by its provisions.

(b) The utility to which the qualifying facility is interconnected shall purchase all
energy and capacity made available by the qualifying facility. The qualifying facility shall
be paid the utility's full avoided capacity and energy costs as negotiated by the parties, as
set by the commission, or as determined through competitive bidding approved by the
commission. The full avoided capacity and energy costs to be paid a qualifying facility
that generates electric power by means of a renewable energy source are the utility's least
cost renewable energy facility or the bid of a competing supplier of a least cost renewable
energy facility, whichever is lower, unless the commission's resource plan order, under
section 216B.2422, subdivision 2, provides that the use of a renewable resource to meet
the identified capacity need is not in the public interest.

(c) For all qualifying facilities having 30-kilowatt capacity or more, the utility
shall, at the qualifying facility's or the utility's request, provide wheeling or exchange
agreements wherever practicable to sell the qualifying facility's output to any other
Minnesota utility having generation expansion anticipated or planned for the ensuing ten
years. The commission shall establish the methods and procedures to insure that except
for reasonable wheeling charges and line losses, the qualifying facility receives the full
avoided energy and capacity costs of the utility ultimately receiving the output.

(d) The commission shall set rates for electricity generated by renewable energy.

Sec. 6.

Minnesota Statutes 2012, section 216B.164, is amended by adding a
subdivision to read:


new text begin Subd. 4a. new text end

new text begin Net metered facility. new text end

new text begin Except for customers receiving a value of solar rate
under subdivision 10, a customer with a net metered facility having less than 1,000-kilowatt
capacity if interconnected to a public utility or 40-kilowatt capacity if interconnected to a
cooperative electric association or municipal utility may elect to be compensated for the
customer's net input into the utility system in the form of a kilowatt-hour credit on the
customer's energy bill carried forward and applied to subsequent energy bills. Any net
input supplied by the customer into the utility system that exceeds energy supplied to the
customer by the utility during a calendar year must be compensated at the utility's avoided
cost rate under subdivision 3, paragraph (c), or subdivision 4, paragraph (b), as applicable.
new text end

Sec. 7.

Minnesota Statutes 2012, section 216B.164, is amended by adding a
subdivision to read:


new text begin Subd. 4b. new text end

new text begin Aggregation of meters. new text end

new text begin (a) For the purpose of measuring electricity
under subdivisions 3 and 4a, a public utility must aggregate for billing purposes a
customer's designated meter with one or more aggregated meters if a customer requests
that it do so. To qualify for aggregation under this subdivision, a meter must be owned by
the customer requesting the aggregation, must be located on contiguous property owned
by the customer requesting the aggregation, and the total of all aggregated meters must be
subject to the size limitation in this section.
new text end

new text begin (b) A public utility must comply with a request by a customer-generator to aggregate
additional meters within 90 days. The specific meters must be identified at the time of the
request. In the event that more than one meter is identified, the customer must designate
the rank order for the aggregated meters to which the net metered credits are to be applied
new text end new text begin .
At least 60 days prior to the beginning of the next annual billing period, a customer may
amend the rank order of the aggregated meters, subject to this subdivision.
new text end

new text begin (c) The aggregation of meters applies only to charges that use kilowatt-hours as the
billing determinant. All other charges applicable to each meter account shall be billed to
the customer.
new text end

new text begin (d) A public utility will first apply the kilowatt-hour credit to the charges for the
designated meter and then to the charges for the aggregated meters in the rank order
specified by the customer. If the net metered facility supplies more electricity to the
public utility than the energy usage recorded by the customer-generator's designated and
aggregated meters during a monthly billing period, the public utility shall apply credits to
the customer's next monthly bill for the excess kilowatt-hours.
new text end

new text begin (e) With the commission's prior approval, a public utility may charge the
customer-generator requesting to aggregate meters a reasonable fee to cover the
administrative costs incurred in implementing the costs of this subdivision, pursuant to
a tariff approved by the commission for a public utility.
new text end

Sec. 8.

Minnesota Statutes 2012, section 216B.164, is amended by adding a
subdivision to read:


new text begin Subd. 4c. new text end

new text begin Limiting cumulative generation prohibited. new text end

new text begin The commission is
prohibited from limiting the cumulative generation of net metered facilities under
subdivision 4a and qualifying facilities under subdivision 3 to less than five percent of
a public utility's average annual retail electricity sales over the previous three calendar
years. Prior to interconnecting a net metered facility that would result in cumulative net
metered facility generation in excess of its limit of five percent, a public utility's obligation
to offer net metering to a new customer-generator may be limited by the commission if
it determines doing so is in the public interest. The commission may limit net metering
obligations under this subdivision only after providing notice and opportunity for public
comment. When determining whether limiting net metering obligations under this
subdivision is in the public interest, the commission shall consider:
new text end

new text begin (1) the environmental and other public policy benefits of net metered systems;
new text end

new text begin (2) the impact of net metered systems on the electricity costs for customers without
net metered systems;
new text end

new text begin (3) the effects of net metering on the reliability of the electric system;
new text end

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

new text begin (5) other statutory obligations imposed on the commission or a utility.
new text end

new text begin The commission may limit net metering obligations under clauses (2) to (4) only if it
finds implementation would cause significant rate impact, require significant measures
to address reliability, or raise significant technical issues.
new text end

Sec. 9.

Minnesota Statutes 2012, section 216B.164, is amended by adding a
subdivision to read:


new text begin Subd. 4d. new text end

new text begin Individual system capacity limits. new text end

new text begin Public utilities that provide retail
electric service may require customers participating in net metering and net billing to limit
the total generation capacity of individual distributed generation systems by either:
new text end

new text begin (1) for wind generation systems, limiting the total generation system capacity kilowatt
alternating current to 120 percent of the customer's on-site maximum electric demand; or
new text end

new text begin (2) for solar photovoltaic and other distributed generation limiting the total
generation system annual energy production kilowatt hours alternating current to 120
percent of the customer's on-site annual electric energy consumption.
new text end

new text begin Limits under clauses (1) and (2) must be based on standard 15-minute intervals,
measured during the previous 12 calendar months, or on a reasonable estimate of the
average monthly maximum demand or average annual consumption if the customer has
either:
new text end

new text begin (i) less than 12 calendar months of actual electric usage; or
new text end

new text begin (ii) no demand metering available.
new text end

Sec. 10.

Minnesota Statutes 2012, section 216B.164, subdivision 6, is amended to read:


Subd. 6.

Rules and uniform contract.

(a) The commission shall promulgate rules
to implement the provisions of this section. The commission shall also establish a uniform
statewide form of contract for use between utilities and a new text beginnet metered or new text endqualifying
facility having less than deleted text begin40-kilowattdeleted text endnew text begin 1,000-kilowattnew text end capacity new text beginif interconnected to a public
utility or 40-kilowatt capacity if interconnected to a cooperative electric association or
municipal utility
new text end.

(b) The commission shall require the qualifying facility to provide the utility with
reasonable access to the premises and equipment of the qualifying facility if the particular
configuration of the qualifying facility precludes disconnection or testing of the qualifying
facility from the utility side of the interconnection with the utility remaining responsible
for its personnel.

(c) The uniform statewide form of contract shall be applied to all new and existing
interconnections established between a utility and a new text beginnet metered or new text endqualifying facility
having less than 40-kilowatt capacity, except that existing contracts may remain in force
until deleted text beginwritten notice of election that the uniform statewide contract form applies is given by
either party to the other, with the notice being of the shortest time period permitted under
the existing contract for termination of the existing contract by either party, but not less
than ten nor longer than 30 days
deleted text endnew text begin terminated by mutual agreement between both partiesnew text end.

new text begin (d) A public utility may not apply a standby charge to a net metered facility.
new text end

Sec. 11.

Minnesota Statutes 2012, section 216B.164, is amended by adding a
subdivision to read:


new text begin Subd. 10. new text end

new text begin Alternative tariff; compensation for resource value. new text end

new text begin (a) A public utility
may apply for commission approval, or a cooperative electric association or municipal
electric utility may apply for approval from its governing body, for an alternative
tariff that compensates customers through a bill credit mechanism for the value to the
utility, its customers, and society for operating distributed solar photovoltaic resources
interconnected to the utility system and operated by customers primarily for meeting their
own energy needs. Alternative tariffs approved by the governing body of a cooperative
electric association or municipal utility must be filed with the commission.
new text end

new text begin (b) If approved, the alternative tariff shall apply to customers' interconnections
occurring after the date of approval. The alternative tariff is in lieu of the small facility
rate or net metering for distributed solar resources under subdivisions 3 and 4a.
new text end

new text begin (c) new text end new text begin The commission or governing body shall after notice and opportunity for public
comment approve the alternative tariff provided the utility or association has demonstrated
the alternative tariff:
new text end

new text begin (1) appropriately applies a methodology substantially similar to the methodology
established by the department under this subdivision;
new text end

new text begin (2) includes a mechanism to allow recovery of the cost to serve customers operating
distributed solar systems;
new text end

new text begin (3) charges the customer for all electricity consumed by the customer at the
applicable rate schedule for sales to that class of customer;
new text end

new text begin (4) credits the customer for all electricity generated by the solar photovoltaic device
at the value-based credit rate established under this subdivision;
new text end

new text begin (5) applies the charges and credits in clauses (3) and (4) to a monthly bill that
includes a provision so that the unused portion of the credit in any month or billing period
shall be carried forward and credited against all charges. In the event that the customer
has a positive balance after the 12-month cycle ending on the last day in February, that
balance will be eliminated and the credit cycle will restart the following billing period
beginning on March 1;
new text end

new text begin (6) complies with the size limits specified in subdivision 4a;
new text end

new text begin (7) complies with the interconnection requirements under section 216B.1611; and
new text end

new text begin (8) is not subject to standby or network charges.
new text end

new text begin (d) A utility must provide to the customer the meter and any other equipment needed
to provide service under the alternative tariff.
new text end

new text begin (e) The department must establish the distributed solar value methodology in
paragraph (c), clause (1), no later than January 31, 2014. The methodology may not be
used unless approved by the commission. The department must submit the methodology
to the commission for approval. The commission must approve, modify with the consent
of the department, or disapprove the methodology within 60 days of its submission.
When developing the distributed solar value methodology, the department shall consult
stakeholders with experience and expertise in power systems, solar energy, and electric
utility ratemaking regarding the proposed methodology, underlying assumptions, and
preliminary data.
new text end

new text begin (f) The distributed solar value methodology established by the department must,
at a minimum, account for the value of energy and its delivery, generation capacity,
transmission capacity, transmission and distribution line losses, and environmental
value. The department may, based on known and measurable evidence of the cost or
benefit of solar operation to the utility, incorporate other values into the methodology,
including credit for locally manufactured or assembled energy systems, systems installed
at high-value locations on the distribution grid, or other factors.
new text end

new text begin (g) The credit for distributed solar value applied to alternative tariffs approved
under this section shall represent the present value of the future revenue streams of the
value components identified in paragraph (f).
new text end

new text begin (h) The utility shall recalculate the alternative tariff on an annual cycle, and shall file
the recalculated alternative tariff with the commission or governing body for approval.
new text end

new text begin (i) Renewable energy credits for solar energy credited under this subdivision belong
to the electric utility providing the credit.
new text end

Sec. 12.

new text begin [216B.1641] COMMUNITY SOLAR GARDEN.
new text end

new text begin (a) The public utility subject to section 116C.779 shall file by September 30, 2013, a
plan with the commission to operate a community solar garden program. Other public
utilities may file an application at their election. The community solar garden program must
be designed to offset the energy use of not less than five subscribers in each community
solar garden program of which no single subscriber has more than a 40 percent interest.
The owner of the community solar garden may be a public utility or any other entity or
organization that contracts to sell the output from the community solar garden to the utility.
new text end

new text begin (b) A solar garden must have a nameplate capacity of no more than one megawatt.
Each subscription shall be sized to represent at least one kilowatt of the community
solar garden's generating capacity and to supply, when combined with other distributed
generation resources serving the premises, no more than 120 percent of the average annual
consumption of electricity by each subscriber at the premises to which the subscription is
attributed.
new text end

new text begin (c) The solar generation facility must be located in the service territory of the public
utility filing the plan. Subscribers must be retail customers of the public utility located in
the same county or a county contiguous to where the facility is located.
new text end

new text begin (d) The public utility must purchase from the community solar garden all energy
generated by the solar garden. The purchase shall be at the value of solar rate as calculated
under section 216B.164, subdivision 10.
new text end

new text begin (e) The commission may approve, disapprove, or modify a plan based on, among
other things, the following factors:
new text end

new text begin (1) that the plan reasonably allows for the creation of solar gardens;
new text end

new text begin (2) that the plan establishes a mechanism that allows the utility to recoup
interconnection costs for each community solar garden;
new text end

new text begin (3) that the plan is nondiscriminatory among customers; and
new text end

new text begin (4) that the plan is consistent with the public interest.
new text end

Sec. 13.

new text begin [216B.2427] SOLAR ELECTRICITY STANDARD.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

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

new text begin (b) "Public utility" has the meaning given in section 216B.02, subdivision 4.
new text end

new text begin (c) "Total retail electric sales" has the meaning given in section 216B.1691,
subdivision 1, paragraph (c).
new text end

new text begin Subd. 2. new text end

new text begin Solar electricity standard. new text end

new text begin (a) A public utility must generate or procure
solar electric generation capacity for its retail customers in Minnesota or the retail
customers of a distribution utility to which the public utility provides wholesale electric
service. At a minimum, one percent of the public utility's total retail electric sales to retail
customers in Minnesota must be generated by solar energy by the end of the year 2025.
new text end

new text begin (b) For the purposes of calculating the total retail electric sales under this section of
a public utility, there shall be excluded retail electric sales to customers that are:
new text end

new text begin (1) a mineral extraction or mineral processing facility or a paper mill that meets the
definition of a "large customer facility" under section 216B.241, subdivision 1, paragraph
(i); or
new text end

new text begin (2) an iron ore mining operation using over ten megawatts connected load and
producing iron concentrate.
new text end

new text begin Those customers may not have included in the rates charged to them by the public utility
any costs of satisfying the solar standard specified by this section.
new text end

new text begin (c) A public utility may not use energy used to satisfy the solar energy standard
under this section to satisfy its standard obligation under section 216B.1691, nor may
energy used to satisfy the standard under section 216B.1691 be used to satisfy the standard
under this section.
new text end

new text begin Subd. 3. new text end

new text begin Use of integrated resource planning process. new text end

new text begin Except if inconsistent with
this section, the commission may modify or delay implementation of a standard obligation
in the same manner as in section 26B.1691, subdivision 2b, as a part of an integrated
resource planning proceeding under section 216B.2422, or in other proceedings before the
commission. The order to delay or modify shall not be considered advisory with respect
to any public utility. This subdivision shall not be construed to limit the commission's
authority to modify or delay implementation of a standard obligation in other proceedings
before it.
new text end

new text begin Subd. 4. new text end

new text begin Utility plans filed with commission. new text end

new text begin Each public utility shall report
to the commission on its plans, activities, and progress demonstrating the efforts made
towards complying with this section. The report shall be included in its filings under
section 216B.2422 or in a separate report submitted to the commission every two years,
whichever is more frequent. In its resource plan or separate report, each public utility shall
provide a description of:
new text end

new text begin (1) the status of the utility's solar energy mix relative to the standards;
new text end

new text begin (2) efforts taken to meet the standards;
new text end

new text begin (3) any obstacles encountered or anticipated in meeting the standards;
new text end

new text begin (4) potential solutions to the identified obstacles; and
new text end

new text begin (5) an estimation of the rate impact related to measures taken by the public utility
necessary to comply with this section. The rate impact estimate must be for wholesale
rates and, if the public utility makes retail sales, an estimate shall also be completed
for the impact on the public utility's retail rates. An estimation of rate impacts must
also account for acquisition of energy capacity, distribution, and transmission upgrades
avoided as a result of the standards.
new text end

new text begin Subd. 5. new text end

new text begin Renewable energy credits. new text end

new text begin In lieu of generating or procuring energy
directly to satisfy the solar electricity standard of this section, a public utility may use
renewable energy credits that originate from a solar electricity generator to satisfy the
standard. In doing so, a public utility must follow protocols established by the commission
under section 216B.1691, subdivision 4 for registering, tracking, and retiring credits.
new text end

new text begin Subd. 6. new text end

new text begin Compliance; penalties. new text end

new text begin (a) The commission must regularly investigate
whether a public utility is in compliance with its standard obligation under subdivision 2.
new text end

new text begin (b) If the commission finds noncompliance, it may order the public utility to
construct solar energy facilities, purchase solar energy, purchase renewable energy credits
generated by solar energy, or engage in other activities to achieve compliance. If a public
utility fails to comply with an order under this subdivision, the commission may impose a
financial penalty on the public utility in an amount not to exceed the estimated cost of the
public utility to achieve compliance. The penalty may not exceed the lesser of the cost
of constructing facilities or purchasing renewable energy credits necessary for the public
utility to achieve compliance. The commission must deposit financial penalties imposed
under this subdivision in the energy and conservation account established in the special
revenue fund under section 216B.241, subdivision 2a.
new text end

new text begin (c) Nothing in this subdivision shall be construed to limit any other authority the
commission possesses to enforce this section.
new text end

Sec. 14. new text beginSTUDY; SOLAR ENERGY AND COOPERATIVE ELECTRIC
ASSOCIATIONS AND MUNICIPAL UTILITIES.
new text end

new text begin The Legislative Energy Commission must convene a group, including
representatives from cooperative electric associations and municipal utilities, to discuss
the role of solar energy as a generation resource for associations and municipal utilities.
The discussions should be broadly focused on all issues related to solar as a generation
resource including, without limitation:
new text end

new text begin (1) the comparative cost and value of solar and other generation resources;
new text end

new text begin (2) the need for new generation resources and timing of that need;
new text end

new text begin (3) the ownership, siting, sizing, pricing, and interconnection of solar generation; and
new text end

new text begin (4) the integration of solar generation with conservation and other generation
resources.
new text end

new text begin The group must be convened by July 1, 2013, and must report the results of the discussion
to the commission by February 1, 2014.
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

ARTICLE 3

MADE IN MINNESOTA

Section 1.

new text begin [216C.411] DEFINITIONS.
new text end

new text begin For the purposes of sections 216C.411 to 216C.415, the following terms have the
meanings given.
new text end

new text begin (a) "Made in Minnesota" means the manufacture in this state of solar photovoltaic
modules:
new text end

new text begin (1) at a manufacturing facility located in Minnesota that is registered and authorized
to manufacture and apply the UL 1703 certification mark to solar photovoltaic modules by
Underwriters Laboratory (UL), CSA International, Intertek, or an equivalent UL-approved
independent certification agency;
new text end

new text begin (2) that bear UL 1703 certification marks from UL, CSA International, Intertek, or
an equivalent UL-approved independent certification agency, which must be physically
applied to the modules at a manufacturing facility described in clause (1); and
new text end

new text begin (3) that are manufactured in Minnesota:
new text end

new text begin (i) by manufacturing processes that must include tabbing, stringing, and lamination;
or
new text end

new text begin (ii) by interconnecting low-voltage direct current photovoltaic elements that produce
the final useful photovoltaic output of the modules.
new text end

new text begin A solar photovoltaic module that is manufactured by attaching microinverters, direct
current optimizers, or other power electronics to a laminate or solar photovoltaic
module that has received UL 1703 certification marks outside Minnesota from UL, CSA
International, Intertek, or an equivalent UL-approved independent certification agency is
not "Made in Minnesota" under this paragraph.
new text end

new text begin (b) "Solar photovoltaic module" has the meaning given in section 116C.7791,
subdivision 1, paragraph (e).
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.

new text begin [216C.412] "MADE IN MINNESOTA" SOLAR ENERGY PRODUCTION
INCENTIVE ACCOUNT.
new text end

new text begin Subdivision 1. new text end

new text begin Account established; account management. new text end

new text begin A "Made in
Minnesota" solar energy production incentive account is established as a separate account
in the special revenue fund in the state treasury. Earnings, such as interest, dividends,
and any other earnings arising from account assets, must be credited to the account.
Funds remaining in the account at the end of a fiscal year do not cancel to the general
fund but remain in the account. There is annually appropriated from the account to the
commissioner of commerce money sufficient to make the incentive payments under
section 216C.415 and to administer sections 216C.412 to 216C.415.
new text end

new text begin Subd. 2. new text end

new text begin Payments from public utilities. new text end

new text begin (a) Beginning January 1, 2014, and
each January 1 thereafter, through 2023, for a total of ten years, each electric public
utility subject to section 216B.241 must annually pay to the commissioner of commerce
five percent of the minimum amount it is required to spend on energy conservation
improvements under section 216B.241, subdivision 1a. Payments made under this
paragraph count towards satisfying expenditure obligations of a public utility under section
216B.241, subdivision 1a. The commissioner shall, upon receipt of the funds, deposit them
in the account established in subdivision 1. A public utility subject to this paragraph must
be credited energy-savings for the purpose of satisfying its energy savings requirement
under section 216B.241, subdivision 1c, based on its payment to the commissioner.
new text end

new text begin (b) Notwithstanding section 116C.779, subdivision 1, paragraph (g), beginning
January 1, 2014, and continuing through January 1, 2023, for a total of ten years, the utility
that manages the account under section 116C.779 must annually pay from that account to
the commissioner an amount that, when added to the total amount paid to the commissioner
of commerce under paragraph (a), totals $15,000,000 annually. The commissioner shall,
upon receipt of the payment, deposit it in the account established in subdivision 1.
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. 3.

new text begin [216C.413] "MADE IN MINNESOTA" SOLAR ENERGY PRODUCTION
INCENTIVE; QUALIFICATION.
new text end

new text begin Subdivision 1. new text end

new text begin Application. new text end

new text begin A manufacturer of solar photovoltaic modules seeking
to qualify those modules as eligible to receive the "Made in Minnesota" solar energy
production incentive must submit an application to the commissioner of commerce on a
form prescribed by the commissioner. The application must contain:
new text end

new text begin (1) a technical description of the solar photovoltaic module and the processes used
to manufacture it, excluding proprietary details;
new text end

new text begin (2) documentation that the solar photovoltaic module meets all the required
applicable parts of the "Made in Minnesota" definition in section 216C.411, including
evidence of the UL 1703 right to mark for all solar photovoltaic modules seeking to
qualify as "Made in Minnesota";
new text end

new text begin (3) any additional nonproprietary information requested by the commissioner
of commerce; and
new text end

new text begin (4) certification signed by the chief executive officer of the manufacturing company
attesting to the truthfulness of the contents of the application and supporting materials
under penalty of perjury.
new text end

new text begin Subd. 2. new text end

new text begin Certification. new text end

new text begin If the commissioner determines that a manufacturer's solar
photovoltaic module meets the definition of "Made in Minnesota" in section 216C.411, the
commissioner shall issue the manufacturer a "Made in Minnesota" certificate containing
the name and model numbers of the certified solar photovoltaic modules and the date of
certification. The commissioner must issue or deny the issuance of a certificate within 90
days of receipt of a completed application. A copy of the certificate must be provided to
each purchaser of the solar photovoltaic module.
new text end

new text begin Subd. 3. new text end

new text begin Revocation of certification. new text end

new text begin The commissioner may revoke a certification
of a module as "Made in Minnesota" if the commissioner finds that the module no longer
meets the requirements to be certified. The revocation does not affect incentive payments
awarded prior to the revocation.
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.

new text begin [216C.414] "MADE IN MINNESOTA" SOLAR ENERGY PRODUCTION
INCENTIVE.
new text end

new text begin Subdivision 1. new text end

new text begin Setting incentive. new text end

new text begin Within 90 days of a module being certified as
"Made in Minnesota" the commissioner of commerce shall set a solar energy production
incentive amount for that solar photovoltaic module for the purpose of the incentive
payment under section 216C.415. The incentive is a performance-based financial
incentive expressed as a per kilowatt-hour amount. The amount shall be used for incentive
applications approved in the year to which the incentive amount is applicable for the
ten-year duration of the incentive payments. An incentive amount must be calculated for
each module for each calendar year, through 2023.
new text end

new text begin Subd. 2. new text end

new text begin Criteria for determining incentive amount. new text end

new text begin (a) The commissioner shall
set the incentive payment amount by determining the average amount of incentive payment
required to allow an average owner of installed solar photovoltaic modules a reasonable
return on their investment. In setting the incentive amount the commissioner shall consider:
new text end

new text begin (1) an estimate of the installed cost per kilowatt-direct current, based on the cost data
supplied by the manufacturer in the application submitted under section 216C.413, and an
estimate of the average installation cost based on a representative sample of Minnesota
solar photovoltaic installed projects;
new text end

new text begin (2) the average insolation rate in Minnesota;
new text end

new text begin (3) an estimate of the decline in the generation efficiency of the solar photovoltaic
modules over time;
new text end

new text begin (4) the rate paid by utilities to owners of solar photovoltaic modules under section
216B.164 or other law;
new text end

new text begin (5) applicable federal tax incentives for installing solar photovoltaic modules; and
new text end

new text begin (6) the estimated levelized cost per kilowatt-hour generated.
new text end

new text begin (b) The commissioner shall annually, for incentive applications received in a year,
revise each incentive amount based on the factors in paragraph (a), clauses (1) to (6),
general market conditions, and the availability of other incentives. In no case shall the
"Made in Minnesota" incentive amount result in the "Made in Minnesota" incentives paid
exceeding 40 percent, net of average applicable taxes on the ten-year incentive payments,
of the average historic installation cost per kilowatt. The commissioner may exceed the 40
percent cap if the commissioner determines it is necessary to fully expend funds available
for incentive payments in a particular year.
new text end

new text begin Subd. 3. new text end

new text begin Metering of production. new text end

new text begin A utility or association must, at the expense of a
customer, provide a meter to measure the production of a solar photovoltaic module
system that is approved to receive incentive payments. The utility or association must
furnish the commissioner with information sufficient for the commissioner to determine
the incentive payment. The information must be provided on a calendar year basis by no
later than March 1. The commissioner shall provide an association or utility with forms to
use to provide the production information. A customer must attest to the accuracy of the
production information.
new text end

new text begin Subd. 4. new text end

new text begin Payment due date. new text end

new text begin Payments must be made no later than July 1 following
the year of production.
new text end

new text begin Subd. 5. new text end

new text begin Renewable energy credits. new text end

new text begin Renewable energy credits associated with
energy provided to a utility or association for which an incentive payment is made belong
to the utility or association.
new text end

Sec. 5.

new text begin [216C.415] "MADE IN MINNESOTA" SOLAR ENERGY PRODUCTION
INCENTIVE; PAYMENT.
new text end

new text begin Subdivision 1. new text end

new text begin Incentive payment. new text end

new text begin Incentive payments may be made under this
section only to an owner of grid-connected solar photovoltaic modules with a total
nameplate capacity below 40 kilowatts direct current who:
new text end

new text begin (1) has submitted to the commissioner, on a form established by the commissioner,
an application to receive the incentive that has been approved by the commissioner;
new text end

new text begin (2) has received a "Made in Minnesota" certificate under section 216C.413 for
the module; and
new text end

new text begin (3) has installed on residential or commercial property solar photovoltaic modules
that are generating electricity and has received a "Made in Minnesota" certificate under
section 216C.413.
new text end

new text begin Subd. 2. new text end

new text begin Application process. new text end

new text begin Applications for an incentive payment must be
received by the commissioner between January 1 and February 28. The commissioner
shall by a random method approve the number of applications the commissioner
reasonably determines will exhaust the funds available for payment for the ten-year period
of incentive payments. Applications for residential and commercial installations shall be
separately randomly approved.
new text end

new text begin Subd. 3. new text end

new text begin Commissioner approval of incentive application. new text end

new text begin The commissioner
must approve an application for an incentive for an owner to be eligible for incentive
payments. The commissioner must not approve an application in a calendar year if the
commissioner determines there will not be sufficient funding available to pay an incentive
to the applicant for any portion of the ten-year duration of payment. The commissioner
shall annually establish a cap on the cumulative capacity for a program year based on
funds available and historic average installation costs. Receipt of an incentive is not
an entitlement and payment need only be made from available funds in the "Made in
Minnesota" solar production incentive account.
new text end

new text begin Subd. 4. new text end

new text begin Eligibility window; payment duration. new text end

new text begin (a) Payments may be made under
this section only for electricity generated from new solar photovoltaic module installations
that are commissioned between January 1, 2014, and December 31, 2023.
new text end

new text begin (b) The payment eligibility window of the incentive begins and runs consecutively
from the date the solar system is commissioned.
new text end

new text begin (c) An owner of solar photovoltaic modules may receive payments under this
section for a particular module for a period of ten years provided that sufficient funds are
available in the account.
new text end

new text begin (d) No payment may be made under this section for electricity generated after
December 31, 2033.
new text end

new text begin (e) An owner of solar photovoltaic modules may not first begin to receive payments
under this section after December 31, 2024.
new text end

new text begin Subd. 5. new text end

new text begin Allocation of payments. new text end

new text begin (a) If there are sufficient applications,
approximately 50 percent of the incentive payment shall be for owners of eligible solar
photovoltaic modules installed on residential property, and approximately 50 percent shall
be for owners of eligible solar photovoltaic modules installed on commercial property.
new text end

new text begin (b) The commissioner shall endeavor to distribute incentives paid under this section
to owners of solar photovoltaic modules installed in a manner so that the amount of
payments received in an area of the state reasonably approximates the amount of payments
made by a utility serving that area.
new text end

new text begin (c) For purposes of this subdivision:
new text end

new text begin (1) "residential property" means residential real estate that is occupied and used as a
homestead by its owner or by a renter and includes "multifamily housing development"
as defined in section 462C.02, subdivision 5, except that residential property on which
solar photovoltaic modules (i) whose capacity exceeds 10 kilowatts is installed; or (ii)
connected to a utility's distribution system and whose electricity is purchased by several
residents, each of whom own a share of the electricity generated, shall be deemed
commercial property; and
new text end

new text begin (2) "commercial property" means real property on which is located a business,
government, or nonprofit establishment.
new text end

new text begin Subd. 6. new text end

new text begin Limitation. new text end

new text begin An owner receiving an incentive payment under this section
may not receive a rebate under section 116C.7791 for the same solar photovoltaic modules.
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. 6. new text beginVALUE OF ON-SITE ENERGY STORAGE STUDY.
new text end

new text begin (a) The commissioner of commerce shall contract with an independent consultant
selected through a request for proposal process to produce a report analyzing the potential
costs and benefits of installing utility-managed energy storage modules in residential and
commercial buildings in this state. The study must:
new text end

new text begin (1) estimate the potential value of on-site energy storage modules as a
load-management tool to reduce costs for individual customers and for the utility,
including, but not limited to, reductions in energy, particularly peaking and capacity costs;
new text end

new text begin (2) examine the interaction of energy storage modules with on-site solar photovoltaic
modules; and
new text end

new text begin (3) analyze existing barriers to the installation of on-site energy storage modules
by utilities, and examine strategies and design potential economic incentives, including
using utility funds expended under Minnesota Statutes, section 216B.241, to overcome
those barriers.
new text end

new text begin By January 1, 2014, the commissioner of commerce shall submit the study to the chairs
and ranking minority members of the legislative committees with jurisdiction over energy
policy and finance.
new text end

new text begin (b) The commissioner of commerce shall assess an amount, not to exceed $100,000,
under Minnesota Statutes, section 216B.241, subdivision 1e, for the purpose of completing
the study described in this section.
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. 7. new text beginVALUE OF SOLAR THERMAL STUDY.
new text end

new text begin (a) The commissioner of commerce shall contract with an independent consultant
selected through a request for proposal process to produce a report analyzing the potential
costs and benefits of expanding the installation of solar thermal projects, as defined in
Minnesota Statutes, section 216B.2411, subdivision 2, in residential and commercial
buildings in this state. The study must examine the potential for solar thermal projects to
reduce heating and cooling costs for individual customers and to reduce utilities' costs.
The study must also analyze existing barriers to the installation of solar thermal projects
by utilities, and examine strategies and design potential economic incentives, including
using utility funds expended under Minnesota Statutes, section 216B.241, to overcome
those barriers. By January 1, 2014, the commissioner of commerce shall submit the study
to the chairs and ranking minority members of the legislative committees with jurisdiction
over energy policy and finance.
new text end

new text begin (b) The commissioner of commerce shall assess an amount, not to exceed $100,000,
under Minnesota Statutes, section 216B.241, subdivision 1e, for the purpose of completing
the study described in this section.
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

ARTICLE 4

TRANSMISSION COST RECOVERY

Section 1.

Minnesota Statutes 2012, section 216B.16, subdivision 7b, is amended to
read:


Subd. 7b.

Transmission cost adjustment.

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

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

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

new text begin (iii) new text endcharges incurred by a utility new text beginunder a federally approved tariff new text endthat accrue
from other transmission owners' regionally planned transmission projects that have been
determined by the Midwest Independent new text beginTransmission new text endSystem Operator to benefit the
utilitydeleted text begin, as provided for under a federally approved tariffdeleted text endnew text begin or integrated transmission systemnew text end.

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

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

(2) allows the new text beginutility to recover new text endcharges incurred deleted text beginby a utilitydeleted text endnew text begin under a federally
approved tariff
new text end that accrue from other transmission owners' regionally planned
transmission projects that have been determined by the Midwest Independent new text beginTransmission
new text endSystem Operator to benefit the utilitydeleted text begin, as provided for under a federally approved tariff
deleted text endnew text begin or integrated transmission systemnew text end. These charges must be reduced or offset by revenues
received by the utility and by amounts the utility charges to other regional transmission
owners, to the extent those revenues and charges have not been otherwise offset;

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

new text begin (4) new text endallows a return on investment at the level approved in the utility's last general
rate case, unless a different return is found to be consistent with the public interest;

deleted text begin (4)deleted text end new text begin(5) new text endprovides a current return on construction work in progress, provided that
recovery from Minnesota retail customers for the allowance for funds used during
construction is not sought through any other mechanism;

deleted text begin (5)deleted text end new text begin(6) new text endallows for recovery of other expenses if shown to promote a least-cost project
option or is otherwise in the public interest;

deleted text begin (6)deleted text end new text begin(7) new text endallocates project costs appropriately between wholesale and retail customers;

deleted text begin (7)deleted text end new text begin(8) new text endprovides a mechanism for recovery above cost, if necessary to improve the
overall economics of the project or projects or is otherwise in the public interest; and

deleted text begin (8)deleted text end new text begin(9) new text endterminates recovery once costs have been fully recovered or have otherwise
been reflected in the utility's general rates.

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

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

(2) a schedule for implementation of applicable projects;

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

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

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

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

ARTICLE 5

CERTS FUNDING

Section 1.

Minnesota Statutes 2012, section 216B.241, subdivision 1e, is amended to
read:


Subd. 1e.

Applied research and development grants.

(a) The commissioner
may, by order, approve and make grants for applied research and development projects
of general applicability that identify new technologies or strategies to maximize energy
savings, improve the effectiveness of energy conservation programs, or document
the carbon dioxide reductions from energy conservation programs. When approving
projects, the commissioner shall consider proposals and comments from utilities and
other interested parties. The commissioner may assess up to $3,600,000 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) The commissioner, as part of the assessment authorized under paragraph (a),
shall annually assess and grant up to $500,000 for the purpose of subdivision 9.

new text begin (c) The commissioner, as part of the assessment authorized under paragraph (a),
each state fiscal year shall assess $500,000 for a grant to the partnership created by section
216C.385, subdivision 2. The grant must be used to exercise the powers and perform the
duties specified in section 216C.385, subdivision 3.
new text end

new text begin (d) By February 15 annually, the commissioner shall report to the chairs and ranking
minority members of the committees of the legislature with primary jurisdiction over
energy policy and energy finance on the assessments made under this subdivision for the
previous calendar year and the use of the assessment. The report must clearly describe the
activities supported by the assessment and the parties that engaged in those activities.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Paragraph (c) is effective for assessments for state fiscal
years commencing on or after July 1, 2013.
new text end

ARTICLE 6

ENERGY POLICY AMENDMENT

Section 1.

Minnesota Statutes 2012, section 216B.2401, is amended to read:


216B.2401 ENERGY deleted text beginCONSERVATIONdeleted text endnew text begin SAVINGSnew text end POLICY GOAL.

new text begin The legislature finds that energy savings are an energy resource, and that
cost-effective energy savings are preferred over all other energy resources. The legislature
further finds that cost-effective energy savings 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,
new text endit is the energy policy of the state of Minnesota to achieve annual
energy savings equal to new text beginat least new text end1.5 percent of annual retail energy sales of electricity and
natural gas deleted text begindirectlydeleted text end throughnew text begin cost-effective new text end energy conservation improvement programs
and rate design, deleted text beginand indirectly throughdeleted text endnew text begin energy efficiency achieved by energy consumers
without direct utility involvement,
new text end 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.

Sec. 2.

Minnesota Statutes 2012, section 216C.05, is amended to read:


216C.05 FINDINGS AND PURPOSE.

Subdivision 1.

Energy planning.

The legislature finds and declares that continued
growth in demand for energy will cause severe social and economic dislocations, and that
the state has a vital interest in providing for: increased efficiency in energy consumption,
the development and use of renewable energy resources wherever possible, and the
creation of an effective energy forecasting, planning, and education program.

The legislature further finds and declares that the protection of life, safety, and
financial security for citizens during an energy crisis is of paramount importance.

Therefore, the legislature finds that it is in the public interest to review, analyze, and
encourage those energy programs that will minimize the need for annual increases in fossil
fuel consumption by 1990 and the need for additional electrical generating plants, and
provide for an optimum combination of energy sourcesnew text begin and energy conservationnew text end consistent
with environmental protection and the protection of citizens.

The legislature intends to monitor, through energy policy planning and
implementation, the transition from historic growth in energy demand to a period when
demand for traditional fuels becomes stable and the supply of renewable energy resources
is readily available and adequately utilized.

new text begin The legislature further finds that for economic growth, environmental improvement,
and protection of citizens, it is in the public interest to encourage those energy programs
that will provide an optimum combination of energy resources, including energy savings.
new text end

new text begin Therefore, the legislature, through its committees, must monitor and evaluate
progress towards greater reliance on cost-effective energy efficiency and renewable
energy and lesser dependence on fossil fuels in order to reduce the economic burden
of fuel imports, diversify utility-owned and consumer-owned energy resources, reduce
utility costs for businesses and residents, improve the competitiveness and profitability of
Minnesota businesses, create more energy-related jobs that contribute to the Minnesota
economy, and reduce pollution and emissions that cause climate change.
new text end

Subd. 2.

Energy policy goals.

It is the energy policy of the state of Minnesota that:

new text begin (1) annual energy savings equal to at least 1.5 percent of annual retail energy sales of
electricity and natural gas be achieved through cost-effective energy efficiency;
new text end

deleted text begin (1)deleted text endnew text begin (2)new text end the per capita use of fossil fuel as an energy input be reduced by 15 percent
by the year 2015, through increased reliance on energy efficiency and renewable energy
alternatives; and

deleted text begin (2)deleted text endnew text begin (3)new text end 25 percent of the total energy used in the state be derived from renewable
energy resources by the year 2025.

Sec. 3. new text beginDEPARTMENT OF COMMERCE; DIVISION OF ENERGY
RESOURCES; STUDY.
new text end

new text begin The Division of Energy Resources of the Department of Commerce must conduct
public meetings with stakeholders and members of the public and shall produce a report
on findings and legislative recommendations to accomplish the following purposes:
new text end

new text begin (1) clarify statewide energy-savings policies and utility energy-savings goals;
new text end

new text begin (2) maximize long-term cost-effective energy savings and minimize energy waste;
new text end

new text begin (3) maximize carbon reductions and economic benefits by increasing the efficiency
of all sectors of the state's energy system;
new text end

new text begin (4) minimize total utility costs and rate impacts for ratepayers in all sectors;
new text end

new text begin (5) determine appropriate funding sources for nonconservation projects and
programs, cogeneration, and combined heat and power projects;
new text end

new text begin (6) determine the appropriate consideration in the integrated resource planning and
certificate of need processes of the requirements to meet the state's energy conservation
and renewable energy goals; and
new text end

new text begin (7) provide the utility the appropriate incentives to meet the state's energy
conservation and renewable energy goals.
new text end

new text begin The report must be submitted by January 15, 2014, to the chairs and ranking minority
members of the committees of the legislature with primary jurisdiction over energy policy.
new text end

new text begin The division must provide public notice of the meetings.
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

ARTICLE 7

EMISSION REDUCTION COST RECOVERY

Section 1.

Minnesota Statutes 2012, section 216B.1692, subdivision 1, is amended to
read:


Subdivision 1.

Qualifying projects.

new text begin(a) new text endProjects that may be approved for the
emissions reduction-rate rider allowed in this section must:

(1) be installed on existing large electric generating power plants, as defined in
section 216B.2421, subdivision 2, clause (1), that are located in the state and that are
currently not subject to emissions limitations for new power plants under the federal Clean
Air Act, United States Code, title 42, section 7401 et seq.;

(2) not increase the capacity of the existing electric generating power plant more
than ten percent or more than 100 megawatts, whichever is greater; and

(3) result in the existing plant either:

(i) complying with applicable new source review standards under the federal Clean
Air Act; or

(ii) emitting air contaminants at levels substantially lower than allowed for new
facilities by the applicable new source performance standards under the federal Clean
Air Act; or

(iii) reducing emissions from current levels at a unit to the lowest cost-effective level
when, due to the age or condition of the generating unit, the public utility demonstrates
that it would not be cost-effective to reduce emissions to the levels in item (i) or (ii).

new text begin (b) Notwithstanding paragraph (a), a project may be approved for the emission
reduction rate rider allowed in this section if the project is to be installed on existing
large electric generating power plants, as defined in section 216B.2421, subdivision 2,
clause (1), that are located outside the state and are needed to comply with state or federal
air quality standards, but only if the project has received an advance determination of
prudence from the commission under section 216B.1695.
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 2012, section 216B.1692, is amended by adding a
subdivision to read:


new text begin Subd. 1a. new text end

new text begin Exemption. new text end

new text begin Subdivisions 2, 4, and 5, paragraph (c), clause (1), do not
apply to projects qualifying under subdivision 1, paragraph (b).
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. 3.

Minnesota Statutes 2012, section 216B.1692, subdivision 8, is amended to read:


Subd. 8.

Sunset.

This section is effective until December 31, deleted text begin2015deleted text endnew text begin 2020new text end, and
applies to plans, projects, and riders approved before that date and modifications made to
them after that date.

Sec. 4.

Minnesota Statutes 2012, section 216B.1695, subdivision 5, is amended to read:


Subd. 5.

Cost recovery.

The utility may begin recovery of costs that have been
incurred by the utility in connection with implementation of the project in the next rate
case following an advance determination of prudencenew text begin or in a rider approved under section
216B.1692
new text end. The commission shall review the costs incurred by the utility for the project.
The utility must show that the project costs are reasonable and necessary, and demonstrate
its efforts to ensure the lowest reasonable project costs. Notwithstanding the commission's
prior determination of prudence, it may accept, modify, or reject any of the project costs.
The commission may determine whether to require an allowance for funds used during
construction offset.

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 2012, section 216B.1695, is amended by adding a
subdivision to read:


new text begin Subd. 5a. new text end

new text begin Rate of return. new text end

new text begin The return on investment in the rider shall be at the
level approved by the commission in the public utility's last general rate case, unless the
commission determines that a different rate of return is in the public interest.
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

ARTICLE 8

STATE BUILDINGS GUARANTEED ENERGY SAVINGS PROGRAM

Section 1.

Minnesota Statutes 2012, section 16C.144, subdivision 2, is amended to read:


Subd. 2.

Guaranteed energy-savings agreement.

The commissioner may enter
into a guaranteed energy-savings agreement with a qualified provider if:

(1) the qualified provider is selected through a competitive process in accordance
with the guaranteed energy-savings program guidelines within the Department of
Administration;

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

(3) the term of the guaranteed energy-savings agreement shall not exceed deleted text begin15deleted text endnew text begin 25
new text end years from the date of final installation;

(4) the commissioner finds that the amount it would spend on the utility cost-savings
measures recommended in the engineering report will not exceed the amount to be
saved in utility operation and maintenance costs over deleted text begin15deleted text endnew text begin 25new text end years from the date of
implementation of utility cost-savings measures;

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

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

ARTICLE 9

INTEGRATED RESOURCE PLANNING

Section 1.

Minnesota Statutes 2012, section 216B.2422, subdivision 4, is amended to
read:


Subd. 4.

Preference for renewable energy facility.

The commission shall not
approve a new or refurbished nonrenewable energy facility in an integrated resource plan
or a certificate of need, pursuant to section 216B.243, nor shall the commission allow rate
recovery pursuant to section 216B.16 for such a nonrenewable energy facility, unless the
utility has demonstrated that a renewable energy facility is not in the public interest.new text begin The
public interest determination must include whether the resource plan 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.2427.
new text end

ARTICLE 10

RENEWABLE INTEGRATION STUDY

Section 1. new text beginRENEWABLE INTEGRATION STUDY.
new text end

new text begin The commission shall order all Minnesota electric utilities, as defined in Minnesota
Statutes, section 216B.1691, subdivision 1, paragraph (b), to study and develop plans for
the transmission network enhancements necessary to support increasing the renewable
energy standard established in Minnesota Statutes, section 216B.1691, subdivision 2a, to
40 percent by 2030, while maintaining system reliability.
new text end

new text begin The Minnesota electric utilities must complete the study work under the direction of
the commissioner of commerce. Prior to the start of the study, the commissioner shall
appoint a technical review committee consisting of up to 15 individuals with experience
and expertise in electric transmission system engineering, electric power systems
operations, and renewable energy generation technology to review the study's proposed
methods and assumptions, ongoing work, and preliminary results.
new text end

new text begin As part of the planning process, the Minnesota electric utilities must incorporate
and build upon the analyses that have previously been done or that are in progress
including but not limited to the 2006 Minnesota Wind Integration Study and ongoing
work to address geographically dispersed development plans, the 2007 Minnesota
Transmission for Renewable Energy Standard Study, the 2008 and 2009 Statewide Studies
of Dispersed Renewable Generation, the 2009 Minnesota RES Update, Corridor, and
Capacity Validation Studies, the 2010 Regional Generation Outlet Study, the 2011 Multi
Value Project Portfolio Study, and recent and ongoing Midwest Independent System
Operator transmission expansion planning work. The utilities shall collaborate with the
Midwest Independent System Operator to optimize and integrate, to the extent possible,
Minnesota's transmission plans with other regional considerations and to encourage the
Midwest Independent System Operator to incorporate Minnesota's planning work into its
transmission expansion future planning.
new text end

new text begin The study must be completed and submitted to the Minnesota Public Utilities
Commission by December 1, 2013. The report shall include a description of the analyses
that have been conducted and the results, including:
new text end

new text begin (1) a conceptual plan for transmission necessary for generation interconnection and
delivery and for access to regional geographic diversity and regional supply and demand
side flexibility; and
new text end

new text begin (2) identification and development of potential solutions to any critical issues
encountered to support increasing the renewable energy standard to 40 percent by 2030
while maintaining system reliability, as well as potential impacts and barriers of increasing
the renewable energy standard to 45 percent and 50 percent.
new text end

ARTICLE 11

GAS UTILITY INFRASTRUCTURE COSTS

Section 1.

Minnesota Statutes 2012, section 216B.1635, is amended to read:


216B.1635 RECOVERY OF GAS UTILITY INFRASTRUCTURE COSTS.

Subdivision 1.

Definitions.

(a) "Gas utility" means a public utility as defined in
section 216B.02, subdivision 4, that furnishes natural gas service to retail customers.

(b) "Gas utility infrastructure costs" or "GUIC" means new text begincosts incurred in new text endgas utility
projects that:

(1) do not serve to increase revenues by directly connecting the infrastructure
replacement to new customers;

(2) are in service but were not included in the gas utility's rate base in its most recent
general rate casedeleted text begin; anddeleted text endnew text begin, or are planned to be in service during the period covered by the
report submitted under subdivision 2, but in no case longer than the one year forecast
period in the report; and
new text end

(3) deleted text beginreplace or modify existing infrastructure if the replacement or modification does
not constitute a betterment, unless the betterment is required by a political subdivision,
as evidenced by specific documentation from the government entity requiring the
replacement or modification of infrastructure
deleted text endnew text begin do not constitute a betterment, unless the
betterment is based on requirements by a political subdivision or a federal or state agency,
as evidenced by specific documentation, an order, or other similar requirement from the
government entity requiring the replacement or modification of infrastructure
new text end.

(c) "Gas utility projects" means deleted text beginrelocation anddeleted text endnew text begin:
new text end

new text begin (1)new text end replacement of natural gas facilities located in the public right-of-way required
by the construction or improvement of a highway, road, street, public building, or other
public work by or on behalf of the United States, the state of Minnesota, or a political
subdivisiondeleted text begin.deleted text endnew text begin; and
new text end

new text begin (2) replacement or modification of existing natural gas facilities, including surveys,
assessments, reassessment, and other work necessary to determine the need for replacement
or modification of existing infrastructure that is required by a federal or state agency.
new text end

Subd. 2.

new text beginGas infrastructure new text endfiling.

deleted text begin(a) The commission may approve a gas utility's
petition for a rate schedule
deleted text end new text beginA public utility submitting a petition new text endto recover deleted text beginGUICdeleted text end new text begingas
infrastructure costs
new text endunder this sectiondeleted text begin. A gas utility maydeleted text end new text beginmust submit to the commission,
the department, and interested parties a gas infrastructure project plan report and a
new text endpetition deleted text beginthe commission to recover a rate of return, income taxes on the rate of return,
incremental property taxes, plus incremental depreciation expense associated with GUIC
deleted text endnew text begin for rate recovery of only incremental costs associated with projects under subdivision
1, paragraph (c), clause (2). The report and petition must be made at least 150 days in
advance of implementation of the rate schedule, provided that the rate schedule will not be
implemented until the petition is approved by the commission pursuant to subdivision
6. The report must be for a forecast period of one year
new text end.

deleted text begin (b) The filing is subject to the following:
deleted text end

deleted text begin (1) A gas utility may submit a filing under this section no more than once per year.
deleted text end

deleted text begin (2) A gas utility must file sufficient information to satisfy the commission regarding
the proposed GUIC or be subject to denial by the commission. The information includes,
but is not limited to:
deleted text end

deleted text begin (i) the government entity ordering the gas utility project and the purpose for which
the project is undertaken;
deleted text end

deleted text begin (ii) the location, description, and costs associated with the project;
deleted text end

deleted text begin (iii) a description of the costs, and salvage value, if any, associated with the existing
infrastructure replaced or modified as a result of the project;
deleted text end

deleted text begin (iv) the proposed rate design and an explanation of why the proposed rate design
is in the public interest;
deleted text end

deleted text begin (v) the magnitude and timing of any known future gas utility projects that the utility
may seek to recover under this section;
deleted text end

deleted text begin (vi) the magnitude of GUIC in relation to the gas utility's base revenue as approved
by the commission in the gas utility's most recent general rate case, exclusive of gas
purchase costs and transportation charges;
deleted text end

deleted text begin (vii) the magnitude of GUIC in relation to the gas utility's capital expenditures since
its most recent general rate case;
deleted text end

deleted text begin (viii) the amount of time since the utility last filed a general rate case and the utility's
reasons for seeking recovery outside of a general rate case; and
deleted text end

deleted text begin (ix) documentation supporting the calculation of the GUIC.
deleted text end

new text begin Subd. 3. new text end

new text begin Gas infrastructure project plan report. new text end

new text begin The gas infrastructure project
plan report required to be filed under subdivision 2 shall include all pertinent information
and supporting data on each proposed project including, but not limited to, project
description and scope, estimated project costs, and project in-service date.
new text end

new text begin Subd. 4. new text end

new text begin Cost recovery petition for utility's facilities. new text end

new text begin Notwithstanding any other
provision of this chapter, the commission may approve a rate schedule for the automatic
annual adjustment of charges for gas utility infrastructure costs net of revenues under
this section, including a rate of return, income taxes on the rate of return, incremental
property taxes, incremental depreciation expense, and any incremental operation and
maintenance costs. A gas utility's petition for approval of a rate schedule to recover
gas utility infrastructure costs outside of a general rate case under section 216B.16, is
subject to the following:
new text end

new text begin (1) a gas utility may submit a filing under this section no more than once per year; and
new text end

new text begin (2) a gas utility must file sufficient information to satisfy the commission regarding
the proposed GUIC. The information includes, but is not limited to:
new text end

new text begin (i) the information required to be included in the gas infrastructure project plan
report under subdivision 3;
new text end

new text begin (ii) the government entity ordering or requiring the gas utility project and the
purpose for which the project is undertaken;
new text end

new text begin (iii) a description of the estimated costs and salvage value, if any, associated with the
existing infrastructure replaced or modified as a result of the project;
new text end

new text begin (iv) a comparison of the utility's estimated costs included in the gas infrastructure
project plan and the actual costs incurred, including a description of the utility's efforts to
ensure the costs of the facilities are reasonable and prudently incurred;
new text end

new text begin (v) calculations to establish that the rate adjustment is consistent with the terms
of the rate schedule, including the proposed rate design and an explanation of why the
proposed rate design is in the public interest;
new text end

new text begin (vi) the magnitude and timing of any known future gas utility projects that the
utility may seek to recover under this section;
new text end

new text begin (vii) the magnitude of GUIC in relation to the gas utility's base revenue as approved
by the commission in the gas utility's most recent general rate case, exclusive of gas
purchase costs and transportation charges;
new text end

new text begin (viii) the magnitude of GUIC in relation to the gas utility's capital expenditures
since its most recent general rate case; and
new text end

new text begin (ix) the amount of time since the utility last filed a general rate case and the utility's
reasons for seeking recovery outside of a general rate case.
new text end

new text begin Subd. 5. new text end

new text begin Commission action. new text end

new text begin Upon receiving a gas utility report and petition for
cost recovery under subdivision 2 and assessment and verification under subdivision 4, the
commission may approve the annual GUIC rate adjustments provided that, after notice
and comment, the costs included for recovery through the rate schedule are prudently
incurred and achieve gas facility improvements at the lowest reasonable and prudent
cost to ratepayers.
new text end

new text begin Subd. 5a. new text end

new text begin Rate of return. new text end

new text begin The return on investment for the rate adjustment shall be
at the level approved by the commission in the public utility's last general rate case, unless
the commission determines that a different rate of return is in the public interest.
new text end

Subd. deleted text begin3deleted text endnew text begin 6new text end.

Commission authority; rules.

The commission may issue orders and
adopt rules necessary to implement and administer this section.

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.

Laws 2005, chapter 97, article 10, section 3, is amended to read:


Sec. 3. SUNSET.

Sections 1 and 2 shall expire on June 30, deleted text begin2015deleted text endnew text begin 2023new text end.

Sec. 3. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2012, section 216B.1637, new text end new text begin is repealed.
new text end

ARTICLE 12

PACE

Section 1.

Minnesota Statutes 2012, section 216C.435, is amended by adding a
subdivision to read:


new text begin Subd. 3a. new text end

new text begin Cost-effective energy improvements. new text end

new text begin "Cost-effective energy
improvements" mean energy improvements that have been identified in an energy audit
or renewable energy system feasibility study as repaying their purchase and installation
costs in 20 years or less, based on the amount of future energy saved and estimated future
energy prices.
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 2012, section 216C.435, subdivision 8, is amended to read:


Subd. 8.

Qualifying real property.

"Qualifying real property" means a
single-family or multifamily residential dwelling, or a commercial or industrial building,
that the implementing entity has determined, after review of an energy audit or renewable
energy system feasibility study, can be benefited by installation of new text begincost-effective new text endenergy
improvements.

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 2012, section 216C.436, subdivision 2, is amended to read:


Subd. 2.

Program requirements.

A financing program must:

(1) impose requirements and conditions on financing arrangements to ensure timely
repayment;

(2) require an energy audit or renewable energy system feasibility study to be
conducted on the qualifying real property and reviewed by the implementing entity prior
to approval of the financing;

(3) require the inspection of all installations and a performance verification of at
least ten percent of the energy improvements financed by the program;

(4) new text beginnot prohibit the financing of all cost-effective energy improvements not otherwise
prohibited by this section;
new text end

new text begin (5) new text endrequire that all cost-effective energy improvements be made to a qualifying
real property prior to, or in conjunction with, an applicant's repayment of financing for
energy improvements for that property;

deleted text begin (5)deleted text endnew text begin (6)new text end have energy improvements financed by the program performed by licensed
contractors as required by chapter 326B or other law or ordinance;

deleted text begin (6)deleted text endnew text begin (7)new text end require disclosures to borrowers by the implementing entity of the risks
involved in borrowing, including the risk of foreclosure if a tax delinquency results from
a default;

deleted text begin (7)deleted text endnew text begin (8)new text end provide financing only to those who demonstrate an ability to repay;

deleted text begin (8)deleted text endnew text begin (9)new text end not provide financing for a qualifying real property in which the owner is not
current on mortgage or real property tax payments;

deleted text begin (9)deleted text endnew text begin (10)new text end require a petition to the implementing entity by all owners of the qualifying
real property requesting collections of repayments as a special assessment under section
429.101;

deleted text begin (10)deleted text endnew text begin (11)new text end provide that payments and assessments are not accelerated due to a default
and that a tax delinquency exists only for assessments not paid when due; and

deleted text begin (11)deleted text endnew text begin (12)new text end require that liability for special assessments related to the financing runs
with the qualifying real property.

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 2012, section 216C.436, subdivision 7, is amended to read:


Subd. 7.

Repayment.

An implementing entity that finances an energy improvement
under this section must:

(1) secure payment with a lien against the deleted text beginbenefiteddeleted text end qualifying real property; and

(2) collect repayments as a special assessment as provided for in section 429.101
or by charternew text begin, provided that special assessments may be made payable in up to 20 equal
annual installments
new text end.

If the implementing entity is an authority, the local government that authorized
the authority to act as implementing entity shall impose and collect special assessments
necessary to pay debt service on bonds issued by the implementing entity under subdivision
8, and shall transfer all collections of the assessments upon receipt to the authority.

Sec. 5.

Minnesota Statutes 2012, section 216C.436, subdivision 8, is amended to read:


Subd. 8.

Bond issuance; repayment.

(a) An implementing entity may issue
revenue bonds as provided in chapter 475 for the purposes of this sectionnew text begin, provided the
revenue bond must not be payable more than 20 years from the date of issuance
new text end.

(b) The bonds must be payable as to both principal and interest solely from the
revenues from the assessments established in subdivision 7.

(c) No holder of bonds issued under this subdivision may compel any exercise of the
taxing power of the implementing entity that issued the bonds to pay principal or interest
on the bonds, and if the implementing entity is an authority, no holder of the bonds may
compel any exercise of the taxing power of the local government. Bonds issued under
this subdivision are not a debt or obligation of the issuer or any local government that
issued them, nor is the payment of the bonds enforceable out of any money other than the
revenue pledged to the payment of the bonds.

Sec. 6.

Minnesota Statutes 2012, section 429.101, subdivision 2, is amended to read:


Subd. 2.

Procedure for assessment.

Any special assessment levied under
subdivision 1 shall be payable in a single installment, or by up to ten equal annual
installments as the council may providenew text begin, except that a special assessment made under an
energy improvements financing program under subdivision 1, paragraph (c), may be
repayable in up to 20 equal installments
new text end. With deleted text beginthis exceptiondeleted text endnew text begin these exceptionsnew text end, sections
429.061, 429.071, and 429.081 shall apply to assessments made under this section.

new text begin EFFECTIVE DATE. new text end

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

ARTICLE 13

WASTE HEAT RECOVERY

Section 1.

Minnesota Statutes 2012, section 216B.241, subdivision 1, is amended to
read:


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 deleted text beginrecoverydeleted text endnew text begin that is recovered andnew text end converted into electricitynew text begin,new text end but does not include electric
utility infrastructure projects approved by the commission under section 216B.1636.
new text begin Energy conservation improvement also includes waste heat recovered and used as thermal
energy.
new text end

(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.

new text begin (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.
new text end

deleted text begin (n)deleted text endnew text begin (o)new text end "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.

Sec. 2.

Minnesota Statutes 2012, section 216B.241, is amended by adding a
subdivision to read:


new text begin Subd. 10. new text end

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

new text begin 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 towards a utility's natural gas or electric energy
savings goals, subject to department approval.
new text end

ARTICLE 14

SOLAR ENERGY INCENTIVE PROGRAM

Section 1.

new text begin [116C.7792] SOLAR ENERGY INCENTIVE PROGRAM.
new text end

new text begin The utility subject to section 116C.779 shall operate a program to provide solar
energy production incentives for solar energy systems of no more than a total nameplate
capacity of 20 kilowatts direct current. The program shall be operated for five consecutive
calendar years commencing in 2014. The lesser of $10,000,000 or as much as is available
in the account shall be allocated for each of the five years from the renewable development
account established in section 116C.779 to a separate account for the purpose of the solar
production incentive program. The solar system must be sized to less than 120 percent of
the customer's on-site annual energy consumption. The production incentive must be paid
for ten years commencing with the commissioning of the system. The utility must file
a plan to operate the program with the commissioner of commerce. The utility may not
operate the program until it is approved by the commissioner.
new text end

ARTICLE 15

STUDY OF INDUSTRIAL ENERGY EFFICIENCY

Section 1. new text beginStudy.
new text end

new text begin The Legislative Energy Commission may study and report to the chairs and ranking
minority members of the legislative committees and divisions with primary jurisdiction
over energy policy on how best to increase the competitiveness of the paper, pulp, mining,
foundry, and steel industries in the state through additional cost-effective energy efficiency,
including the potential use of renewable energy systems, work process initiatives, or best
practices. In addition, the study must examine ways to use industrial energy efficiency
to assist in creating markets for new energy efficiency products and services, and assess
the impact of industrial energy efficiency in moderating electricity, water, and waste
prices by reducing demand. The commission may include legislative recommendations
in its report. The commission shall seek input from interested stakeholders, including
entities with recognized expertise with industrial efficiency and work processes with
these industries. The commission may contract for all or part of the activities related to
preparation of the report.
new text end

ARTICLE 16

APPROPRIATIONS

Section 1. new text beginAPPROPRIATIONS.
new text end

new text begin (a) $364,000 in fiscal year 2014 and $100,000 in fiscal year 2015 are appropriated
from the general fund to the commissioner of commerce for the purpose of carrying out
the activities required in this act. It is assumed that an amount equal to this appropriation
will be assessed by the commissioner of commerce under Minnesota Statutes, section
216B.62, and deposited in the general fund. The base for this appropriation is $22,000 in
fiscal year 2016 and $23,000 in fiscal year 2017.
new text end

new text begin (b) $279,000 in fiscal year 2014 and $263,000 in fiscal year 2015 are appropriated
from the general fund from the assessments on utilities to the Public Utilities Commission
for the purpose of carrying out the activities required in this act. It is assumed that
an amount equal to this appropriation will be assessed by the commission under
Minnesota Statutes, section 216B.62, and deposited in the general fund. The base for this
appropriation is $63,000 in fiscal year 2016 and $27,000 in fiscal year 2017.
new text end