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2003 Minnesota Session Laws

Key: (1) language to be deleted (2) new language

                              CHAPTER 11-H.F.No. 9 
                  An act relating to energy; modifying provisions 
                  relating to radioactive waste storage; modifying 
                  incentives and objectives for alternative energy 
                  development; requiring studies; approving consumptive 
                  use of water; amending Minnesota Statutes 2002, 
                  sections 116C.71, subdivision 7; 116C.779; 216B.095; 
                  216B.097, by adding a subdivision; 216B.1645, by 
                  adding a subdivision; 216B.1691; 216B.241, subdivision 
                  1b, by adding a subdivision; 216B.2411; 216B.2424, 
                  subdivision 5; 216B.2425, by adding a subdivision; 
                  216B.243, subdivision 3b; 216C.051, subdivisions 3, 6, 
                  9, by adding a subdivision; 216C.052, subdivisions 2, 
                  3; 216C.41, subdivisions 1, 2, 3, 4, 5, by adding 
                  subdivisions; proposing coding for new law in 
                  Minnesota Statutes, chapters 116C; 216B; repealing 
                  Minnesota Statutes 2002, sections 116C.80; 216C.051, 
                  subdivisions 1, 4, 5. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                                   ARTICLE 1 
                           NUCLEAR ENERGY PROVISIONS 
           Section 1.  Minnesota Statutes 2002, section 116C.71, 
        subdivision 7, is amended to read: 
           Subd. 7.  [RADIOACTIVE WASTE MANAGEMENT FACILITY.] 
        "Radioactive waste management facility" means a geographic site, 
        including buildings, structures, and equipment in or upon which 
        radioactive waste is retrievably or irretrievably disposed by 
        burial in soil or permanently stored.  An independent spent fuel 
        storage installation located on the site of a Minnesota nuclear 
        generation facility for dry cask storage of spent nuclear fuel 
        generated solely by that facility is not a radioactive waste 
        management facility. 
           Sec. 2.  [116C.83] [AUTHORIZATION FOR ADDITIONAL DRY CASK 
        STORAGE.] 
           Subdivision 1.  [AUTHORIZATION TO END OF CURRENT PRAIRIE 
        ISLAND LICENSE.] Subject to the dry cask storage limits of the 
        federal license for the independent spent fuel storage 
        installation at Prairie Island, the public utility that owns the 
        Prairie Island nuclear generation plant has authorization for 
        sufficient dry cask storage capacity at that installation to 
        allow:  
           (1) the unit 1 reactor at Prairie Island to operate until 
        the end of its current license in 2013; and 
           (2) the unit 2 reactor at Prairie Island to operate until 
        the end of its current license in 2014. 
           Subd. 2.  [COMMISSION PROCESS FOR FUTURE ADDITIONAL 
        AUTHORIZATION.] Authorization of any additional dry cask storage 
        other than that provided for in subdivision 1, or expansion or 
        establishment of an independent spent fuel storage facility at a 
        nuclear generation facility in this state, is subject to 
        approval of a certificate of need by the public utilities 
        commission pursuant to section 216B.243.  In any proceeding 
        under this subdivision, the commission may make a decision that 
        could result in a shutdown of a nuclear generating facility.  In 
        considering an application for a certificate of need pursuant to 
        this subdivision, the commission may consider whether the public 
        utility that owns the nuclear generation facility in the state 
        is in compliance with section 216B.1691 and the utility's past 
        performance under that section. 
           Subd. 3.  [LEGISLATIVE REVIEW.] (a) To allow opportunity 
        for review by the legislature, a decision by the commission on 
        an application for a certificate of need pursuant to subdivision 
        2 is stayed until the June 1 following the next regular annual 
        session of the legislature that begins after the date of the 
        commission decision.  By January 15 of the year of that 
        legislative session, the commission shall issue a report to the 
        chairs of the house and senate committees with jurisdiction over 
        energy and environmental policy issues, providing a summary of 
        the commission's decision and the grounds for that decision, the 
        alternatives considered and rejected by the commission, and the 
        reasons for rejecting those alternatives.  If the legislature 
        does not modify or reject the commission's decision by law 
        enacted during that regular legislative session, the 
        commission's decision shall become effective on the expiration 
        of the stay.  
           (b) The stay of a commission decision to approve an 
        application for a certificate of need for additional dry cask 
        storage under subdivision 2 does not apply to the fabrication of 
        the spent fuel storage casks.  However, if the utility proceeds 
        with the fabrication of casks, it does so bearing the risk of an 
        adverse legislative decision. 
           Subd. 4.  [OTHER CONDITIONS.] (a) The storage of spent 
        nuclear fuel in the pool and in dry casks at a nuclear 
        generating plant must be managed to facilitate the shipment of 
        waste out of state to a permanent or interim storage facility as 
        soon as feasible in a manner that allows the continued operation 
        of the plant consistent with sections 116C.71 to 116C.83 and 
        216B.1645, subdivision 4. 
           (b) The authorization for storage capacity pursuant to this 
        section is limited to the storage of spent nuclear fuel 
        generated by a Minnesota nuclear generation facility and stored 
        on the site of that facility. 
           Subd. 5.  [WATER STANDARDS.] The standards established in 
        section 116C.76, subdivision 1, clauses (1) to (3), apply to an 
        independent spent fuel installation.  Such an installation must 
        be operated in accordance with those standards. 
           Subd. 6.  [ENVIRONMENTAL REVIEW AND PROTECTION.] (a) The 
        siting, construction, and operation of an independent spent fuel 
        storage installation located on the site of a Minnesota 
        generation facility for dry cask storage of spent nuclear fuel 
        generated solely by that facility is subject to all 
        environmental review and protection provisions of this chapter 
        and chapters 115, 115B, 116, 116B, 116D, and 216B, and rules 
        associated with those chapters, except those statutes and rules 
        that apply specifically to a radioactive waste management 
        facility as defined in section 116C.71, subdivision 7. 
           (b) An environmental impact statement is required under 
        chapter 116D for a proposal to construct and operate a new or 
        expanded independent spent fuel storage installation.  The 
        environmental quality board shall be the responsible 
        governmental unit for the environmental impact statement.  Prior 
        to finding the statement adequate, the board must find that the 
        applicant has demonstrated that the facility is designed to 
        provide a reasonable expectation that the operation of the 
        facility will not result in groundwater contamination in excess 
        of the standards established in section 116C.76, subdivision 1, 
        clauses (1) to (3). 
           Sec. 3.  Minnesota Statutes 2002, section 216B.1645, is 
        amended by adding a subdivision to read: 
           Subd. 4.  [SETTLEMENT WITH MDEWAKANTON DAKOTA TRIBAL 
        COUNCIL AT PRAIRIE ISLAND.] The commission shall approve a rate 
        schedule providing for the automatic adjustment of charges to 
        recover the costs or expenses of a settlement between the public 
        utility that owns the Prairie Island nuclear generation facility 
        and the Mdewakanton Dakota Tribal Council at Prairie Island, 
        resolving outstanding disputes regarding the provisions of Laws 
        1994, chapter 641, article 1, section 4.  The settlement must 
        provide for annual payments, not to exceed $2,500,000 annually, 
        by the public utility to the Prairie Island Indian Community, to 
        be used for, among other purposes, acquiring up to 1,500 
        contiguous or noncontiguous acres of land in Minnesota within 50 
        miles of the tribal community's reservation at Prairie Island to 
        be taken into trust by the federal government for the benefit of 
        the tribal community for housing and other residential 
        purposes.  The legislature acknowledges that the intent to 
        purchase land by the tribe for relocation purposes is part of 
        the settlement agreement and this act.  However, the state, 
        through the governor, reserves the right to support or oppose 
        any particular application to place land in trust status. 
           Sec. 4.  Minnesota Statutes 2002, section 216B.243, 
        subdivision 3b, is amended to read: 
           Subd. 3b.  [NUCLEAR POWER PLANT; NEW CONSTRUCTION 
        PROHIBITED; RELICENSING.] (a) The commission may not issue a 
        certificate of need for the construction of a new 
        nuclear-powered electric generating plant. 
           (b) Any certificate of need for additional storage of spent 
        nuclear fuel for a facility seeking a license extension shall 
        address the impacts of continued operations over the period for 
        which approval is sought. 
           Sec. 5.  [PERSONS LIVING NEAR A NUCLEAR FACILITY; HEALTH 
        STUDY.] 
           The commissioner of health shall review data collected by 
        the department, and in the context of other relevant information 
        developed by the National Institutes of Health and other 
        entities, report to the legislature by January 1, 2004, on 
        whether a further health study funded by the owner of the 
        Prairie Island nuclear facility is necessary. 
           Sec. 6.  [EFFECTIVE DATE.] 
           This article is effective the day following final enactment.

                                   ARTICLE 2
                          RENEWABLE ENERGY DEVELOPMENT
           Section 1.  Minnesota Statutes 2002, section 116C.779, is 
        amended to read: 
           116C.779 [FUNDING FOR RENEWABLE DEVELOPMENT.] 
           Subdivision 1.  [RENEWABLE DEVELOPMENT ACCOUNT.] (a) The 
        public utility that operates owns the Prairie Island nuclear 
        generating plant must transfer to a renewable development 
        account $500,000 each year for each dry cask containing spent 
        fuel that is located at the independent spent fuel storage 
        installation at Prairie Island after January 1, 1999 $16,000,000 
        annually each year the plant is in operation, and $7,500,000 
        each year the plant is not in operation if ordered by the 
        commission pursuant to paragraph (c).  The fund transfer must be 
        made if nuclear waste is stored in a dry cask at the independent 
        spent fuel storage facility at Prairie Island for any part of a 
        year.  Funds in the account may be expended only for development 
        of renewable energy sources. Preference must be given to 
        development of renewable energy source projects located within 
        the state. 
           (b) Expenditures from the account may only be made after 
        approval by order of the public utilities commission upon a 
        petition by the public utility.  
           (c) After discontinuation of operation of the Prairie 
        Island nuclear plant and each year spent nuclear fuel is stored 
        in dry cask at the Prairie Island facility, the commission shall 
        require the public utility to pay $7,500,000 for any year in 
        which the commission finds, by the preponderance of the 
        evidence, that the public utility did not make a good faith 
        effort to remove the spent nuclear fuel stored at Prairie Island 
        to a permanent or interim storage site out of the state.  This 
        determination shall be made at least every two years. 
           Subd. 2.  [RENEWABLE ENERGY PRODUCTION INCENTIVE.] (a) 
        Until January 1, 2018, up to $6,000,000 annually must be 
        allocated from available funds in the account to fund renewable 
        energy production incentives.  $4,500,000 of this annual amount 
        is for incentives for up to 100 megawatts of electricity 
        generated by wind energy conversion systems that are eligible 
        for the incentives under section 216C.41.  The balance of this 
        amount, up to $1,500,000 annually, may be used for production 
        incentives for on-farm biogas recovery facilities that are 
        eligible for the incentive under section 216C.41 or for 
        production incentives for other renewables, to be provided in 
        the same manner as under section 216C.41.  Any portion of the 
        $6,000,000 not expended in any calendar year for the incentive 
        is available for other spending purposes under this section.  
        This subdivision does not create an obligation to contribute 
        funds to the account.  
           (b) The department of commerce shall determine eligibility 
        of projects under section 216C.41 for the purposes of this 
        subdivision.  At least quarterly, the department of commerce 
        shall notify the public utility of the name and address of each 
        eligible project owner and the amount due to each project under 
        section 216C.41.  The public utility shall make payments within 
        15 working days after receipt of notification of payments due. 
           Sec. 2.  [216B.013] [HYDROGEN ENERGY ECONOMY GOAL.] 
           It is a goal of this state that Minnesota move to hydrogen 
        as an increasing source of energy for its electrical power, 
        heating, and transportation needs. 
           Sec. 3.  Minnesota Statutes 2002, section 216B.1691, is 
        amended to read: 
           216B.1691 [RENEWABLE ENERGY OBJECTIVES.] 
           Subdivision 1.  [DEFINITIONS.] (a) Unless otherwise 
        specified in law, "eligible energy technology" means an energy 
        technology that: 
           (1) generates electricity from the following renewable 
        energy sources:  solar,; wind,; hydroelectric with a capacity of 
        less than 60 megawatts,; hydrogen, provided that after January 
        1, 2010, the hydrogen must be generated from the resources 
        listed in this clause; or biomass, which includes an energy 
        recovery facility used to capture the heat value of mixed 
        municipal solid waste or refuse-derived fuel from mixed 
        municipal solid waste as a primary fuel; and 
           (2) was not mandated by state law Laws 1994, chapter 641, 
        or by commission order enacted or issued pursuant to that 
        chapter prior to August 1, 2001. 
           (b) "Electric utility" means a public utility providing 
        electric service, a generation and transmission cooperative 
        electric association, or a municipal power agency. 
           (c) "Total retail electric sales" means the kilowatt-hours 
        of electricity sold in a year by an electric utility to retail 
        customers of the electric utility or to a distribution utility 
        for distribution to the retail customers of the distribution 
        utility. 
           Subd. 2.  [ELIGIBLE ENERGY OBJECTIVES.] (a) Each electric 
        utility shall make a good faith effort to generate or procure 
        sufficient electricity generated by an eligible energy 
        technology to provide its retail consumers, or the retail 
        members customers of a distribution utility to which the 
        electric utility provides wholesale electric service, so that: 
           (1) commencing in 2005, at least one percent of the 
        electric energy provided to those retail customers utility's 
        total retail electric sales is generated by eligible energy 
        technologies; 
           (2) the amount provided under clause (1) is increased by 
        one percent of the utility's total retail electric sales each 
        year until 2015; and 
           (3) ten percent of the electric energy provided to retail 
        customers in Minnesota is generated by eligible energy 
        technologies; and.  
           (4) (b) Of the eligible energy technology generation 
        required under paragraph (a), clauses (1) and (2), at least not 
        less than 0.5 percent of the energy must be generated by biomass 
        energy technologies, including an energy recovery facility used 
        to capture the heat value of mixed municipal solid waste or 
        refuse-derived fuel from mixed municipal solid waste as a 
        primary fuel, by 2010 and one percent by 2015 2005.  By 2010, 
        one percent of the eligible technology generation required under 
        paragraph (a), clauses (1) and (2), shall be generated by 
        biomass energy technologies.  An energy recovery facility used 
        to capture the heat value of mixed municipal solid waste or 
        refuse-derived fuel from mixed municipal solid waste, with a 
        power sales agreement in effect as of the date of final 
        enactment of this act that terminates after December 31, 2010, 
        does not qualify as an eligible energy technology unless the 
        agreement provides for rate adjustment in the event the facility 
        qualifies as a renewable energy source. 
           (b) (c) By June 1, 2004, and as needed thereafter, the 
        commission shall issue an order detailing the criteria and 
        standards by which it will measure an electric utility's efforts 
        to meet the renewable energy objectives of this section to 
        determine whether the utility is making the required good faith 
        effort.  In this order, the commission shall include criteria 
        and standards that protect against undesirable impacts on the 
        reliability of the utility's system and economic impacts on the 
        utility's ratepayers and that consider technical feasibility. 
           (d) In its order under paragraph (c), the commission shall 
        provide for a weighted scale of how energy produced by various 
        eligible energy technologies shall count toward a utility's 
        objective.  In establishing this scale, the commission shall 
        consider the attributes of various technologies and fuels, and 
        shall establish a system that grants multiple credits toward the 
        objectives for those technologies and fuels the commission 
        determines is in the public interest to encourage. 
           Subd. 3.  [UTILITY PLANS FILED WITH THE COMMISSION.] (a) 
        Each electric utility shall report on its plans, activities, and 
        progress with regard to these objectives in their its filings 
        under section 216B.2422 or in a separate report submitted to the 
        commission every two years, whichever is more frequent, 
        demonstrating to the commission that the utility is making the 
        required good faith effort.  In its resource plan or a separate 
        report, each electric utility shall provide a description of: 
           (1) the status of the utility's renewable energy mix 
        relative to the good faith objective; 
           (2) efforts taken to meet the objective; 
           (3) any obstacles encountered or anticipated in meeting the 
        objective; and 
           (4) potential solutions to the obstacles. 
           (c) (b) The commission, in consultation with the 
        commissioner of commerce, shall compile the information provided 
        to the commission under paragraph (b) (a), and report to the 
        chairs of the house of representatives and senate committees 
        with jurisdiction over energy and environment policy issues as 
        to the progress of utilities in the state in increasing the 
        amount of renewable energy provided to retail customers, with 
        any recommendations for regulatory or legislative action, by 
        January 15, 2002 of each odd-numbered year. 
           Subd. 4.  [RENEWABLE ENERGY CREDITS.] (a) To facilitate 
        compliance with this section, the commission, by rule or order, 
        may establish a program for tradable credits for electricity 
        generated by an eligible energy technology.  In doing so, the 
        commission shall implement a system that constrains or limits 
        the cost of credits, taking care to ensure that such a system 
        does not undermine the market for those credits. 
           (b) In lieu of generating or procuring energy directly to 
        satisfy the renewable energy objective of this section, an 
        electric utility may purchase sufficient renewable energy 
        credits, issued pursuant to this subdivision, to meet its 
        objective. 
           (c) Upon the passage of a renewable energy standard, 
        portfolio, or objective in a bordering state that includes a 
        similar definition of eligible energy technology or renewable 
        energy, the commission may facilitate the trading of renewable 
        energy credits between states. 
           Subd. 5.  [TECHNOLOGY BASED ON FUEL COMBUSTION.] (a) 
        Electricity produced by fuel combustion may only count towards a 
        utility's objectives if the generation facility: 
           (1) was constructed in compliance with new source 
        performance standards promulgated under the federal Clean Air 
        Act for a generation facility of that type; or 
           (2) employs the maximum achievable or best available 
        control technology available for a generation facility of that 
        type. 
           (b) An eligible energy technology may blend or co-fire a 
        fuel listed in subdivision 1, paragraph (a), clause (1), with 
        other fuels in the generation facility, but only the percentage 
        of electricity that is attributable to a fuel listed in that 
        clause can be counted towards an electric utility's renewable 
        energy objectives. 
           Subd. 6.  [ELECTRIC UTILITY THAT OWNS A NUCLEAR GENERATION 
        FACILITY.] (a) An electric utility that owns a nuclear 
        generation facility, as part of its good-faith effort under this 
        subdivision and subdivision 2, shall deploy an additional 300 
        megawatts of nameplate capacity of wind energy conversion 
        systems by 2010, beyond the amount of wind energy capacity to 
        which the utility is required by law or commission order as of 
        May 1, 2003.  At least 100 megawatts of this capacity is to be 
        wind energy conversion systems of two megawatts or less, which 
        shall not be eligible for the production incentive under section 
        216C.41.  To the greatest extent technically feasible and 
        economic, these 300 megawatts of wind energy capacity are to be 
        distributed geographically throughout the state.  The utility 
        may opt to own, construct, and operate up to 100 megawatts of 
        this wind energy capacity, except that the utility may not own, 
        construct, or operate any of the facilities that are under two 
        megawatts of nameplate capacity.  The deployment of the wind 
        energy capacity under this subdivision must be consistent with 
        the outcome of the engineering study required under section 21. 
           (b) The renewable energy objective set forth in subdivision 
        2 shall be a requirement for the public utility that owns the 
        Prairie Island nuclear generation plant.  The objective is a 
        requirement subject to resource planning and least cost planning 
        requirements in section 216B.2422, unless implementation of the 
        objective can reasonably be shown to jeopardize the reliability 
        of the electric system.  The least cost planning analysis must 
        include the costs of ancillary services and other necessary 
        generation and transmission upgrades. 
           (c) Also as part of its good faith effort under this 
        section, the utility that owns a nuclear generation facility is 
        to enter into a power purchase agreement by January 1, 2004, for 
        ten to 20 megawatts of biomass energy and capacity at an 
        all-inclusive price not to exceed $55 per megawatt-hour, for a 
        project described in section 216B.2424, subdivision 5, paragraph 
        (e), clause (2).  The project must be operational and producing 
        energy by June 30, 2005. 
           Sec. 4.  [216B.1693] [CLEAN ENERGY TECHNOLOGY.] 
           (a) If the commission finds that a clean energy technology 
        is or is likely to be a least cost resource, including the costs 
        of ancillary services and other generation and transmission 
        upgrades necessary, the utility that owns a nuclear generating 
        facility shall supply at least two percent of the electric 
        energy provided to retail customers from clean energy technology.
           (b) Electric energy required by this section shall be 
        supplied by the innovative energy project defined in article 4, 
        section 1, subdivision 1, unless the commission finds doing so 
        contrary to the public interest.  
           (c) For purposes of this section, "clean energy technology" 
        means a technology utilizing coal as a primary fuel in a highly 
        efficient combined-cycle configuration with significantly 
        reduced sulfur dioxide, nitrogen oxide, particulate, and mercury 
        emissions from those of traditional technologies. 
           (d) This section expires January 1, 2012. 
           Sec. 5.  Minnesota Statutes 2002, section 216B.241, is 
        amended by adding a subdivision to read: 
           Subd. 6.  [RENEWABLE ENERGY RESEARCH.] (a) A public utility 
        that owns a nuclear generation facility in the state shall spend 
        five percent of the total amount that utility is required to 
        spend under this section to support basic and applied research 
        and demonstration activities at the University of Minnesota 
        Initiative for Renewable Energy and the Environment for the 
        development of renewable energy sources and technologies.  The 
        utility shall transfer the required amount to the University of 
        Minnesota on or before July 1 of each year and that annual 
        amount shall be deducted from the amount of money the utility is 
        required to spend under this section.  The University of 
        Minnesota shall transfer at least ten percent of these funds to 
        at least one rural campus or experiment station. 
           (b) Research funded under this subdivision shall include: 
           (1) development of environmentally sound production, 
        distribution, and use of energy, chemicals, and materials from 
        renewable sources; 
           (2) processing and utilization of agricultural and forestry 
        plant products and other bio-based, renewable sources as a 
        substitute for fossil-fuel-based energy, chemicals, and 
        materials using a variety of means including biocatalysis, 
        biorefining, and fermentation; 
           (3) conversion of state wind resources to hydrogen for 
        energy storage and transportation to areas of energy demand; 
           (4) improvements in scalable hydrogen fuel cell 
        technologies; and 
           (5) production of hydrogen from bio-based, renewable 
        sources; and sequestration of carbon. 
           (c) Notwithstanding other law to the contrary, the utility 
        may, but is not required to, spend more than two percent of its 
        gross operating revenues from service provided in this state 
        under this section or section 216B.2411. 
           (d) This subdivision expires June 30, 2008.  
           Sec. 6.  Minnesota Statutes 2002, section 216B.2411, is 
        amended to read: 
           216B.2411 [DISTRIBUTED ENERGY RESOURCES.] 
           Subdivision 1.  [GENERATION PROJECTS.] (a) To the extent 
        that cost-effective projects are available in the service 
        territory of a utility or association providing conservation 
        services under section 216B.241, the utility or association 
        shall Any municipality or rural electric association providing 
        electric service and subject to section 216B.241 that is meeting 
        the objectives under section 216B.1691 may, and each public 
        utility may, use five percent of the total amount to be spent on 
        energy conservation improvements under section 216B.241, on: 
           (1) projects in Minnesota to construct an electric 
        generating facility that utilizes eligible renewable fuels 
        energy sources as defined in section 216B.2422, subdivision 1 2, 
        such as methane or other combustible gases derived from the 
        processing of plant or animal wastes, biomass fuels such as 
        short-rotation woody or fibrous agricultural crops, or other 
        renewable fuel, as its primary fuel source; or 
           (2) projects in Minnesota to install a distributed 
        generation facility of ten megawatts or less of interconnected 
        capacity that is fueled by natural gas, renewable fuels, or 
        another similarly clean fuel.  
           (b) For public utilities, as defined under section 216B.02, 
        subdivision 4, projects under this section must be considered 
        energy conservation improvements as defined in section 
        216B.241.  For cooperative electric associations and municipal 
        utilities, projects under this section must be considered 
        load-management activities described in section 216B.241, 
        subdivision 1, paragraph (i).  
           (d) This section expires May 30, 2006.  
           Subd. 2.  [DEFINITIONS.] (a) For the purposes of this 
        section, the terms defined in this subdivision and section 
        216B.241, subdivision 1, have the meanings given them. 
           (b) "Eligible renewable energy sources" means fuels and 
        technologies to generate electricity through the use of any of 
        the resources listed in section 216B.1691, subdivision 1, 
        paragraph (a), clause (1), except that the term "biomass" has 
        the meaning provided under paragraph (c). 
           (c) "Biomass" includes: 
           (1) methane or other combustible gases derived from the 
        processing of plant or animal material; 
           (2) alternative fuels derived from soybean and other 
        agricultural plant oils or animal fats; 
           (3) combustion of barley hulls, corn, soy-based products, 
        or other agricultural products; 
           (4) wood residue from the wood products industry in 
        Minnesota or other wood products such as short-rotation woody or 
        fibrous agricultural crops; and 
           (5) landfill gas, mixed municipal solid waste, and 
        refuse-derived fuel from mixed municipal solid waste.  
           Subd. 3.  [OTHER PROVISIONS.] (a) Electricity generated by 
        a facility constructed with funds provided under this section 
        and using an eligible renewable energy source may be counted 
        towards the renewable energy objectives in section 216B.1691, 
        subject to the provisions of that section. 
           (b) Two or more entities may pool resources under this 
        section to provide assistance jointly to proposed eligible 
        renewable energy projects.  The entities shall negotiate and 
        agree among themselves for allocation of benefits associated 
        with a project, such as the ability to count energy generated by 
        a project toward a utility's renewable energy objectives under 
        section 216B.1691.  The entities shall provide a summary of the 
        allocation of benefits to the commissioner.  A utility may spend 
        funds under this section for projects in Minnesota that are 
        outside the service territory of the utility. 
           Sec. 7.  Minnesota Statutes 2002, section 216B.2424, 
        subdivision 5, is amended to read: 
           Subd. 5.  [MANDATE.] (a) A public utility, as defined in 
        section 216B.02, subdivision 4, that operates a nuclear-powered 
        electric generating plant within this state must construct and 
        operate, purchase, or contract to construct and operate (1) by 
        December 31, 1998, 50 megawatts of electric energy installed 
        capacity generated by farm-grown closed-loop biomass scheduled 
        to be operational by December 31, 2001; and (2) by December 31, 
        1998, an additional 75 megawatts of installed capacity so 
        generated scheduled to be operational by December 31, 2002.  
           (b) Of the 125 megawatts of biomass electricity installed 
        capacity required under this subdivision, no more than 50 55 
        megawatts of this capacity may be provided by a facility that 
        uses poultry litter as its primary fuel source and any such 
        facility:  
           (1) need not use biomass that complies with the definition 
        in subdivision 1; 
           (2) must enter into a contract with the public utility for 
        such capacity, that has an average purchase price per megawatt 
        hour over the life of the contract that is equal to or less than 
        the average purchase price per megawatt hour over the life of 
        the contract in contracts approved by the public utilities 
        commission before April 1, 2000, to satisfy the mandate of this 
        section, and file that contract with the public utilities 
        commission prior to September 1, 2000; and 
           (3) must schedule such capacity to be operational by 
        December 31, 2002.  
           (c) Of the total 125 megawatts of biomass electric energy 
        installed capacity required under this section, no more than 75 
        megawatts may be provided by a single project.  
           (d) Of the 75 megawatts of biomass electric energy 
        installed capacity required under paragraph (a), clause (2), no 
        more than 25 33 megawatts of this capacity may be provided by a 
        St. Paul district heating and cooling system cogeneration 
        facility utilizing waste wood as a primary fuel source.  The St. 
        Paul district heating and cooling system cogeneration facility 
        need not use biomass that complies with the definition in 
        subdivision 1.  
           (e) The public utility must accept and consider on an equal 
        basis with other biomass proposals: 
           (1) a proposal to satisfy the requirements of this section 
        that includes a project that exceeds the megawatt capacity 
        requirements of either paragraph (a), clause (1) or (2), and 
        that proposes to sell the excess capacity to the public utility 
        or to other purchasers; and 
           (2) a proposal for a new facility to satisfy more than ten 
        but not more than 20 megawatts of the electrical generation 
        requirements by a small business-sponsored independent power 
        producer facility to be located within the northern quarter of 
        the state, which means the area located north of Constitutional 
        Route No. 8 as described in section 161.114, subdivision 2, and 
        that utilizes biomass residue wood, sawdust, bark, chipped wood, 
        or brush to generate electricity.  A facility described in this 
        clause is not required to utilize biomass complying with the 
        definition in subdivision 1, but must have the capacity required 
        by this clause operational by December 31, 2002. 
           (f) If a public utility files a contract with the 
        commission for electric energy installed capacity that uses 
        poultry litter as its primary fuel source, the commission must 
        do a preliminary review of the contract to determine if it meets 
        the purchase price criteria provided in paragraph (b), clause 
        (2), of this subdivision.  The commission shall perform its 
        review and advise the parties of its determination within 30 
        days of filing of such a contract by a public utility.  A public 
        utility may submit by September 1, 2000, a revised contract to 
        address the commission's preliminary determination.  
           (g) The commission shall finally approve, modify, or 
        disapprove no later than July 1, 2001, all contracts submitted 
        by a public utility as of September 1, 2000, to meet the mandate 
        set forth in this subdivision.  
           (h) If a public utility subject to this section exercises 
        an option to increase the generating capacity of a project in a 
        contract approved by the commission prior to April 25, 2000, to 
        satisfy the mandate in this subdivision, the public utility must 
        notify the commission by September 1, 2000, that it has 
        exercised the option and include in the notice the amount of 
        additional megawatts to be generated under the option 
        exercised.  Any review by the commission of the project after 
        exercise of such an option shall be based on the same criteria 
        used to review the existing contract. 
           (i) A facility specified in this subdivision qualifies for 
        exemption from property taxation under section 272.02, 
        subdivision 43. 
           Sec. 8.  Minnesota Statutes 2002, section 216B.2425, is 
        amended by adding a subdivision to read: 
           Subd. 7.  [TRANSMISSION NEEDED TO SUPPORT RENEWABLE 
        RESOURCES.] Each entity subject to this section shall determine 
        necessary transmission upgrades to support development of 
        renewable energy resources required to meet objectives under 
        section 216B.1691 and shall include those upgrades in its report 
        under subdivision 2. 
           Sec. 9.  Minnesota Statutes 2002, section 216C.41, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [DEFINITIONS.] (a) The definitions in this 
        subdivision apply to this section. 
           (b) "Qualified hydroelectric facility" means a 
        hydroelectric generating facility in this state that: 
           (1) is located at the site of a dam, if the dam was in 
        existence as of March 31, 1994; and 
           (2) begins generating electricity after July 1, 1994, or 
        generates electricity after substantial refurbishing of a 
        facility that begins after July 1, 2001. 
           (c) "Qualified wind energy conversion facility" means a 
        wind energy conversion system in this state that: 
           (1) produces two megawatts or less of electricity as 
        measured by nameplate rating and begins generating electricity 
        after December 31, 1996, and before July 1, 1999; 
           (2) begins generating electricity after June 30, 1999, 
        produces two megawatts or less of electricity as measured by 
        nameplate rating, and is: 
           (i) located within one county and owned by a natural person 
        who an entity that is not prohibited from owning agricultural 
        land under section 500.24 that owns the land where the facility 
        is sited; 
           (ii) owned by a Minnesota small business as defined in 
        section 645.445; 
           (iii) owned by a Minnesota nonprofit organization; or 
           (iv) owned by a tribal council if the facility is located 
        within the boundaries of the reservation; or 
           (v) owned by a Minnesota municipal utility or a Minnesota 
        cooperative electric association; or 
           (vi) owned by a Minnesota political subdivision or local 
        government, including, but not limited to, a county, statutory 
        or home rule charter city, town, school district, or any other 
        local or regional governmental organization such as a board, 
        commission, or association; or 
           (3) begins generating electricity after June 30, 1999, 
        produces seven megawatts or less of electricity as measured by 
        nameplate rating, and: 
           (i) is owned by a cooperative organized under chapter 
        308A other than a Minnesota cooperative electric association; 
        and 
           (ii) all shares and membership in the cooperative are held 
        by natural persons or estates, at least 51 percent of whom 
        reside in a county or contiguous to a county where the wind 
        energy production facilities of the cooperative are located an 
        entity that is not prohibited from owning agricultural land 
        under section 500.24. 
           (d) "Qualified on-farm biogas recovery facility" means an 
        anaerobic digester system that: 
           (1) is located at the site of an agricultural operation; 
           (2) is owned by a natural person who an entity that is not 
        prohibited from owning agricultural land under section 500.24 
        that owns or rents the land where the facility is located; and 
           (3) begins generating electricity after July 1, 2001.  
           (e) "Anaerobic digester system" means a system of 
        components that processes animal waste based on the absence of 
        oxygen and produces gas used to generate electricity. 
           Sec. 10.  Minnesota Statutes 2002, section 216C.41, 
        subdivision 2, is amended to read: 
           Subd. 2.  [INCENTIVE PAYMENT; APPROPRIATION.] (a) Incentive 
        payments must be made according to this section to (1) a 
        qualified on-farm biogas recovery facility, (2) the owner or 
        operator of a qualified hydropower facility or qualified wind 
        energy conversion facility for electric energy generated and 
        sold by the facility, (3) a publicly owned hydropower facility 
        for electric energy that is generated by the facility and used 
        by the owner of the facility outside the facility, or (4) the 
        owner of a publicly owned dam that is in need of substantial 
        repair, for electric energy that is generated by a hydropower 
        facility at the dam and the annual incentive payments will be 
        used to fund the structural repairs and replacement of 
        structural components of the dam, or to retire debt incurred to 
        fund those repairs. 
           (b) Payment may only be made upon receipt by the 
        commissioner of finance of an incentive payment application that 
        establishes that the applicant is eligible to receive an 
        incentive payment and that satisfies other requirements the 
        commissioner deems necessary.  The application must be in a form 
        and submitted at a time the commissioner establishes.  
           (c) There is annually appropriated from the general fund to 
        the commissioner of commerce sums sufficient to make the 
        payments required under this section, other than the amounts 
        funded by the renewable development account as specified in 
        subdivision 5a. 
           Sec. 11.  Minnesota Statutes 2002, section 216C.41, 
        subdivision 3, is amended to read: 
           Subd. 3.  [ELIGIBILITY WINDOW.] Payments may be made under 
        this section only for electricity generated: 
           (1) from a qualified hydroelectric facility that is 
        operational and generating electricity before December 31, 2005; 
           (2) from a qualified wind energy conversion facility that 
        is operational and generating electricity before January 1, 2005 
        2007; or 
           (3) from a qualified on-farm biogas recovery facility from 
        July 1, 2001, through December 31, 2015 2017. 
           Sec. 12.  Minnesota Statutes 2002, section 216C.41, 
        subdivision 4, is amended to read: 
           Subd. 4.  [PAYMENT PERIOD.] (a) A facility may receive 
        payments under this section for a ten-year period.  No payment 
        under this section may be made for electricity generated: 
           (1) by a qualified hydroelectric facility after December 
        31, 2015 2017; 
           (2) by a qualified wind energy conversion facility after 
        December 31, 2015 2017; or 
           (3) by a qualified on-farm biogas recovery facility after 
        December 31, 2015.  
           (b) The payment period begins and runs consecutively from 
        the first year in which electricity generated from the facility 
        is eligible for incentive payment the date the facility begins 
        generating electricity or, in the case of refurbishment of a 
        hydropower facility, after substantial repairs to the hydropower 
        facility dam funded by the incentive payments are initiated. 
           Sec. 13.  Minnesota Statutes 2002, section 216C.41, 
        subdivision 5, is amended to read: 
           Subd. 5.  [AMOUNT OF PAYMENT; WIND FACILITIES LIMIT.] (a) 
        An incentive payment is based on the number of kilowatt hours of 
        electricity generated. The amount of the payment is: 
           (1) for a facility described under subdivision 2, paragraph 
        (a), clause (4), 1.0 cent per kilowatt hour; and 
           (2) for all other facilities, 1.5 cents per kilowatt hour.  
        For electricity generated by qualified wind energy conversion 
        facilities, the incentive payment under this section is limited 
        to no more than 100 megawatts of nameplate capacity.  During any 
        period in which qualifying claims for incentive payments exceed 
        100 megawatts of nameplate capacity, the payments must be made 
        to producers in the order in which the production capacity was 
        brought into production.  
           (b) For wind energy conversion systems installed and 
        contracted for after January 1, 2002, the total size of a wind 
        energy conversion system under this section must be determined 
        according to this paragraph.  Unless the systems are 
        interconnected with different distribution systems, the 
        nameplate capacity of one wind energy conversion system must be 
        combined with the nameplate capacity of any other wind energy 
        conversion system that is: 
           (1) located within five miles of the wind energy conversion 
        system; 
           (2) constructed within the same calendar year as the wind 
        energy conversion system; and 
           (3) under common ownership. 
        In the case of a dispute, the commissioner of commerce shall 
        determine the total size of the system, and shall draw all 
        reasonable inferences in favor of combining the systems. 
           (c) In making a determination under paragraph (b), the 
        commissioner of commerce may determine that two wind energy 
        conversion systems are under common ownership when the 
        underlying ownership structure contains similar persons or 
        entities, even if the ownership shares differ between the two 
        systems.  Wind energy conversion systems are not under common 
        ownership solely because the same person or entity provided 
        equity financing for the systems. 
           Sec. 14.  Minnesota Statutes 2002, section 216C.41, is 
        amended by adding a subdivision to read: 
           Subd. 5a.  [RENEWABLE DEVELOPMENT ACCOUNT.] The department 
        of commerce shall authorize payment of the renewable energy 
        production incentive to wind energy conversion systems for 100 
        megawatts of nameplate capacity in addition to the capacity 
        authorized under subdivision 5 and to on-farm biogas recovery 
        facilities.  Payment of the incentive shall be made from the 
        renewable energy development account as provided under section 
        116C.779, subdivision 2. 
           Sec. 15.  Minnesota Statutes 2002, section 216C.41, is 
        amended by adding a subdivision to read: 
           Subd. 7.  [ELIGIBILITY PROCESS.] (a) A qualifying project 
        is eligible for the incentive on the date the commissioner 
        receives: 
           (1) an application for payment of the incentive; 
           (2) one of the following: 
           (i) a copy of a signed power purchase agreement; 
           (ii) a copy of a binding agreement other than a power 
        purchase agreement to sell electricity generated by the project 
        to a third person; or 
           (iii) if the project developer or owner will sell 
        electricity to its own members or customers, a copy of the 
        purchase order for equipment to construct the project with a 
        delivery date and a copy of a signed receipt for a nonrefundable 
        deposit; and 
           (3) any other information the commissioner deems necessary 
        to determine whether the proposed project qualifies for the 
        incentive under this section.  
           (b) The commissioner shall determine whether a project 
        qualifies for the incentive and respond in writing to the 
        applicant approving or denying the application within 15 working 
        days of receipt of the information required in paragraph (a).  A 
        project that is not operational within 18 months of receipt of a 
        letter of approval is no longer approved for the incentive.  The 
        commissioner shall notify an applicant of potential loss of 
        approval not less than 60 days prior to the end of the 18-month 
        period.  Eligibility for a project that loses approval may be 
        reestablished as of the date the commissioner receives a new 
        completed application. 
           Sec. 16.  [216B.2424] [Subd. 5a.] [REDUCTION OF BIOMASS MANDATE.] 
           Notwithstanding subdivision 5, the 
        biomass electric energy mandate shall be reduced from 125 
        megawatts to 110 megawatts.  The public utilities commission 
        shall approve a request pending before the public utilities 
        commission as of May 15, 2003, for an amendment and assignment 
        of a contract for power from a facility that uses 
        short-rotation, woody crops as its primary fuel previously 
        approved to satisfy a portion of the biomass mandate if the 
        developer of the project agrees to reduce the size of its 
        project from 50 megawatts to 35 megawatts, while maintaining a 
        price for energy at or below the current contract price. 
           Sec. 17.  [RENEWABLE DEVELOPMENT FUND ADMINISTRATION.] 
           The public utilities commission may review the 
        appropriateness of the transfer of the administration of the 
        renewable development account under Minnesota Statutes, section 
        116C.779, to an independent administrator initially selected by 
        the commissioner of commerce and answerable to a board of 
        directors that includes representatives from the public utility 
        currently administering the fund, environmental organizations, 
        legislators, representatives of residential and business 
        consumers, the Mdewakanton Dakota community, and other affected 
        communities.  Upon petition, the commission may approve the 
        transfer if, upon completion of the review, the transfer is 
        consistent with the public interest. 
           Sec. 18.  [HYDROGEN ECONOMY RESEARCH.] 
           (a) Notwithstanding Minnesota Statutes, section 116C.779, 
        subdivision 1, paragraph (b), $10,000,000 from the renewable 
        development account established in Minnesota Statutes, section 
        116C.779, from unobligated funds in the account as of June 30, 
        2003, shall be distributed to the University of Minnesota 
        Initiative for Renewable Energy and the Environment to support 
        basic and applied research and demonstration activities at the 
        university.  These funds shall be transferred to the University 
        of Minnesota on or before July 1, 2003.  The university shall 
        ensure that at least $3,000,000 of these funds are available for 
        basic and applied research, for construction and deployment of 
        research technologies, or for other purposes in support of this 
        research, at one rural campus or experiment station. 
           (b) Research funded under this section must focus on: 
           (1) development of environmentally sound production, 
        distribution, and use of energy, chemicals, and materials from 
        renewable resources; 
           (2) processing and utilization of agricultural and forestry 
        plant products and other bio-based, renewable sources as a 
        substitute for fossil-fuel-based energy, chemicals, and 
        materials using a variety of means including biocatalysis, 
        biorefining, and fermentation; 
           (3) conversion of state wind resources to hydrogen for 
        energy storage and transportation to areas of energy demand; 
           (4) improvements in scalable hydrogen fuel cell 
        technologies; and 
           (5) production of hydrogen from bio-based, renewable 
        sources; and sequestration of carbon. 
           Sec. 19.  [DEPARTMENT OF TRADE AND ECONOMIC DEVELOPMENT; 
        PROGRAM DEVELOPMENT.] 
           Subdivision 1.  [DEVELOPMENT OF BUSINESSES ENGAGED IN 
        HYDROGEN PRODUCTION.] The department of trade and economic 
        development must develop a targeted program to promote and 
        encourage the development and attraction of businesses engaged 
        in the biocatalysis of agricultural and forestry plant products 
        for the production of hydrogen, the manufacture of hydrogen fuel 
        cells, and hydrogen electrolysis from renewable energy sources.  
        The program may make use of existing departmental programs, 
        either alone or in combination.  The department shall report to 
        the legislature by January 15, 2004, on legislative changes or 
        additional funding needed, if any, to accomplish the purposes of 
        this section.  
           Subd. 2.  [ENERGY INNOVATION ZONES.] (a) The commissioner 
        of trade and economic development, in consultation with the 
        commissioners of commerce and revenue, shall develop a plan to 
        designate not more than three energy innovation zones to spur 
        the development of fuel cells, fuel cell components, hydrogen 
        infrastructure, and other energy efficiency and renewable energy 
        technologies in the state.  In developing the criteria for the 
        designations, the commissioner shall consider: 
           (1) the availability of business, academic, and government 
        partners; 
           (2) the likelihood of establishing a distributed, renewable 
        energy microgrid to power the zone, providing below-market 
        electricity and heat to businesses from within the zone; 
           (3) the prospect of tenants for the zone that will 
        represent net new jobs to the state; and 
           (4) the likelihood of the production, storage, 
        distribution, and use of hydrogen, including its use in fuel 
        cells, for electricity and heat. 
           (b) Energy under paragraph (a), clause (2), must come from 
        one or more of the following renewable sources:  wind, water, 
        sun, biomass, not including municipal solid waste, or hydrogen 
        reformed from natural gas up to 2010. 
           (c) The plan must allow for interested parties to form 
        energy innovation cooperatives.  In addition, the commissioner 
        must consider the feasibility of the sale of energy innovation 
        bonds for the construction of qualifying facilities. 
           (d) In drafting the plan, the commissioner must consider 
        incentives for investment in the zone, including: 
           (1) subsidization of construction of qualifying facilities; 
           (2) long-term contracts for market-rate heat and power; 
           (3) streamlined interconnection to the existing power grid; 
           (4) exemptions from property tax; 
           (5) expedited permitting; 
           (6) methods for providing technical assistance; and 
           (7) other methods of encouraging the development and use of 
        fuel cell and hydrogen generation technologies. 
           (e) The commissioner shall report to the legislature by 
        January 15, 2004, on legislative changes and necessary funding 
        to accomplish the purposes of this subdivision. 
           Sec. 20.  [DEMONSTRATION PROJECT.] 
           (a) The department of commerce, in cooperation with the 
        department of trade and economic development, must develop and 
        issue a request for proposal for the construction of a 
        hydrogen-to-electricity demonstration project with the following 
        components:  
           (1) commercial-scale windmill-powered electrolysis of water 
        to hydrogen; 
           (2) on-site storage of hydrogen and fuel cells for 
        hydrogen-to-electricity conversion to maintain the supply of 
        electricity in the absence of wind; 
           (3) a hydrogen pipeline of less than ten miles to a public 
        facility demonstration site; and 
           (4) a public facility with on-site hydrogen fuel cells 
        providing hydrogen to electricity and, if practicable, 
        heating/cooling function.  
           (b) For purposes of this section, a "public facility" is a 
        municipal building, public school, state college or university, 
        or other public building. 
           Sec. 21.  [INDEPENDENT STUDY ON INTERMITTENT RESOURCES.] 
           The commission shall order the electric utility subject to 
        Minnesota Statutes, section 216B.1691, subdivision 7, to 
        contract with a firm selected by the commissioner of commerce 
        for an independent engineering study of the impacts of 
        increasing wind capacity on its system above the 825 megawatts 
        of nameplate wind energy capacity to which the utility is 
        already committed, to evaluate options available to manage the 
        intermittent nature of this renewable resource.  The study shall 
        be completed by June 1, 2004, and incorporated into the 
        utility's next resource plan filing.  The costs of the study, 
        options pursued by the utility to manage the intermittent nature 
        of wind energy, and the costs of complying with Minnesota 
        Statutes, section 216B.1691, subdivision 7, shall be recoverable 
        under Minnesota Statutes, section 216B.1645. 
           Sec. 22.  [EFFECTIVE DATE.] 
           This article is effective the day following final enactment.

                                   ARTICLE 3
                                OTHER PROVISIONS
           Section 1.  Minnesota Statutes 2002, section 216B.095, is 
        amended to read: 
           216B.095 [DISCONNECTION DURING COLD WEATHER.] 
           The commission shall amend its rules governing 
        disconnection of residential utility customers who are unable to 
        pay for utility service during cold weather to include the 
        following: 
           (1) coverage of customers whose household income is less 
        than 50 percent of the state median income; 
           (2) a requirement that a customer who pays the utility at 
        least ten percent of the customer's income or the full amount of 
        the utility bill, whichever is less, in a cold weather month 
        cannot be disconnected during that month.  The customer's income 
        means the actual monthly income of the customer or the average 
        monthly income of the customer computed on an annual calendar 
        year, whichever is less, and does not include any amount 
        received for energy assistance; 
           (3) that the ten percent figure in clause (2) must be 
        prorated between energy providers proportionate to each 
        provider's share of the customer's total energy costs where the 
        customer receives service from more than one provider; 
           (4) verification of income by the local energy assistance 
        provider or the utility, unless the customer is automatically 
        eligible for protection against disconnection as a recipient of 
        any form of public assistance, including energy assistance, that 
        uses income eligibility in an amount at or below the income 
        eligibility in clause (1); 
           (5) a requirement that the customer receive referrals to 
        energy assistance, weatherization, conservation, or other 
        programs likely to reduce the customer's energy bills; and 
           (6) a requirement that customers who have demonstrated an 
        inability to pay on forms provided for that purpose by the 
        utility, and who make reasonably timely payments to the utility 
        under a payment plan that considers the financial resources of 
        the household, cannot be disconnected from utility service from 
        October 15 through April 15.  A customer who is receiving energy 
        assistance is deemed to have demonstrated an inability to pay. 
           For the purposes of this section, "disconnection" includes 
        a service or load limiter or any device that limits or 
        interrupts electric service in any way. 
           Sec. 2.  Minnesota Statutes 2002, section 216B.097, is 
        amended by adding a subdivision to read: 
           Subd. 4.  [APPLICATION TO SERVICE LIMITERS.] For the 
        purposes of this section, "disconnection" includes a service or 
        load limiter or any device that limits or interrupts electric 
        service in any way. 
           Sec. 3.  [216B.0975] [DISCONNECTION DURING EXTREME HEAT 
        CONDITIONS; RECONNECTION.] 
           A utility may not effect an involuntary disconnection of 
        residential services in affected counties when an excessive heat 
        watch, heat advisory, or excessive heat warning issued by the 
        National Weather Service is in effect.  For purposes of this 
        section, "utility" means a public utility providing electric 
        service, municipal utility, or cooperative electric association. 
           Sec. 4.  Minnesota Statutes 2002, section 216B.241, 
        subdivision 1b, is amended to read: 
           Subd. 1b.  [CONSERVATION IMPROVEMENT BY COOPERATIVE 
        ASSOCIATION OR MUNICIPALITY.] (a) This subdivision applies to: 
           (1) a cooperative electric association that provides retail 
        service to its members; 
           (2) a municipality that provides electric service to retail 
        customers; and 
           (3) a municipality with gross operating revenues in excess 
        of $5,000,000 from sales of natural gas to retail customers.  
           (b) Each cooperative electric association and municipality 
        subject to this subdivision shall spend and invest for energy 
        conservation improvements under this subdivision the following 
        amounts: 
           (1) for a municipality, 0.5 percent of its gross operating 
        revenues from the sale of gas and 1.5 percent of its gross 
        operating revenues from the sale of electricity, excluding gross 
        operating revenues from electric and gas service provided in the 
        state to large electric customer facilities; and 
           (2) for a cooperative electric association, 1.5 percent of 
        its gross operating revenues from service provided in the state, 
        excluding gross operating revenues from service provided in the 
        state to large electric customer facilities indirectly through a 
        distribution cooperative electric association. 
           (c) Each municipality and cooperative electric association 
        subject to this subdivision shall identify and implement energy 
        conservation improvement spending and investments that are 
        appropriate for the municipality or association, except that a 
        municipality or association may not spend or invest for energy 
        conservation improvements that directly benefit a large electric 
        customer facility for which the commissioner has issued an 
        exemption under subdivision 1a, paragraph (b). 
           (d) Each municipality and cooperative electric association 
        subject to this subdivision may spend and invest annually up to 
        ten percent of the total amount required to be spent and 
        invested on energy conservation improvements under this 
        subdivision on research and development projects that meet the 
        definition of energy conservation improvement in subdivision 1 
        and that are funded directly by the municipality or cooperative 
        electric association.  
           (e) Load-management activities that do not reduce energy 
        use but that increase the efficiency of the electric system may 
        be used to meet the following percentage of the conservation 
        investment and spending requirements of this subdivision: 
           (1) 2002 - 90 percent; 
           (2) 2003 - 80 percent; 
           (3) 2004 - 65 percent; and 
           (4) 2005 and thereafter - 50 percent. 
           (f) A generation and transmission cooperative electric 
        association that provides energy services to cooperative 
        electric associations that provide electric service at retail to 
        consumers may invest in energy conservation improvements on 
        behalf of the associations it serves and may fulfill the 
        conservation, spending, reporting, and energy savings goals on 
        an aggregate basis.  A municipal power agency or other 
        not-for-profit entity that provides energy service to municipal 
        utilities that provide electric service at retail may invest in 
        energy conservation improvements on behalf of the municipal 
        utilities it serves and may fulfill the conservation, spending, 
        reporting, and energy savings goals on an aggregate basis, under 
        an agreement between the municipal power agency or 
        not-for-profit entity and each municipal utility for funding the 
        investments. 
           (g) By June 1, 2002, and every two years thereafter, each 
        municipality or cooperative shall file an overview of its 
        conservation improvement plan with the commissioner.  With this 
        overview, the municipality or cooperative shall also provide an 
        evaluation to the commissioner detailing its energy conservation 
        improvement spending and investments for the previous period.  
        The evaluation must briefly describe each conservation program 
        and must specify the energy savings or increased efficiency in 
        the use of energy within the service territory of the utility or 
        association that is the result of the spending and investments.  
        The evaluation must analyze the cost effectiveness of the 
        utility's or association's conservation programs, using a list 
        of baseline energy and capacity savings assumptions developed in 
        consultation with the department. 
        The commissioner shall review each evaluation and make 
        recommendations, where appropriate, to the municipality or 
        association to increase the effectiveness of conservation 
        improvement activities.  Up to three percent of a utility's 
        conservation spending obligation under this section may be used 
        for program pre-evaluation, testing, and monitoring and program 
        evaluation.  The overview filed by a municipality with less than 
        $2,500,000 in annual gross revenues from the retail sale of 
        electric service may consist of a letter from the governing 
        board of the municipal utility to the department providing the 
        amount of annual conservation spending required of that 
        municipality and certifying that the required amount has been 
        spent on conservation programs pursuant to this subdivision.  
           (h) The commissioner shall also review each evaluation for 
        whether a portion of the money spent on residential conservation 
        improvement programs is devoted to programs that directly 
        address the needs of renters and low-income persons unless an 
        insufficient number of appropriate programs are available.  For 
        the purposes of this subdivision and subdivision 2, "low-income" 
        means an income at or below 50 percent of the state median 
        income.  
           (i) As part of its spending for conservation improvement, a 
        municipality or association may contribute to the energy and 
        conservation account.  A municipality or association may propose 
        to the commissioner to designate that all or a portion of funds 
        contributed to the account be used for research and development 
        projects that can best be implemented on a statewide basis.  Any 
        amount contributed must be remitted to the commissioner by 
        February 1 of each year. 
           (j) A municipality may spend up to 50 percent of its 
        required spending under this section to refurbish an existing 
        district heating or cooling system.  This paragraph expires July 
        1, 2007. 
           Sec. 5.  [216B.361] [TOWNSHIP AGREEMENT WITH NATURAL GAS 
        UTILITY.] 
           A township may enter into an agreement with a public 
        utility providing natural gas services to provide services 
        within a designated portion or all of the township.  If a city 
        annexes township land for which a utility has an agreement with 
        a township to serve, the utility shall continue to have a 
        nonexclusive right to offer and provide service in the area 
        identified by the agreement with the township for the term of 
        that agreement, subject to the authority of the annexing city to 
        manage public rights-of-way within the city as provided in 
        sections 216B.36, 237.162, and 237.163. 
           Nothing in this section precludes a city from acquiring the 
        property of a public utility under sections 216B.45 to 216B.47 
        for the purpose of allowing the city to own and operate a 
        natural gas utility, or to extend natural gas and other utility 
        services into newly annexed areas. 
           Sec. 6.  Minnesota Statutes 2002, section 216C.051, 
        subdivision 3, is amended to read: 
           Subd. 3.  [FUTURE ENERGY SOLUTIONS; TECHNICAL AND ECONOMIC 
        ANALYSIS.] (a) In light of the electric energy guidelines 
        established in subdivision 7 and in light of existing 
        conservation improvement programs and plans, utility resource 
        plans, and other existing energy plans and analyses, the 
        legislative task force on energy shall undertake an analysis of 
        the technical and economic feasibility of an electric energy 
        future for the state that relies on environmentally and 
        economically sustainable and advantageous electric energy supply 
        utility resource plans and competitive bidding dockets before 
        the commission, the task force shall gather information and make 
        recommendations to the legislature regarding potential electric 
        energy resources.  The task force shall may contract with one or 
        more energy policy experts and energy economists to assist it in 
        its analysis.  The task force may not contract for service nor 
        employ any person who was involved in any capacity in any 
        portion of any proceeding before the public utilities 
        commission, the administrative law judge, the state court of 
        appeals, or the United States Nuclear Regulatory Commission 
        related to the dry cask storage proposal on Prairie Island.  The 
        task force must gather information on at least the following 
        electric energy resources, but may expand its inquiry as 
        warranted by the information collected: 
           (1) wind energy; 
           (2) hydrogen as a fuel carrier produced from renewable and 
        fossil fuel resources; 
           (3) biomass; 
           (4) decomposition gases produced by solid waste management 
        facilities; 
           (5) solid waste as a direct fuel or refuse-derived fuel; 
        and 
           (6) clean coal technology.  
           (b) The analysis must address In evaluating these electric 
        energy resources, the task force must consider at least the 
        following: 
           (1) to the best of forecasting abilities, how much electric 
        generation capacity and demand for electric energy is necessary 
        to maintain a strong economy and a high quality of life in the 
        state over the next 15 to 20 years; how is this demand level 
        affected by achievement of the maximum reasonably feasible and 
        cost-effective demand side management and generation and 
        distribution efficiencies; 
           (2) what alternative forms of energy can provide a stable 
        supply of energy and are producible and sustainable in the state 
        and at what cost; 
           (3) what are the costs to the state and ratepayers to 
        ensure that new electric energy generation utilizes less 
        environmentally damaging sources; how do those costs change as 
        the time frame for development and implementation of new 
        generation sources is compressed; 
           (4) what are the implications for delivery systems for 
        energy produced in areas of the state that do not now have 
        high-volume transmission capability; are new transmission 
        technologies being developed that can address some of the 
        concerns with transmission; can a more dispersed electric 
        generation system lessen the need for long-distance 
        transmission; 
           (5) what are the actual costs and benefits of purchasing 
        electricity and fuel to generate electricity from outside the 
        state; what are the present costs to the state's economy of 
        exporting a large percentage of the state's energy dollars and 
        what is the future economic impact of continuing to do so; 
           (6) are there benefits to be had from a large immediate 
        investment in quickly implementing alternative electric energy 
        sources in terms of developing an exportable technology and/or 
        commodity; is it feasible to turn around the flow of dollars for 
        energy so that the state imports dollars and exports energy and 
        energy technology; what is a reasonable time frame for the shift 
        if it is possible; 
           (7) are there taxation or regulatory barriers to developing 
        more sustainable and less problematic electric energy 
        generation; what are they specifically and how can they be 
        specifically addressed; 
           (8) can an approach be developed that moves quickly to 
        development and implementation of alternative energy sources 
        that can be forgiving of interim failures but that is also 
        sufficiently deliberate to ensure ultimate success on a large 
        scale; and 
           (9) in what specific ways can the state assist regional 
        energy suppliers to accelerate phasing out energy production 
        processes that produce wastes or emissions that must necessarily 
        be carefully controlled and monitored to minimize adverse 
        effects on the environment and human health and to assist in 
        developing and implementing base load energy production that 
        both prevents or minimizes by its nature adverse environmental 
        and human health effects and utilizes resources that are 
        available or producible in the state;. 
           (10) whether there is a need to establish additional 
        dislocated worker assistance for workers at the Prairie Island 
        nuclear power plant; if so, how that assistance should be 
        structured; 
           (11) can the state monitor, evaluate, and affect federal 
        actions relating to permanent storage of high-level radioactive 
        waste; what actions by the state over what period of time would 
        expedite federal action to take responsibility for the waste; 
           (12) should the state establish a legislative oversight 
        commission on energy issues; should the responsibilities of an 
        oversight commission be coordinated with the activities of the 
        public utilities commission and the department of public service 
        and if so, how; and 
           (13) is it feasible to convert existing nuclear power and 
        coal-fired electric generating plants to utilization of energy 
        sources that result in significantly less environmental damage; 
        if so, what are the short-term and long-term costs and benefits 
        of doing so; how do shorter or longer time periods for 
        conversion affect the cost/benefit analysis. 
           (c) The task force must study issues related to the 
        transportation of spent nuclear fuel from this state to interim 
        or permanent repositories outside this state.  The task force 
        must also gather information on at least the following factors, 
        but may expand its inquiry as warranted by the information 
        collected: 
           (1) Minnesota's actual and projected electricity demand; 
           (2) electricity export potential; 
           (3) inventory of energy resources currently used to 
        generate all electricity sold in Minnesota and an analysis of 
        the social, economic, and environmental benefits and burdens 
        associated with each energy resource; 
           (4) electricity demand savings from greater efficiency; and 
           (5) job growth and economic development potential. 
           (d) The public utility that owns the Prairie Island and 
        Monticello nuclear generation facilities shall update the 
        reports required under section 116C.772, subdivisions 3 to 5, 
        and shall submit those updates periodically to the public 
        utilities commission with the utility's resource plan filing 
        under section 216B.2422 and to the task force. 
           Sec. 7.  Minnesota Statutes 2002, section 216C.051, is 
        amended by adding a subdivision to read: 
           Subd. 4a.  [REPORT AND RECOMMENDATIONS.] By January 15, 
        2005, and every two years thereafter, the task force shall 
        submit a report to the chairs of the committees in the house of 
        representatives and the senate that have responsibility for 
        energy and for environmental and natural resources issues that 
        contains an overview of information gathered and analyses that 
        have been prepared, and specific recommendations, if any, for 
        legislative action that will ensure development and 
        implementation of electric energy policy that will provide the 
        state with adequate, renewable, and economic electric power for 
        the long term.  The report shall also identify issues that must 
        be addressed to provide Minnesotans with adequate electricity 
        from in-state renewable energy sources for the long term and 
        export to adjacent states.  
           Sec. 8.  Minnesota Statutes 2002, section 216C.051, 
        subdivision 6, is amended to read: 
           Subd. 6.  [ASSESSMENT; APPROPRIATION.] On request by the 
        cochairs of the legislative task force and after approval of the 
        legislative coordinating commission, the commissioner of 
        commerce shall assess from all public utilities, generation and 
        transmission cooperative electric associations, and municipal 
        power agencies providing electric or natural gas services in 
        Minnesota, in addition to assessments made under section 
        216B.62, the amount requested for the operation of the task 
        force not to exceed $150,000 $250,000 in a fiscal year.  The 
        amount assessed under this section is appropriated to the 
        director of the legislative coordinating commission for those 
        purposes, and is available until expended.  The department shall 
        apportion those costs among all energy utilities in proportion 
        to their respective gross operating revenues from the sale of 
        gas or electric service within the state during the last 
        calendar year.  For the purposes of administrative efficiency, 
        the department shall assess energy utilities and issue bills in 
        accordance with the billing and assessment procedures provided 
        in section 216B.62, to the extent that these procedures do not 
        conflict with this subdivision. 
           Sec. 9.  Minnesota Statutes 2002, section 216C.051, 
        subdivision 9, is amended to read: 
           Subd. 9.  [EXPIRATION.] This section is repealed June 
        30, 2005 2007. 
           Sec. 10.  Minnesota Statutes 2002, section 216C.052, 
        subdivision 2, is amended to read: 
           Subd. 2.  [ADMINISTRATIVE ISSUES.] (a) The commissioner may 
        select the administrator who shall serve for a four-year term.  
        The administrator may not have been a party or a participant in 
        a commission energy proceeding for at least one year prior to 
        selection by the commissioner.  The commissioner shall oversee 
        and direct the work of the administrator, annually review the 
        expenses of the administrator, and annually approve the budget 
        of the administrator.  The administrator may hire staff and may 
        contract for technical expertise in performing duties when 
        existing state resources are required for other state 
        responsibilities or when special expertise is required.  The 
        salary of the administrator is governed by section 15A.0815, 
        subdivision 2. 
           (b) Costs relating to a specific proceeding, analysis, or 
        project are not general administrative costs.  For purposes of 
        this section, "energy utility" means public utilities, 
        generation and transmission cooperative electric associations, 
        and municipal power agencies providing natural gas or electric 
        service in the state.  
           (c) The department of commerce shall pay: 
           (1) the general administrative costs of the administrator, 
        not to exceed $1,500,000 $1,000,000 in a fiscal year, and shall 
        assess energy utilities for reimbursement for those 
        administrative costs.  These costs must be consistent with the 
        budget approved by the commissioner under paragraph (a).  The 
        department shall apportion the costs among all energy utilities 
        in proportion to their respective gross operating revenues from 
        sales of gas or electric service within the state during the 
        last calendar year, and shall then render a bill to each utility 
        on a regular basis; and 
           (2) costs relating to a specific proceeding analysis or 
        project and shall render a bill for reimbursement to the 
        specific energy utility or utilities participating in the 
        proceeding, analysis, or project directly, either at the 
        conclusion of a particular proceeding, analysis, or project, or 
        from time to time during the course of the proceeding, analysis, 
        or project. 
           (d) For purposes of administrative efficiency, the 
        department shall assess energy utilities and issue bills in 
        accordance with the billing and assessment procedures provided 
        in section 216B.62, to the extent that these procedures do not 
        conflict with this subdivision.  The amount of the bills 
        rendered by the department under paragraph (c) must be paid by 
        the energy utility into an account in the special revenue fund 
        in the state treasury within 30 days from the date of billing 
        and is appropriated to the commissioner for the purposes 
        provided in this section.  The commission shall approve or 
        approve as modified a rate schedule providing for the automatic 
        adjustment of charges to recover amounts paid by utilities under 
        this section.  All amounts assessed under this section are in 
        addition to amounts appropriated to the commission and the 
        department by other law. 
           Sec. 11.  Minnesota Statutes 2002, section 216C.052, 
        subdivision 3, is amended to read:  
           Subd. 3.  [ASSESSMENT AND APPROPRIATION.] In addition to 
        the amount noted in subdivision 2, the commissioner of commerce 
        shall transfer may assess utilities, using the mechanism 
        specified in that subdivision, up to an additional $500,000 
        annually of the amounts provided for in subdivision 2 to the 
        commissioner of administration through June 30, 2006.  The 
        amounts assessed under this subdivision are appropriated to the 
        commissioner, and some or all of the amounts assessed may be 
        transferred to the commissioner of administration, for the 
        purposes provided specified in section 16B.325 and Laws 2001, 
        chapter 212, article 1, section 3, as needed to implement that 
        section those sections. 
           Sec. 12.  [REFURBISHMENT OF METROPOLITAN GENERATING 
        PLANTS.] 
           Notwithstanding Minnesota Statutes, section 216B.1692, 
        subdivision 1, clause (2), and subdivision 5, paragraphs (c) and 
        (d), all investments in repowering, emissions reduction 
        technologies and equipment, and power plant rehabilitation and 
        life extension described in the primary metropolitan emission 
        reduction proposal filed with the public utilities commission in 
        July 2002 by the public utility that owns the Prairie Island 
        nuclear generation facility and currently pending before the 
        commission are deemed qualifying projects under Minnesota 
        Statutes, section 216B.1692, and all costs related to all such 
        investments are eligible for rider recovery under Minnesota 
        Statutes, section 216B.1692, subdivision 5.  Upon receiving 
        approval by the commission, the utility shall implement the 
        approved proposal or justify to the commission its decision not 
        to do so. 
           Sec. 13.  [CONSERVATION IMPROVEMENT PROGRAM; EVALUATION.] 
           Subdivision 1.  [CONSERVATION IMPROVEMENT PROGRAM; GENERAL 
        EVALUATION.] (a) The commissioner of commerce shall contract 
        with the legislative auditor or other independent third party 
        for a review of: 
           (1) the relevant state statutes, to determine if 
        conservation requirements could be eliminated or modified to 
        ensure that conservation dollars are directed toward the most 
        cost-effective conservation investments; 
           (2) the relevant state rules, to determine if current rules 
        allow or facilitate optimum conservation practices and 
        procedures; and 
           (3) the department of commerce's conservation regulatory 
        processes, to determine if the regulatory review process 
        currently employed results in optimum conservation investments. 
           (b) The costs of the review under paragraph (a) may be 
        recovered by the department as a general administrative expense 
        under Minnesota Statutes, section 216C.052, subdivision 2. 
           Sec. 14.  [LEGISLATIVE APPROVAL OF CONSUMPTIVE USE OF 
        WATER; PROPOSED FACILITY ROSEMOUNT.] 
           Pursuant to Minnesota Statutes, section 103G.265, 
        subdivision 3, the legislature approves the consumptive use 
        under a permit of more than 2,000,000 gallons per day average in 
        a 30-day period in Rosemount, in connection with a gas-fueled 
        combined-cycle electric generating facility, subject to the 
        commissioner of natural resources making a determination that 
        the water remaining in the basin of origin will be adequate to 
        meet the basin's need for water and approval by the commissioner 
        of natural resources of all applicable permits. 
           Sec. 15.  [LEGISLATIVE APPROVAL OF CONSUMPTIVE USE OF 
        WATER; PROPOSED FACILITY MANKATO.] 
           Pursuant to Minnesota Statutes, section 103G.265, 
        subdivision 3, the legislature approves the consumptive use 
        under a permit of more than 2,000,000 gallons per day average in 
        a 30-day period in Mankato, in connection with a gas-fueled 
        combined-cycle electric generating facility, subject to the 
        commissioner of natural resources making a determination that 
        the water remaining in the basin of origin will be adequate to 
        meet the basin's need for water and approval by the commissioner 
        of natural resources of all applicable permits. 
           Sec. 16.  [REPEALER.] 
           Minnesota Statutes 2002, sections 116C.80 and 216C.051, 
        subdivisions 1, 4, and 5, are repealed.  
           Sec. 17.  [EFFECTIVE DATE.] 
           This article is effective the day following final enactment.

                                   ARTICLE 4
                           INNOVATIVE ENERGY PROJECT
           Section 1.  [216B.1694] [INNOVATIVE ENERGY PROJECT.] 
           Subdivision 1.  [DEFINITION.] For the purposes of this 
        section, the term "innovative energy project" means a proposed 
        energy generation facility or group of facilities which may be 
        located on up to three sites: 
           (1) that makes use of an innovative generation technology 
        utilizing coal as a primary fuel in a highly efficient 
        combined-cycle configuration with significantly reduced sulfur 
        dioxide, nitrogen oxide, particulate, and mercury emissions from 
        those of traditional technologies; 
           (2) that the project developer or owner certifies is a 
        project capable of offering a long-term supply contract at a 
        hedged, predictable cost; and 
           (3) that is designated by the commissioner of the iron 
        range resources and rehabilitation board as a project that is 
        located in the taconite tax relief area on a site that has 
        substantial real property with adequate infrastructure to 
        support new or expanded development and that has received prior 
        financial and other support from the board.  
           Subd. 2.  [REGULATORY INCENTIVES.] (a) An innovative energy 
        project: 
           (1) is exempted from the requirements for a certificate of 
        need under section 216B.243, for the 
        generation facilities, and transmission infrastructure 
        associated with the generation facilities, but is subject to all 
        applicable environmental review and permitting procedures of 
        sections 116C.51 to 116C.69; 
           (2) once permitted and constructed, is eligible to increase 
        the capacity of the associated transmission facilities without 
        additional state review upon filing notice with the commission; 
           (3) has the power of eminent domain, which shall be limited 
        to the sites and routes approved by the environmental quality 
        board for the project facilities.  The project shall be 
        considered a utility as defined in section 
        116C.52, subdivision 10, for the limited purpose of section 116C.63.  
        The project shall report any intent 
         to exercise eminent domain authority to the board; 
           (4) shall qualify as a "clean energy technology" as defined 
        in section 216B.1693; 
           (5) shall, prior to the approval by the commission of any 
        arrangement to build or expand a fossil-fuel-fired generation 
        facility, or to enter into an agreement to purchase capacity or 
        energy from such a facility for a term exceeding five years, be 
        considered as a supply option for the generation facility, and 
        the commission shall ensure such consideration and take any 
        action with respect to such supply proposal that it deems to be 
        in the best interest of ratepayers; 
           (6) shall make a good faith effort to secure funding from 
        the United States Department of Energy and the United States 
        Department of Agriculture to conduct a demonstration project at 
        the facility for either geologic or terrestrial carbon 
        sequestration projects to achieve reductions in facility 
        emissions or carbon dioxide; 
           (7) shall be entitled to enter into a contract with a 
        public utility that owns a nuclear generation facility in the 
        state to provide 450 megawatts of baseload capacity and energy 
        under a long-term contract, subject to the approval of the terms 
        and conditions of the contract by the commission.  The 
        commission may approve, disapprove, amend, or modify the 
        contract in making its public interest determination, taking 
        into consideration the project's economic development benefits 
        to the state; the use of abundant domestic fuel sources; the 
        stability of the price of the output from the project; the 
        project's potential to contribute to a transition to hydrogen as 
        a fuel resource; and the emission reductions achieved compared 
        to other solid fuel baseload technologies; and 
           (8) shall be eligible for a grant from the renewable 
        development account, subject to the approval of the entity 
        administering that account, of $2,000,000 a year for five years 
        for development and engineering costs, including those costs 
        related to mercury removal technology; thermal efficiency 
        optimization and emission minimization; environmental impact 
        statement preparation and licensing; development of hydrogen 
        production capabilities; and fuel cell development and 
        utilization. 
           (b) This subdivision does not apply to nor affect a 
        proposal to add utility-owned resources that is pending on the 
        date of enactment of this act before the public utilities 
        commission or to competitive bid solicitations to provide 
        capacity or energy that is scheduled to be online by December 
        31, 2006. 
           Sec. 2.  [EFFECTIVE DATE.] 
           This article is effective the day following final enactment.
           Presented to the governor May 27, 2003 
           Signed by the governor May 29, 2003, 10:20 a.m.

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